10. Declaration of policy
It is declared to be the policy of the State of Vermont that:(1) the business of organizations that offer financial services and products shall be supervised by the Commissioner in a manner to assure the solvency, liquidity, stability, and efficiency of all such organizations, to assure reasonable and orderly competition, thereby encouraging the development, expansion, and availability of financial services and products advantageous to the public welfare and to maintain close cooperation with other supervisory authorities; (2) all such organizations shall be supervised in such a way as to protect consumers against unfair and unconscionable practices and to provide consumer education. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001.) 
 11. Department
(a) General. The Department of Financial Regulation created by 3 V.S.A.  212 shall have jurisdiction over and shall supervise:(1) Financial institutions, credit unions, licensed lenders, mortgage brokers, insurance companies, insurance agents, broker-dealers, investment advisors, and other similar persons subject to the provisions of this title and 9 V.S.A. chapters 59, 61, and 150. (2) The administration of health care as provided in 18 V.S.A. chapter 221.(b) Conflicts of Interest. (1) Neither the Commissioner nor any employee of the Department shall, during his or her term of office or while employed by the Department, be an officer, director, organizer, employee of, or attorney for any institution subject to supervision or regulation by the Department. (2) The Commissioner and employees of the Department shall not, during their terms of office, receive directly or indirectly any payment or gratuity from any institution subject to supervision or regulation by the Department or be engaged in the negotiation of loans for others with any such institution. The prohibitions contained in this subdivision shall not be construed as prohibiting a person from being a depositor, equity interest owner, or member in any financial institution or credit union or an insurance policyholder or equity interest owner on the same terms as are available to the public generally. (3) If the Commissioner, or any employee of the Department or the spouse of any of them or the son or daughter of any of them residing at their respective homes obtains a loan from or holds an equity interest in any financial institution or credit union subject to supervision or regulation by the Department, the fact of the loan or of the holding, together with the appropriate terms and conditions, shall be disclosed immediately to the Commissioner in writing by the person obtaining the loan or holding. (4) A record of the indebtedness or holding described in subdivision (3) of this subsection shall be kept on file in the Department and shall be open to inspection by the public. (5) The Commissioner shall investigate the loan or equity interest to ensure that no preferential treatment has been given the Department employee in the process of granting the loan or issuing the interest and that the loan or interest will not compromise the employees effectiveness in carrying out his or her departmental duties. Where the loan has been obtained by or where the interest is held by the Commissioner, the investigation shall be conducted by the State Treasurer. (c) Retention of documents. The Commissioner shall keep on file for a reasonable period of time such instruments, papers, and documents required by law to be filed with the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2007, No. 49,  18, eff. July 1, 2006; 2011, No. 78 (Adj. Sess.),  2, 3, eff. April 2, 2012; 2013, No. 79,  45.) 
 12. Commissioner
The Department shall be administered by a Commissioner of Financial Regulation who shall be appointed by the Governor biennially, in the month of February, with the advice and consent of the Senate. Commissioner, as used in this title, shall mean the Commissioner of Financial Regulation. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 13. Powers and penalties
(a) In addition to any other penalties, and in order to enforce this title, 9 V.S.A. chapters 131 and 150, Title 9A, and 18 V.S.A. chapter 221, the Commissioner may issue subpoenas, examine persons, administer oaths, and require production of papers and records. Any subpoena or notice to produce may be served by registered or certified mail or in person by an agent of the Commissioner. Service by registered or certified mail shall be effective three business days after mailing. Any subpoena or notice to produce shall provide at least six business days time from service within which to comply, except that the Commissioner may shorten the time for compliance for good cause shown. Any subpoena or notice to produce sent by registered or certified mail, postage prepaid, shall constitute service on the person to whom it is addressed. Each witness who appears before the Commissioner under subpoena shall receive a fee and mileage as provided for witnesses in civil cases in Superior Courts; provided, however, any person subject to regulation under this title shall not be eligible to receive fees or mileage under this section. (b) A person who fails or refuses to appear, to testify, or to produce papers or records for examination before the Commissioner, upon properly being ordered to do so, may be assessed an administrative penalty by the Commissioner of Financial Regulation of not more than $2,000.00 for each day of noncompliance and proceeded against as provided in the Administrative Procedure Act, and that persons authority to do business may be suspended for not more than six months. (c) If an appeal or other petition for judicial review of a final order is not filed in connection with an order of the Commissioner under this title, or 18 V.S.A. chapter 22, the Commissioner may file a certified copy of the final order with the clerk of a court of competent jurisdiction. The order so filed has the same effect as a judgment of the court and may be recorded, enforced, or satisfied in the same manner as a judgment of the court. (d) In addition to any other penalties or powers, the Commissioner may order a person to make restitution or provide disgorgement of any sums shown to have been obtained in violation of provisions of this title and 18 V.S.A. chapter 221, plus interest at the legal rate. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2007, No. 49,  19; eff. July 1, 2006; 2009, No. 42,  4; 2011, No. 78 (Adj. Sess.),  4, eff. April 2, 2012.) 
 15. Rules, orders, and administrative interpretations
(a) In addition to other powers conferred by this title and 18 V.S.A. chapter 221, the Commissioner may adopt rules and issue orders as shall be authorized by or necessary to the administration of this title and of 18 V.S.A. chapter 221, and to carry out the purposes of such titles. (b) The Commissioner may, whether or not requested by any person, issue written advisory interpretations, advisory opinions, non-objection letters, and no action letters under this title and regulations issued under it, including interpretations of the applicability of any provision of this title and regulations issued under it. Such interpretations shall be presumed to be correct unless found to be clearly erroneous by a court of competent jurisdiction. The Commissioner may make public all or a portion of an advisory interpretation. (c) The Commissioner may waive the requirements of 15 V.S.A.  795(b) as the Commissioner deems necessary to permit the Department to participate in any national licensing or registration systems with respect to any person or entity subject to the jurisdiction of the Commissioner under this title, Title 9, or 18 V.S.A. chapter 221. (d) Upon written request by the Office of Child Support and after notice and opportunity for hearing to the licensee as required under any applicable provision of law, the Commissioner may revoke or suspend any license or other authority to conduct a trade or business (including a license to practice a profession) issued to any person under this title, 9 V.S.A. chapter 150, and 18 V.S.A. chapter 221, if the Commissioner finds that the applicant or licensee is subject to a child support order and is not in good standing with respect to that order or is not in full compliance with a plan to pay any and all child support payable under a support order as of the date the application is filed or as of the date of the commencement of revocation proceedings, as applicable. For purposes of such findings, the written representation to that effect by the Office of Child Support to the Commissioner shall constitute prima facie evidence. The Office of Child Support shall have the right to intervene in any hearing conducted with respect to such license revocation or suspension. Any findings made by the Commissioner based solely upon the written representation with respect to that license revocation or suspension shall be made only for the purposes of that proceeding and shall not be relevant to or introduced in any other proceeding at law, except for any appeal from that license revocation or suspension. Any license or certificate of authority suspended or revoked under this section shall not be reissued or renewed until the Department receives a certificate issued by the Office of Child Support that the licensee is in good standing with respect to a child support order or is in full compliance with a plan to pay any and all child support payable under a support order. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2009, No. 42,  33a; 2013, No. 73,  58, eff. June 5, 2013; 2015, No. 63,  3, eff. June 17, 2015; 2019, No. 20,  106.) 
 15a. Insurance regulatory sandbox; innovation waiver; sunset
(a) Subject to the limitations specified in subsection (g) of this section, the Commissioner may grant a variance or waiver (innovation waiver or waiver) with respect to the specific requirements of any insurance law, regulation, or bulletin if a person subject to that law, regulation, or bulletin demonstrates to the Commissioners satisfaction that: (1) the application of the law, regulation, or bulletin would prohibit the introduction of an innovative or more efficient insurance product or service that the applicant intends to offer during the period for which the proposed waiver is granted; (2) the public policy goals of the law, regulation, or bulletin will be or have been achieved by other means; (3) the waiver will not substantially or unreasonably increase any risk to consumers; and (4) the waiver is in the public interest.(b) An application for an innovation waiver shall include the following information:(1) the identity of the person applying for the waiver;(2) a description of the product or service to be offered if the waiver is granted, including how the product or service functions and the manner and terms on which it will be offered; (3) an explanation of the potential benefits to consumers of the product or service;(4) an explanation of the potential risks to consumers posed by the product or service and how the applicant proposes to mitigate such risks; (5) an identification of the statutory or regulatory provision that prohibits the introduction, sale, or offering of the product or service; and (6) any additional information required by the Commissioner.(c)(1) An innovation waiver shall be granted for an initial period of up to 12 months, as deemed appropriate by the Commissioner. (2) Prior to the end of the initial waiver period, the Commissioner may grant a one-time extension for up to an additional 12 months. An extension request shall be made to the Commissioner at least 30 days prior to the end of the initial waiver period and shall include the length of the extension period requested and specific reasons why the extension is necessary. The Commissioner shall grant or deny an extension request before the end of the initial waiver period. (d) An innovation waiver shall include any terms, conditions, and limitations deemed appropriate by the Commissioner, including limits on the amount of premium that may be written in relation to the underlying product or service and the number of consumers that may purchase or utilize the underlying product or service; provided that in no event shall a product or service subject to an innovation waiver be purchased or utilized by more than 10,000 Vermont consumers. (e) A product or service offered pursuant to an innovation waiver shall include the following written disclosures to consumers in clear and conspicuous form: (1) the name and contact information of the person providing the product or service;(2) that the product or service is authorized pursuant to an innovation waiver for a temporary period of time and may be discontinued at the end of the waiver period, the date of which shall be specified; (3) contact information for the Department, including how a consumer may file a complaint with the Department regarding the product or service; and (4) any additional disclosures required by the Commissioner.(f) The Commissioners decision to grant or deny a waiver or extension shall not be subject to the contested-case provisions of the Vermont Administrative Procedures Act. (g)(1) Pursuant to the authority granted by this section, the Commissioner shall not grant a waiver with respect to any of the following: (A) any law, regulation, bulletin, or other provision that is not subject to the Commissioners jurisdiction under Title 8; (B) section 3304, section 3366, or subsections 6004(a)-(b) of this title or any other requirement as to the minimum amount of paid-in capital or surplus required to be possessed or maintained by any person; (C) chapter 107 (concerning health insurance), 112 (concerning the Vermont Life and Health Insurance Guaranty Association Act), 117 (concerning workers compensation insurance), 129 (concerning insurance trade practices), or 131 (concerning licensing requirements), and chapter 154 (concerning long-term care insurance) of this title or any regulations or bulletins directly relating thereto; (D) section 4211 (concerning volunteer drivers) of this title;(E) any law, regulation, or bulletin required for the Department to maintain its accreditation by the National Association of Insurance Commissioners unless the law or regulation permits variances or waivers; (F) the application of any taxes or fees; and(G) any other law or regulation deemed ineligible by the Commissioner.(2) The authority granted to the Commissioner under this section shall not be construed to allow the Commissioner to grant or extend a waiver that would abridge the recovery rights of Vermont policyholders. (h) A person who receives a waiver under this section shall be required to make a deposit of cash or marketable securities with the State Treasurer in an amount subject to such conditions and for such purposes as the Commissioner determines necessary for the protection of consumers. (i)(1) At least 30 days prior to granting an innovation waiver, the Commissioner shall provide public notice of the draft waiver by publishing the following information: (A) the specific statute, regulation, or bulletin to which the draft waiver applies;(B) the proposed terms, conditions, and limitations of the draft waiver;(C) the proposed duration of the draft waiver; and(D) any additional information deemed appropriate by the Commissioner.(2) The notice requirement of this subsection may be satisfied by publication on the Departments website. (j)(1) If a waiver is granted pursuant to this section, the Commissioner shall provide public notice of the existence of the waiver by providing the following information: (A) the specific statute, regulation, or bulletin to which the waiver applies;(B) the name of the person who applied for and received the waiver;(C) the duration of and any other terms, conditions, or limitations of the waiver; and(D) any additional information deemed appropriate by the Commissioner.(2) The notice requirement of this subsection may be satisfied by publication on the Departments website. (k) The Commissioner, by regulation, shall adopt uniform procedures for the submission, granting, denying, monitoring, and revocation of petitions for a waiver pursuant to this section. The procedures shall set forth requirements for the ongoing monitoring, examination, and supervision of, and reporting by, each person granted a waiver under this section and shall permit the Commissioner to attach reasonable conditions or limitations on the conduct permitted pursuant to a waiver. The procedures shall provide for an expedited application process for a product or service that is substantially similar to one for which a waiver has previously been granted by the Commissioner. The procedures shall include an opportunity for public comment on draft waivers under consideration by the Commissioner. (l) Upon expiration of an innovation waiver, the person who obtained the waiver shall cease all activities that were permitted only by the waiver and comply with all generally applicable laws and regulations. (m) The ability to grant a waiver under this section shall not be interpreted to limit or otherwise affect the authority of the Commissioner to exercise discretion to waive or enforce requirements as permitted under any other section of this title or any regulation or bulletin adopted pursuant thereto. (n) Biannually, beginning on January 15, 2020, the Commissioner shall submit a report to the General Assembly providing the following information: (1) the total number of petitions for waivers that have been received, granted, and denied by the Commissioner; (2) for each waiver granted by the Commissioner, the information specified under subsection (f) of this section; (3) a list of any regulations or bulletins that have been adopted or amended as a result of or in connection with a waiver granted under this section; (4) with respect to each statute to which a waiver applies, the Commissioners recommendation as to whether such statute should be continued, eliminated, or amended in order to promote innovation and establish a uniform regulatory system for all regulated entities; and (5) a list of any waivers that have lapsed or been revoked and, if revoked, a description of other regulatory or disciplinary actions, if any, that resulted in, accompanied, or resulted from such revocation. (o) No new waivers or extensions shall be granted after July 1, 2023.(p) This section shall be repealed on July 1, 2025. (Added 2019, No. 57,  1; amended 2021, No. 25,  17, eff. May 12, 2021.)
 16. Judicial review
Any person aggrieved and directly affected by an order of the Commissioner may appeal to the Supreme Court of Vermont, except as otherwise expressly provided in this title or in 9 V.S.A. chapters 131 and 150. The filing of an appeal for review or injunctive relief shall not stay enforcement of an order, but the Court may order a stay on such terms as it deems proper. The Court may affirm the order of the Commissioner, may direct him or her to take the action withheld, or may reverse or modify the order if it: (1) was issued pursuant to unconstitutional statutory provisions;(2) was in excess of statutory authority;(3) was issued on unlawful procedure; or(4) is not supported by substantial evidence in the record. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2007, No. 49,  20; eff. July 1, 2006.)
 17. Liability for acts
A person serving in any official capacity under this title, 9 V.S.A. chapter 131 or 150, or 18 V.S.A. chapter 221, including the Commissioner and any officer, employee, or agent of the Department, shall not be liable in any civil action for damages for any act done or omitted in good faith in performing the functions of his or her office. No person may be subjected to any civil or criminal liability for any act or omission to act done in good faith in reliance on a subsisting order, regulation, or rule of the Commissioner, notwithstanding a subsequent decision by a court invalidating the order, regulation, or rule. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2007, No. 49,  21; eff. July 1, 2006.) 
 18. Charges for examinations, applications, reviews, and investigations
(a) Every person subject to regulation by the Department shall pay the Department the reasonable costs of any examination, review, or investigation that is conducted or caused to be conducted by the Department of such person, or of any application or filing made by such person, or of any examination, review, or investigation of any order, decision, or certificate issued by the Commissioner, at a rate to be determined by the Commissioner. The Department may retain experts or other persons who are independently practicing their professions to assist in such examination, review, or investigation. The Department shall be reimbursed for all reasonable costs and expenses, including the reasonable costs and expenses of such persons retained by the Department, by the person examined, submitting the application or filing reviewed, investigated, or subject to or under the jurisdiction of an order, decision, or certificate issued by the Commissioner under this title or under Title 18. An examination, review, or investigation subject to this section shall include an examination, review, or investigation of any application, information, rate filing, or form filing submitted, or any order, decision, or certificate issued under this title or under Title 18. In unusual circumstances, the Commissioner may waive reimbursement for the costs and expenses of any review in the interests of justice. Except as set forth in subsection (b) of this section, those institutions subject to assessment or fees for services provided under section 19 of this title shall not be billed for a regular examination performed under subsection 11501(a) or 30601(a) of this title or for services for which such fees under subsection 19(a) of this title have been paid. (b) Merchant banks established under section 12603 of this title, uninsured banks established under section 12604 of this title, and independent trust companies subject to assessment under subdivision 2405(f)(1) of this title shall pay the Department the costs and expenses of all examinations, including regular and special or expanded scope examinations. (c) The authority granted to the Commissioner by this section is in addition to any other authority granted to the Commissioner by law. (d) The Commissioner shall bill costs incurred by the Department in connection with any examination, review, or investigation conducted or caused to be conducted by the Department to the EB-5 projects subject to regulatory oversight under 10 V.S.A. chapter 3. It is the intent of the General Assembly that the costs of regulation of EB-5 projects be borne by project developers and not by the State General Fund or special funds. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended 2003, No. 53,  21, eff. June 4, 2003; 2005, No. 16,  2, eff. July 1, 2005; 2011, No. 21,  6; 2011, No. 78 (Adj. Sess.),  5, eff. April 2, 2012; 2013, No. 29,  1; 2015, No. 149 (Adj. Sess.),  34e.) 
 19. Fees and departmental expenses
(a) The Commissioner shall charge each financial institution or financial institution applicant for Department services rendered. Charges for Department services shall be billed as follows: (1) New financial institution application or new independent trust company application, $5,000.00. (2) Interim reorganization application, $2,000.00.(3) Merger, change in control, or other reorganization, share exchange, consolidation, or acquisition, $2,000.00. (4) Conversion of a charter, $2,500.00.(5) Establishment of a branch in the State, $500.00.(6) Establishment of a remote service unit, $250.00. Where more than one remote service unit performing identical services on single premises are petitioned at the same time, the total charge shall be $250.00. This fee shall not apply if the remote service unit is placed at an existing branch. (7) Relocation of main office, branch, or remote service unit, $250.00.(8) For trust powers subsequent to the granting of the authority as financial institution, $2,000.00. (9) Sale of branch, $500.00.(10) Sale, lease, or exchange of all an institutions assets, $5,000.00.(11) Voluntary dissolution or liquidation of an institution, $5,000.00.(12) Establishment of a special purpose financial institution, $5,000.00.(13) Establishment of a temporary agency, $150.00.(14) Activity at a school, $250.00.(15) Establishment of a loan production office or engaging in loan production activity in the State, $750.00. (16) Permit a foreign exchange activity, $500.00.(17) Purchase or establish a subsidiary or service corporation, $2,500.00.(18) Certificate (good standing), $100.00.(19) Establish a development credit corporation, $1,000.00.(20) Permission to use bank in name, $100.00.(21) Advisory interpretations, advisory opinions, non-objection letters, and no action letters, $250.00, plus expenses. (22) Increase or reduction in permanent capital, $250.00.(23) New credit union application, new credit union service organization application, or new corporate credit union application, $2,500.00. (24) Extension of a certificate of general good or extension of a certificate of approval, $50.00. (25) Contract with another financial institution as agent, $500.00.(26) Any other corporate organizational changes not covered in this subsection, $250.00 plus expenses. No petition or application shall be considered by the Commissioner until payment for the enumerated charge has been received. (b) Merchant banks established under section 12603 of this title, uninsured banks established under section 12604 of this title, and independent trust companies assessed as provided in subdivision 2405(f)(1) of this title shall be billed for all examinations. All other institutions subject to assessment under subsection (d) of this section shall not be billed for regular examinations. (c) Each person, except as otherwise provided in subsection (d) of this section, within 30 days of notification, shall pay the Department fees as prescribed by section 18 of this title, which fees shall be billed when they are incurred. (d) The Commissioner shall apportion the expenses allowed under the title Department of Financial RegulationBanking in the annual appropriation bill among the several financial institutions, credit unions, and independent trust companies directly regulated under this title, including the operations in Vermont of any such entity organized in another jurisdiction. Annually, on or before November 1, the Commissioner shall notify the institutions of the proposed assessment. The assessment shall consider surpluses or shortfalls from prior year assessments, increases, and decreases in entity deposits and assets under management, and any other factor that may affect the Banking Divisions expenditures and revenues. The Commissioner shall send each entity a bill for such entitys portion of the assessment on or before March 1 of each year, which bill shall be paid into the State Treasury on or before April 1. (1) Financial institutions and credit unions that accept deposits will be assessed based on the amount of their deposits held in this State on the preceding June 30. (2) In the case of merchant banks established under section 12603 of this title, the assessment shall be based on assets in this State on the preceding June 30. (3) In the case of nondepository trust companies established under section 12602 of this title, the assessment will be based on assets under management in this State on the preceding June 30. (4) In the case of an uninsured bank established under section 12604 of this title:(A) an uninsured bank whose primary activity is transactional shall pay to the Department an annual assessment equal to $0.0001 per dollar volume of activity performed for the most recent year ended December 31, which assessment shall not be greater than $50,000.00; and (B) an uninsured bank whose primary activity is accepting uninsured deposits shall be assessed based on the amount of deposits on the preceding June 30. (5) No financial institution, credit union, nondepository trust company, merchant bank, or uninsured bank subject to assessment under subdivision (1), (2), (3), or (4) of this subsection may pay less than $2,000.00 per annual assessment. (6) Loan production offices or persons engaged in an approved loan production activity authorized under prior law that do not pay an assessment under subdivision (1), (2), (3), or (4) of this subsection shall pay an annual fee of $1,200.00. (7) In the case of independent trust companies organized under chapter 77 of this title:(A) an independent trust company whose primary activity in this State is transactional shall pay an assessment calculated under subdivision 2405(f)(1) of this title; and (B) an independent trust company whose primary activity in this State is asset management shall pay an assessment based on assets under management, provided the annual assessment shall not be less than $2,000.00. (e) If any entity fails to pay fees or expenses as provided in this section or section 18 of this title, within 45 days after notice from the Department of the amount due, the Commissioner may issue an execution against the property of the delinquent for an amount equal to 150 percent of the amount of the overdue payment. Such execution shall be enforced as an execution of a court. (f) There is hereby created a fund to be known as the Financial Institution Supervision Fund for the purpose of providing the financial means for the Commissioner of Financial Regulation to administer Parts 2, 4, and 5 of this title, 9 V.S.A. Parts 1 and 3, and Title 9A. All fees and assessments received by the Department pursuant to such administration shall be deposited in this Fund. (g) All payments from the Banking Supervision Fund for the maintenance of staff and associated expenses, including contractual services as necessary, shall be disbursed from the State Treasury only upon warrants issued by the Commissioner of Finance and Management after receipt of proper documentation regarding services rendered and expenses incurred. (h) Any entity, subject to the assessment under subsection (d) of this section, that converts or relinquishes its State charter or closes all of its branches or offices in this State will be responsible for a pro rata share of the assessment made under subsection (d) of this section for the final period it was authorized to conduct business under this title. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001; amended No. 155 (Adj. Sess.),  7, eff. Jan. 1, 2001; 2005, No. 72,  1; 2009, No. 42,  1; 2011, No. 21,  7-9; 2011, No. 78 (Adj. Sess.),  2, 6-8, eff. April 2, 2012; 2013, No. 29,  2, eff. May 13, 2013; 2015, No. 63,  4, eff. June 17, 2015; 2019, No. 20,  107.) 
 20. Uniform Commercial Code
(a) All commercial transactions of financial institutions doing business in this State shall be governed by and conducted in accordance with Title 9A. (b) In any conflict between the provisions of Title 9A and any other provisions of law, including organizational documents of financial institutions, dealing with the same subject matter, Title 9A shall prevail unless otherwise specifically provided by law. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001.) 
 21. Applicability of laws governing business organizations
Depending on the permitted type of organizational form, the provisions of Titles 11, 11A, and 11B, relating to corporations, limited liability companies, limited liability partnerships, limited partnerships, partnerships, mutual and cooperative organizations and other organizations, shall apply to business organizations regulated under this title. In the case of a conflict and to the extent that such provisions may be inconsistent with the provisions of Titles 11, 11A, and 11B, the provisions of this title shall control. (Added 1999, No. 153 (Adj. Sess.),  1, eff. Jan. 1, 2001.) 
 22. Confidentiality and information sharing agreements
(a) Except as expressly provided in subsection (b) of this section, all documents, material, or other information reported to, or developed or maintained by the Commissioner may be used by the Commissioner in the furtherance of legal or regulatory proceedings brought as a part of the Commissioners official duties. (b) In order to assist in the performance of the Commissioners duties, the Commissioner:(1) may share documents, materials, or other information, including confidential and privileged documents, materials, or other information with other state, federal, or international agencies; the National Association of Insurance Commissioners; the North American Securities Administrators Association; the International Association of Insurance Supervisors; the Conference of State Bank Supervisors; the National Association of State Credit Union Supervisors; self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1; other self-regulatory organizations and their 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; (2) may receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from other state, federal, and international agencies; the National Association of Insurance Commissioners; the North American Securities Administrators Association; the International Association of Insurance Supervisors; the Conference of State Bank Supervisors; the National Association of State Credit Union Supervisors; self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1; other self-regulatory organizations and their affiliates or subsidiaries; and from state, federal, and international law enforcement authorities; 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; (3) may enter into agreements governing sharing and use of information consistent with this section; and (4) shall determine, prior to sharing information about an individual pursuant to subdivision (1) of this subsection, that sharing the information will substantially further the performance of the regulatory or law enforcement duties of the recipient. (c) Any information furnished pursuant to this section by or to the Commissioner that has been designated confidential by the furnisher of the information shall not be subject to public inspection under 1 V.S.A. chapter 5, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. (d) Neither the Commissioner nor any person who received documents, material, or information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, material, or information. (e) No waiver of an existing privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure or sharing as authorized under this section. (f) The provisions of this section shall apply to information relating to persons that engage in activities that are financial in nature, or incidental or complementary to such financial activity within the meaning of 12 U.S.C.  1843(k) and to credit unions; provided, however, this section shall apply to captives formed or licensed under the provisions of chapter 141 or 142 of this title only to the extent contemplated by 15 U.S.C.  6716. (Added 2001, No. 71,  1, eff. June 16, 2001; amended 2009, No. 42,  5; 2017, No. 1,  1, eff. Feb. 23, 2017.) 
 23. Confidentiality of investigation and examination reports
(a) This section shall apply to all persons licensed, authorized, or registered, or required to be licensed, authorized, or registered, under this title. (b) Regardless of source, all records of investigations, including information pertaining to a complaint by or for a consumer, and all records and reports of examinations by the Commissioner, whether in the possession of a supervisory agency or another person, shall be confidential and privileged, shall not be made public, and shall not be subject to discovery or introduction into evidence in any private civil action. No person who participated on behalf of the Commissioner in an investigation or examination shall be permitted or required to testify in any such civil action as to any findings, recommendations, opinions, results, or other actions relating to the investigation or examination. (c) The Commissioner may, in his or her discretion, disclose or publish or authorize the disclosure or publication of any such record or report or any part thereof in the furtherance of legal or regulatory proceedings brought as a part of the Commissioners official duties. The Commissioner may, in his or her discretion, disclose or publish or authorize the disclosure or publication of any such record or report or any part thereof, to civil or criminal law enforcement authorities for use in the exercise of such authoritys duties, in such manner as the Commissioner may deem proper. (d) For the purposes of this section, records of investigations and records and reports of examinations shall include joint examinations by the Commissioner and any other supervisory agency. Records of investigations and reports of examinations shall also include records of examinations and investigations conducted by: (1) any agency with supervisory jurisdiction over the person; and(2) any agency of any foreign government with supervisory jurisdiction over any person subject to the jurisdiction of the Department, when such records are considered confidential by such agency or foreign government and the records are in the possession of the Commissioner. (Added 2001, No. 55,  3, eff. June 12, 2001; amended 2015, No. 63,  5, eff. June 17, 2015; 2021, No. 25,  10, eff. May 12, 2021.) 
 24. Senior investor protection
(a) The Commissioner may, in addition to other powers conferred on the Commissioner by law, adopt rules and issue orders necessary to protect senior investors from being misled by false or misleading certifications, licenses, professional designations, or other credentials that imply or indicate a special level of knowledge with regard to senior investors or their needs in the sale of securities or insurance, or both, in the providing of investment advice. (b) To implement the protections described in subsection (a) of this section, the Commissioner may: (1) establish standards for senior-specific certifications, licenses, professional designations, and other credentials; (2) develop initiatives to investigate and take action against fraudulent, misleading, dishonest, or unethical marketing practices directed toward seniors; (3) develop educational materials and training aimed at reducing such marketing practices; and (4) accept grants from government or private entities to fund the activities set forth in this section. (c) Any rules adopted or orders issued by the Commissioner under this section shall conform to the extent practicable to the North American Securities Administrators Association Model Rule on the Use of Senior-Specific Certifications and Professional Designation, as amended, and the National Association of Insurance Commissioners Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities, as amended. (d)(1) A violation of a rule adopted or orders issued under this section with respect to the business of insurance shall constitute an unfair or deceptive act or practice in the business of insurance, and the Commissioner may enforce such violations pursuant to the Commissioners authority conferred by the Insurance Trade Practices Act, chapter 129 of this title, and pursuant to any other authority conferred upon the Commissioner by law. (2) A violation of a rule adopted or order issued under this section with respect to the business of securities and investment advice shall constitute a violation of 9 V.S.A.  5412(d)(13), and the Commissioner may enforce such violations pursuant to the Commissioners authority conferred by the Vermont Uniform Securities Act, 9 V.S.A. chapter 150, and pursuant to any other authority conferred upon the Commissioner. (e) The Commissioner, in addition to other powers conferred on the Commissioner by law, may increase the amount of an administrative penalty by not more than $5,000.00 per violation for violations involving a person who is a vulnerable adult as defined in 33 V.S.A.  6902(14). (Added 2009, No. 53,  3; amended 2017, No. 80,  2.) 
 3301. Purposes
(a) Subject to the additional or varied requirements stated in this subchapter, a corporation may be formed pursuant to the general corporation law to do any and all insurance and reinsurance comprised in any one of the following numbered subdivisions: (1) Life insurance, which is insurance on human lives. The business of life insurance includes also the granting of endowment benefits, additional benefits in event of death or dismemberment by accident or accidental means, additional benefits in event of the insureds disability, and optional modes of settlement of proceeds of life insurance. Life insurance does not include workers compensation coverages. (2) Health insurance, which is insurance of human beings against bodily injury, disablement, or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness, and every insurance appertaining thereto. Health insurance does not include workers compensation coverages. (3) Casualty insurance, which includes:(A) Vehicle insurance. Insurance against loss of or damage to any land vehicle or aircraft or any draft or riding animal or to property while contained therein or thereon or being loaded or unloaded therein or therefrom, from any hazard or cause, and against any loss, liability, or expense resulting from or incidental to ownership, maintenance, or use of any such vehicle, aircraft, or animal; and provision of medical, hospital, surgical, disability benefits to injured persons, and funeral and death benefits to dependents, beneficiaries, or personal representatives of persons killed, irrespective of legal liability of the insured, when issued as an incidental coverage with or supplemental to insurance on the vehicle, aircraft, or animal. (B) Automobile guaranty. Insurance of the mechanical condition or freedom from defective or worn parts or equipment, of motor vehicles. (C) Liability insurance. Insurance against legal liability for the death, injury, or disability of any human being, or for damage to property; and provision of medical, hospital, surgical, disability benefits to injured persons, and funeral and death benefits to dependents, beneficiaries, or personal representatives of persons killed, irrespective of legal liability of the insured, when issued as an incidental coverage with or supplemental to liability insurance. (D) Workers compensation. Insurance of the obligations accepted by, imposed upon, or assumed by employers under law for death, disablement, or injury of employees. (E) Burglary and theft. Insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation, or wrongful conversion, disposal or concealment, or from any attempt at any of the foregoing; including supplemental coverage for medical, hospital, surgical, and funeral expense incurred by the named insured or any other person as a result of bodily injury during the commission of a burglary, robbery, or theft by another; also insurance against loss of or damage to monies, coins, bullion, securities, notes, drafts, acceptances, or any other valuable papers and documents, resulting from any cause. (F) Personal property floater. Insurance upon personal effects against loss or damage from any cause, under a personal property floater. (G) Glass. Insurance against loss or damage to glass, including its lettering, ornamentation, and fittings. (H) Boiler and machinery. Insurance against any liability and loss or damage to property or interest resulting from accidents to or explosions of boilers, pipes, pressure containers, machinery, or apparatus, and to make inspection of and issue certificates of inspection upon boilers, machinery, and apparatus of any kind, whether or not insured. (I) Leakage and fire extinguishing equipment. Insurance against loss or damage to any property or interest caused by the breakage or leakage of sprinklers, hoses, pumps, and other fire extinguishing equipment or apparatus, water pipes or containers, or by water entering through leaks or openings in buildings, and insurance against loss or damage to such sprinklers, hoses, pumps, and other fire extinguishing equipment or apparatus. (J) Credit. Insurance against loss or damage resulting from failure of debtors to pay their obligations to the insured. (K) Malpractice. Insurance against legal liability of the insured, and against loss, damage, or expense incidental to a claim of such liability, and including medical, hospital, surgical, and funeral benefits to injured persons, irrespective of legal liability of the insured, arising out of the death, injury, or disablement of any person or arising out of damage to the economic interest of any person, as the result of negligence in rendering expert, fiduciary, or professional service. (L) Congenital defects. Insurance against congenital defects in human beings.(M) Livestock insurance. Insurance against loss or damage to livestock and services of a veterinary for such animals. (N) Elevator. Insurance against loss of or damage to any property of the insured, resulting from the ownership, maintenance, or use of elevators, except loss or damage by fire, and to make inspections of and issue certificates of inspection upon elevators. (O) Entertainments. Insurance indemnifying the producer of any motion picture, television, radio, theatrical, sport, spectacle, entertainment, or similar production, event, or exhibition against loss from interruption, postponement, or cancellation thereof due to death, accidental injury, or sickness of performers, participants, directors, or other principals. (P) Failure to file certain instruments. Insurance against loss resulting from failure to file or record written instruments affecting the title of or creating a lien upon personal property. (Q) Miscellaneous. Insurance against any other kind of loss, damage, or liability properly a subject of insurance and not within any other kind of insurance as defined in this chapter, if such insurance is not disapproved by the commissioner as being contrary to law or public policy; provision of medical, hospital, surgical, and funeral benefits, and of coverage against accidental death or injury, as incidental to and part of other insurance as stated under subdivisions (3)(A), (C), (E), (H), (K), and (N) of this subsection shall for all purposes be deemed to be the same kind of insurance to which it is so incidental, and shall not be subject to provisions of this code applicable to life or health insurances. (4) Marine and transportation insurance, which includes insurance against any and all kinds of loss or damage to: (A) Vessels, craft, aircraft, cars, automobiles, and vehicles of every kind, as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, money, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests, and all other kinds of property and interests therein, in respect to, appertaining to, or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed, or similarly prepared for shipment or while awaiting shipment or during delays, storage, transshipment, or reshipment incident thereto, including marine builders risks and all personal property floater risks. (B) A person or to property in connection with or appertaining to a marine, inland marine, transit, or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance, or use of the subject matter of the insurance (but not including life insurance or surety bonds or insurance against loss by reason of bodily injury to the person arising out of the ownership, maintenance, or use of automobiles). (C) Precious stones, jewels, jewelry, gold, silver, and other precious metals, whether used in business or trade or otherwise and whether in the course of transportation or otherwise. (D) Bridges, tunnels, and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents, and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot or civil commotion, or both are the only hazards to be covered; piers, wharves, docks, and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot or civil commotion, or both, other aids to navigation and transportation, including dry docks and marine railways. (5) Marine protection and indemnity insurance, which is insurance against, or against legal liability of the insured for, loss, damage, or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair, or construction of a vessel, craft, or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness, or death or for loss of or damage to the property of another person. (6) Wet marine and transportation insurance, which is that part of marine and transportation insurance that includes only: (A) Insurance upon vessels, crafts, hulls, and of interests therein or with relation thereto.(B) Insurance of marine builders risks, marine war risks and contracts or marine protection and indemnity insurance. (C) Insurance of freights and disbursements pertaining to a subject of insurance coming within this section. (D) Insurance of personal property and interests therein, in the course of exportation from or importation into any country, and in the course of transportation coastwise or on inland waters, including transportation by land, water, or air from point of origin to final destination, in respect to, appertaining to, or in connection with, any and all risks or perils of navigation, transit, or transportation, and while being prepared for and while awaiting shipment, and during delays, storage, transshipment, or reshipment incident thereto. (7) Property insurance, which is insurance on real or personal property of every kind and of every interest therein, whether on land, water, or in the air, against loss or damage from any and all hazard or cause, and against loss consequential upon such loss or damage, other than noncontractual legal liability for such loss or damage. Property insurance does not include title insurance, as defined in subdivision (9) of this subsection. (8) Surety insurance, which includes:(A) Fidelity insurance, which is insurance guaranteeing the fidelity of persons holding positions of public or private trust. (B) Insurance or guaranty of the obligations of employers under workers compensation laws. (C) Insurance guaranteeing the performance of contracts, other than insurance policies, and guaranteeing and executing bonds, undertakings, and contracts of suretyship. (D) Insurance indemnifying banks, bankers, brokers, financial or monied corporations or associations against loss, resulting from any cause, of bills of exchange, notes, bonds, securities, evidences of debt, deeds, mortgages, warehouse receipts, or other valuable papers, documents, money, precious metals and articles made therefrom, jewelry, watches, necklaces, bracelets, gems, precious and semiprecious stones, including any loss while the same are being transported in armored motor vehicles, or by messenger, but not including any other risks of transportation or navigation; also insurance against loss or damage to such an insureds premises or to his or her furniture, furnishings, fixtures, equipment, safes, and vaults therein, caused by burglary, robbery, theft, vandalism, or malicious mischief, or any attempt thereat. (9) Title insurance, which is the certification or guarantee of title or ownership, or insurance of owners of property or others having an interest therein or liens or encumbrances thereon, against loss by encumbrance, or defective titles, or invalidity, or adverse claim to title. A title insurer may also insure the identity, due execution, and validity of any note or bond secured by mortgage or deed of trust and the identity, due execution, validity, and recording of any such mortgage or deed of trust. This definition shall not be deemed to apply to the business of preparing and issuing abstracts of title to or ownership of property or certifying to the validity of documents relative to such titles. (10) Multiple line insurance, which is insurance combining on a mandatory basis in a single policy coverage coming within two or more of the kinds of insurance as defined in this chapter, other than title insurance, life insurance, or the granting of annuities, and for either a divisible or an indivisible rate or premium. (11) Inland marine insurance means any insurance that is defined by statute, rule, or general custom as inland marine insurance. (b) It is intended that certain insurance coverages may come within the definitions of two or more kinds of insurance as defined in this chapter, and the inclusion of such coverage within one definition shall not exclude it as to any other kind of insurance within the definition of which such coverage is likewise reasonably includible. Unless the context requires otherwise, a corporation engaged in the business described in subdivision (a)(1) of this section may also do any and all insurance business comprised in subdivision (a)(2) of this section relating to health insurance and subdivision (a)(3)(D) of this section relating to workers compensation. A corporation engaged in business comprised in any subdivision except subdivision (a)(1) of this section may do any business comprised in any of the other subdivisions except subdivision (a)(1) of this section, provided the requirements of law are complied with, and provided further that a company not engaged in writing a particular class of insurance on July 1, 1968, shall not write insurance of such class thereafter without approval of the Commissioner after he or she is satisfied that such insurance will be soundly underwritten on the strength of adequate capital and reserves considering the risks insured against and the experience, resources, and responsibility of the underwriter. In addition to any power to engage in any other kind of business besides an insurance business that may be specifically conferred by this part, an insurance company organized under this section may engage in other kinds of business to the extent necessarily or reasonably incidental to the kind or kinds of insurance business that it is authorized to do under this section. (c) Nothing in this section shall authorize a company to issue a policy of title insurance in this State until the applicant therefor has been notified in writing by such company of all defects in title that will be excluded from coverage under the prospective policy. Such notice shall set forth in descriptive terms the nature of such excluded defects. Upon receipt of such notice, the applicant shall have the option of cancelling his or her application without any liability therefor to said company. (d) Any corporation or organization that on July 1, 1968 had been organized and was existing under a special charter granted by the General Assembly prior hereto, or had been organized and was existing under insurance laws in effect prior hereto, may continue to do a business of insurance specified in this section and authorized by its charter under the continued supervision of the Commissioner. (e) The provisions of this title relating to the regulation of the business of insurance shall not apply to activities engaged in by ambulance services and first responder services for which they are licensed by the Board of Health pursuant to 24 V.S.A. chapter 71. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  1); amended 1981, No. 165 (Adj. Sess.),  1; 1993, No. 166 (Adj. Sess.),  1; 2021, No. 139 (Adj. Sess.),  12, eff. May 27, 2022.) 
 3301a. Insurance defined
As used in this title, insurance means an agreement to indemnify or otherwise assume an obligation, provide services or any other thing of value on the happening of a particular event or contingency, or to provide indemnity for loss with respect to a specified subject by specified circumstances in return for a consideration. Without limiting the generality of the term, insurance shall include any business defined in section 3301 of this title, annuity contracts, and the business of health maintenance organizations and continuing care retirement communities. (Added 2001, No. 71,  2, eff. June 16, 2001.) 
 3302. Plan of organization; incorporators
For the purpose of this chapter an insurance company may be incorporated as a stock insurer with its capital divided into shares and owned by the stockholders, or a mutual insurer without capital stock the governing body of which is elected by its policyholders. There shall be not less than 15 incorporators of whom not less than two-thirds shall be citizens of this State. Except as provided in sections 4831 through 4856 of this title, no unincorporated association shall be formed after July 1, 1968, for the purpose of doing any insurance business in Vermont. Those domestic unincorporated associations which are doing insurance business of any kind under authority of the Commissioner on July 1, 1968, may continue to carry on their business subject to the provisions of this part. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  2); amended 1971, No. 31,  2, eff. March 31, 1971.) 
 3303. Mutual companies; directors, charter provisions as to
The articles of association or bylaws of a mutual insurer shall set forth the manner in which its board of directors or other governing body shall be elected, and in which meetings of policyholders shall be called, held, and conducted, subject to such procedures as may be required by the Commissioner under section 75 of this title. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  3); amended 1971, No. 51,  1, eff. July 1, 1971.) 
 3304. Capital and surplus requirements
To qualify for authority to transact the business of insurance, a stock insurer seeking such authorization shall possess and thereafter maintain unimpaired paid-in capital of not less than $2,000,000.00 and, when first so authorized, shall possess and maintain free surplus of not less than $3,000,000.00. Such capital and surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the State Treasurer, such securities as designated by the insurer and approved by the Commissioner, in an amount and subject to such conditions determined by the Commissioner. Such conditions shall include a requirement that any interest or other earnings attributable to such cash or marketable securities shall inure to the benefit of the insurer until such time as the Commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer. The Commissioner may prescribe additional capital or surplus for all stock insurers authorized to transact the business of insurance based upon the type, volume, and nature of insurance business transacted. The Commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the Commissioner. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  4); amended 1991, No. 101,  1; 2003, No. 105 (Adj. Sess.),  2; 2005, No. 36,  9, eff. June 1, 2005.) 
 3305. Petition; hearing
Before the articles of association are transmitted to the Secretary of State, the incorporators shall petition the Commissioner to hold a public hearing, in the county where the proposed corporation is to have its principal office, to determine whether the establishment and maintenance of the proposed corporation will promote the general good of the State. The Commissioner shall thereupon appoint a time and place in such county for hearing the petition and shall make an order for the publication of the substance of the petition and of the time and place of the hearing three weeks successively in a newspaper published in the county, or, for want thereof, in an adjoining county, the last publication to be at least 12 days before the day appointed for the hearing. If, after the hearing, the Commissioner finds and adjudges that the establishment and maintenance of the proposed corporation will promote the general good of the State, he or she shall give the incorporators a certificate to that effect under his or her seal. In determining the general good of the State as herein required, the Commissioner shall consider: (1) The character, reputation, financial standing, and purposes of the organizers, incorporators, and subscribers organizing the proposed insurer or organization. (2) The character, reputation, financial responsibility, insurance experience, and business qualifications of its proposed officers and directors. (3) Such other aspects of the proposed insurer or financing as he or she may deem advisable. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  5).)
 3306. Duties of Secretary of State, records
The articles of association, the certificate, and the organization fee shall be transmitted to the Secretary of State, who shall thereupon record both the articles and the certificate. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  6).) 
 3307. Consideration for stock
(a) The capital stock of a corporation doing any and all insurance and reinsurance comprised in any one or more of the subdivisions of section 3301 of this title shall be issued at not less than par and under any of the following conditions, subject to the approval of the Commissioner: (1) For cash.(2) For the stock of another insurance company on a reorganization or merger.(3) For the stock of the same insurance company at the same or a different par value or preference than that of the stock called for exchange. (4) As a stock dividend. Any increase in par value under subdivisions (2) and (3) of this subsection and of the stock dividend provided in this subdivision are chargeable against the issuing corporations surplus, undivided profits or a reserve established for that purpose. However, the limitations of this subdivision shall not exclude the payment of cash for a part of any increase in par value provided in subdivisions (2) and (3) of this subsection. (b) Whenever the charter or articles of association of an insurance company are so amended as to authorize an increase in its capital stock, it shall not be required to issue the whole amount of authorized increase, nor required to make any statement of capital except to the amount actually paid in or issued in accordance with the provisions of this chapter. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  7).) 
 3308. List of stockholders; certificate to transact business; liability of president and directors
When the entire capital stock of a corporation having capital stock has been issued, a complete list of the stockholders with the name and post office address of each and the number of shares held by each shall be filed with the Commissioner, who shall examine the corporation. If, after such examination, it appears that the whole capital stock has been paid in cash, and the Commissioner has considered the criteria in section 3361 of this chapter, the Commissioner shall issue a certificate under his or her seal authorizing the corporation to begin the transaction of business, which shall be filed with the Secretary of State. A corporation having capital stock shall not begin the transaction of business until the certificate has been issued and filed. If a corporation commences business before a certificate is issued and filed, the president and directors assenting thereto are personally liable for all debts incurred before the certificate is issued and filed. (Amended 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  8); 2015, No. 15,  1, eff. May 1, 2015.) 
 3308a. Reorganization formations
Notwithstanding sections 3302, 3303, 3304, 3307, 3308, and 3309 of this title, the Commissioner may permit the formation of an insurance company without capital or surplus to be merged with or into or consolidated with an existing insurance company authorized to do business under this chapter for the purpose of facilitating a reorganization or acquisition transaction, including a triangular merger transaction, involving such existing company. There shall be no more than one authorized insurance company surviving reorganization under this section. (Added 1997, No. 54,  1, eff. June 26, 1997.) 
 3309. Mutual insurers to commence business; when
(a) A corporation that, according to its charter, is not to have a capital stock shall not receive authorization to commence business until: (1) it complies with preliminary requirements for the procurement of an adequate amount of subscriptions for insurance and possesses and thereafter maintains unimpaired basic surplus of not less than $2,000,000.00 and, when first authorized, shall possess free surplus of not less than $3,000,000.00; and (2) the Commissioner has considered the criteria in section 3361 of this chapter.(b) The Commissioner in his or her discretion may establish lesser surplus amount requirements in the case of affiliated corporations jointly conducting the business of insurance under a pooling agreement. Such surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the State Treasurer, such securities as designated by the insurer and approved by the Commissioner, in an amount and subject to conditions determined by the Commissioner. The conditions shall include a requirement that any interest or other earnings attributable to cash or marketable securities shall inure to the benefit of the insurer until the Commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer. The Commissioner may prescribe additional surplus based upon the type, volume, and nature of insurance business transacted. (Amended 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  9); 1991, No. 101,  2; 2003, No. 105 (Adj. Sess.),  3; 2015, No. 15,  2, eff. May 1, 2015.) 
 3310. Amendment of charter
A corporation formed under the provisions of this chapter or by a special act of the Legislature may amend its articles of association or its charter as provided therein or in the absence of such provision by vote of three-fourths of its stockholders (in the case of a stock company) or members (in the case of a mutual company) present at a meeting thereof, provided the Commissioner, in all cases, on petition and after a hearing held substantially as is specified in section 3305 of this title, certifies that such amendment shall not be detrimental to the policyholders and such other persons as have an interest in said corporation. His or her certificate shall be recorded with the certificate of amendment. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  10).) 
 3311. Quorum
In the case of a mutual insurance company, the policyholders or annuitants therein, who attend a duly called meeting, shall constitute a quorum. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  11).) 
 3312. Construction with other laws
(a) Corporations formed under the provisions of this subchapter shall have the privileges and be subject to the provisions of the general corporation law as well as the applicable provisions contained in this part. In the event of conflict between the provisions of the general corporation law and the provisions of this part, the latter shall control. Such corporations shall not be required to make any annual report except as provided in this part. (b) A corporation formed prior to July 1, 1968, for any purpose for which a corporation may be formed under this subchapter, with respect to all acts done after such date, shall be deemed to be within the provisions of this subchapter and of the general corporation law, in like manner as a corporation formed under this subchapter. But the foregoing provisions shall be subject to all such exceptions and qualifications as are contained in 11 V.S.A.  2. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  12).) 
 3313. Proxies
(a) The Commissioner may prescribe by rules and regulations, the form, content and manner of solicitation of any proxy, consent, or authorization in respect of any voting security issued by a domestic insurer as necessary or appropriate in the public interest, or for protection of investors in the securities, or to insure the fair dealing in the securities. (b) The term voting security as used in this section shall mean any instrument issued by a domestic stock insurance company which, in law or by contract, gives the holder the right to vote, consent, or authorize any corporate action of the insurer. (c) This section shall not apply to voting securities of a domestic insurer if the securities are registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. (d) Any person, domestic insurer, or director, officer, or employee of the insurer, shall not solicit or permit the use of his or her name to solicit, by mail or otherwise, any person to give a proxy, consent, or authorization in respect of a voting security issued by the insurer in contravention of any rule or regulation made under this section. (e) Failure to comply with any rule or regulation made under this section shall be unlawful and any proxy or consent obtained in violation of this section or in contravention of any rule or regulation made thereunder shall be void. Any domestic insurer or any person who is legally entitled to vote, consent, or authorize by virtue of being the holder of record of such a security, or the Commissioner, if the other parties fail to act within 15 days after the date on which the vote was cast or counted, may enforce compliance with any rule or regulation made under this section, by appropriate civil action, except that no suit shall be brought more than 30 days after the date on which the vote, consent, or authorization was to have been effected. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 1,  13).) 
 3314. Annual financial statements; reports; filing fee
Notwithstanding any other provision of law, any insurer, of whatever form and description other than captive insurance companies organized under chapter 141 of this title, that is required by statute to file an annual statement or report of financial condition, shall pay a fee of $100.00 for filing its statement or report with the Commissioner. (Added 1985, No. 236 (Adj. Sess.),  13.) 
 3315. Coordinated regulation
Notwithstanding section 5112 of this title and any other provision of this title, the Commissioner may cooperate and coordinate with the insurance supervisory authorities of other states or through the facilities or subsidiaries of a national organization which facilitate regulatory efficiency and cooperation on a nationwide basis. The areas of cooperation and coordination contemplated by this section include the following: solvency oversight; company and producer licensing, appointment, and discipline; rate and forms review and approval; and investigation and examination of persons subject to the insurance laws of this State. The Commissioner may enter into agreements or contracts concerning the coordination and cooperation contemplated by this section with such other state or organization. The Commissioner may adopt, by rule, any uniform standards or procedures as are necessary to fully implement cooperative and coordinated supervision of the business of insurance. In the event of conflict between this provision and other pertinent provisions of parts 3 and 4 of this title, the Commissioner may elect that this provision prevail, if the Commissioner deems that such election is in the best interests of the State. (Added 2001, No. 71,  3, eff. June 16, 2001.) 
 3316. Corporate governance; disclosure
(a) Purpose. The purpose of this section is to:(1) provide the Commissioner a summary of an insurer or insurance groups corporate governance structure, policies, and practices so the Commissioner may gain and maintain an understanding of the insurers corporate governance framework; (2) outline the requirements for completing a corporate governance annual disclosure with the Commissioner; and (3) provide for the confidential treatment of the corporate governance annual disclosure and related information that contains confidential and sensitive information related to an insurer or insurance groups internal operations and proprietary and trade secret information that, if made public, could potentially cause the insurer or insurance group competitive harm or disadvantage. (b) Scope. This section shall not be construed to prescribe or impose corporate governance standards and internal procedures beyond that which is required under applicable State corporate law. Nor shall it be construed to limit the Commissioners authority, or the rights or obligations of third parties, under section 13 of this title. (c) Application. The requirements of this section shall apply to all insurers domiciled in Vermont.(d) Definitions. As used in this section:(1) Corporate Governance Annual Disclosure or CGAD means a confidential report on corporate governance filed by the insurer or insurance group as required by this section. (2) Insurance group means those insurers and affiliates included within an insurance holding company system as defined in subdivision 3681(4) of this title. (3) Insurer means an insurance company that offers any of the types of insurance itemized under subsection 3301(a) of this chapter, except that it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state. It shall also mean an insurance group. (4) ORSA Summary Report means a report as defined in subdivision 3582(6) of this chapter.(e)(1) Disclosure. On or before June 1 of each year, beginning in the year 2016, an insurer shall submit to the Commissioner a CGAD, which contains the information described in subdivision (g)(2) of this section. Notwithstanding a request from the Commissioner made under subdivision (3) of this subsection, if the insurer is a member of an insurance group, the insurer shall submit the report required by this subsection to the Commissioner of the lead state for the insurance group, in accordance with the laws of the lead state, as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the National Association of Insurance Commissioners (NAIC). (2) The CGAD shall include a signature of the insurers chief executive officer or corporate secretary attesting to the best of that individuals belief and knowledge that the insurer has implemented the corporate governance practices and that a copy of the disclosure has been provided to the insurers board of directors or the appropriate committee thereof. (3) An insurer not required to submit a CGAD under this section shall do so upon the Commissioners request. (4) For purposes of completing the CGAD, the insurer may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, depending upon how the insurer has structured its system of corporate governance. The insurer is encouraged to make the CGAD disclosures at the level at which: the insurers risk appetite is determined; the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors is coordinated and exercised; or legal liability for failure of general corporate governance duties would be placed. If the insurer determines the level of reporting based on these criteria, it shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in level of reporting. (5) The review of the CGAD and any additional requests for information shall be made through the lead state as determined by the procedures within the most recent Handbook referenced in subdivision (1) of this subsection. (6) Insurers providing information substantially similar to the information required by this section in other documents provided to the Commissioner, including proxy statements filed in conjunction with Form B requirements, or other state or federal filings provided to the Commissioner, shall not be required to duplicate that information in the CGAD, but shall only be required to cross reference the document in which the information is included. (f) Rules. The Commissioner may adopt rules and issue orders necessary to carry out the provisions of this section. (g)(1) CGAD contents. An insurer has discretion over the responses to CGAD inquiries, provided CGAD contains the material information necessary to permit the Commissioner to gain an understanding of the insurers corporate governance structure, policies, and practices. The Commissioner may request additional information he or she deems material and necessary to provide the Commissioner with a clear understanding of the corporate governance policies, and the reporting or information system or controls implementing those policies. (2) Notwithstanding subdivision (1) of this subsection, CGAD shall be prepared consistent with CGAD rules adopted by the Commissioner. Rules adopted by the Commissioner under this subdivision shall be consistent with the NAIC Model Regulation on CGAD. Documentation and supporting information shall be maintained and made available upon examination or upon request of the Commissioner. (h)(1) Confidentiality. Documents, materials, or other information, including CGAD, in the possession or control of the Department obtained or created by, or disclosed to the Commissioner or any other person under this section, are recognized by this State as being proprietary and to contain trade secrets. All such documents, materials, or other information are confidential and privileged, and are exempt from public inspection and copying under the Public Records Act. In addition, they are not subject to subpoena nor discovery, nor admissible in evidence in any private civil action. However, the Commissioner is authorized to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as a part of the Commissioners official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. Nothing in this subsection shall be construed to require written consent of the insurer before the Commissioner may share or receive confidential documents, materials, or other CGAD-related information pursuant to subdivision (3) of this subsection for the purpose of assisting in the performance of the Commissioners regular duties. (2) Neither the Commissioner nor any person who receives documents, materials, or other CGAD-related information, through examination or otherwise, while acting under the authority of the Commissioner, or with whom such documents, materials, or other information are shared pursuant to this section, is permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subdivision (1) of this subsection. (3) In order to assist in the performance of the Commissioners regulatory duties, the Commissioner may: (A) Upon request, share documents, materials, or other CGAD-related information including confidential and privileged documents, materials, or information subject to subdivision (1) of this subsection including proprietary and trade secret documents and materials with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in subsection 3695(c) of this chapter, the NAIC, and with third-party consultants pursuant to subsection (i) of this section, provided the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and verifies in writing the legal authority to maintain confidentiality. (B) Receive documents, materials, or other CGAD-related information, including otherwise confidential and privileged documents, materials or information, including proprietary and trade-secret information or documents, from regulatory officials of other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in subsection 3695(c) of this chapter, and from the NAIC, and shall maintain as confidential or privileged any documents, materials, 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, materials, or information. (4) The sharing of information and documents by the Commissioner pursuant to this section does not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this section. (5) A waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other CGAD-related information shall not occur as a result of disclosure of such CGAD-related information or documents to the Commissioner under this section or as a result of sharing as authorized under this section. (i)(1) NAIC and third-party consultants. The Commissioner may retain, at the insurers expense, third-party consultants, including attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioners staff he or she deems reasonably necessary to assist with the review of the CGAD and related information or with the insurers compliance with this section. (2) A person retained under this subsection is under the direction and control of the Commissioner and shall act in a purely advisory capacity. (3) The NAIC and third-party consultants are subject to the same confidentiality standards and requirements as the Commissioner. (4) As part of the retention process, a third-party consultant shall verify to the Commissioner, with notice to the insurer, that it is free of a conflict of interest and that it has internal procedures in place to monitor compliance with a conflict and to comply with the confidentiality standards and requirements of this section. (5) A written agreement with the NAIC or a third-party consultant governing the sharing and use of information provided under this section shall contain the following provisions and expressly require the written consent of the insurer prior to making public such information: (A) Specific procedures and protocols for maintaining the confidentiality and security of CGAD-related information shared with the NAIC or a third-party consultant pursuant to this subdivision (5). (B) Procedures and protocols for sharing by the NAIC only with other state regulators from states in which an insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality. (C) A provision specifying that ownership of the CGAD-related information shared with the NAIC or a third-party consultant remains with the Department and that use of such information by the NAIC or a third-party consultant is subject to the direction of the Commissioner. (D) A provision prohibiting the NAIC and third-party consultants from storing the information in a permanent database after the underlying analysis is completed. (E) A provision requiring the NAIC and third-party consultants to provide prompt notice to the Commissioner and to the insurer regarding any subpoena, request for disclosure, or request for production of the insurers CGAD-related information. (F) A requirement that the NAIC and third-party consultants consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or third-party consultant pursuant to this section. (j) Sanctions. An insurer failing, without just cause, to timely file the CGAD as required by this section shall be required, after notice and hearing, to pay a penalty of $10,000.00 for each days delay, to be recovered by the Commissioner, and the penalty so recovered shall be paid into the General Fund of this State. The maximum penalty under this section is $1,000,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer. (k) Severability Clause. If any provision of this section other than subsection (h), or the application thereof to any person or circumstance, is held invalid, such determination shall not affect the provisions or applications of this section which can be given effect without the invalid provision or application, and to that end the provisions of this section, with the exception of subsection (h), are severable. (Added 2015, No. 10,  1, eff. May 1, 2015.) 
 3361. Requirements for license
(a) A foreign or alien insurer shall not transact business in this State unless it first obtains from the Commissioner a license authorizing it to do so. Before receiving a license, it shall file with the Commissioner a certified copy of its charter and bylaws, a statement under oath of its president and secretary, showing its financial condition, and any other statements required by the Commissioner. (b) An insurer making an application or reapplication for an original license to transact business in this State shall pay to the Commissioner a nonrefundable fee of $200.00 for examining, investigating, and processing the application. In addition, each insurer shall pay a license fee for the year of registration and a renewal fee for each year thereafter of $300.00 not including fees for producers licenses and renewals thereof. The annual renewal fee of $300.00 shall be paid on or before March 1. (c) If the Commissioner is satisfied with the copies and statements that such insurer has complied with the provisions of this part, he or she may grant a license authorizing it to do insurance business by lawfully constituted and licensed agents only, until April 1 thereafter, which license may be renewed. In granting or renewing such license to do business the Commissioner shall consider the criteria established for the approval and certification of domestic insurers hereinabove set forth, within the context of the stated legislative policy. Notwithstanding the provisions of Title 11A, any insurer licensed by the Commissioner under this section may transact insurance business in this State. Such corporations shall not be required to make any annual report except as provided in this title. This section shall not be construed to prohibit residents of this State from procuring insurance at the home office of a foreign insurer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  1); amended 1977, No. 148 (Adj. Sess.),  1, eff. date, see note set out below; 1981, No. 42,  1; 1993, No. 235 (Adj. Sess.),  9b, eff. June 21, 1994; 2001, No. 71,  4, eff. June 16, 2001; 2005, No. 122 (Adj. Sess.),  8.) 
 3362. Authority to transact various kinds of insurance business
A foreign or alien insurer may transact more than one kind of insurance business, provided the charter of such corporation authorizes it to transact such different kinds of insurance business and its capital is sufficient to provide the required capital for each kind of business to be transacted. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  2); amended 2017, No. 134 (Adj. Sess.),  1.) 
 3363. Revocation of license
If such insurer violates any of the laws of this State relating to insurance companies, the Commissioner may revoke its license and cause notice thereof to be published at least one week in two daily newspapers, one of general circulation in Montpelier and one of general circulation in Burlington. An agent of such insurer shall not, after the first publication of such notice, issue or renew a policy of insurance in its behalf. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  3).) 
 3364. Authorization for investment purposes only
Such insurer may make investments in this State without qualifying to do business in this State as a foreign corporation under the general corporation law or as a foreign or alien insurer under this article provided such insurer constitutes the Secretary of State as his or her agent for the service of process and enters into a stipulation with said Secretary to submit to the jurisdiction of the courts of this State. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  4).) 
 3365. Plan of organization
Such insurers admitted to do business in this State under authority of this article shall be incorporated as stock or mutual companies as defined in section 3302 of this title. Except as provided in sections 4831 through 4856 of this title, no unincorporated or joint stock association shall be admitted after July 1, 1968, for the purpose of doing any insurance business in Vermont. Such unincorporated or joint stock associations which are lawfully admitted and qualified on such date may continue to carry on their business in this State subject to the provisions of this part, but they shall not write any new or additional lines of insurance after such date. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  5); amended 1971, No. 31,  3, eff. March 31, 1971.) 
 3366. Assets of companies
(a)(1) A foreign or alien insurer authorized to do business in this State shall possess and thereafter maintain unimpaired paid-in capital or basic surplus of not less than $2,000,000.00 and, when first so authorized, shall possess and maintain free surplus of not less than $3,000,000.00. (2) The capital and surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the State Treasurer, such securities as designated by the insurer and approved by the Commissioner, in an amount and subject to conditions determined by the Commissioner. The conditions shall include a requirement that any interest or other earnings attributable to such cash or marketable securities shall inure to the benefit of the insurer until such time as the Commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer. (3) The Commissioner may prescribe additional capital or surplus for all insurers authorized to transact the business of insurance based upon the type, volume, and nature of insurance business transacted. The Commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the Commissioner. (b) The express purpose of subsection (a) of this section and the Commissioners power to require the deposit of cash or marketable securities set forth therein is to protect the interests of Vermont policyholders in the event of the insolvency of the insurer. Except to the extent it would contravene applicable provisions of 9A V.S.A. Article 9, the State of Vermont shall be deemed to control the funds on deposit and to have a lien on the funds for the benefit of the Vermont policyholders affected by the insolvency. The lien so created shall be superior to any lien filed by a general creditor of the insurer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  6); amended 2003, No. 105 (Adj. Sess.),  4; 2005, No. 36,  10, eff. June 1, 2005; 2019, No. 57,  3.) 
 3367. Retaliatory provisions
(a) If another state or country imposes upon or requires of a domestic insurer, association, or society, or a surety or guaranty company, or its agents doing business therein, fees, fines, penalties, deposits, obligations, or prohibitions exceeding those imposed by this State upon or required of a foreign or alien insurer, association, or society, or a surety or guaranty company doing business herein, an insurer, association, or society or a surety or guaranty company organized under the laws of such other state or country and its agents doing business in this State, shall be subject to the fees, fines, penalties, deposits, obligations, or prohibitions similar to those so imposed in such other state or country, and the same shall be imposed, required, and enforced as like fees, fines, penalties, deposits, obligations, and prohibitions are under the laws of this State; but this section shall not apply unless the fees required by such other state or country of an insurer, association, or society, or a surety or guaranty company of this State doing business in such other state or country are larger in the aggregate on the same amount of business than the fees required by this State of an insurer, association, or society, or a surety or guaranty company of such other state or country doing business in this State. When any other state prohibits all foreign and domestic insurers and associations from writing therein any line or class of insurance permitted to be written in this State, companies and associations domiciled in such other state or country shall not by reason of this section be prohibited from writing such line or class in this State. The Commissioner need not assert the provisions of this section against a foreign company with respect to its request for a certificate of authority to do business in this State if the Commissioner determines that such company would otherwise comply with the requirements for such certificate. (b) If the Commissioner determines that an insurance department or other similar regulatory entity of any other state or territory of the United States has imposed any sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind on domestic companies authorized to transact insurance in this State and licensed to transact business in such other state or territory, (1) because the insurance department of this State is not accredited or otherwise approved by the National Association of Insurance Commissioners, or by any agent or representative of the association; or (2) because the insurance department of this State has not complied with any directive, financial annual statement requirement, model act or regulation, market conduct or financial examination report or requirement, or any report or requirement of any kind imposed directly, or indirectly through the laws or regulations of another state, by the National Association of Insurance Commissioners, or by any agent or representative of the association; or (3) because a domestic insurer has refused to comply with, file, or pay any requirement, report, fee, assessment, or charge determined by the Commissioner to be unreasonable and imposed directly, or indirectly through the laws or regulations of another state, by the National Association of Insurance Commissioners, or by any agent or representative of the association, then the Commissioner shall impose similar sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations of any kind on the domestic companies of such other state or territory. The Commissioner shall adopt by rule standards and procedures for imposing, calculating, apportioning, or collecting such similar sanctions, fines, penalties, financial or deposit requirements, prohibitions, restrictions, regulatory requirements, or other obligations. (c) If any other state requires a domestic insurer licensed to transact insurance in such state to pay, directly or indirectly, a fee, assessment, or charge of any kind to the National Association of Insurance Commissioners in excess of the fees, assessments, or charges, if any, approved by the Commissioner under section 3552 of this title, such fees, assessments, or charges shall be considered excessive and shall be imposed on the domestic insurers of such other state doing business in this State. The Commissioner shall adopt by rule standards and procedures for imposing, calculating, apportioning, and collecting such excessive fees, assessments, or charges. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 2,  7); amended 1967, No. 353 (Adj. Sess.),  7; 1995, No. 83 (Adj. Sess.),  4.) 
 3368. Transacting business without certificate of authority prohibited
(a) It shall be unlawful for any insurer to enter into a contract of insurance as an insurer or to transact insurance business in this State as set forth in subsection (b) of this section, without a certificate of authority from the Commissioner of Financial Regulation; provided that this subsection shall not apply to: (1) The lawful transaction of surplus lines insurance.(2) The lawful transaction of reinsurance by insurers.(3) Transactions in this State involving a policy lawfully solicited, written, and delivered outside this State covering only subjects of insurance not resident, located, or expressly to be performed in this State at the time of issuance and which transactions are subsequent to the issuance of such policy. (4) Transactions in Vermont involving group or blanket insurance and group annuities if:(A) the master policy was lawfully issued and delivered in a state in which the insurer was authorized to do an insurance business; (B)(i) no more than 25 of the certificate holders are Vermont residents; or(ii) the master policy covers one or more certificate holders who reside in Vermont, are employed at a workplace located outside Vermont and have obtained insurance coverage through the workplace; (C) the person or entity holding the master policy exists primarily for purposes other than to procure insurance, is not a Vermont corporation or resident, and does not have its principal office in Vermont; and (D) the policy is not offered for sale by an agent or broker licensed in Vermont, offered by mail to a Vermont resident, directly advertised to a Vermont resident, or marketed in Vermont in a similar manner. An insurer exempted from the requirements of this subsection by the provisions of this subdivision shall not issue or deliver a policy or certificate to a resident of Vermont without including a notice approved by the Commissioner that the policy or certificate is not subject to regulation by Vermont. (5) Transactions involving contracts issued by a life insurance or annuity company, organized and operated without profit, to any private shareholder or individual exclusively for the purpose of aiding and strengthening educational institutions by issuing insurance and annuity contracts only to or for the benefit of such institutions and individuals engaged in the service of such institution. (6) Transactions involving any insurance company or underwriter issuing contracts of insurance to industrial insured, or to industrial insureds, or to contracts of insurance issued to an industrial insured. For purposes of this section, an industrial insured is: (A) an insured who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer; and (B) whose aggregate annual premiums for insurance on all risks total at least $25,000.00; and (C) has at least 25 full-time employees.(7) Transactions involving wet marine and transportation insurance covering property in the course of transportation by land, air, or water, to, from, or through this State and including any preparation or storage incidental thereto. (8) Transactions in this State involving insurance on the property or operations of aircraft or railroads engaged in interstate or foreign commerce. (9) Transactions in this State involving a policy of insurance or annuity contract issued prior to July 1, 1968, with regard to subdivisions (1) through (7) of this subsection (a) and prior to July 1, 1980, with regard to subdivision (8) of this subsection (a) of this section. (b) Any of the following acts in this State, effected by mail or otherwise by an unauthorized insurer, shall be included among those deemed to constitute transacting insurance business in this State: (1) the issuance or delivery of contracts of insurance to residents of this State;(2) the solicitation of applications for such contracts;(3) the collection of premium, membership fees, assessments, or other considerations for such contracts; or (4) the transaction of matters subsequent to the execution of such contracts and arising out of them. (c) Any insurer that violates subsection (a) of this section shall be required to pay an administrative penalty of not less than $500.00 nor more than $5,000.00 for each violation. (d) The failure of an insurer to obtain a certificate of authority shall not impair the validity of any act or contract of such insurer and shall not prevent such insurer from defending any action in any court of this State, but no insurer transacting insurance business in this State without a certificate of authority shall be permitted to maintain an action in any court of this State to enforce any right, claim, or demand arising out of the transaction of such business until such insurer shall have obtained a certificate of authority, and with respect to contracts solicited, issued, or delivered after passage of this act an insurer shall not maintain an action in this State upon such contract if, at the time of soliciting, issuing, or delivering such contract, it was doing business in this State without lawful authority. Nor shall an action be maintained in any court of this State by any successor or assignee of such insurer on any such right, claim, or demand originally held by such insurer until a certificate of authority shall have been obtained by such insurer or by an insurer which has acquired all or substantially all of its assets, and with respect to contracts solicited, issued, or delivered after passage of this act, a successor or assignee of such contract shall not maintain an action in this State upon such contract if, at the time of soliciting, issuing, or delivering such contract, the insurer was doing business in this State without lawful authority. (Added 1967, No. 353 (Adj. Sess.),  1; amended 1979, No. 197 (Adj. Sess.),  13; 1989, No. 106,  1, eff. Sept. 1, 1989; 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 167 (Adj. Sess.),  1; 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 3368a. Unauthorized and misleading transactions
(a) No person shall transact insurance business in this State unless the Commissioner has issued a license or certificate of authority to such person as required by section 3361 or 3368 of this title, or by chapters 123, 125, and 139 of this title. The provisions of this section shall not apply to an insurer licensed in this State or in any foreign or alien jurisdiction who is subject to section 3368 of this title. (b) No person shall act as an officer, director, or controlling person for a person who is engaged in a violation of subsection (a) of this section. As used in this subsection, controlling is defined by subdivision 3681(3) of this title. (c) No person shall directly or indirectly represent or aid a person in violating subsection (a) of this section. (d)(1) No person shall use in its advertisements or other marketing materials or communications the term insurance or any other term in a manner which could reasonably lead a person into believing that the product marketed, offered, or issued is insurance, unless such person is authorized under this title to transact the business of insurance. (2) No person shall use in its advertisements or other marketing materials or communications the terms health plan, coverage, co-pay, co-payments, deductible, preexisting conditions, guaranteed issue, premium, enrollment, preferred provider organization, or any other term in a manner that could reasonably mislead an individual into believing that the product marketed, offered, or issued is health insurance, unless such person is authorized under this title to transact the business of health insurance. (e) In addition to any other remedies or penalties provided by law:(1) For each violation of the provisions of subsection (a), (b), or (c) of this section a person shall be imprisoned not more than five years or fined not more than $10,000.00, or both. (2) For each violation of the provisions of subsection (d) of this section a person shall be imprisoned not more than two years or fined not more than $5,000.00, or both. (Added 2007, No. 178 (Adj. Sess.),  6.) 
 3369. Commissioner may enjoin unauthorized insurer
Whenever the Commissioner believes, from evidence satisfactory to him or her, that any foreign or alien insurer is violating or about to violate the provisions of section 3368 of this title, the Commissioner may, through the Attorney General of this State, cause a complaint to be filed in Superior Court to enjoin and restrain such insurer from continuing such violation or engaging therein or doing any act in furtherance thereof. The Court shall have the power to make and enter an order of judgment awarding such preliminary or final injunctive relief as in its judgment is proper. (Added 1967, No. 353 (Adj. Sess.),  2; amended 1973, No. 193 (Adj. Sess.),  3, eff. April 9, 1974.) 
 3370. Service of process upon unauthorized insurer by director
(a) Any act of entering into a contract of insurance as an insurer or transacting insurance business in this State as set forth in subsection (b) of section 3368 of this title, by an unauthorized foreign or alien insurer is equivalent to and shall constitute an appointment by such insurer, of the Secretary of State and his or her successor or successors in office, to be its true and lawful attorney upon whom may be served all lawful process in any action or proceeding against it, arising out of a violation of section 3368 of this title, and the commission of any of these acts constitutes an agreement that any such process so served shall be of the same legal force and validity as if served upon the insurer. (b) Service of such process shall be made by delivering and leaving with the Secretary of State two copies thereof and the payment to the Secretary of State of the fee prescribed by law. The Secretary of State shall forthwith mail by registered mail one of the copies of such process to such insurer at its last known principal place of business, and shall keep a record of all process so served upon him or her. Such process shall be sufficient service upon such insurer provided notice of such service and a copy of the process are, within 14 days thereafter, sent by registered mail or on behalf of the director to such insurer at its last known principal place of business, and such insurers receipt and the affidavit of compliance herewith by or on behalf of the director are filed with the clerk of the court in which such action or proceeding is pending on or before the return date of such process or within such further time as the court may allow. (c)(1) The court in any action or proceeding in which service is made in the manner provided in subsection (b) of this section may, in its discretion, order such postponement as may be necessary to afford such insurer reasonable opportunity to defend such action or proceeding. (2) Nothing in this section is to be construed to prevent an unauthorized foreign or alien insurer from filing a motion to quash a writ or to set aside service thereof made in the manner provided in subsection (b) of this section on the ground that such unauthorized insurer has not done any of the acts referred to in subsection (a) of this section. (d) No judgment by default shall be entered in any such action or proceeding until the expiration of 30 days from the date of the filing of the affidavit of compliance. (e) Nothing in this section contained shall limit or affect the right to serve any process, notice or demand required or permitted by law to be served upon any insurer in any other manner now or hereafter permitted by law. (Added 1967, No. 353 (Adj. Sess.),  3; amended 2017, No. 11,  3.) 
 3371. Limits of risk
(a) No insurer shall retain any risk on any one subject of insurance, whether located or to be performed in this State or elsewhere, in an amount exceeding 10 percent of its surplus to policyholders unless otherwise authorized by the Commissioner. (b) A subject of insurance for the purposes of this section, as to insurance provided for protection against fire, perils, hazards, or causes of loss, other than earthquake and other catastrophic hazards, includes all properties insured by the same insurer which are customarily considered by underwriters to be subject to loss or damage from the same fire or the same occurrence of any other hazard insured against. (c) Reinsurance ceded as authorized by section 3634a of this title shall be deducted in determining risk retained. As to surety risks, deduction shall also be made of the amount assumed by any licensed or authorized co-surety and the fair market value of any security deposited, pledged, or held subject to the suretys consent and for the suretys protection. (d) As to alien insurers, this section shall relate only to risks and surplus to policyholders of the insurers United States branch. (e) Surplus to policyholders for the purposes of this section, in addition to the insurers unassigned capital and surplus, shall be deemed to include any voluntary reserves which are not required pursuant to law, and shall be determined from the last sworn statement of the insurer on file with the Commissioner, or by the last report of examination of the insurer, whichever is the more recent at time of assumption of risk. (f) This section shall not apply to life or health insurance, annuities, title insurance, insurance of wet marine and transportation risks, workers compensation insurance, employers liability coverages, nor to any policy or type of coverage as to which the maximum possible loss to the insurer is not readily ascertainable on issuance of the policy. (Added 1985, No. 145 (Adj. Sess.),  1; amended 1993, No. 12,  1, eff. April 26, 1993.) 
 3381. Legislative purpose and policy
The purpose of this article is to subject certain insurers to the jurisdiction of courts of this State by or on behalf of insureds or beneficiaries under insurance contracts. The Legislature declares that it is a subject of concern that many residents of this State hold policies of insurance issued or delivered in this State by insurers while not authorized to do business in this State, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies. In furtherance of such State interest, the Legislature herein provides a method of substituted service of process upon such insurers and declares that in so doing it exercises its power to protect its residents and to define, for the purpose of this article, what constitutes doing business in this State, and also exercises powers and privileges available to the State by virtue of The McCarran-Ferguson Act, 15 U.S.C.  1011-1015, which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  1).) 
 3382. Acts which constitute Secretary of State agent for service of process
Any of the following acts in this State, effected by mail or otherwise, by an unauthorized foreign or alien insurer: (1) the issuance or delivery of contracts of insurance to residents of this State or to corporations authorized to do business therein; (2) the solicitation of applications for such contracts;(3) the collection of premiums, membership fees, assessments, or other considerations for such contracts; or (4) any other transaction of insurance business; is equivalent to and shall constitute an appointment by such insurer of the Secretary of State and his or her successor or successors in office, to be its true and lawful attorney, upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of an insured or beneficiary arising out of any such contract of insurance, and any such act shall be signification of its agreement that such service of process is of the same legal force and validity as personal service of process in this State upon such insurer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  2).) 
 3383. Service upon the Secretary of State notice to defendant
Such service of process shall be made by delivering to and leaving with the Secretary of State or some person in apparent charge of his or her office two copies thereof and the payment to him or her of such fee as is required by 12 V.S.A.  852. The Secretary of State shall forthwith mail by registered mail one of the copies of such process to the defendant at its last known principal place of business and shall keep a record of all processes so served upon him or her. Such service of process is sufficient, provided notice of such service and a copy of the process are sent within 14 days thereafter by registered mail by plaintiff or plaintiffs attorney to the defendant at its last known principal place of business, and the defendants receipt, or receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiffs attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  3); amended 2017, No. 11,  4.) 
 3384. Service upon other agents; notice to defendant
Service of process in any such action, suit, or proceeding shall in addition to the manner provided in section 3383 of this title be valid if served upon any person within this State who, in this State on behalf of such insurer, is: (1) soliciting insurance; or(2) making, issuing, or delivering any contract of insurance; or(3) collecting or receiving any premium, membership fee, assessment, or other consideration for insurance; and a copy of such process is sent within 14 days thereafter by registered mail by the plaintiff or plaintiffs attorney to the defendant at the last known principal place of business of the defendant, and the defendants receipt, or the receipt issued by the post office with which the letter is registered, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff or plaintiffs attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  4); amended 2017, No. 11,  5.) 
 3386. Effect on other modes of service
Nothing in sections 3382-3384 of this title shall limit or abridge the right to serve any process, notice, or demand upon any insurer in any other manner now or hereafter permitted by law. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  6).) 
 3387. Prerequisites to defense of action
Before any unauthorized foreign or alien insurer shall file or cause to be filed any pleading in any action, suit or proceeding instituted against it, such unauthorized insurer shall: (1) deposit with the clerk of the court in which such action, suit, or proceeding is pending, cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action; or (2) procure a certificate of authority to transact the business of insurance in this State. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  7).)
 3388. Postponements
The court in any action, suit, or proceeding, in which service is made in the manner provided in section 3383 or 3384 of this title may, in its discretion, order such postponement as may be necessary to afford the defendant reasonable opportunity to comply with the provisions of section 3387 of this title and to defend such action. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  8).) 
 3389. Motion to quash for improper service
Nothing in section 3387 of this title is to be construed to prevent an unauthorized foreign or alien insurer from filing a motion to quash a writ or to set aside service thereof made in the manner provided in section 3383 or 3384 of this title on the ground either: (1) that such unauthorized insurer has not done any of the acts enumerated in section 3382 of this title; or (2) that the person on whom service was made pursuant to section 3384 of this title was not doing any of the acts therein enumerated. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  9).) 
 3390. Attorneys fees
In any action against an unauthorized foreign or alien insurer upon a contract of insurance issued or delivered in this State to a resident thereof or to a corporation authorized to do business therein, if the insurer has failed for 30 days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and the court finds that such refusal was vexatious and without reasonable cause, the court may allow to the plaintiff a reasonable attorneys fee and include such fee in any judgment that may be rendered in such action. Failure of an insurer to defend any such action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 3,  10).) 
 3421. Mutualization of stock insurer
(a) A domestic stock insurer may become a mutual insurer under such plan and procedure as may be approved by the Commissioner after a hearing held substantially in accordance with the provisions of section 3305 of this title. (b) The Commissioner shall not approve any such plan or mutualization unless:(1) It is equitable to its stockholders and policyholders.(2) It is subject to approval by the holders of not less than a majority of the insurers outstanding capital stock having voting rights present at a duly called regular or special meeting thereof, and by not less than a majority of the insurers policyholders who vote on such plan in person, by proxy or by mail pursuant to such notice and procedure as may be approved by the Commissioner. (3) If a life insurer, the right to vote thereon is limited to holders of policies other than term or group policies, and whose policies have been in force for more than one year. (4) Mutualization will result in retirement of shares of the insurers capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers. (5) The plan provides for the purchase of the shares of any nonconsenting stockholder in substantially the same manner and subject to the same rights and conditions as are accorded a dissenting shareholder under section 3428 of this title. (6) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective and for notices substantially in accordance with section 3424 of this title. (7) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in states in which it is then authorized to transact business, and for the kinds of insurance included in its certificates of authority in such states. (c) No director, officer, agent, or employee of the insurer, nor any other person, shall receive any fee, commission, or other valuable consideration whatsoever for in any manner aiding, promoting, or assisting therein except as set forth in the plan of mutualization as approved by the Commissioner. (d) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  1).) 
 3422. Mutual insurersProhibitions
A domestic mutual insurer shall not merge or consolidate with a stock insurer where the surviving corporation will be a stock insurer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  2); amended 1993, No. 28,  1, eff. May 21, 1993.) 
 3423. Converting mutual insurer or mutual insurance holding company
(a) A mutual insurer may become a stock insurer or a mutual insurance holding company may become a stock company or reorganize under such reasonable plan and procedure as may be approved by the Commissioner after a hearing thereon of which notice was given to the eligible members, all of whom shall have the right to appear at the hearing. (b) The Commissioner shall not approve any such plan or procedure unless:(1) Its terms and conditions are fair and equitable.(2) The plan shall have been duly adopted by action of not less than three-fourths of the members of the board of directors or trustees of the mutual insurer or mutual insurance holding company, as the case may be. (3) It is subject to approval by vote of not less than three-fourths of the eligible members actually voting thereon in person, by proxy, or by mail at a meeting of members called for the purpose, for which at least 30 days notice has been provided to eligible members, pursuant to such reasonable notice and procedure as may be approved by the Commissioner. (4) The plan provides the method by which the aggregate value of eligible members interests will be determined. The method specified must be acceptable to the Commissioner and shall be based on the market value of the converted company, unless another method for determining this value is approved by the Commissioner. (5) The plan provides for each eligible member to receive a fixed component of consideration or a variable component of consideration, or both, or any other component of consideration acceptable to the Commissioner. Any component shall reflect, based upon fair and equitable formulas, methods and assumptions, factors such as estimated proportionate contributions of classes, or groupings of policies and contracts to the aggregate component of consideration being distributed to eligible members, or other factors the Commissioner may approve. (6) The plan specifies the consideration to the eligible members entitled thereto, which consideration may consist of cash, securities of the reorganized insurer or securities of another institution or institutions, subscription rights to purchase securities of the reorganized insurer or securities of another institution or institutions, a certificate of contribution, surplus notes, additional insurance or annuity benefits, policy credits, increased dividends or other consideration, or any combination of such forms of consideration as the Commissioner may approve. The form or forms of consideration to be distributed to any class or category of member need not be the same as the consideration to be distributed to any other class or category of member. The choice of the form or forms of consideration to be distributed may take into account such factors as the class or category of policy with respect to what consideration is being distributed, the country of residence or tax status of eligible members, the reasonableness of the cost of providing a particular form of consideration in relation to its value, or other appropriate factors. If the plan provides for the sale of securities to members, the securities shall be offered to members at a price not greater than that to be offered under the plan to others. (7) If the plan relates to the conversion of a mutual life insurer, the plan shall provide for the reasonable expectations of policyholders through the establishment of a closed block or other method acceptable to the Commissioner. Any provision for dividend expectations may be limited to participating individual life insurance policies and participating individual annuity contracts in force or deemed to be in force by the plan of conversion on the effective date of the plan for which the insurer has an experience-based dividend scale due, paid or accrued by action of the board of directors of the mutual insurer in the year in which the plan is adopted; provided, however, that other categories of policies and benefits may be included or excluded, subject to approval of the Commissioner. (8) If the plan relates to the conversion of a mutual insurer, the plan, when completed, would provide for the converted insurer paid-in capital stock in an amount not less than the minimum paid-in capital stock required of a domestic stock insurer upon initial authorization to transact like kinds of insurance, together with an amount of surplus which is no less than the amount that the Commissioner deems to be reasonably necessary for the insurers future solvency. (9) If the plan relates to the conversion or reorganization of a mutual insurance holding company, the plan shall provide for: (A) the conversion of the mutual insurance holding company to a stock company followed by a merger or consolidation of the converted stock company with another stock company, which may include a subsidiary of the mutual insurance holding company; (B) a sale of an intermediate stock holding company or stock insurer with shares or other consideration being distributed to members of the mutual insurance holding company, followed by the liquidation or dissolution of the mutual insurance holding company; (C) a liquidation or dissolution of the mutual insurance holding company; or(D) any combination of the foregoing or other reorganization or transfer of assets and assumption of liabilities approved by the Commissioner. (10) The Commissioner finds that the insurers management has not, through reduction in volume of new business written, or cancellation or through any other means sought to reduce, limit, or affect the number or identity of the insurers members to be entitled to participate in such plan, in order to secure for the individuals comprising management any unfair financial advantage through such plan, or intentionally engaged in any other conduct designed to secure for the individuals comprising management any unfair financial advantage through such plan. (c) Subsection (b) of this section shall not be deemed to prohibit the inclusion in the demutualization plan of provisions under which the individuals comprising the insurers management or mutual insurance holding companys management, as the case may be, and employee group may receive employee benefit and compensation arrangements, including arrangements through the use of stock of the reorganized insurer or stock of its parent corporation or other entity, which are to become effective simultaneously with the plan of reorganization or, subsequently, provided such provisions are approved by the Commissioner. If the plan provides for the distribution or sale to members of capital stock of the converted company, nothing in subsection (b) of this section shall be deemed to prohibit the inclusion in the plan of provisions under which the converting companys directors, officers, agents, or employees shall be entitled to purchase for cash at the same price as offered to the insurers members, shares of stock not taken by members in accordance with such terms and reasonable classifications of such individuals as may be included in the plan and approved by the Commissioner. (d) No director, officer, agent, or employee of the insurer, the mutual insurance holding company, or any other person, shall receive any fee, commission, or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting, or assisting in such conversion except as set forth in the plan approved by the Commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, and actuaries for services performed in the independent practice of their professions, even though also directors of the insurer. (e) Upon the effective date of the plan, the rights of members in the mutual insurer or mutual insurance holding company shall be extinguished. All policies of a mutual insurer in force on the effective date of the plan shall remain in force under the terms of those policies, except for any terms affected by the extinguishment of those membership rights. (f) If a plan provides for the distribution of common stock, but does not provide for registration and public trading of the common stock of the converted insurer or the parent corporation or the converted mutual insurance holding company or other entity as of the effective date of the plan, the plan shall require the appropriate entity or entities to use good faith efforts to encourage and assist in the establishment of a market for such stock as soon as reasonably possible and, in any event, not later than two years after the effective date of the reorganization unless otherwise approved by the Commissioner. Within two years after the effective date of the reorganization unless otherwise approved by the Commissioner, the converted insurer or the parent corporation or the converted mutual insurance holding company or other entity shall make available to each eligible policyholder or member who received and retained shares of common stock with minimal aggregate value upon reorganization, a procedure to dispose of shares of stock at market value without brokerage commissions or similar fees under a plan approved by the Commissioner. (g) At the option of the mutual insurer or mutual insurance holding company, as the case may be, any common shares or other securities of the converted stock company or of any other institution, included in the members consideration, other than those acquired as a result of a member exercising any subscription rights, may be placed in a trust or other entity existing for the exclusive benefit of the members, and established solely for the purpose of effectuating the reorganization to which such common shares or other securities are issued by the issuer on the effective date of the reorganization, such consideration to be distributed to members during a process specified in the plan and approved by the Commissioner. (h) Except as otherwise specifically provided in the plan of conversion, prior to and for a period of five years following the effective date of such plan, no person other than the converted stock insurer or an institution controlling the converted stock insurer or a converted mutual insurance holding company or institutions controlling the converted mutual insurance holding company shall, directly or indirectly, offer to acquire or acquire in any manner the beneficial ownership of five percent or more of any class of a voting security of the new stock insurer or of an institution which owns a majority or all of the voting securities of the new stock insurer or converted mutual insurance holding company, without the prior approval of the Commissioner, of an application for acquisition filed by such person with the Commissioner. The Commissioner shall not approve an application for acquisition unless the Commissioner finds, after a public hearing, that the acquisition would not frustrate the plan of conversion as approved by the policyholders or members and the Commissioner, would be consistent with the purposes of this statute, and would be on terms and conditions that are fair and equitable to the policyholders or members, as the case may be. No security which is acquired or is to be acquired in contravention of this section or of any rule, regulation, or order of the Commissioner may be voted at any shareholders meeting. If the new stock insurer or converted mutual insurance holding company or any institution which owns a majority or all of the voting securities of the new stock insurer or converted mutual insurance holding company or the Commissioner believes that any voting securities have been or are about to be acquired in contravention of this section or of any rule, regulation, or order of the Commissioner, he or she may apply to any court of competent jurisdiction in the State of Vermont for an order to enjoin any offer or acquisition made or any voting of any security so acquired, or to void the vote of any such security in contravention of this section or any rule, regulation, or order of the Commissioner, and for such other equitable relief as may be appropriate. (i) A failure by a mutual insurer or a mutual insurance company to provide a member or members with the notice required by this section shall not impair the validity of any action taken under this section, if such mutual insurer or mutual insurance holding company has complied substantially and in good faith with all notice requirements, as determined by the Commissioner. (j) Documents submitted to the Commissioner by the mutual insurer or mutual insurance holding company in connection with obtaining approval of the plan of conversion shall be public documents, except that financial data, actuarial memoranda, and any other information which the Commissioner determines could result in harm to the mutual entity or the converted entity or to its members if disclosed, shall be considered confidential. This confidentiality shall not extend to information provided by the mutual entity which the Commissioner deems necessary to be provided to members to evaluate the plan of conversion. (k) Any aggrieved party to a plan, within the meaning of section 77 of this title, may appeal an order of the Commissioner, pursuant to the provisions of such section, within 30 days after the issuance of an order of the Commissioner approving or disapproving such plan. Any review by the court shall be confined to the record before the Commissioner. (l) As used in this section:(1) Eligible member means, in the case of a mutual insurer, a person who owns or, pursuant to the terms of the plan, is deemed to own a policy which was in force as of the record date or, in the case of a mutual insurance holding company, a person who was or, pursuant to the terms of the plan, is deemed to have been a member as of the record date. For this purpose, the record date is the date when the mutual companys board of directors first adopts the plan of conversion, unless another date is specified in the plan of conversion and approved by the Commissioner. In the case of a mutual life insurance company or a mutual insurance holding company, the membership of which is derived from the purchase of contracts from a life insurance company, eligibility may be limited to members holding contracts which have been in force not less than one year. (2) Fair and equitable means that any action undertaken, pursuant to this section, with respect to a plan of conversion, provides for full and proper consideration of the aggregate membership interests and corresponding values of eligible members, in no manner discriminates improperly among eligible members, and appropriately protects the interests of eligible members before and subsequent to the conversion. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  2a); amended 1999, No. 86 (Adj. Sess.),  1, eff. April 27, 2000.) 
 3424. Procedure for merger
Any domestic insurer subject to the prohibitions of section 3422 of this title may merge with any other insurer in the following manner: (1) The board of directors of each insurer shall, by a resolution adopted by a majority vote of the members of such board, approve a joint agreement of merger setting forth: (A) The names of the insurers proposed to merge, and the name of the insurer into which they propose to merge, which is hereafter designated as the surviving company. (B) The terms and conditions of the proposed merger and the mode of carrying the same into effect. (C) The manner and basis of converting the shares of capital stock of stock insurers, if applicable, other than the surviving insurer into shares or other securities or obligations of the surviving insurer. (D) A restatement of such provisions of the articles of incorporation of the surviving insurer as may be deemed necessary or advisable to give effect to the proposed merger. (E) Such other provisions with respect to the proposed merger as are deemed necessary or desirable. (2) The resolution of the board of directors of each insurer approving the agreement shall direct that the agreement be submitted to a vote of the shareholders, members, or policyholders, as the case may be, of such insurer entitled to vote in respect thereof at a designated meeting thereof, which may be an annual meeting of shareholders, members, or policyholders entitled to vote in respect thereof. If the designated meeting of any insurer at which the agreement is to be submitted is an annual meeting, notice of the submission of the agreement shall be included in the notice of such annual meeting. If the designated meeting of any insurer at which the agreement is to be submitted is a special meeting of the shareholders, members, or policyholders, entitled to vote in respect thereof, such special meeting shall be called by the resolution designating the meeting, and notice of such meeting shall be given as provided in the bylaws or charter, as the case may be, of each insurer. (3) The agreement of merger so approved shall be submitted to a vote of the shareholders, members, or policyholders, as the case may be, of each insurer entitled to vote in respect thereof at the meeting directed by the resolution of the board of directors of such company approving the agreement, and the agreement shall be adopted by such insurer upon receiving the affirmative vote of such proportion of the shareholders, members or policyholders as provided in section 3427 of this title. (4) Following the adoption of the agreement by any insurer, the clerk or secretary thereof, within such time and in such manner as shall be approved by the Commissioner, shall give notice of the adoption of the agreement to each shareholder, member, or policyholder, as the case may be, of record of such insurer entitled to vote who was not present in person or represented by proxy at the meeting at which the agreement was adopted. The insurer shall file an affidavit with the Commissioner, signed by the clerk or secretary of such insurer, that such notice was given. (5) Any shareholder, member, or policyholder, as the case may be, of any such insurer, who did not vote in favor of the adoption of the agreement of merger, may object to such merger in the manner and with the effect provided in sections 3428 and 3429 of this title. (6) As soon as practicable after the expiration of a period of 30 days after the adoption of the agreement of merger by the shareholders, members, or policyholders, as the case may be, of that one of the merging insurers which is the last, in point of time, to adopt the same, the agreement shall again be considered by the board of directors of each insurer a party thereto, at a regular or special meeting of such board, and if the board of directors of each such insurer, by a majority vote of the members of such board, shall again approve the agreement and shall authorize the execution thereof, the agreement shall be signed on behalf of each such insurer by its president or a vice president and its clerk or secretary or an assistant clerk or secretary and shall have the corporate seal of each such insurer thereto affixed. (7) Articles of merger shall be adopted in the following manner:(A) Upon the execution of the agreement of merger by all of the insurers parties thereto, there shall be executed and filed, in the manner hereafter provided, articles of merger setting forth the agreement of merger, the signatures of the several insurers parties thereto, the manner of its adoption and the vote by which adopted by each of such insurers. (B) The articles of merger shall be signed on behalf of each insurer by its president or a vice president and its clerk or secretary or an assistant clerk or secretary, and acknowledged before a notary public by the officers signing the same, in such multiple copies as shall be required to enable the insurers to comply with the provisions of this subchapter with respect to filing and recording the articles of merger, and shall then be presented to the Commissioner. (C) The Commissioner shall approve the articles of merger if he or she finds that the merger will promote the general good of the State in conformity with those standards set forth in section 3305 of this title. If he or she approves the articles of merger, he or she shall indorse his or her approval thereon and shall present the same to the Secretary of State of the State of Vermont at his or her office. (8) Upon the presentation of the articles of merger, the Secretary of State, if he or she finds that they conform to law, shall indorse his or her approval on each of the multiple copies of the articles, and, when all fees have been paid as required by law, shall file one copy of the articles of merger in his or her office and issue a certificate of merger, and shall return the remaining copies of the articles bearing the indorsement of his or her approval, together with the certificate of merger, to the surviving insurer, or its representatives. (9) The surviving insurer shall obtain a certified copy of the certificate of merger from the Secretary of State and file the same with the Commissioner, accompanied by a copy of the articles of merger bearing the indorsement and approval of the Secretary of State. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  3).) 
 3425. Procedure for consolidation
Any domestic insurer, subject to the prohibitions of section 3422 of this title, may consolidate with any other insurer or insurers in the following manner: (1) The board of directors of each insurer shall, by a resolution adopted by a majority vote of the members of such board, approve a joint agreement of consolidation setting forth: (A) the names of the insurers proposing to consolidate, and the name of the new insurer into which they propose to consolidate, which is hereinafter designated as the new insurer; (B) the terms and conditions of the proposed consolidation and the mode of carrying the same into effect; (C) the manner and basis of converting the shares of capital stock of stock insurers into shares or other securities or obligations of the new insurer; (D) with respect to the new insurer, such provisions as are required to be set forth in original articles of incorporation for insurers formed under this part; (E) such other provisions with respect to the proposed consolidation as are deemed necessary or desirable. (2) The agreement of consolidation shall then be submitted to a vote of the shareholders, members, or policyholders, as the case may be, entitled to vote in respect thereof of each insurer in the same manner as provided in section 3424 of this title and this agreement shall be adopted by such insurer upon receiving the affirmative vote of such proportion of the shareholders, members, or policyholders, as provided in section 3427 of this title, and the adoption thereof by directors and by the shareholders, members, or policyholders shall be followed by the same notice to shareholders, members, or policyholders, as the case may be, as provided in section 3424 of this title. (3) Any shareholder, member, or policyholder, as the case may be, of any such insurer who did not vote in favor of the adoption of the agreement of consolidation, may object to such consolidation in the manner and with the effect provided in sections 3428 and 3429 of this title. (4) Upon the adoption of the agreement of consolidation it shall again be considered by the board of directors of each insurer a party to the agreement, and, if again approved and the execution of the agreement authorized by such board, the agreement shall be executed all in the same manner and within the same time as provided in subdivision 3424(6) of this title. (5) Upon the execution of the agreement of consolidation by all of the insurers and parties thereto, articles of consolidation shall be executed and filed, accompanied by the fees prescribed by law in the same manner and form and in such multiple copies as provided in subdivision 3424(7) of this title and shall then be presented to the Commissioner for approval and presentation to the Secretary of State in the manner provided in said subdivision 3424(7) of this title. (6) Upon the presentation of the articles of consolidation, the Secretary of State, if he or she finds that they conform to law, shall indorse his or her approval on each of the multiple copies of the articles, and, when all fees have been paid as required by law, shall file one copy of the articles of consolidation in his or her office and issue a certificate of consolidation and shall return the remaining copies of the articles bearing the indorsement of his or her approval, together with the certificate of consolidation, to the new insurer, or its representatives. (7) The new insurer shall obtain a certified copy of the certificate of consolidation and incorporation from the Secretary of State and file the same with the Commissioner, accompanied by a copy of the articles of consolidation bearing the indorsement of the approval of the Secretary of State. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  4).) 
 3426. Effective date of merger or consolidation
Upon the issuance of a certificate of merger or a certificate of consolidation by the Secretary of State, the merger or consolidation, as the case may be, shall be effected, subject to the rights of dissenting shareholders, members or policyholders, as provided in sections 3428 and 3429 of this title. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  5).) 
 3427. Voting
At any meeting of the shareholders, members, or policyholders, as the case may be, held pursuant to the resolution of the board of directors for the purpose of adopting an agreement of merger or consolidation, as provided for in sections 3424 and 3425 of this title, the shareholders, members, or policyholders, as the case may be, entitled to vote in respect thereof may vote in person or by proxy and shall have such votes as they are entitled to pursuant to the charter and bylaws of the insurer or as may otherwise be provided by law. Two-thirds of the votes cast at the meeting in person or by proxy, shall be necessary for the adoption of such proposed articles of merger or consolidation. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  6).) 
 3428. Rights of dissenting shareholders
(a) If any shareholder of any insurer, a party to a merger or consolidation, who did not vote in favor of such merger or consolidation at the meeting at which the agreement of merger or consolidation was adopted by the shareholders of such insurer shall, at any time within 30 days after the filing of the affidavit of notice of the adoption of the agreement of merger or consolidation as provided for in sections 3424 and 3425 of this title, object thereto in writing and demand payment of the value of his or her shares, the surviving or new insurer shall, in the event that the merger or consolidation shall be made effective, pay to such shareholder upon surrender of his or her certificates therefor, the value of such shares at the effective date of the merger or consolidation. If within 30 days after such effective date, the value of such shares is agreed upon between the shareholder and the surviving or new insurer, as the case may be, payment therefor may be made within 90 days after the effective date. If, within 30 days after such effective date, the surviving or new insurer, as the case may be, and the shareholder do not so agree, either such insurer or the shareholder may, within 90 days after such effective date, petition the Superior Court of the county in which the principal office of the insurer is located, to appraise the value of such shares; and payment of the appraised value thereof shall be made within 60 days after the entry of the judgment or order finding such appraised value. The practice, procedure, and judgment in the Superior Court upon such petition shall be the same, so far as practicable, as that under the eminent domain laws in this State. (b) Upon the effective date of the merger or consolidation, any shareholder who has made such objection and demand shall cease to be a shareholder and shall have no rights with respect to such shares except the right to receive payment therefor. Every shareholder who did not vote in favor of such merger or consolidation and who does not object in writing and demand payment of the value of his or her shares at the time and in the manner aforesaid, shall be conclusively presumed to have assented to such merger or consolidation. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  7).) 
 3429. Rights of dissenting members or policyholders
If not less than five percent of the members or policyholders in a mutual insurer, who did not vote in favor of such merger or consolidation at the meeting at which the agreement of merger or consolidation was adopted by the members or policyholders of such insurer, shall at any time within 30 days after the filing of the affidavit of notice of the adoption of the agreement of merger or consolidation as provided for in sections 3424 and 3425 of this title, file a petition with the Commissioner for a hearing upon the adoption of such agreement of merger or consolidation, the Commissioner shall order a hearing upon said petition and give notice fixing the time and place of such hearing, to the insurers which are parties to the merger or consolidation 15 days before the date of such hearing. The insurer whose policyholders file such petition shall give notice by mail to each member or policyholder of such insurer, at least 10 days before such hearing. At the time and place fixed in such notice, or at the time or times and place or places to which such hearing shall be adjourned, the Commissioner shall proceed with the hearing and make or order such examination into the affairs and condition of each of such insurers as he or she may deem proper. The Commissioner shall have the power to summon and compel the attendance and testimony of witnesses and the production of books and papers before him or her at such hearing. Any member or policyholder, as the case may be, of the insurer so petitioning may appear before the Commissioner and be heard with reference to said contract. If, upon such hearing being had, the Commissioner is not satisfied that the interests of the members or policyholders, as the case may be, of such insurer are properly protected, or if he or she finds that any reasonable objection exists to such contract, he or she shall revoke the approval already given, and the said agreement of merger or consolidation shall thereupon become null and void. The Commissioner shall have like power to revoke any approval of any such agreement of merger or consolidation if any officer, director, or employee of any insurer party to such agreement of merger or consolidation shall, after reasonable notice, fail or refuse to attend and testify at such hearing, or to produce any books or papers called for by said Commissioner. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  8).) 
 3430. Effect of merger or consolidation
When such merger or consolidation has been effected as hereinabove provided;(1) The several insurers parties to the agreement of merger or consolidation shall be a single insurer which shall be: (A) in case of a merger, the surviving insurer a party to the agreement of merger into which it has been agreed the other insurers parties to the agreement shall be merged, which surviving insurer shall survive the merger; or (B) in case of a consolidation, the new insurer into which it has been agreed the insurers parties to the agreement of consolidation shall be consolidated. (2) The separate existence of all of the insurers parties to the agreement of merger or consolidation, except the surviving insurer in the case of a merger, shall cease. (3) Such single insurer shall have all of the rights, privileges, immunities, and powers and shall be subject to all of the duties and liabilities of an insurer organized under this part. (4) Such single insurer shall thereupon and thereafter possess all the rights, privileges, immunities, powers, and franchises of a public as well as of a private nature of each of the insurers so merged or consolidated; and all property, real, personal, and mixed, and all debts due on whatever account, including subscriptions to shares of capital stock, and all other choses in action and all and every other interest, of or belonging to or due to each of the insurers so merged or consolidated shall be taken and deemed to be transferred to and vested in such single insurer without further act or deed; and the title to any real estate, or any interest therein, under the laws of this State vested in any of such insurers shall not revert or be in any way impaired by reason of such merger or consolidation. (5) Such single insurer shall thenceforth be responsible and liable for all the liabilities and obligations of each of the insurers so merged or consolidated in the same manner and to the same extent as if such single insurer had itself incurred the same or contracted therefor; and any claim existing or action or proceeding pending by or against any of such insurers may be prosecuted to judgment as if such merger or consolidation had not taken place. Neither the rights of creditors nor any liens upon the property of any such insurers shall be impaired by such merger or consolidation, but such liens shall be limited to the property upon which they were liens immediately prior to the time of such merger or consolidation, unless otherwise provided in the agreement of merger or consolidation. (6) In case of a merger, the articles of incorporation of the surviving insurer shall be supplanted and superseded to the extent, if any, that any provision or provisions of such articles shall be restated in the agreement of merger as provided in section 3424 of this title, and such articles of incorporation shall be deemed to be thereby and to that extent amended; and in case of a consolidation, the statements set forth in the agreement of consolidation as provided in section 3425 of this title shall be deemed to be articles of incorporation of the new insurer formed by such consolidation. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  9).) 
 3431. Merger or consolidation between domestic and foreign insurersRequirements
(a) In case of a merger or consolidation between a domestic and a foreign insurer, the articles of merger or consolidation shall be regarded as executed by the proper officers of said foreign insurer when such officers are duly authorized to execute same through such action on the part of the directors, shareholders, members, or policyholders, as the case may be, of said foreign insurer as may be required by the laws of the state where the same is incorporated; and upon execution, the articles of merger or consolidation shall be submitted to the Commissioner of Financial Regulation or other officer at the head of the insurance department of the state where such foreign insurer is incorporated. No such merger or consolidation shall take effect until it shall have been approved by the insurance official of the state where said foreign insurer is incorporated nor until a certificate of his or her approval has been filed with the Commissioner of Financial Regulation for the State of Vermont; provided, that such submission to and approval by the proper official of such other state shall not be required unless the same are required by the laws of such foreign state. Provided, further, that the domestic insurer involved in such merger or consolidation shall not through anything contained in this section be relieved of any of the procedural requirements enumerated in the preceding sections of this subchapter. (b) No merger, consolidation, or reinsurance between a domestic and a foreign insurer shall take effect, unless and until the surviving, new, or accepting insurer, if such is a foreign insurer, shall file with the Department a power of attorney appointing the Secretary of State and his or her successors in office, the attorney for service of said foreign insurer, upon whom all lawful process against said insurers may be served. Said power of attorney shall be irrevocable so long as said foreign insurer has outstanding in this State any contract of insurance, or other obligation whatsoever, and shall by its terms so provide. Service upon the Secretary of State shall be deemed sufficient service upon the insurer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  10); amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 3432. Transfer of deposits
If the state in which a foreign, new, surviving, or accepting insurer is incorporated or organized shall require the maintenance with any official of such state of a deposit of the legal reserve on the policies so assumed and such foreign insurer shall maintain such deposit, then the State Treasurer is authorized to deliver to the proper custodian of such funds in the state in which the said foreign insurer is incorporated or organized, such deposits as he or she may hold pertaining to the policies so assumed by the new, surviving, or accepting insurer. If a surviving, new, or accepting domestic insurer assumes all or a substantial number of the risks of a foreign insurer incorporated in a state which requires the maintenance with a state official of a deposit of the legal reserve on policies so assumed, then the State Treasurer is hereby authorized to receive from such official such deposits as he or she may hold pertaining to the policies so assumed. The amount of deposit to be maintained from time to time for each policy on which liability is assumed shall be at least equal to the amount which would be required in the state where such deposit has theretofore been maintained. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  11).) 
 3433. Certificates of fees and commissions paid
Whenever articles of merger, consolidation, or reinsurance are filed with the Commissioner, there shall also be filed a certificate, executed by the president or a vice president and attested by the clerk or secretary, and under the corporate seal of each of the insurers parties to the agreement of merger, consolidation, and reinsurance, verified by the affidavits of all such officers, setting forth all fees, commissions, or other compensations, or valuable considerations paid or to be paid, directly or indirectly, to any person or persons, firm or firms, corporation or corporations whomsoever, which in any manner secured, aided, promoted, or assisted in any such merger, consolidation, or reinsurance. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  12).) 
 3434. FeesPenalty for receiving
(a) No director, officer, or member of any such insurer or insurers except as fully expressed in the affidavits, described in section 3433 of this title, shall receive any fee, commission, other compensation, or valuable consideration whatever, direct or indirect, for in any manner aiding, promoting, or assisting in such merger, consolidation, or reinsurance. (b) Any person violating the provisions of this section shall be deemed guilty of a misdemeanor, and upon conviction thereof, shall be punished by a fine of not less than $5,000.00 and not more than $15,000.00. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 4,  13); amended 1995, No. 167 (Adj. Sess.),  2.) 
 3437. Redomestication; approval as a domestic insurer
Any foreign or alien insurer may become a domestic insurer by complying with all of the requirements of law relative to the organization and licensing of a domestic insurer of the same type, and by filing with the Secretary of State its articles of association, charter, or other organization document, together with appropriate amendments thereto adopted in accordance with the laws of this State bringing such articles of association, charter, or other organizational document into compliance with the laws of this State, along with a certificate of general good issued by the Commissioner. Said domestic insurer shall be entitled to the necessary or appropriate certificates and licenses to continue its business and to transact business in this State, and shall be subject to the authority and jurisdiction of this State. In connection with any such redomestication, the Commissioner may waive any and all requirements for public hearings, including those relating to the amendment of an insurers articles of association and that required by section 3305 of this title. No insurer redomesticating into this State need merge, consolidate, transfer assets, or otherwise engage in any other reorganization, other than as specified in this section. (Added 1991, No. 41,  1.) 
 3438. Redomestication; conversion to foreign insurer
Any domestic insurer may, upon the approval of and compliance with such conditions as may be imposed by the Commissioner, transfer its domicile, in accordance with the laws thereof, to any other state or jurisdiction, and upon such a transfer shall cease to be a domestic insurer, and its corporate or other legal existence in this State shall cease upon the filing of proof of such redomestication with the Secretary of State and upon payment to the Secretary of State of a filing fee in the amount of $100.00. Such insurer shall be admitted to this State if qualified as a foreign or alien insurer, upon compliance with the qualification requirements for foreign or alien insurers to the extent not waived by the Commissioner. (Added 1991, No. 41,  2.) 
 3439. Effects of redomestication
Upon redomestication in accordance with section 3437 of this title, the foreign or alien insurer shall become a domestic insurer organized under the laws of this State and have all the rights, privileges, immunities, and powers, and be subject to all applicable laws, duties, and liabilities, of domestic insurers of the same type. Such domestic insurer shall thereupon and thereafter possess all rights that obtained prior to the redomestication to the extent permitted by the laws of this State, and thenceforth be responsible and liable for all the liabilities and obligations that obtained prior to the redomestication. The certificate of authority, agents, appointments and licenses, rates, and other items that the Commissioner of insurance allows, in his or her discretion, which are in existence at the time any insurer licensed to transact the business of insurance in this State transfers its corporate domicile to this or any other state or jurisdiction by redomestication, shall continue in full force and effect upon such transfer if such insurer remains duly qualified to transact the business of insurance in this State. All transferring insurers qualified in this State shall notify the Commissioner of the transfer of domicile and shall provide the Commissioner such information and documentation as the Commissioner may request. All outstanding policies of any transferring insurer shall remain in full force and effect. (Added 1991, No. 41,  3.) 
 3440. Redomestication; fees
An insurer becoming a domestic insurer through the redomestication procedure specified in section 3437 of this title shall pay to the Commissioner such fees as would be payable by a like domestic insurer organizing and becoming licensed or transacting business in this State. An insurer becoming a domestic insurer pursuant to section 3437 shall pay to the Secretary of State a filing fee in the amount of $300.00 for the filing required under section 3437. (Added 1991, No. 41,  4.) 
 3441. Formation of a mutual insurance holding company
(a) A domestic mutual insurance company, upon approval of the Commissioner, may reorganize by forming an insurance holding company based upon a mutual plan and continue the corporate existence of the reorganizing insurance company as a stock insurance company subsidiary of the mutual insurance holding company. The mutual insurance company shall file with the Commissioner the plan of reorganization, proposed amended and restated charters for the mutual holding company and the insurance company, and such other relevant information as the Commissioner shall require. The Commissioner shall, in accordance with section 3305 of this title, make a determination as to the general good of the proposed reorganization. The Commissioner may, in his or her discretion, conduct a single public hearing as provided by section 3305 of this title to consider the formation of the mutual holding company and stock insurance company. The Commissioner shall, within 90 days, approve any proposed mutual holding company formation unless the Commissioner finds: (1) disapproval is necessary to prevent practices that will cause financial impairment to the mutual insurance company or proposed stock company; (2) the financial or management resources of the mutual insurance company warrant disapproval;(3) the mutual insurance company fails to furnish the information required by this section;(4) the mutual insurance company fails to provide certified copies of the approval of its plan of reorganization by two-thirds of its board of directors; or (5) the proposed reorganization would be unfair to policyholders.(b) All of the initial shares of the capital stock of the reorganized insurance company shall be issued to the mutual insurance holding company or to a stock insurance holding company which is wholly owned by the mutual insurance holding company. The membership interests of the policyholders of the reorganized insurance company shall become membership interests in the mutual insurance holding company. Policyholders of the reorganized insurance company shall be members of the mutual insurance holding company in accordance with the articles of incorporation and bylaws of the mutual insurance holding company. The mutual insurance holding company shall at all times own, directly or indirectly, a majority of the voting shares of the capital stock of the subsidiary stock insurance company. For purposes of this subchapter, stock insurance holding company means a corporation at least a majority of the voting shares of which is owned, directly or through another stock insurance holding company, by a mutual insurance holding company and which holds, directly or indirectly, all the voting shares of the reorganized insurer. (c) Reorganization of the domestic mutual insurance company shall be subject to approval of its members or policyholders in accordance with section 3427 of this title and dissenting members or policyholders may petition the Commissioner in accordance with section 3429 of this title, except the request for a hearing must be filed within 30 days of the giving of notice to policyholders of their right to dissent after the regular or special meeting of the policyholders at which the reorganization was approved; provided, however, that no notice is required to be sent to policyholders who voted in favor of the reorganization. (d) Notwithstanding the provisions of subsection (a) of this section, the Commissioner, in his or her discretion, may disapprove any proposed mutual holding company formation if he or she determines that the proposal is contrary to the financial interests of the policyholders. (Added 1995, No. 167 (Adj. Sess.),  29a; amended 1997, No. 54,  12, eff. June 26, 1997; 1999, No. 86 (Adj. Sess.),  2, 3, eff. April 27, 2000.) 
 3442. Merger of mutual insurance company into an existing mutual insurance holding company; merger and acquisition by mutual insurance holding company or subsidiary of mutual insurance holding company
(a) Merger of mutual insurance company into mutual insurance holding company. A domestic or foreign mutual insurance company, upon the approval of the Commissioner, may reorganize by merging its policyholders membership interests into a mutual insurance holding company formed pursuant to section 3441 of this title and continue the corporate existence of the reorganizing insurance company as a stock insurance company subsidiary of the mutual insurance holding company. A merger pursuant to this section shall be governed by the terms, conditions, and procedure set forth in section 3441 of this title. (b) Merger and acquisition by mutual insurance holding company or subsidiary of mutual insurance holding company. Subject to applicable requirements of this chapter, a mutual insurance holding company may: (1) merge or consolidate with, or acquire the assets of, a mutual insurance holding company reorganized pursuant to this act or any similar entity organized pursuant to the laws of any other state; (2) either alone or together with one or more stock insurance holding companies as defined in subsection 3443(c) of this title, or other subsidiaries, directly or indirectly, acquire the stock of a stock insurance company or a mutual insurance company that reorganizes under this act or the law of its state of organization; (3) together with one or more of its stock insurance company subsidiaries, acquire the assets of a stock insurance company or a mutual insurance company; or (4) acquire a stock insurance company through the merger of such stock insurance subsidiary with a stock insurance company or stock insurance holding company. (c) A merger or consolidation pursuant to subsection (b) of this section is subject to the standards and procedures prescribed in sections 3424 through 3434 of this title. Mutual insurance holding companies and stock insurance holding companies shall be considered insurers for purposes of application of such sections. (d) No such merger or consolidation shall be effectuated unless in advance thereof, the plan and agreement therefor have been filed with and approved by the Commissioner. Such approval shall be given unless the Commissioner finds such plan or agreement: (1) is inequitable to the policyholders of any insurer involved in the merger or the members of any mutual insurance holding company involved in the merger; or (2) would substantially reduce the security of and service to be rendered to policyholders of an insurer involved in the merger or consolidation. (e) A stock or asset acquisition pursuant to subsection (b) of this section shall be subject to the provisions of subsection 3443(c) of this title. (f) The provisions of subsection 3441(b) of this title shall apply to any transaction under this section which involves the merger, consolidation, or acquisition of a mutual insurance company or mutual insurance holding company. (Added 1995, No. 167 (Adj. Sess.),  29a; amended 1999, No. 86 (Adj. Sess.),  4, eff. April 27, 2000.) 
 3443. Regulated as an insurance company
(a) A stock insurance company resulting from the reorganization of a domestic mutual insurance company shall be regulated as a stock insurance company under this title and shall have all the rights, privileges, immunities, and powers of the former mutual insurance company and shall be subject to all the duties and liabilities of an insurer organized under this title. (b) The Commissioner shall retain jurisdiction over a mutual insurance holding company and any stock insurance holding company to assure that policyholder interests are protected. A mutual insurance holding company and any stock insurance holding company are deemed to be insurers subject to chapter 145 of this title. A mutual insurance holding company and any stock insurance holding company shall automatically be a party to any proceeding under chapter 145 of this title involving a stock insurance company reorganized under this subchapter. In any proceeding under chapter 145 of this title involving a reorganized stock insurance company, the assets of the mutual insurance holding company and any stock insurance holding company are deemed to be assets of the estate of the reorganized insurance company for purposes of satisfying the claims of the reorganized insurance companys policyholders. A mutual insurance holding company shall not dissolve or liquidate without the approval of the Commissioner or as ordered by the Superior Court pursuant to chapter 145 of this title. The Commissioner shall have jurisdiction over a stock insurance holding company as if it were a mutual insurance holding company. (c) Acquisitions and investments by mutual insurance holding companies, including those acquisitions pursuant to subsection 3442(b) of this title, shall be subject to the procedures and standards prescribed by chapter 101, subchapter 13 of this title. Mutual insurance holding companies and stock insurance holding companies shall be considered a domestic insurer for purposes of such acquisition. (Added 1995, No. 167 (Adj. Sess.),  29a; amended 1999, No. 86 (Adj. Sess.),  5, eff. April 27, 2000.) 
 3444. Demutualization of a mutual insurance holding company
(a) Sections 3422 and 3423 of this title are not applicable to a reorganization or merger pursuant to section 3441 or 3442 of this title. (b) Sections 3422 and 3423 of this title are applicable to the demutualization of a mutual insurance holding company that resulted from the reorganization of a domestic mutual insurance company pursuant to section 3441 as if it were a mutual insurance company. (Added 1995, No. 167 (Adj. Sess.),  29a.) 
 3445. Membership interest not a security
A membership interest in a domestic mutual insurance holding company shall not constitute a security as defined by 9 V.S.A.  4202a. (Added 1995, No. 167 (Adj. Sess.),  29a.) 
 3446. Filing of amended charters
Upon the consummation of a reorganization or merger pursuant to this subchapter, duplicate originals of amended and restated charter documents adopted by the mutual holding company and the insurance company shall be filed in the office of the Secretary of State, and shall take effect as of the date of the filing of such originals in such office. (Added 1995, No. 167 (Adj. Sess.),  29a.) 
 3461. Definitions
As used in this chapter:(1) Admitted assets means assets permitted to be reported as admitted assets on the annual statutory financial statement of the insurer for the next preceding year or as shown by a current financial statement. (2) Appraised or appraised value when used in connection with real estate shall refer to appraisals made or examined and approved by an insurer or its agents. An insurer shall have the right to make one or more renewals or extensions of a loan secured by real estate, provided any renewal or extension is based upon a reexamination of the facts and upon an appraisal made within three years. (3) Asset-backed security means a security or other instrument, excluding a mutual fund, evidencing an interest in, or the right to receive payments from, or payable from distributions on, an admitted asset, a pool of admitted assets, or specifically divisible cash flows which are legally transferred to a trust or another special purpose bankruptcy-remote business entity, on the following conditions: (A) The trust or other business entity is established solely for the purpose of acquiring specific types of admitted assets or rights to cash flows, issuing securities and other instruments representing an interest in or right to receive cash flows from those admitted assets or rights, and engaging in activities required to service the admitted assets or rights and any credit enhancement or support features held by the trust or other business entity. (B) The admitted assets of the trust or other business entity consist solely of interest-bearing obligations or other contractual obligations representing the right to receive payment from the cash flows from the admitted assets or rights. However, the existence of credit enhancements, such as letters of credit or guarantees, or support features such as swap agreements, shall not cause a security or other instrument to be ineligible as an asset-backed security. (4) Canada means Canada, any province of Canada, or any political subdivision of Canada.(5) Cap means an agreement obligating the seller to make payments to the buyer, with each payment based on the amount by which a reference price or level or the performance or value of one or more underlying interests exceeds a predetermined number, sometimes called the strike rate or strike price. (6) Collar means an agreement to receive payments as the buyer of an option, cap, or floor and to make payments as the seller of a different option, cap, or floor. (7) Counterparty exposure amount means:(A) The net amount of credit risk attributable to a derivative instrument entered into with a business entity other than through a qualified exchange or qualified foreign exchange or cleared through a qualified clearinghouse. Such derivative instruments are hereinafter referred to as over-the-counter derivative instruments. The amount of credit risk equals: (i) the market value of the over-the-counter derivative instrument if the liquidation of the derivative instrument would result in a final cash payment to the insurer; or (ii) zero, if the liquidation of the derivative instrument would not result in a final cash payment to the insurer. (B) If over-the-counter derivative instruments are entered into under a written master agreement that provides for netting of payments owed by the respective parties, and the domiciliary jurisdiction of the counterparty is either within the United States or, if not within the United States, within a foreign jurisdiction listed in the Purposes and Procedures of the NAIC Investment Analysis Office as eligible for netting, the net amount of credit risk shall be the greater of zero or the net sum of: (i) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment to the insurer; and (ii) the market value of the over-the-counter derivative instruments entered into under the agreement, the liquidation of which would result in a final cash payment by the insurer to the business entity. (C) For open transactions, market value shall be determined at the end of the most recent quarter of the insurers fiscal year and shall be reduced by the market value of acceptable collateral held by the insurer or placed in escrow by one or both parties. (8) Covered means that an insurer owns or can immediately acquire, through the exercise of options, warrants, or conversion rights already owned, the underlying interest in order to fulfill or secure its obligations under a call option, cap, or floor it has written or has set aside under a custodial or escrow agreement cash or cash equivalents with a market value equal to the amount required to fulfill its obligations under a put option it has written, in an income generation transaction. (9) Derivative instrument means an agreement, option, instrument, or a series or combination thereof: (A) to make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests or to make a cash settlement in lieu thereof; or (B) that has a price, performance, value, or cash flow based primarily upon the actual or expected price, level, performance, value, or cash flow of one or more underlying interests. Derivative instruments include options, warrants used in a hedging transaction and not attached to another financial instrument, caps, floors, collars, swaps, forwards, futures, and any other agreements, options, or instruments substantially similar thereto or any series or combination thereof and any agreements, options, or instruments permitted under this chapter. Derivative instruments shall not include an investment authorized under subdivisions 3463(a)(1) through (a)(14) and (a)(16) through (a)(29) of this title. (10) Derivative transaction means a transaction involving the use of one or more derivative instruments. (11) Direct when used in connection with obligation means that a designated obligor shall be primarily liable on the instrument representing the obligation. (12) Domestic jurisdiction means the United States, any state of the United States, or any political subdivision of any of the foregoing. (13) Equity interest means any of the following that are not rated credit instruments:(A) common stock;(B) preferred stock;(C) trust certificate;(D) equity investment in an investment company other than a money market mutual fund or a listed bond mutual fund; (E) investment in a common trust fund of a bank regulated by a federal or state agency;(F) an ownership interest in minerals, oil, or gas, the rights to which have been separated from the underlying fee interest in the real estate where the minerals, oil, or gas is located; (G) instruments that are mandatorily, or at the option of the issuer, convertible to equity;(H) limited partnership interests;(I) member interests in limited liability companies;(J) warrants or other rights to acquire equity interests that are created by the person that owns or would issue the equity to be acquired; or (K) instruments that would be rated credit instruments except for the provisions of subdivision (39)(B) of this section. (14) Floor means an agreement obligating the seller to make payments to the buyer in which each payment is based on the amount by which a predetermined number, sometimes called the floor rate or price, exceeds a reference price, level, performance, or value of one or more underlying interests. (15)(A) Foreign investment means an investment in a foreign jurisdiction, or an investment in a person, real estate, or asset domiciled in a foreign jurisdiction, that is substantially of the same type as those eligible for investment under this subchapter, other than under subdivision 3463(a)(28) of this title. An investment shall not be deemed to be foreign if the issuing person, qualified primary credit source, or qualified guarantor is a domestic jurisdiction or Canada or a person domiciled in a domestic jurisdiction or Canada, unless: (i) the issuing person is a shell business entity; and(ii) the investment is not assumed, accepted, guaranteed, or insured or otherwise backed by a domestic jurisdiction or Canada or a person that is not a shell business entity domiciled in a domestic jurisdiction or Canada. (B) For purposes of this definition:(i) Qualified guarantor means a guarantor against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction or Canada. (ii) Qualified primary credit source means the credit source to which an insurer looks for payment as to an investment and against which an insurer has a direct claim for full and timely payment, evidenced by a contractual right for which an enforcement action can be brought in a domestic jurisdiction or Canada. (iii) Shell business entity means a business entity having no economic substance except as a vehicle for owning interests in assets issued, owned, or previously owned by a person domiciled in a foreign jurisdiction. (16) Foreign jurisdiction means a jurisdiction other than a domestic jurisdiction or Canada. (17) Forward means an agreement (other than a future) to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance, or value of, one or more underlying interests. (18) Future means an agreement, traded on a qualified exchange or qualified foreign exchange, to make or take delivery of, or effect a cash settlement based on the actual or expected price, level, performance, or value of, one or more underlying interests. (19) Guaranteed means that the guarantor will perform the obligation of the obligor or will purchase the obligation to the extent of the guaranty. (20) Hedging transaction means a derivative transaction that is entered into and maintained to reduce: (A) the risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or (B) the currency exchange rate risk or the degree of exposure as to assets or liabilities that an insurer has acquired or incurred or anticipates acquiring or incurring. (21) High grade investment means a rated credit instrument rated 1 or 2 by the SVO or that meets and continues to meet the conditions for exemption as provided in section 3461d of this title. (22) Income generation transaction means a derivative transaction involving the writing of covered call options, covered put options, covered caps, or covered floors that is intended to generate income or enhance return. (23) Institution or business entity includes a sole proprietorship, corporation, limited liability company, association, partnership, joint stock company, joint venture, mutual fund, trust, joint tenancy, or other similar form of business organization, whether organized for profit or not for profit. (24) Listed bond mutual fund means a mutual fund that at all times qualifies for inclusion on the bond fund list within the Purposes and Procedures of the NAIC Investment Analysis Office or any successor publication. (25) Lower grade investment or lower grade obligation means a rated credit instrument rated 4, 5, or 6 by the SVO. (26) Medium grade investment or medium grade obligation means a rated credit instrument rated 3 by the SVO. (27) Money market mutual fund means a mutual fund that meets the conditions of 17 C.F.R. Part 270.2a-7, under the Investment Company Act of 1940 (15 U.S.C.  80a-1 et seq.), as amended or renumbered.(28) Mortgage loan means an obligation secured by a mortgage, deed of trust, trust deed, or other consensual lien on real estate. (29) Mutual fund means an investment company or, in the case of an investment company that is organized as a series company, an investment company series that, in either case, is registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C.  80a-1 et seq.), as amended. (30) NAIC means the National Association of Insurance Commissioners.(31) Obligation means a bond, note, debenture, trust certificate, including an equipment certificate, production payment, negotiable bank certificate of deposit, bankers acceptance, credit tenant plan, loan secured by financing net leases, and other evidence of indebtedness for the payment of money (or participations, certificates, or other evidences of interest in any of the foregoing). (32) Option means an agreement giving the buyer the right to buy or receive (a call option), sell or deliver (a put option), enter into, extend, or terminate or effect a cash settlement based on the actual or expected price, level, performance, or value of one or more underlying interests. (33) Potential exposure means the amount determined in accordance with the NAIC Annual Statement Instructions. (34) Qualified bank means:(A) a national bank, state bank, or trust company that at all times is no less than adequately capitalized as determined by standards adopted by U.S. banking regulators, and that is either regulated by state banking laws or is a member of the Federal Reserve System; or (B) a bank or trust company incorporated or organized under the laws of a country other than the United States that is regulated as a bank or trust company by that countrys government or an agency thereof and that at all times is no less than adequately capitalized as determined by the standards adopted by international banking authorities. (35) Qualified clearinghouse means a clearinghouse for, and subject to the rules of, a qualified exchange or a qualified foreign exchange, which provides clearing services, including acting as a counterparty to each of the parties to a transaction, such that the parties no longer have credit risk as to each other. (36) Qualified exchange means:(A) a securities exchange registered as a national securities exchange or a securities market regulated under the Securities Exchange Act of 1934 (15 U.S.C.  78 et seq.), as amended; (B) a board of trade or commodities exchange designated as a contract market by the Commodity Futures Trading Commission or any successor thereof; (C) Private Offerings, Resales and Trading through Automated Linkages (PORTAL);(D) a designated offshore securities market as defined in Securities Exchange Commission Regulation S, 17 C.F.R. Part 230, as amended; or (E) a qualified foreign exchange.(37) Qualified foreign exchange means a foreign exchange, board of trade, or contract market located outside the United States, its territories, or possessions: (A) that has received regulatory comparability relief under Commodity Futures Trading Commission (CFTC) Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTCs Regulations, 17 C.F.R. Part 30); (B) that is, or its members are, subject to the jurisdiction of a foreign futures authority that has received regulatory comparability relief under CFTC Rule 30.10 (as set forth in Appendix C to Part 30 of the CFTCs Regulations, 17 C.F.R. Part 30) as to futures transactions in the jurisdiction where the exchange, board of trade, or contract market is located; or (C) upon which foreign stock index futures contracts are listed that are the subject of no-action relief issued by the CFTCs Office of General Counsel, provided that an exchange, board of trade, or contract market that qualifies as a qualified foreign exchange only under this subdivision shall only be a qualified foreign exchange as to foreign stock index futures contracts that are the subject of no-action relief. (38)(A) Rated credit instrument means a contractual right to receive cash or another rated credit instrument from another entity, which instrument: (i) is rated or required to be rated by the SVO or meets and continues to meet the conditions for exemption as provided in section 3461d of this title; (ii) in the case of an instrument with a maturity of 397 days or less, is issued, guaranteed, or insured by an entity that is rated by, or another obligation of such entity is rated by, the SVO or by a nationally recognized statistical rating organization recognized by the SVO; (iii) in the case of an instrument with a maturity of 90 days or less, is issued by a qualified bank; (iv) is a share of a listed bond mutual fund; or(v) is a share of a money market mutual fund.(B) Rated credit instrument does not mean:(i) an instrument that is mandatorily or, at the option of the issuer, convertible to an equity interest; or (ii) a security that has a par value and whose terms provide that the issuers net obligation to repay all or part of the securitys par value is determined by reference to the performance of an equity, a commodity, a foreign currency, or an index of equities, commodities, foreign currencies, or combinations thereof. (39) Special rated credit instrument means a rated credit instrument that is:(A) An instrument that is structured so that, if it is held until retired by or on behalf of the issuer, its rate of return, based on its purchase cost and any cash flow stream possible under the structure of the transaction, may become negative due to reasons other than the credit risk associated with the issuer of the instrument; however, a rated credit instrument shall not be a special rated credit instrument under this subdivision if it is: (i) a share in a listed bond mutual fund;(ii) an instrument, other than an asset-backed security, with payments of par value fixed as to amount and timing, or callable but in any event payable only at par or greater, and interest or dividend cash flows that are based on either a fixed or variable rate determined by reference to a specified rate or index; (iii) an instrument, other than an asset-backed security, that has a par value, and is purchased at a price no greater than 110 percent of par; (iv) an instrument, including an asset-backed security, whose rate of return would become negative only as a result of a prepayment due to casualty, condemnation or economic obsolescence of collateral, or change of law; (v) an asset-backed security that relies on collateral that meets the requirements of subdivision (ii) of this subdivision (39)(A), the par value of which collateral: (I) is not permitted to be paid sooner than one-half of the remaining term to maturity from the date of acquisition; (II) is permitted to be paid prior to maturity only at a premium sufficient to provide a yield to maturity for the investment, considering the amount prepaid and reinvestment rates at the time of early repayment, at least equal to the yield to maturity of the initial investment; or (III) is permitted to be paid prior to maturity at a premium at least equal to the yield of a treasury issue of comparable remaining life; or (vi) an asset-backed security that relies on cash flows from assets that are not prepayable at any time at par, but is not otherwise governed by subdivision (v) of this subdivision (39)(A), if the asset-backed security has a par value reflecting principal payments to be received if held until retired by or on behalf of the issuer, and is purchased at a price no greater than 105 percent of such par amount. (B) An asset-backed security that:(i) Relies on cash flows from assets that are prepayable at par at any time;(ii) Does not make payments of par that are fixed as to amount and timing; and(iii) Has a negative rate of return at the time of acquisition if a prepayment threshold assumption is used with such prepayment threshold assumption defined as either: (I) Two times the prepayment expectation reported by a recognized, publicly available source as being the median of expectations contributed by broker dealers or other entities, except insurers, engaged in the business of selling or evaluating such securities or assets. The prepayment expectation used in this calculation shall be, at the insurers election, the prepayment expectation for pass-through securities of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association, or for other assets of the same type as the assets that underlie the asset-backed security, in either case with a gross weighted average coupon comparable to the gross weighted average coupon of the assets that underlie the asset-backed security; or (II) Another prepayment threshold assumption specified by the Commissioner by rule.(C) For purposes of subdivision (B) of this subdivision (39), if the asset-backed security is purchased in combination with one or more other asset-backed securities that are supported by identical underlying collateral, the insurer may calculate the rate of return for these specific combined asset-backed securities in combination. The insurer must maintain documentation demonstrating that such securities were acquired and are continuing to be held in combination. (40) State of the United States means any state of the United States of America, the District of Columbia, and the Commonwealth of Puerto Rico. (41) SVO means the Securities Valuation Office of the NAIC or any successor office established by the NAIC. (42) Swap means an agreement to exchange or to net payments at one or more times based on the actual or expected price, level, performance, or value of one or more underlying interests. (43) Underlying interest means the assets, liabilities, other interests, or a combination thereof underlying a derivative instrument, such as any one or more securities, currencies, rates, indices, commodities, or derivative instruments. (44) Warrant means an instrument that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times outlined in the warrant agreement. Warrants may be issued alone or in connection with the sale of other securities, for example, as part of a merger or recapitalization agreement or to facilitate divestiture of the securities of another business entity. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 4,  1-10); amended 1999, No. 84 (Adj. Sess.),  1, eff. April 19, 2000; 2017, No. 134 (Adj. Sess.),  2.) 
 3461a. General limitations and diversification requirements for property and casualty, financial guaranty and mortgage guaranty insurers
(a) General five percent diversification. (1) Except as otherwise specified in this subchapter, a domestic property and casualty, financial guaranty or mortgage guaranty insurer shall not acquire directly or indirectly through an investment subsidiary an investment under this subchapter if, as a result of and after giving effect to the investment, the insurer would hold more than five percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured, or guaranteed by a single person. (2) This five percent limitation shall not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally recognized statistical rating organization. (3) Asset-backed securities shall not be subject to the limitations of subdivision (1) of this subsection; however, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity then held by the insurer would exceed five percent of its admitted assets. (b) An insurer subject to this section shall comply with applicable regulations addressing investments in lower and medium grade obligations. (c) Canadian investments. (1) An insurer subject to this section shall not acquire, directly or indirectly through an investment subsidiary, any Canadian investments authorized by this subchapter, if, as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40 percent of its admitted assets or if the aggregate amount of Canadian investments not acquired under subdivision 3461c(2) of this subchapter then held by the insurer would exceed 25 percent of its admitted assets. (2) However, as to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of subdivision (1) of this subsection shall be increased by the greater of: (A) the amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or (B) 125 percent of the amount of its reserves and other obligations under contracts on risks resident or located in Canada. (Added 1999, No. 84 (Adj. Sess.),  2, eff. April 19, 2000.) 
 3461b. General limitations and diversification requirements for life and health insurers
(a) General three percent diversification. (1) Except as otherwise specified in this subchapter, a domestic life and health insurer shall not acquire, directly or indirectly through an investment subsidiary, an investment under this subchapter if, as a result of and after giving effect to the investment, the insurer would hold more than three percent of its admitted assets in investments of all kinds issued, assumed, accepted, insured or guaranteed by a single person. (2) This three percent limitation shall not apply to the aggregate amounts insured by a single financial guaranty insurer with the highest generic rating issued by a nationally-recognized statistical rating organization. (3) Asset-backed securities shall not be subject to the limitations of subdivision (1) of this subsection; however, an insurer shall not acquire an asset-backed security if, as a result of and after giving effect to the investment, the aggregate amount of asset-backed securities secured by or evidencing an interest in a single asset or single pool of assets held by a trust or other business entity then held by the insurer would exceed three percent of its admitted assets. (b) An insurer subject to this section shall comply with applicable regulations addressing investments in lower and medium grade obligations. (c) Canadian investments. (1) An insurer subject to this section shall not acquire, directly or indirectly through an investment subsidiary, a Canadian investment authorized by this subchapter if, as a result of and after giving effect to the investment, the aggregate amount of these investments then held by the insurer would exceed 40 percent of its admitted assets or if the aggregate amount of Canadian investments not acquired under subdivision 3461c(2) of this title then held by the insurer would exceed 25 percent of its admitted assets. (2) However, as to an insurer that is authorized to do business in Canada or that has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in Canada and denominated in Canadian currency, the limitations of subdivision (1) of this subsection shall be increased by the greater of: (A) the amount the insurer is required by Canadian law to invest in Canada or to be denominated in Canadian currency; or (B) 115 percent of the amount of its reserves and other obligations under contracts on lives or risks resident or located in Canada. (Added 1999, No. 84 (Adj. Sess.),  3, eff. April 19, 2000.) 
 3461c. Rated credit investments
Subject to the limitations of subdivision (6) of this section, an insurer may acquire rated credit instruments. (1) Subject to applicable limitations of subsection 3461a(b) or 3461b(b) of this subchapter, but not the limitations of subsection 3461a(a) or 3461b(a), an insurer may acquire rated credit instruments issued, assumed, guaranteed or insured by: (A) the United States; or(B) a government-sponsored enterprise of the United States, if the instruments of the government-sponsored enterprise are assumed, guaranteed, or insured by the United States or are otherwise backed or supported by the full faith and credit of the United States. (2) Subject to applicable limitations of subsection 3461a(b) or 3461b(b) of this subchapter, but not the limitations of subsection 3461a(a) or 3461b(a), an insurer may acquire rated credit instruments issued, assumed, guaranteed or insured by: (A) Canada; or(B) a government-sponsored enterprise of Canada, if the instruments of the government-sponsored enterprise are assumed, guaranteed, or insured by Canada or are otherwise backed or supported by the full faith and credit of Canada; (C) an insurer shall not acquire an instrument under this subdivision if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subdivision would exceed 40 percent of its admitted assets. (3)(A) Subject to applicable limitations of subsection 3461a(b) or 3461b(b) of this subchapter, but not the limitations of subsection 3461a(a) or 3461b(a), an insurer may acquire rated credit instruments, excluding asset-backed securities: (i) issued by a government money market mutual fund or a listed bond mutual fund;(ii) issued, assumed, guaranteed, or insured by a government-sponsored enterprise of the United States other than those eligible under subdivision (i) of this subdivision (3)(A); (iii) issued, assumed, guaranteed, or insured by a state, if the instruments are general obligations of the state; or (iv) issued by a multilateral development bank.(B) However, an insurer shall not acquire an instrument of any one fund, any one enterprise or entity or any one state under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held in any one fund, enterprise, or entity or state under this subdivision would exceed 10 percent of its admitted assets. (4) Subject to the applicable limitations of section 3461a or 3461b of this subchapter, an insurer may acquire preferred stocks that are not foreign investments and that meet the requirements of rated credit instruments if, as a result of and after giving effect to the investment: (A) the aggregate amount of preferred stocks then held by the insurer under this subdivision does not exceed 20 percent of its admitted assets; and (B) the aggregate amount of preferred stocks then held by the insurer under this subdivision which are not sinking fund stocks or rated P1 or P2 by the SVO does not exceed 10 percent of its admitted assets or does not meet or continue not to meet the conditions for exemption as provided in section 3461d of this title. (5) Subject to the applicable limitations of section 3461a or 3461b of this subchapter, in addition to those investments eligible under subdivisions (1), (2), (3), and (4) of this section, an insurer may acquire rated credit instruments that are not foreign investments. (6) An insurer shall not acquire special rated credit instruments under this section if, as a result of and after giving effect to the investment, the aggregate amount of special rated credit instruments then held by the insurer would exceed five percent of its admitted assets. (Added 1999, No. 84 (Adj. Sess.),  4, eff. April 19, 2000; amended 2017, No. 134 (Adj. Sess.),  3.) 
 3461d. Registration or filing exemption
Notwithstanding the provisions of any other section of subchapter 4 of this chapter, an insurer shall not be required to register or file with the SVO any security that meets and continues to meet the conditions for exemption for certain nationally recognized statistical rating organization rated securities consistent with the Purposes and Procedures Manual of the NAIC Investment Analysis Office or any successor publication. (Added 1999, No. 84 (Adj. Sess.),  5, eff. Jan. 1, 2000; amended 2017, No. 134 (Adj. Sess.),  4.) 
 3462. InvestmentsForeign insurers
The investments of a foreign or alien insurer shall be as permitted by the laws of its domicile if of a quality substantially as high as that required under this chapter for similar funds of like domestic insurers. (1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 2).) 
 3463. Domestic insurers
(a) Subject to the provisions of sections 3461a, 3461b, and 3461c of this title, a domestic insurer, including a hospital service corporation established or licensed under the provisions of chapter 123 of this title and a medical service corporation established or licensed under the provisions of chapter 125 of this title, may prudently invest its assets in any of the following: (1) Government obligations. Direct obligations of the United States for the payment of money, or obligations for the payment of money which are guaranteed or insured as to the payment of principal and interest by the United States. (2) Government agencyInstrumentality obligations. Direct obligations for the payment of money, issued by an agency or instrumentality of the United States, or obligations for the payment of money which are guaranteed or insured as to the payment of principal or interest by an agency or instrumentality of the United States. (3) State obligations. Bonds and other legally created direct general obligations of any state of the United States for the payment of money provided that any such state at the date of such investment shall not be in default in the payment of principal or interest on any of its direct general obligations. (4) State political subdivision obligations. Bonds and other legally created direct general obligations of any political subdivision of any state of the United States for the payment of money provided that any such political subdivision at the date of such investment shall not be in default in the payment of principal or interest on any of its direct general obligations. (5) Development credit corporations. Evidences of indebtedness, and shares of stock issued by a development credit corporation incorporated under the general laws of the State of Vermont and subject to supervision by the Commissioner as provided by the laws of the State. (6) Obligations and stock of certain federal agencies. An insurer may invest in the obligations or stock, or both of the following agencies of the government of the United States of America, whether or not such obligations are guaranteed by such government: (A) Commodity Credit Corporation.(B) Federal Intermediate Credit Banks.(C) Federal Land Banks.(D) Central Bank for Cooperatives and Banks for Cooperatives.(E) Federal Home Loan Banks.(F) Federal National Mortgage Association.(G) Any other similar agency of the government of the United States of America and of similar financial quality. (7) International bank for reconstruction and development. Obligations issued or guaranteed by the international bank for reconstruction and development; provided, however, that the aggregate amount of such investments which are held at any time shall not exceed five percent of its total admitted assets. (8) Inter-American Development Bank. Obligations issued or guaranteed by the Inter-American Development Bank; provided, however, that the aggregate amount of such investments which are held at any time by any domestic insurer shall not exceed five percent of its total admitted assets. (9) Revenue bonds. Bonds and other obligations of the United States of America, of any state thereof, or of any political subdivision thereof, or of any public authority or instrumentality of one or more of the foregoing, which are payable as to both principal and interest from adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment, but not including any obligations payable solely out of special assessments on properties benefited by local improvements. (10) Equipment trust obligations. Equipment trust obligations or other instruments evidencing an interest in or ownership of personal property where there is a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such personal property, provided the aggregate investments therein shall not exceed 10 percent of the total admitted assets of such life insurance company. (11) Corporate obligations. Fixed interest and variable interest bearing obligations issued, assumed or guaranteed by any solvent institution, whether or not secured, which are not in default as to principal or interest and that have been or will be registered with the SVO or that meet and continue to meet the conditions for exemption as provided in section 3461d of this title. (12) Equity interests. (A) An insurer may acquire equity interests in business entities organized under the laws of any domestic jurisdiction or Canada. (B) A life and health insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this subdivision would exceed 20 percent of its admitted assets or the amount of equity interests then held by the insurer that are not listed on a qualified exchange would exceed five percent of its admitted assets. An accident and health insurer shall not be subject to this section but shall be subject to the same aggregate limitation on equity interests as a property and casualty insurer under subdivision (C) of this subdivision (12). (C) A property and casualty insurer shall not acquire an investment under this section if, as a result of and after giving effect to the investment, the aggregate amount of investments then held by the insurer under this section would exceed the greater of 25 percent of its admitted assets or 100 percent of its surplus as regards policyholders. (D) An insurer shall not acquire under this section any investments that the insurer may acquire under subdivisions (a)(19) through (a)(25) of this section. (E) An insurer shall not short sell equity investments unless the insurer covers the short sale by owning the equity investment or an unrestricted right to the equity instrument exercisable within six months of the short sale. (13) Asset-backed securities. An insurers investment in the asset-backed securities secured by or representing an interest in a single asset or pool of assets held by a trust or other business entity shall not exceed five percent of the insurers admitted assets. (14) Stock and obligations of mortgage companies. (A) Stock and obligations of any solvent institution created or existing under the laws of the United States or of any state thereof which is engaged primarily in the business of making, originating, purchasing, or otherwise acquiring or investing in, and servicing, or selling or otherwise disposing of, loans secured by mortgages on real property located in the United States, whether for its own account or as mortgage loan correspondent for others, or both, provided that immediately prior to such investment by a domestic insurer such institution shall be acting as, or shall be under a contract to act as, a mortgage loan correspondent for such insurer. (B) The amount invested under this subdivision in any one such institution shall not exceed one-tenth of one percent of the admitted assets of such insurer. The cost of any investment made under this subdivision when added to the aggregate cost of all other investments made under this subdivision and then held by such insurer shall not exceed one-half of one percent of the admitted assets of such insurer. (15) Derivative investments and transactions. An insurer may, directly or indirectly through an investment subsidiary, engage in derivative transactions under this subdivision, on the following conditions: (A) General conditions. (i) An insurer may use derivative instruments under this subchapter to engage in hedging transactions and certain income generation transactions; (ii) An insurer shall be able to demonstrate to the Commissioner the intended hedging characteristics and the ongoing effectiveness of the derivative transaction or combination of the transactions through cash flow testing or other appropriate analyses. (B) Limitations on hedging transactions. An insurer may enter into hedging transactions under this section if, as a result of and after giving effect to the transaction: (i) The aggregate statement value of options, caps, floors, and warrants not attached to another financial instrument purchased and used in hedging transactions does not exceed seven and one-half percent of its admitted assets; (ii) The aggregate statement value of options, caps, and floors written in hedging transactions does not exceed three percent of its admitted assets; or (iii) The aggregate potential exposure of collars, swaps, forwards, and futures used in hedging transactions does not exceed six and one-half percent of its admitted assets. (C) Limitations on income generation transactions. An insurer may enter into the following types of income generation transactions if, as a result of and after giving effect to the transactions, the aggregate statement value of the fixed income assets that are subject to call or that generate the cash flows for payments under the caps or floors, plus the face value of fixed income securities underlying a derivative instrument subject to call, plus the amount of the purchase obligations under the puts, does not exceed 10 percent of its admitted assets: (i) sales of covered call options on noncallable fixed income securities, callable fixed income securities if the option expires by its terms prior to the end of the noncallable period or derivative instruments based on fixed income securities; (ii) sales of covered call options on equity securities if the insurer holds in its portfolio or can immediately acquire through the exercise of options, warrants, or conversion rights already owned, the equity securities subject to call during the complete term of the call option sold; (iii) sales of covered puts on investments that the insurer is permitted to acquire under this subchapter if the insurer has escrowed or entered into a custodian agreement, segregating cash or cash equivalents with a market value equal to the amount of its purchase obligations under the put during the complete term of the put option sold; or (iv) sales of covered caps or floors if the insurer holds in its portfolio the investments generating the cash flow to make the required payments under the caps or floors during the complete term that the cap or floor is outstanding. (D) Counterparty exposure. An insurer shall include all counterparty exposure amounts in determining compliance with the limitations of sections 3461a and 3461b of this title. (16) Policy loans. Indebtedness secured by the extent thereof by the loan value of life insurance policies or annuity contracts. (17) Collateral loans. Obligations secured by a pledge of personal property, whether the same be tangible or intangible, upon the condition that the collateral be marketable and is fairly worth sufficiently in excess of the amount of the loan to make it a sound and prudent investment. (18) Unsecured loans. Unsecured obligations of any person or corporation, provided that any such loan or investment in excess of $2,500.00 shall be supported by the signed financial statement of the borrower, or supported by any other assurances satisfactory to insurer, which evidence the financial stability of such obligator. No insurer shall loan or make investments under this section in an amount greater than one-fourth of one percent of its admitted assets as to any one loan transaction or investment, nor shall the aggregate amounts so loaned or invested exceed two percent of the admitted assets of such insurer. (19) Acceptances and bills of exchange. Bank certificates of deposit and bankers acceptances, and other bills of exchange of the kind and maturities made eligible by law for purchase in the open market by federal reserve banks. (20) Mortgage loansReal estate. Obligations for the payment of money secured by first mortgages on real estate situated within any state or territory of the United States or the District of Columbia upon the following conditions: (A) The security for the loan shall be a first lien upon timberland or improved real estate, including mines, and quarries, except that a first mortgage on lands impressed with a public use, sometimes known as society or glebe lands, but held under a durable lease, or lands subject to lease under which rents are reserved to the owner and with all of the owners rights and options under the lease are collaterally assigned to the insurer as security, shall nonetheless be deemed to be a first lien as in this subdivision (A) required; provided, however, there is no condition or right of reentry or forfeiture, not insured against by a responsible title insurance company qualified to do business in the state wherein the mortgaged property is located, under which, in the case of real estate other than leaseholds, such lien can be cut off or subordinated or otherwise disturbed or under which, in the case of leaseholds, the insurer is unable to continue the lease in force for the duration of the loan. (i) Nothing herein shall prohibit any loan or investment by reason of the existence of any prior lien for grounds rents, taxes, assessments, or other similar charges not delinquent. (ii) Real estate shall not be deemed to be encumbered, within the meaning of this subdivision, by reason of the existence of instruments reserving or granting rights-of-way, mineral rights, oil or timber rights or easements, provided such interests do not unreasonably interfere with the use of the real estate contemplated at the time of investment. (iii) A leasehold estate shall constitute real estate under this subdivision only if it has an unexpired term of not less than 21 years, inclusive of the term or terms which may be provided by enforceable options of renewal, provided the underlying fee simple estate is not subject to any prior lien or encumbrance; and no mortgage loan upon a leasehold shall be made or acquired unless the terms thereof shall provide for the complete amortization of principal by the end of four-fifths of the period of the leasehold, inclusive of the period or periods which may be provided by enforceable options of renewal, which is unexpired at the time the loan is made, and shall further provide that the amount of required principal and interest payable in any prior full year. (B) No such mortgage loan or loans made or acquired on any one property shall exceed 75 percent of the appraised value of the real estate, and the terms thereof shall provide for: (i) payments of principal, whatever the period of the loan so that at no time during the period of the loan shall the aggregate payments of principal theretofore required to be made under the terms of the loan be less than would have been necessary for a loan payable completely by the end of 30 years through payments of interest only for five years; and (ii) substantially equal payments of principal and interest at the end of each year thereafter, except that loans secured by dwellings for use by not more than two families may exceed 75 percent of the appraised value of the real estate but shall not be greater than 80 percent unless the secured real estate be located in the state of Vermont, in which event said loans shall not be greater than 90 percent; and, anything in this subdivision to the contrary notwithstanding, loans secured chiefly by timberland, mines or quarries shall not exceed 50 percent of the appraised value of the real estate nor have a maturity greater than five years. If there is no provision for substantially complete amortization of principal as hereinabove provided, then in that event no such mortgage loan or loans made or acquired on any one property shall exceed 662/3 percent of the appraised value and the same shall be made payable upon demand or within not to exceed two years. (C) The appraised value of real estate securing any mortgage loan shall be established and evidenced by the written appraisal of a qualified real estate appraiser who may be an employee of the insurer, except that in the case of property to be qualified hereunder as timberland, mines or quarries, the appraisal must be made by an engineer or geologist or other person qualified in the relevant field. (D) If the obligation is purchased, no payment thereon shall be more than 30 days overdue at the time of the investment. (E) No mortgage loan made or acquired which is a participation or a part of a series or issue secured by the same mortgage shall be a lawful investment under this subdivision unless (i) the entire series or issue is held by such insurer, or (ii) the insurer holds a participation in such mortgage giving it, by written agreement with all other participants, substantially, rights of a first mortgagee, or (iii) the loan is evidenced by bonds, notes or evidences of indebtedness forming part of an issue of bonds, notes or evidences of indebtedness secured by a mortgage which, if there are more than five holders of such issue at the time such mortgage loan is made or acquired by such insurer, or if there are more than three holders of such issue at that time and such issue aggregates less than $5,000,000.00 in original principal amount, shall be to a bank, trust company, or national bank duly authorized and licensed to act as a corporate trustee in its state of domicile (with or without a co-trustee), provided that such issue is all of equal rank. (F) Each mortgage loan must be supported by evidence satisfactory to insurer that such mortgage is a first lien on the secured real estate as in this subdivision provided. (G) Insurer shall not invest more than 60 percent of its admitted assets pursuant to this subdivision. (H) Insurer shall not invest under this subdivision more than two percent of its admitted assets in obligations of any one obligor. (21) Mortgage loansInsured or guaranteed. Obligations for the payment of money secured by mortgages guaranteed or insured, as the case may be, as follows: (A) by the Federal Housing Administration under the terms of an act of Congress of the United States of June 27, 1934, entitled the National Housing Act, as heretofore or hereafter amended; (B) by the Administrator of Veterans Affairs, pursuant to the provisions of Title III of an act of Congress of the United States of June 22, 1944, entitled the Servicemens Readjustment Act of 1944, as heretofore or hereafter amended, provided that any excess investment over 80 percent of the appraised value is guaranteed; (C) by the United States, any state, territory, or district thereof, or of any instrumentality, agency or political subdivision of one or more of the foregoing, provided that any excess investment over 75 percent of the appraised value is so insured or guaranteed; (D) any mortgage loan so guaranteed or insured as in this subdivision (21) provided, shall not be subject to the provisions of any law of this state prescribing the nature, amount or form of security, or requiring security upon which loans or advances of credit may be made, or prescribing or limiting the period or principal amount for which loans or advances of credit may be made, or prescribing or limiting the interest which may be charged or taken upon any loan or advance of credit. (22) Mortgage loansAdditionally secured by assignment of certain leases. Obligations for the payment of money under the following conditions:(A) the obligation shall be secured by a first mortgage or lien on real or personal property and additionally secured by assignment of the mortgagors interest, as lessor, on a lease or leases on said property located within any state of the United States, any territory thereof, or the District of Columbia; (B) such lease or leases shall be collaterally assigned for the benefit of the insurer, and shall be nonterminable upon foreclosure of any lien upon the leased property; (C) the rents payable under such lease or leases shall be sufficient to provide for amortization during the term of the lease of not less than 60 percent of the investment with interest thereon as to real property and 80 percent as to personal property; (D) such lease or leases shall be noncancelable by lessee during the term of the lease or period of the obligation, whichever is less, other than in the event of lessors default therein, condemnation, or destruction of the leased property to the extent that it is no longer tenantable for the purposes to which it was devoted at the time of destruction, by any hazard excluding, however, from the provisions of this subdivision (D) leases to the United States government or its agencies; (E) the lessee or lessees under the lease or leases, or any corporation or corporations which have assumed or guaranteed any lessees performance thereunder shall be the United States government, its agencies, any state of the United States, or political subdivision thereof, or a corporation or corporations whose obligations would be eligible for investment by an insurer in accordance with the provisions of this subdivision (11) of this section; (F) insurer shall not invest more than 10 percent of its admitted assets pursuant to this section; and (G) insurer shall not invest under this subdivision more than two percent of its admitted assets in the obligations of any one obligor or in obligations secured by leases to any one corporation. (23) Mortgage loansPersonal property. Obligations for the payment of money secured by first mortgages or liens, including conditional sale contracts, on tangible personal property situated within any state, territory or district of the United States, provided no such investment made or acquired shall at the time of acquisition exceed 75 percent of the fair market value of the property secured. (24) Real estateCompany business. Real estate (including leasehold interests) for the convenient accommodation of the insurers business operations, including home office, branch office and field operations, on the following conditions: (A) any parcel of real estate acquired under this provision may include excess space for rent to others if it is reasonably anticipated that such excess will be required by the insurer for expansion or if the excess is reasonably required in order to have a building that will be an economic unit; (B) such real estate may be subject to a mortgage; and(C) an insurers aggregate investment under this provision will not exceed 10 percent of its admitted assets, except with the permission of the commissioner if he or she finds that such percentage of its admitted assets are insufficient to provide convenient accommodation for the insurers business. (25) Real estate and personal property under lease. Real estate in the United States or its territories under lease or commitment for lease and personal property for intended use in the United States under lease, or commitment for lease, on the following conditions: (A) the lessee or the guarantor of lessees obligations under the lease is a corporation with tangible net worth of $500,000.00 or more; (B) the lease provides for a net rental sufficient to amortize the investment with interest over the primary term of the lease or 40 years, whichever is less; (C) insurer shall not invest in real estate under lease more than 10 percent of its admitted assets pursuant to this subdivision; and (D) insurer shall not invest in personal property under lease more than five percent of its admitted assets pursuant to this subdivision. (26) Real estateIncome producing. Real estate and equipment incident and related to the operation of said real estate for the production of income, or as may be acquired to be improved or developed for such investment purpose pursuant to an existing program therefor, situated in any state of the United States of America, any territory thereof, or the District of Columbia, and the construction thereon of improvements, on the following conditions: (A) The term real estate as used in this subdivision shall include any real property and interest therein including, without limitation any interest on, above or below the surface of the land any leasehold estate therein and any interest held or to be held by the insurer in cotenancy with one or more other institutions. (B) The insurers investment shall not exceed the reasonable value of the property or of the interest therein acquired. (C) The insurer may let contracts for construction and pay costs of construction and leasing, hold, maintain, lease, and manage the property, collect rents and other income therefrom, and sell the property in whole or in part. (D) The property may be encumbered by leases to tenants and by rights-of-way, easements, mineral reservations, building restrictions, and restrictive covenants, provided none of them can interfere substantially with the use of the property or result in a forfeiture of the property, unless a policy of title insurance, issued by a responsible title insurer qualified to do business in the state wherein the property is located, insures the company against loss or damage arising from such encumbrances or reversionary rights. (E) Insurer shall not invest more than 10 percent of its admitted assets under this subdivision.(27) Real estateParticipation. Any of the investments which are authorized by subdivisions (24), (25), and (26) of this subsection may be made by an insurer through ownership of: (A) voting capital stock of a corporation;(B) an interest in a partnership, joint venture, or other form of business entity.(28) Foreign investments. Investments in foreign jurisdictions subject to the following:(A) Any domestic insurer which is authorized to do business in a foreign jurisdiction or possession of the United States or which has outstanding insurance, annuity or reinsurance contracts on lives or risks resident or located in a foreign jurisdiction or possession of the United States may invest in, or otherwise acquire or loan upon securities and investments in such foreign jurisdiction or possession which are substantially of the same kind, classes, and investment grades as those eligible for investment under the provisions of this chapter; but the aggregate amount of such investments in a foreign jurisdiction or a possession of the United States and of cash in the currency of such jurisdiction or possession which is at any time held by such insurer shall not exceed one and one-half times the amount of its reserves and other obligations under such contracts or the amounts which such insurer is required by law to invest in such jurisdiction or possession; (B) In addition to the foreign investments permitted under subdivision (A) of this subdivision (28), any domestic insurer may invest or otherwise acquire or loan upon securities and investments in foreign countries which are substantially of the same kinds, classes and investment grades as those eligible for investment under this chapter; but: (i) The aggregate amount of such investments made pursuant to this subdivision (B) shall not exceed 20 percent of its admitted assets; and (ii) The aggregate amount of foreign investments then held by the insurer under this subdivision in a single foreign jurisdiction shall not exceed 10 percent of its admitted assets as to a foreign jurisdiction that has a sovereign debt rating of SVO 1 or five percent of its admitted assets as to any other foreign jurisdiction (three percent in the case of life and health insurers). Of the investments permitted under this subdivision, the aggregate amount of investments denominated in foreign currencies may not exceed 15 percent of the insurers admitted assets (10 percent in the case of life and health insurers). Such investments denominated in the foreign currency of a single foreign jurisdiction which has a sovereign debt rating of SVO 1 may not exceed 10 percent of the insurers admitted assets. Such investments denominated in the foreign currency of a single foreign jurisdiction which does not have a sovereign debt rating of SVO 1 may not exceed five percent of the insurers admitted assets (three percent in the case of life and health insurers). (29) Other loans or investments. Loans or investments not qualifying or permitted under this chapter in an amount not exceeding 10 percent of a domestic insurers admitted assets regardless of whether the same or similar type investment has been included in or omitted from any provision of this chapter. (b) Investments in subsidiaries are subject to section 3682 of this title and are not subject to any other investment limitations contained in this subchapter. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 1,  1-28); amended 1969, No. 12, eff. Feb. 26, 1969; 1981, No. 15,  1; 1999, No. 84 (Adj. Sess.),  6, eff. April 19, 2000; 2001, No. 71,  5, eff. June 16, 2001; 2003, No. 163 (Adj. Sess.),  43, eff. June 10, 2004.) 
 3463a. Valuation of investments
Investments of domestic insurers shall be valued in accordance with the valuation procedures established by the National Association of Insurance Commissioners, unless the Commissioner requires or finds another method of valuation that is not inconsistent with the valuation method promulgated by the National Association of Insurance Commissioners and is reasonable under the circumstances. (Added 1991, No. 101,  3; amended 1993, No. 12,  11, eff. April 26, 1993.) 
 3465. Exemption from investment limitations
(a) Nothing in this chapter or other statute law of the State shall be construed as denying to an insurer the right to invest its funds, operate a business, manage or deal in property, or take any other action over whatever period of time may be reasonably necessary to avoid loss on a loan or investment previously made or an obligation created in good faith, the conditions and limitations of the investment of funds in this chapter to the contrary notwithstanding. (b) No investment limitation contained in this chapter shall prohibit an insurer from investing in or acquiring securities or other properties of another insurance company in connection with a lawful agreement of bulk reinsurance, merger, consolidation, sale of assets, or acquisition of a subsidiary under subchapter 13 of this chapter. (c) No investment limitation contained in this chapter shall prohibit the acquisition and retention by an insurer of substitute or additional securities or property if: (1) received as a dividend;(2) a lawful distribution of assets;(3) through the exercise of rights of conversion, warrants, or rights to purchase stock or preemptive rights to subscribe to stock, contained in or attached to a previously existing investment in such company; (4) pursuant to a lawful plan of reorganization. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  1); amended 2003, No. 163 (Adj. Sess.),  44, eff. June 10, 2004.)
 3467. Qualification of investments
(a) Any restriction, exclusion, or provision appearing in any section of this chapter shall apply only with respect to the authorization of the particular section in which it appears and shall not be applicable to any other section. The qualification or disqualification of an investment under one section shall not prevent its qualification in whole or in part under another section, and an investment authorized by more than one section may be held under whatever authorizing section the insurer elects. An investment may be transferred from time to time at the election of the insurer to the authority of any section under which it qualifies whether originally qualifying thereunder or not. (b) The qualification of an investment under a particular section of this chapter shall be determined as of the date of its acquisition by the insurer or as of the date on which the insurer becomes legally obligated to acquire the same as the case may be. (c) As used herein, the word section shall include any subsections or specific provisions authorizing a particular kind or class of investments. (d) An investment instrument not specifically qualified under this subchapter shall be deemed to qualify under this subchapter, based on the underlying nature of the actual securities that comprise such investment instrument subject to the prior written permission of the Commissioner. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  3); amended 1999, No. 84 (Adj. Sess.),  8, eff. April 19, 2000.) 
 3468. Investments qualified under prior law
The provisions of this chapter shall not affect or operate to disqualify any investment which an insurer has made or which it is legally obligated to acquire prior to the effective date of this subchapter; provided, however, that an insurer at its option may transfer any previously made investment to the authority of the provisions of this chapter whereupon such investments shall be subject to and governed thereby. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  4).) 
 3469. Loans to directors and officersRestrictions
No domestic insurer shall invest in or loan upon any property, directly or indirectly, whether real or personal, in which any officer or director of such insurer has a financial interest, nor shall any such insurer make a loan of any kind to any officer or director of such insurer unless such officer or director neither participates in, nor votes at any management decision or meeting regarding such loan. This section shall not apply to policy loans or first mortgage loans on dwellings of not more than two families to be occupied by such officer as a residence, nor in circumstances where the financial interest of such officer or director is only nominal, trifling, or so remote as not to give rise to a conflict of interest. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  5).) 
 3470. Mortgage loans to minors
An insurer is hereby authorized to make loans secured by a mortgage on real estate to a husband and wife where either or both is a minor 18 years old or over and where said real estate is to be used as a home by said husband and wife, subject to statutory conditions relating to such insurer, and may make any contract relating thereto with such minor. Such minors may be legally bound to the full performance of such mortgage and notes and contracts relating thereto without right of rescission because of their minority. The minority of such minor shall not be a defense nor a material issue in any civil action in which such mortgage or contract is material. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  6).) 
 3471. Mortgages on real and personal property as liens; priorities
Any mortgages acquired by an insurer on real or personal property so written as to secure a present debt and any future advances by the mortgagee or an assignee shall be a lien upon the mortgaged property for the full amount of debt directly created between the mortgagor and the mortgagee and between the mortgagor and an assignee of the mortgagee subsequent to assignment, due to the mortgagee or assignee at any given time provided that if the mortgaged property includes a homestead, the spouse of the mortgagor must consent in writing to the creation of any subsequent indebtedness. Any such mortgage may be assigned for the full amount due thereon at the time of such assignment. A subsequent mortgage on the same premises shall be inferior to the first mortgage unless the second mortgagee in writing notifies the first mortgagee of the incidence of his or her mortgage, in which case indebtedness created by the mortgagor to the first mortgagee subsequent to such notice shall be inferior to the lien of the second mortgagee. In any conflict with other provisions of Vermont statutes this section shall control. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  7).) 
 3472. Earnings statements and income ratiosSpecial situations
In the application of the provisions and requirements of this subchapter to determine whether a particular investment in any corporation, association, or institution is qualified the following shall be applicable: (1) When a corporation, association, or institution, whether or not it has been in existence during the whole or whatever period may be required by the particular provision of this chapter under which it is sought to be qualified as an investment, has been constituted in the form that it has at the time of such investment by consolidation, acquirement of merger, the adjusted pro forma consolidated earnings statement may be used to determine the income ratios as provided by any such provisions. (2) Similarly, for the purpose of determining such income ratios for holding corporations or institutions with subsidiaries, the consolidated earnings statement of parent and subsidiary institutions may be used. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 5, art. 3,  8).) 
 3501. Life insurance and annuities
For all life insurance policies and annuity contracts, the insurer shall maintain reserves as required by chapter 103, subchapter 4 of this title. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 6,  1).) 
 3502. InsuranceOther life insurance and annuities
For all policies of insurance other than life insurance and annuities, the insurer shall maintain reserves which shall place a sound value on its liabilities under such policies and which shall not be less than the reserves according to appropriate standards set forth in regulations issued by the Commissioner and, in no event, less in the aggregate than the pro rata gross unearned premium reserve for such policies. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 6,  2).) 
 3503. Deposits of domestic insurer doing foreign business
(a) A domestic insurer may deposit with the Treasurer of this State or with the comptroller or chief financial officer of another state or country funds or securities of the insurer which the laws of such state or country require to enable such insurer to establish agencies or prosecute the business of insurance within such state or country. The Treasurer of this State shall safely keep such securities so deposited with him or her for the benefit of the policyholders of the insurer, but it may receive interest or dividends from the securities, or exchange them for others of equal value. (b) If such insurer discontinues doing business in such other states or countries, it may at any time bring an action in the Superior Court against the State of Vermont, provided such deposit is made with the Treasurer of this State, to enforce, administer, or terminate the trust created by such deposit. The process in such action shall be served on the State Treasurer and the Commissioner, who shall appear and answer on behalf of the State. On proof by such company that it has paid or made sufficient provision for the payment of all liabilities arising from business written or transacted in such other states and countries, the court may make such orders and decrees for the payment or return of such funds or securities, or any part thereof, as shall protect the rights of all interested parties and the State Treasurer shall comply therewith. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 7,  1).) 
 3504. Pension system
An insurance company now or hereafter organized and doing business under the laws of this State, in addition to all other powers granted to it by law, may provide a pension in pursuance of the terms of a retirement plan, adopted by its board of directors and approved by the Commissioner, for any person who is or has been an employee of such company, and who shall retire by reason of age or disability, and may further provide that, if such employee shall contribute to a retirement fund established under such retirement plan, and shall thereafter retire from the service of the company for reasons other than age or disability, the employee may withdraw from such fund the amount of the employees contribution thereto with interest thereon at such rate, if any, and subject to such rules and regulations, as may be provided by the board of directors. However, such a company shall not grant a pension after the death of an officer, director, or trustee thereof, to a member of his or her family, or to his or her estate or to any other person for the benefit thereof. For the purposes of this section, the word employee shall include a salaried officer or an employee of such company and, in the case of a life insurance company, a soliciting or general agent of such company and an employee of such general agent, whether or not the person for whom such pension is to be provided is or shall be deemed for any other purpose an employee of such company. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 7,  2); amended 2007, No. 49,  5.) 
 3541. Filing and approval of forms
(a) No basic insurance policy, certificate, or annuity contract form, or application form where written application is required and is to be made a part of the policy or contract, or printed rider or endorsement form or form of renewal certificate, shall be delivered, or issued for delivery in this State, unless the form has been filed with and approved by the Commissioner. This provision shall not apply to surety bonds, or to specially rated inland marine risks, nor to policies, riders, endorsements, or forms of unique character designed for and used with relation to insurance upon a particular subject, or which relate to the manner of distribution of benefits or to the reservation of rights and benefits under life or disability insurance policies and are used at the request of the individual policyholder, contract holder, or certificate holder. All certificates delivered or issued for delivery in this state shall be filed with the Commissioner for approval if the group policy does not qualify under subdivision 3368(a)(4) of this title at the time of delivery or issuance. As to forms for use in property, marine (other than wet marine and transportation insurance), casualty, and surety insurance coverages, the filing required by this subsection may be made by rating organizations on behalf of its members and subscribers; but this provision shall not be deemed to prohibit any such member or subscriber from filing any such forms on its own behalf. (b) Every such filing shall be made not less than 30 days in advance of any such delivery. At the expiration of such 30 days the form so filed shall be deemed approved unless prior thereto it has been affirmatively approved or disapproved by order of the Commissioner. Approval of any such form by the Commissioner shall constitute a waiver of any unexpired portion of such waiting period. The Commissioner may extend by not more than an additional 30 days the period within which he or she may so affirmatively approve or disapprove any such form, by giving notice to the insurer of such extension before expiration of the initial 30-day period. At the expiration of any such period as so extended, and in the absence of such prior affirmative approval or disapproval, any such form shall be deemed approved. The Commissioner may at any time, after notice and for cause shown, withdraw any such approval. In any notice of disapproval, or withdrawal of a previously approved form, the Commissioner shall state that a hearing will be granted within 20 days upon request of the insurer. (c) Any order of the Commissioner disapproving any such form or withdrawing a previous approval shall state the grounds therefor and the particulars thereof in such detail as reasonably to inform the insurer thereof. Any such withdrawal of a previously approved form shall be effective at expiration of such period, not less than 30 days after the giving of notice of withdrawal, as the Commissioner shall in such notice prescribe. Any demand for a hearing relative to the Commissioners withdrawal of approval of a form which has been received by the Commissioner prior to the effective date of such withdrawal shall stay such action pending the hearing thereon. (d) The Commissioner may, by order, exempt from the requirements of this section for so long as he or she deems proper any insurance document or form or type thereof as specified in such order, to which, in his or her opinion, this section may not practicably be applied, or the filing and approval of which are, in his or her opinion, not desirable or necessary for the protection of the public. (e) Appeals from orders of the Commissioner disapproving any such form or withdrawing a previous approval may be taken as provided in section 77 of this title. (f) Each filing of a policy, contract, endorsement, rider, certificate, or application form shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00, per filing submission. A minimum fee of $150.00 shall accompany each such filing if submitted by a rating, advisory or service organization. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 8,  1); amended 1985, No. 236 (Adj. Sess.),  5; 1989, No. 106,  2; 1991, No. 166 (Adj. Sess.),  1; 1997, No. 161 (Adj. Sess.),  5, eff. Jan. 1, 1998.) 
 3542. Grounds for disapproval
The Commissioner shall disapprove any form filed under this subchapter or withdraw any previous approval thereof, only on one or more of the following grounds: (1) if it is in any respect in violation of or does not comply with this act;(2) if it contains or incorporates by reference, where such incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract; (3) if it has any title, heading, or other indication of its provisions which is misleading;(4) if it is printed or otherwise reproduced in such manner as to render any provision of the form substantially illegible. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 8,  2).) 
 3543. Existing forms and filings
Every form of insurance or annuity document or other filing referred to in section 3541 of this title lawfully in use immediately prior to July 1, 1968 may continue to be so used or be effective until the Commissioner otherwise prescribes; except, that before expiration of one year from and after such effective date neither this part nor the Commissioner shall prohibit the use of any such document or filing because of any power, prohibition, or requirement contained in this part which did not exist under laws in force immediately prior to such effective date. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 8,  3).) 
 3552. Fees assessed by the National Association of Insurance Commissioners
A company domiciled in this State and licensed by the Commissioner of Financial Regulation under this title, including captive insurance companies and risk retention groups licensed under chapter 141 of this title shall not be required to pay any fee, assessment, or charge of any kind to the National Association of Insurance Commissioners, including annual statement filing fees, securities valuation fees, and any other such fees, assessments, and charges determined by the Commissioner to be necessary for such companies to do business, unless such fees, assessments, or charges have been established and authorized in rules adopted by the Commissioner. (Added 1995, No. 83 (Adj. Sess.),  3; amended 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 3561. Annual statement
(a) Each domestic, foreign, and alien insurance company doing business in this state shall annually submit to the Commissioner a statement of its financial condition, verified by oath of two of its executive officers. The statement shall be prepared in accordance with the National Association of Insurance Commissioners Instructions Handbook and Accounting Practices and Procedures Manual and shall be in such general form and context, as approved by, and shall contain any other information required by, the National Association of Insurance Commissioners with any useful or necessary modifications or adaptations thereof required or approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner. The statement of an alien insurer shall relate only to the insurers transactions and affairs in the United States unless the Commissioner requires otherwise. A foreign or alien company, upon withdrawing from the State of Vermont shall pay to the Commissioner $25.00 for the filing of its final financial statement. (b)(1) At the direction of the Commissioner, each domestic, foreign, and alien insurance company doing business in this State shall annually submit to the Commissioner, in a manner and on forms approved by the Commissioner, a statement of its market conduct performance for the purpose of permitting the participation of this State in the Market Conduct Annual Statement program of the National Association of Insurance Commissioners. The statement shall be prepared in accordance with the Market Conduct Annual Statement instructions published by the National Association of Insurance Commissioners, with any useful or necessary modifications or adaptations thereof required or approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner. (2) Subject to section 22 of this title, all market conduct annual statements and other information filed pursuant to subdivision (1) of this subsection, all records, and other information of investigations conducted by the Department under this title, whether such statements, records, or information are in the possession of another regulatory or law enforcement agency, the National Association of Insurance Commissioners, or any person, shall be confidential and privileged, shall not be made public, shall not be subject to subpoena, and shall not be subject to discovery or introduction into evidence in any private civil action. (c) The Commissioner shall adopt by rule the Medical Professional Liability Closed Claim Reporting Model Law of the National Association of Insurance Commissioners, as amended from time to time, or in the Commissioners discretion a substantially similar rule. Subject to section 22 of this title, information which identifies, directly or indirectly, the closed claims of a health care facility or a health care provider shall be confidential and privileged, shall not be made public, shall not be subject to subpoena, and shall not be subject to discovery or introduction into evidence in any private civil action. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 9,  1); amended 1991, No. 101,  5; 1991, No. 249 (Adj. Sess.),  1; 2009, No. 42,  6.) 
 3562. Time reports due
Reports of all insurance companies shall be made annually, on or before March 1 for the year ending December 31, or within any extension of time not to exceed 30 days which the Commissioner for good cause may have granted. Whenever the Commissioner deems it necessary, the Commissioner may demand an additional statement of the affairs of any company transacting business in this State. (1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 9,  2); amended 1981, No. 15,  2; 2001, No. 71,  6, eff. June 16, 2001.) 
 3563. Examination of companies; fees
The Commissioner shall thoroughly inspect and examine the affairs of each domestic insurer to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with the provisions of law. Such an inspection and examination shall be conducted personally or by a competent person appointed by the Commissioner at least every three years and whenever determined to be prudent by the Commissioner. The Commissioner may enlarge the aforesaid three-year period to five years, provided the insurer is subject to a comprehensive annual audit during such period of a scope satisfactory to the Commissioner by independent auditors approved by the Commissioner. The examination shall include a review of the financial analysis performed by the Commissioner and shall be conducted in accordance with statutory accounting principles pursuant to guidelines, principles, manuals, instructions, and other procedures promulgated by the National Association of Insurance Commissioners, together with any useful or necessary modifications or adaptations thereof required or approved by the Commissioner. The expenses of the examinations shall be paid to the State by the company or companies examined and the Commissioner of Finance and Management shall issue his or her warrants for the proper charges incurred in all examinations. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 9,  3); amended 1971, No. 170 (Adj. Sess.),  1, eff. April 27, 1982; 1983, No. 195 (Adj. Sess.),  5(b); 1991, No. 101,  6; 2003, No. 105 (Adj. Sess.),  5; 2013, No. 29,  22, eff. May 13, 2013.) 
 3564. Examination of foreign insurers; expenses
(a) At least once every three years and when the Commissioner determines it to be prudent for the protection of policyholders in this State, he or she shall, in like manner, visit and examine or cause to be visited and examined by some competent person whom the Commissioner may appoint for that purpose, any foreign or alien insurer applying for admission or already admitted to do business in this State. The Commissioner may enlarge the aforesaid three-year period to five years. The examination of an alien insurer shall be limited to its insurance transactions and affairs in the United States unless otherwise required by the Commissioner. The examination shall be conducted in accordance with statutory accounting principles pursuant to guidelines, principles, manuals, instructions, and other procedures promulgated by the National Association of Insurance Commissioners, together with any useful or necessary modifications or adaptations thereof required or approved by the Commissioner. Such insurer shall pay the proper charges incurred in such examination, including the expenses of the Commissioner and the expenses and compensation of his or her assistants employed therein. Such examination shall include a computation of the reinsurance reserve. (b) In lieu of an examination under this section of any foreign or alien insurer licensed in this State, the Commissioner may accept an examination report on the company as prepared by the insurance department for the companys state of domicile or port-of-entry state. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 9,  4); amended 1991, No. 101,  7; 1991, No. 249 (Adj. Sess.),  2; 1993, No. 12,  2, eff. April 26, 1993; 1995, No. 83 (Adj. Sess.),  5; 2003, No. 105 (Adj. Sess.),  6.) 
 3565. Examination of officers and books
(a) The Commissioner, inspecting an insurance company, may require its officers, or any agent thereof, to exhibit books kept by them relating to their business and may examine under oath such agents and officers and other persons as he or she thinks proper, in relation to the business transactions and conditions of the company. (b) Every company or person from whom information is sought, its officers, directors, and agents must provide to the examiners appointed by the Commissioner, timely, convenient and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents, and any or all computer or other recordings relating to the property, assets, business, and affairs of the company being examined. The officers, directors, employees, and agents of the company or person shall cooperate in the examination. (Added 1967, No. 344 (Adj. Sess.),  1, (ch. 1, subch. 9,  5); amended 1991, No. 249 (Adj. Sess.),  3.) 
 3566. Penalty for refusal
The Commissioner may suspend, revoke, or nonrenew the license of any company if the company, by its officers, directors, employees, or agents, refuses to submit to examination or to comply with any reasonable written request of the examiners. Any such proceedings for suspension, revocation, or nonrenewal of any license or authority before the Commissioner shall be conducted in accordance with 3 V.S.A. chapter 25. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 9,  6); amended 1991, No. 249 (Adj. Sess.),  4.) 
 3567. Liquor liability insurance records
(a) All insurers licensed to sell insurance, including nonadmitted insurers with whom certain types of insurance may be placed as permitted by chapter 138 of this title, shall submit the following liquor liability insurance statistics to the Commissioner of Financial Regulation who shall collect and maintain records on the following: (1) the number of policies written, premiums written, and premiums earned for liquor liability insurance; (2) the number of claims paid and dollar amount of claims paid; and(3) the number of claims incurred and dollar amount of claims incurred.(b) The Commissioner of Financial Regulation shall make available to the General Assembly the information collected and maintained under this section. The Commissioner shall report to the General Assembly the number of companies writing liquor liability insurance. (c) If an insurer cannot determine the amount of premiums written or premiums earned because the liquor liability coverage is part of a policy or policies providing other liability coverage, reasonable methods of estimation may be used as approved by the Commissioner of Financial Regulation. (d) Liquor liability insurance means that type of liability insurance which covers the selling or serving of alcoholic beverages for a consideration and includes policies which provide other liability coverage in addition to liquor liability insurance. (Added 1987, No. 103,  5; amended 1989, No. 155 (Adj. Sess.),  1; 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a).) 
 3568. Preservation of records
(a) Every domestic and foreign insurer shall preserve their business records in accordance with the rules adopted under this section. (b) The Commissioner may by rule require insurers to preserve any records relating to the business of insurance as are necessary for efficient and effective insurance regulation. (c) If a record is disposed of in accordance with rules adopted by the commissioner, an insurer shall be under no duty to produce the record in any administrative or judicial proceeding. (d) The rules adopted by the Commissioner may designate methods of reproduction of records into electronic, microfilm or microfiche form, or other process. Any such reproduction shall have the same force and effect as the original and may be admitted in evidence as the original itself. (Added 1989, No. 155 (Adj. Sess.),  2.) 
 3569. National Association of Insurance Commissioners filing requirements
(a) Each domestic, foreign, and alien insurer who is authorized to transact insurance in this State shall annually on or before March 1 of each year, or within any extension of time not to exceed 30 days which the Commissioner, for good cause may have granted, file with the National Association of Insurance Commissioners a copy of its annual statement convention blank as prescribed and adopted by the National Association of Insurance Commissioners, along with such additional filings as prescribed by the Commissioner for the preceding year. The information filed with the National Association of Insurance Commissioners shall be in the same format and scope as that required by the Commissioner and shall include the signed jurat page and the actuarial certification. Any amendments and addendums to the annual statement filing subsequently filed with the Commissioner shall also be filed with the National Association of Insurance Commissioners. The Commissioner in his or her sole discretion may waive one or more of the requirements established by this subsection. (b) Foreign insurers that are domiciled in a state which has a law substantially similar to subsection (a) of this section shall be deemed in compliance with this section. (Added 1991, No. 101,  8; amended 2013, No. 29,  23.) 
 3570. Immunity
In the absence of actual malice, members of the National Association of Insurance Commissioners, their duly authorized committees, subcommittees, and task forces, their delegates, National Association of Insurance Commissioners employees, and all others charged with the responsibility of collecting, reviewing, analyzing, and disseminating the information developed from the filing of the annual statement convention blanks shall be acting as agents of the Commissioner under the authority of this act and shall not be subject to civil liability for libel, slander, or any other cause of action by virtue of their collection, review, and analysis or dissemination of the data and information collected from the filings required hereunder. The immunity conferred by this section shall not apply if the Commissioner, in his or her sole discretion, determines that the National Association of Insurance Commissioners has substantially failed to comply with the provisions of section 3551 of this title, or has imposed fees, assessments, or charges in excess of those provided in section 3552 of this title. (Added 1991, No. 101,  9; amended 1995, No. 83 (Adj. Sess.),  6.) 
 3571. Confidentiality
All financial analysis ratios and examination synopses concerning insurance companies that are submitted to the Department by the National Association of Insurance Commissioners Insurance Regulatory Information System are confidential and may not be disclosed by the Department. (Added 1991, No. 101,  10.) 
 3572. Revocation of certificate of authority
The Commissioner may suspend, revoke, or refuse to renew the certificate of authority of any insurer failing to file its annual statement when due or within any extension of time which the Commissioner, for good cause, may have granted. (Added 1991, No. 101,  11.) 
 3573. Conduct of examinations
(a) Upon determining that an examination should be conducted, the Commissioner or the Commissioners designee shall issue an examination order appointing one or more examiners to perform the examination and instructing them as to the scope of the examination. In conducting a financial or a market conduct examination, the examiner shall observe those guidelines and procedures set forth in the Examiners Handbook adopted by the National Association of Insurance Commissioners as amended from time to time. The Commissioner may also use such other guidelines or procedures as the Commissioner may deem necessary or appropriate under the circumstances. (b) When making an examination under this section, the Commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists, the cost of which shall be borne by the company which is the subject of the examination. (c) The Commissioner is authorized to terminate or suspend any examination in order to pursue other legal or regulatory action pursuant to the insurance laws of this State. (d) Findings of fact made pursuant to any examination shall be prima facie evidence in any legal or regulatory action. (e) The Commissioner is authorized to use and make public any final or preliminary examination report, any examiner or company work papers or other documents, or any other information discovered or developed during the course of any examination in the furtherance of any legal or regulatory action. (Added 1991, No. 249 (Adj. Sess.),  5; amended 1999, No. 38,  1, eff. May 20, 1999.) 
 3574. Examination reports
(a) General description. All examination reports shall be comprised of only facts appearing upon the books, records, or other documents of the company, its agents or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs, and such conclusions and recommendations as the examiners find reasonably warranted from the facts. (b) Filing of examination report. No later than 60 days following completion of the examination, the examiner in charge shall file with the Department a written report of examination under oath. Upon receipt of the report, the Department shall transmit the report to the company examined, together with a notice which shall afford the company examined a reasonable opportunity of not more than 30 days to make a written submission or rebuttal with respect to any matters contained in the examination report. (c) Adoption of report on examination. Within 30 days of the end of the period allowed for the receipt of written submissions or rebuttals, the Commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiners work papers and shall order the report adopted together with any modifications and amendments that he or she deems appropriate. If the examination report reveals that the company is operating in violation of any law, regulation or prior order of the Commissioner, the Commissioner may order the company to take any action the Commissioner considers necessary and appropriate to cure such violation. The company may file an administrative appeal within 30 days of the Commissioners order. Such appeal shall be heard in accordance with 3 V.S.A. chapter 25. (d) Publication and use. (1) The Commissioner may hold the contents of the examination report confidential for 15 days following the issuance of the Commissioners order under subsection (c) of this section. (2) The Commissioner may disclose the content of an examination report, preliminary examination report or results, or any related matter, to the insurance department of any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, as long as such agency or office receiving the report or related matters agrees in writing to hold it in a manner consistent with this section. (3) The Commissioner may refuse to disclose any information or records which would indicate or show the existence or content of any investigation or activity of a criminal justice agency. (4) All working papers, recorded information, documents and copies thereof produced by, obtained by or disclosed to the Commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the Commissioner or any other person, except to the extent provided in this subsection and subsection 3573(e) of this title. The Commissioner may grant access to such information to the National Association of Insurance Commissioners. Such parties must agree in writing prior to receiving the information to provide to it the same confidential treatment as required by this section, unless the prior written consent of the company to which it pertains has been obtained. (Added 1991, No. 249 (Adj. Sess.),  6.) 
 3575. Conflict of interest
(a) No examiner may be appointed by the Commissioner if such examiner, either directly or indirectly, has a conflict of interest or is affiliated with the management of or owns a pecuniary interest in any person subject to examination under this subchapter. This section shall not be construed to disqualify an examiner who is: (1) a policyholder or claimant under an insurance policy;(2) a grantor of a mortgage or similar instrument on the examiners residence to a regulated entity if done under customary terms and in the ordinary course of business; (3) an investment owner in shares of regulated diversified investment companies; or(4) a settlor or beneficiary of a blind trust into which any otherwise impermissible holdings have been placed. (b) Notwithstanding the requirements of this section, the Commissioner may retain from time to time, on an individual basis, qualified actuaries, certified public accountants, or other similar individuals who are independently practicing their professions, even though said persons may from time to time be similarly employed or retained by persons subject to examination under this subchapter. (Added 1991, No. 249 (Adj. Sess.),  7.) 
 3576. Immunity from liability
(a) No insurer nor any of its officers, employees, or agents shall have a cause of action against an authorized representative of the Commissioner or an examiner appointed by the Commissioner as a result of any statements made or work performed in good faith while carrying out the provisions of this subchapter. (b) No cause of action shall arise, nor shall any liability be imposed against any person for the act of communicating or delivering information or data to the Commissioner or the Commissioners authorized representative or examiner pursuant to an examination made under this section, if such act of communication or delivery was performed in good faith. (c) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subsection (a) or (b) of this section. (d) A person identified in subsection (a) or (b) of this section shall be entitled to an award of attorneys fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and the party bringing the action was not substantially justified in doing so. For purposes of this section, a proceeding is substantially justified if it had a reasonable basis in law or fact at the time that it was initiated. (Added 1991, No. 249 (Adj. Sess.),  8.) 
 3577. Requirements for actuarial opinions
(a) Each licensed insurance company shall include on or attached to its annual statement submitted under section 3561 of this title a statement of a qualified actuary, entitled statement of actuarial opinion, setting forth an opinion on life and health policy and claim reserves and an opinion on property and casualty loss and loss adjustment expenses reserves. (b) The statement of actuarial opinion shall be treated as a public document and shall conform to the Standards of Practice promulgated by the Actuarial Standards Board of the American Academy of Actuaries, the standards of the Casualty Actuarial Society, and such additional standards as the Commissioner may establish by rule. The Commissioner by rule shall establish minimum standards applicable to the valuation of health disability, sickness, and accident plans. (c) Opinions required by this section shall apply to all business in force, and shall be stated in form and in substance acceptable to the Commissioner as prescribed by rule. (1) In the case of property and casualty insurance companies domiciled in this State, every company that is required to submit a statement of actuarial opinion shall annually submit an actuarial opinion summary, written by the companys appointed actuary. This actuarial opinion summary shall be filed in accordance with the appropriate Property and Casualty Annual Statement Instructions of the National Association of Insurance Commissioners (NAIC) and shall be considered as a document supporting the actuarial opinion required in subsection (a) of this section. A property and casualty insurance company licensed but not domiciled in this State shall provide the actuarial opinion summary upon request. (2) In the case of property and casualty insurance companies, an actuarial report and underlying work papers, as required by the appropriate Property and Casualty Annual Statement Instructions of the NAIC, shall be prepared to support each actuarial opinion. If the property and casualty insurance company fails to provide a supporting actuarial report or work papers at the request of the Commissioner or if the Commissioner determines that the supporting actuarial report or work papers provided by the insurance company is otherwise unacceptable to the Commissioner, the Commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting actuarial report or work papers. (3) In the case of property and casualty insurance companies, the appointed actuary shall not be liable for damages to any person other than the insurance company and the Commissioner for any act, error, omission, decision, or conduct with respect to the actuarys opinion, except in cases of fraud or willful misconduct on the part of the appointed actuary. (d) In the case of life insurance companies doing business in this State, the opinion shall state whether the reserves and related actuarial items held in support of the policies and contracts specified by the Commissioner by rule are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, comply with applicable laws of this State, and comply with such further standards as the Commissioner may establish by rule. (e) Every life insurance company shall annually include in the opinion required by this section an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Commissioner by rule, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the companys obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts. (f) In the case of an opinion required to be submitted by a foreign or alien company, the Commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the Commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State. (g) The Commissioner may provide by rule for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section. (h) In the case of life and health insurance companies, qualified actuary is an individual who: (1) is a member of good standing of the American Academy of Actuaries;(2) is qualified to sign statements of actuarial opinion for life and health insurance company annual statements in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements; and (3) is familiar with the valuation requirements applicable to life and health insurance companies. (i) In the case of property and casualty insurance companies, qualified actuary is an individual who: (1) is a member of good standing of the Casualty Actuarial Society;(2) is qualified to sign statements of actuarial opinion for property and casualty insurance company annual statements in accordance with the Casualty Actuarial Society qualification standards for actuaries signing such statements; and (3) is familiar with the valuation requirements applicable to property and casualty insurance companies. (j) The Commissioner, after notice and administrative hearing, may disqualify an actuary who has: (1) violated any provision of, or any obligation imposed by, the insurance law or other law in the course of his or her dealings as a qualified actuary; or (2) been found guilty of fraudulent or dishonest practices; or(3) demonstrated his or her incompetency, lack of cooperation, or unethical behavior to act as a qualified actuary; or (4) submitted to the Commissioner during the past five years an actuarial opinion or memorandum that the Commissioner rejected because it did not meet the provisions of this section or the standards set by the Actuarial Standards Board or the Casualty Actuarial Society; or (5) resigned or been removed as an actuary within the past five years as a result of acts or omissions indicated in any adverse report on examination or as a result of failure to adhere to generally acceptable actuarial standards; or (6) has failed to notify the Commissioner of any action taken by any commissioner of any other state similar to that under this subsection. (k) Upon written application of any insurer, the Commissioner may, in his or her discretion, grant an exemption from compliance with this section if the Commissioner finds, upon review of the application, that compliance with this rule would constitute a financial or organizational hardship upon the insurer. An exemption may be granted at any time and from time to time for a specified period or periods. (l) Actuarial reports, actuarial opinion summaries, work papers, and any other documents, information, or materials provided to the Department in connection with the actuarial report, work papers, or actuarial opinion summary shall be confidential by law and privileged, shall not be subject to inspection and copying under 1 V.S.A.  316, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private litigation. (1) This subsection shall not be construed to limit the Commissioners authority to release documents to the Actuarial Board for Counseling and Discipline, provided the material is required for the purpose of professional disciplinary proceedings and further provided that procedures satisfactory to the Commissioner are established for preserving the confidentiality of the documents, nor shall this subsection be construed to limit the Commissioners authority to use the documents, materials, or other information in furtherance of any regulatory or legal action brought as part of the Commissioners official duties. (2) Neither the Commissioner nor any person who receives documents, materials, or other information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information under this subsection. (3) In order to assist in the performance of the Commissioners duties, the Commissioner may: (A) Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (d) of this section, with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and 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 and has the legal authority to maintain confidentiality. (B) Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and 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. (4) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of the disclosure to the Commissioner under this section or as a result of sharing as authorized by subdivision (3) of this subsection. (Added 1991, No. 249 (Adj. Sess.),  9; amended 2009, No. 137 (Adj. Sess.),  4a.) 
 3578a. Annual financial reporting
The Commissioner shall adopt by rule the Annual Financial Reporting Model Regulation of the National Association of Insurance Commissioners, as may be amended from time to time, or in the Commissioners discretion a regulation substantially similar thereto. (Added 2009, No. 42,  7; amended 2013, No. 29,  25, eff. May 13, 2013.) 
 3579. Qualified accountants
(a) A certified public accountant retained to perform audits of an insurer pursuant to the annual financial reporting rule adopted by the Commissioner under section 3578a of this title: (1) shall be a member in good standing of the American Institute of Certified Public Accountants and in all states in which the accountant is licensed, or, for a Canadian or British company, be a chartered accountant; (2) shall be independent with respect to the insurer;(3) shall conform to the standards of the profession as contained in the code of professional ethics of the American Institute of Certified Public Accountants and of the Vermont Board of Public Accountancy or similar codes governing such accountants professional conduct or ethics; (4) shall not directly or indirectly enter into an agreement of indemnification or release from liability with respect to the insurer being audited where the intent or effect is to shift or limit in any manner the potential liability of the person or firm for failure to adhere to applicable auditing or professional standards, whether or not resulting in part from knowing or other misrepresentations made by the insurer or its representatives; and (5) may enter into an agreement with an insurer to have disputes relating to an audit resolved by mediation or arbitration; provided, however, in the event of a delinquency proceeding commenced against the insurer under chapter 145 of this title, the mediation or arbitration provisions shall operate at the option of the statutory successor. (b) A domestic insurer required to be audited pursuant to the annual financial reporting rule adopted by the Commissioner under section 3578a of this title shall register with the Commissioner the name and address of the certified public accountant retained in compliance with this section and pay a registration fee of $100.00. If the Commissioner determines that a report filed by a foreign or alien insurer under subsection 3578(f) of this title is not substantially similar to the requirements imposed by the annual financial reporting rule adopted by the Commissioner under section 3578a of this title, the foreign or alien insurer shall, within 30 days of such determination, register the name and address of the certified public accountant retained in compliance with this section and pay a registration fee of $100.00. The notice of registration shall include the accountants statement that the accountant: (1) meets the requirements of this section;(2) is familiar with the insurance laws of the insurers state of domicile that relate to accounting and financial matters; (3) will express his or her opinion on whether the financial statements conform to the statutory accounting practices prescribed or permitted by the Department, and specify any exceptions; (4) understands that the Commissioner will be relying on the accountants report to monitor the financial position of the insurer; (5) agrees to make available to the Commissioner for inspection or copying any and all work papers generated in the audit including, procedures followed, tests performed, information obtained, conclusions, planning documentation, work programs, analyses, memoranda, letters of confirmation and representation, abstracts of documents, schedules, or commentaries prepared or obtained by the independent certified public accountant in the course of examination; and (6) agrees to retain the audit work papers until the Department has filed a report of examination on the period of the audit, but no longer than seven years from the date of the audit report. (c) An insurer shall notify the Commissioner in writing within five business days of the dismissal or resignation of the accountant who prepared the insurers immediately preceding filed audited financial report. The insurer shall notify the Commissioner in writing, within 10 business days of the notice of dismissal or resignation, whether in the 24 months preceding such dismissal or resignation there were any substantial, material disagreements with the former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, including disagreements resolved to the former accountants satisfaction and disagreements not resolved to the former accountants satisfaction. Substantial disagreements include those that occur between the former accountant and personnel of the insurer responsible for the insurers audited financial report. Material disagreements include those which, if not resolved to the satisfaction of the former accountant, would have caused him or her to make reference to the subject matter of the disagreement in connection with his or her opinion. (d)(1) The Commissioner shall disqualify any certified public accountant who:(A) has engaged in unprofessional conduct as defined by 26 V.S.A.  76;(B) has been found to have violated the insurance laws of any state with respect to prior audit reports; or (C) has demonstrated a pattern or practice of failing to detect or disclose material information in previous reports filed under this section. (2) After notice and hearing, the Commissioner may find that a certified public accountant is not qualified to express his or her opinion in the report required by this section and may require the insurer to replace the accountant with an accountant qualified under this section. Any hearing held under this subsection shall be governed by 3 V.S.A. chapter 25. (e) No partner or other person rendering the report required by the annual financial reporting rule adopted by the Commissioner under section 3578a of this title may act in that capacity for more than five consecutive years. Upon application by the insurer, the Commissioner may find that the rotation requirement of this subsection would pose an unreasonable hardship on the insurer and may extend the accountants period of qualification for an additional term. In making such determinations, the Commissioner may consider the experience of the retained accountant and the size of his or her business, the premium volume of the insurer, and the number of jurisdictions in which the insurer transacts business, as provided by the annual financial reporting rule adopted by the Commissioner under section 3578 of this title. (f) In the case of Canadian and British insurers, the annual audited financial report shall be defined as the annual statement of total business on the form filed by such companies with their domiciliary supervision authority duly audited by an independent chartered accountant. (Added 1991, No. 249 (Adj. Sess.),  11; amended 1993, No. 12,  5, eff. April 26, 1993; 2007, No. 49,  4; 2013, No. 29,  26.) 
 3581. Purpose; scope; intent
(a) The purpose of this subchapter is to provide the requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA) and provide guidance and instructions for filing an ORSA Summary Report with the Commissioner. (b) The requirements of this subchapter shall apply to all insurers domiciled in this State unless exempt under section 3586 of this subchapter. (c) The General Assembly finds and declares that the ORSA Summary Report will contain confidential and sensitive information related to an insurers or insurance groups identification of risks material and relevant to the insurer or insurance group filing the report. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public. It is the intent of the General Assembly that the summary report required under this subchapter shall be a confidential document filed with the Commissioner, that it shall be shared only as stated in this subchapter and to assist the Commissioner in the performance of his or her duties, and that in no event shall the summary report be subject to public inspection and copying under the Public Records Act. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3582. Definitions
As used in this subchapter:(1) Insurance group means those insurers and affiliates included within an insurance holding company system as defined in subdivision 3681(5) of this title. (2) Insurer shall have the same meaning as in subdivision 3681(6) of this title.(3) NAIC means the National Association of Insurance Commissioners.(4) Own Risk and Solvency Assessment or ORSA or assessment means a confidential, internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group and conducted by that insurer or insurance group, of the material and relevant risks associated with the insurers or insurance groups current business plan and the sufficiency of capital resources to support those risks. (5) Guidance Manual means the current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the NAIC, as may be amended from time to time. A change in the Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC. (6) Summary Report means a confidential high-level summary of an insurer or insurance groups ORSA. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3583. Risk management framework
An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3584. ORSA requirement
Subject to section 3586 of this subchapter, an insurer or the insurance group of which the insurer is a member shall regularly conduct an ORSA consistent with a process comparable to the Guidance Manual. The assessment shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3585. Summary report
(a) Upon the Commissioners request and no more than once each year, an insurer shall submit to the Commissioner a summary report or any combination of reports that together contain the information described in the Guidance Manual applicable to the insurer or the insurance group of which it is a member. Notwithstanding any request from the Commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report required by this subsection if the Commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC. (b) Each report shall include a signature of the insurer or insurance groups chief risk officer or other executive having responsibility for the oversight of the insurers enterprise risk management process attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management process described in the summary report and that a copy of the report has been provided to the insurers board of directors or the appropriate committee thereof. (c) An insurer may comply with subsection (a) of this section by providing the most recent and substantially similar report provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction if that report provides information that is comparable to the information described in the Guidance Manual. Any such report in a language other than English must be accompanied by a translation of that report into the English language. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3586. Exemption
(a) An insurer shall be exempt from the requirements of this subchapter if:(1) the insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $500,000,000.00; and (2) the insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than $1,000,000,000.00. (b) If an insurer qualifies for exemption under subdivision (a)(1) of this section but the insurance group of which the insurer is a member does not qualify for exemption under subdivision (a)(2), then any summary report required under section 3585 of this subchapter shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one summary report for any combination of insurers provided any combination of reports includes every insurer within the insurance group. (c) If an insurer does not qualify for exemption under subdivision (a)(1) of this section but the insurance group of which it is a member qualifies for exemption under subdivision (a)(2), then the only summary report required under section 3585 of this subchapter shall be the report applicable to that insurer. (d) An insurer that does not qualify for exemption under subsection (a) of this section may apply to the Commissioner for a waiver from the requirements of this subchapter based upon unique circumstances. In deciding whether to grant the insurers request for waiver, the Commissioner may consider the type and volume of business written, ownership and organizational structure, and any other factor the Commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the Commissioner shall coordinate with the lead State Commissioner and with the other domiciliary Commissioners in considering whether to grant the insurers request for a waiver. (e) Notwithstanding the exemptions stated in this section:(1) The Commissioner may require that an insurer maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report based on unique circumstances including the type and volume of business written, ownership and organizational structure, federal agency requests, and international supervisor requests. (2) The Commissioner may require that an insurer maintain a risk management framework, conduct an ORSA assessment, and file a summary report if the insurer has risk based capital for company action level event as set forth in section 8303 of this title, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined in Department Regulation I-93-2, sections 3-4, or otherwise exhibits qualities of a troubled insurer as determined by the Commissioner. (f) If an insurer that qualifies for an exemption under subsection (a) of this section subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurers most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of this subchapter. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3587. Contents of ORSA summary report
(a) The summary report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection (b) of this section. Documentation and supporting information shall be maintained and made available upon examination or upon request of the Commissioner. (b) The review of the summary report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multistate or global insurers and insurance groups. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3588. Confidentiality
(a) Documents, materials, or other information, including the summary report, in the possession of or control of the Department that are obtained by, created by, or disclosed to the Commissioner or any other person under this subchapter, is recognized by this State as being proprietary and to contain trade secrets. All such documents, materials, or other information shall be confidential by law and privileged, shall be exempt from public inspection and copying under the Public Records Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The Commissioner, however, 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 Commissioners official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. (b) Neither the Commissioner nor any person who received documents, materials, or other ORSA-related information, through examination or otherwise, while acting under the authority of the Commissioner or with whom such documents, materials, or other information are shared pursuant to this subchapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this section. (c) In furtherance of his or her regulatory duties, the Commissioner:(1) may, upon request, share documents, materials, or other ORSA-related information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this section, including proprietary and trade secret documents and materials, with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in section 3695 of this title, with the NAIC and with any third-party consultants designated by the Commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality; and (2) may receive documents, materials, or other ORSA-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade-secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in section 3695 of this title and from the NAIC, and shall maintain as confidential or privileged any documents, materials, 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, materials, or information. (3) shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided under this subchapter consistent with this subsection that shall: (A) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to this subchapter, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality; (B) specify that ownership of information shared with the NAIC or a third-party consultant under this subchapter remains with the Commissioner and that the NAICs or a third-party consultants use of the information is subject to the direction of the Commissioner; (C) prohibit the NAIC or third-party consultant from storing the information shared under this subchapter in a permanent database after the underlying analysis is completed; (D) require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant under this subchapter is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production; (E) require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant under this subchapter; and (F) in the case of an agreement involving a third-party consultant, provide for the insurers written consent. (d) The sharing of information and documents by the Commissioner under this subchapter shall not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this subchapter. (e) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade-secret materials, or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the Commissioner under this section or as a result of sharing as authorized under this subchapter. (f) Documents, materials, or other information in the possession or control of the NAIC or a third-party consultant under this subchapter shall be confidential by law and privileged, shall be exempt from public inspection and copying under the Public Records Act, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3589. Sanctions
Any insurer failing without just cause to timely file the summary report as required by this subchapter shall be required, after notice and hearing, to pay a penalty of $10,000.00 for each days delay, to be recovered by the Commissioner, and the penalty so recovered shall be paid into the General Fund of this State. The maximum penalty under this section is $1,000,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer. (Added 2013, No. 29,  44, eff. Jan. 1, 2015.) 
 3604. Offset
(a) In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter, such credits and debits shall be set off and the balance only shall be allowed or paid, except as provided in subsection (b) of this section. Any remaining debit of the insolvent insurer after offset under this section shall be treated as provided by section 3595 of this title. (b) No offset shall be allowed in favor of any such person where:(1) the obligation of the insurer to such person would not at the date of the entry of any liquidation order or otherwise entitle him or her to share as a claimant in the assets of the insurer; (2) the obligation of the insurer to such person was purchased by or transferred to such person with a view of its being used as an offset; (3) the obligation of such person is to pay an assessment levied against the members of a mutual insurer, or against the subscribers of a reciprocal insurer, or is to pay a balance upon the subscription to the capital stock of a stock insurer; or (4) the obligation of the person is to pay premiums whether earned or unearned, to the insurer, unless provided for otherwise in a final order for liquidation issued by the Commissioner or approved by a court of competent jurisdiction. (Added 1985, No. 145 (Adj. Sess.),  6.) 
 3611. Scope of subchapter; short title
This subchapter shall apply to all kinds of direct insurance, except life, title, surety, health, credit, mortgage guaranty, and ocean marine insurance. This subchapter shall be known as the Vermont Property and Casualty Insurance Guaranty Association Act. (Added 1969, No. 279 (Adj. Sess.),  2; amended 1979, No. 18,  6.) 
 3612. Definitions
As used in this subchapter:(1) Account means any one of the three accounts created under section 3613 of this title.(2) Association means the Vermont Property and Casualty Insurance Guaranty Association created under section 3613 of this title. (3) Commissioner means the Commissioner of Financial Regulation.(4) Covered claim means an unpaid claim, including a claim for unearned premiums:(A) which is asserted against an insurer which becomes an insolvent insurer after the effective date of this chapter or against the insured of such an insurer; and (B) which arises out of and is in an amount not in excess of the applicable limits of an insurance policy to which this subchapter applies; and (C)(i) where the claimant or insured is a resident of this State at the time of the insured event; or (ii) where the claim arises from property permanently located in this State; and(D) which does not include a claim for services rendered to or for the insolvent insurer; and (E) which does not include any amount due any reinsurer, insurer, insurance pool or underwriting association; provided, that claims which would be covered claims but for this subdivision may be filed directly with the receiver of the insolvent insurer and shall not be asserted against an insured of the insolvent insurer. (5) Insolvent insurer means an insurer, including a cooperative fire insurance corporation existing under the authority of chapter 105, subchapter 2 of this title: (A) licensed to transact insurance in this State either at the time the policy was issued or when the insured event occurred; and (B) against whom a final order of liquidation has been entered with a finding of insolvency by a court of competent jurisdiction in the insurers state of domicile. (6) Member insurer means any person who:(A) writes any kind of insurance to which this subchapter applies, including the exchange of reciprocal or interinsurance contracts; and (B) is licensed to transact business in this State.(7) Net direct written premiums means direct gross premiums written in this State on insurance policies to which this subchapter applies, less return premiums thereon and dividends paid or credited to policyholders on such direct business. Net direct written premiums does not include premiums on contracts between insurers or reinsurers. (8) Person means any individual, corporation, partnership, association, or voluntary organization. (Added 1969, No. 279 (Adj. Sess.),  4; amended 1979, No. 18,  7; 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2001, No. 95 (Adj. Sess.),  1, eff. May 1, 2002.) 
 3613. Creation of Association
There is created a nonprofit unincorporated legal entity to be known as the Vermont Property and Casualty Insurance Guaranty Association. All insurers defined as member insurers in subdivision 3612(6) of this title shall be and remain members of the Association as a condition of their authority to transact business in this State. The Association shall perform its functions under a plan of operation established and approved under section 3616 of this title and shall exercise its powers through a Board of Directors established under section 3614 of this title. For purposes of administration and assessment, the Association shall be divided into three separate accounts: (1) the workers compensation insurance account;(2) the automobile insurance account; and(3) the account for all other insurance to which this subchapter applies. (Added 1969, No. 279 (Adj. Sess.),  5; amended 1979, No. 18,  8; 1981, No. 165 (Adj. Sess.),  1.)
 3614. Board of Directors
(a) The Board of Directors of the Association shall consist of not less than five nor more than nine persons, at least three of whom shall be persons who are officers, directors, or employees of insurance companies incorporated under the laws of this State, unless there are fewer than three such companies, in which case there shall be one Director for each such company. The Directors shall serve terms as established in the plan of operation. The members of the Board shall be selected by member insurers subject to the approval of the Commissioner. Vacancies on the Board shall be filled for the remaining period of the term by a majority vote of the remaining Board members, subject to the approval of the Commissioner. (b) In approving selections to the Board, the Commissioner shall consider among other things whether all member insurers are fairly represented. (c) Members of the Board may be reimbursed from the assets of the association for expenses incurred by them as members of the Board of Directors. (Added 1969, No. 279 (Adj. Sess.),  6; amended 1979, No. 18,  9; 2007, No. 178 (Adj. Sess.),  12.) 
 3615. Powers and duties of Association
(a) The Association shall:(1) Be obligated to the extent of the covered claims existing prior to the order of liquidation, arising within 30 days after the order of liquidation, or before the policy expiration date if less than 30 days after the order of liquidation, or before the insured replaces the policy or causes its cancellation, if the insured does so within 30 days of the determination, but this obligation shall include only that amount of each covered claim which, unless it is a claim arising out of a workers compensation policy, is less than $500,000.00 and which, if it is a claim for unearned premium, is in excess of $25.00. In no event shall the Association be obligated to a policyholder or claimant in an amount in excess of the obligation of the insolvent insurer under the policy from which the claim arises, nor for any claim filed with the Association after the final date set for the filing of claims against the liquidator or receiver of the insolvent insurer, nor in any event after the expiration of three years from the date of determination of the insolvency of such insurer. (2) Be deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent. (3) Allocate claims paid and expenses incurred among the three accounts and assess member insurers separately for each account those amounts necessary to pay the obligations of the Association under subdivision (1) of this subsection subsequent to an insolvency, the expense of handling claims subsequent to an insolvency, and the cost of examinations under section 3620 of this title and other expenses authorized by this subchapter. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment bears to the net direct written premiums of all member insurers and for the calendar year preceding the assessment. Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed in any year on any account an amount greater than two percent of that member insurers net direct written premiums for the calendar year preceding the determination of insolvency on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the Association, does not provide in any year in any account an amount sufficient to make all necessary payments from that account, the funds available may be pro-rated and the unpaid portion shall be paid as soon thereafter as funds become available. The Association shall pay claims in any order which it considers reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The Association may exempt or defer, in whole or in part, the assessment of any member insurer if the assessment would cause the member insurers financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance. While an assessment is deferred, however, the member insurer shall not pay dividends to its shareholders or policyholders. Deferred assessments shall be paid by the insurer when payment will not reduce capital or surplus below required minimums, and the payments shall be either refunded to those members which received larger assessments because of the deferment, or, at the election of the member, credited against future assessments. Each member insurer authorized by the Association to act as a servicing facility may set off against any assessment all authorized payments made on covered claims and all expenses incurred in the payment of those claims. (4) Investigate claims brought against the Association and adjust, compromise, settle, and pay covered claims to the extent of the Associations obligation and deny all other claims and may review settlements, releases and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which such settlements, releases and judgments may be properly contested. (5) Notify such persons as the Commissioner directs under subdivision 3617(b)(1) of this title. (6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the Commissioner, but such designation may be declined by a member insurer. (7) Reimburse each servicing facility for obligations of the Association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the Association and shall pay the other expenses of the Association by this subchapter. (b) The Association may:(1) employ or retain such persons as are necessary to handle claims and perform other duties of the Association; (2) borrow funds necessary to effect the purposes of this subchapter in accord with the plan of operating; (3) sue or be sued;(4) negotiate and become a party to such contracts as are necessary to carry out the purpose of this subchapter; (5) perform such other acts as are necessary or proper to effectuate the purpose of this subchapter; (6) refund to the member insurers in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities if, at the end of any calendar year, the Board of Directors finds that the assets of the Association in any account exceed the liabilities of that account as estimated by the Board of Directors for the coming year. (Added 1969, No. 279 (Adj. Sess.),  7; amended 1979, No. 18,  10, 11; 1981, No. 165 (Adj. Sess.),  1; 1993, No. 55,  10, eff. June 3, 1993; 2001, No. 95 (Adj. Sess.),  2, eff. May 1, 2002; 2009, No. 42,  15, May 27 2009.) 
 3616. Plan of operation
(a)(1) The Association shall submit to the Commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the Commissioner. (2) If after approval by the Commissioner of the plan of operation, the Association fails to submit amendments to the plan when necessary or advisable to effectuate the provisions of this subchapter, the Commissioner may adopt appropriate rules under 3 V.S.A. chapter 25 which shall continue in force until superseded by amendments submitted by the Association to the Commissioner and approved by him or her. (b) All member insurers shall comply with the plan of operation.(c) The plan of operation shall:(1) Establish the procedures whereby all the powers and duties of the Association under section 3615 of this title will be performed. (2) Establish procedures for handling assets of the Association.(3) Establish the amount and method of reimbursing members of the Board of Directors under section 3614 of this title. (4) Establish procedures by which claims may be filed with the Association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the Association or its agent and a list of such claims shall be periodically submitted to the Association or similar organization in another state by the receiver or liquidator. (5) Establish regular places and times for meetings of the Board of Directors.(6) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the Board of Directors. (7) Provide that any member insurer aggrieved by any final action or decision of the Association may appeal to the Commissioner within 30 days after the action or decision. (8) Establish the procedures whereby selections for the Board of Directors will be submitted to the Commissioner. (9) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association. (d) The plan of operation may provide that any or all powers and duties of the Association, except those under subdivisions 3615(a)(3) and 3615(b)(2) of this title, are delegated to a corporation, Association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent, in two or more states. Such a corporation, association or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the Association. A delegation under this subsection shall take effect only with the approval of both the Board of Directors and the Commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this subchapter. (Added 1969, No. 279 (Adj. Sess.),  8; amended 1979, No. 18,  12.) 
 3617. Powers and duties of Commissioner
(a) The Commissioner shall:(1) notify the Association of the existence of an insolvent insurer not later than three days after he or she receives notice of the determination of the insolvency and furnish to the Association a copy of any complaint or order which was served on his or her office; (2) upon request of the Board of Directors, provide the Association with a statement of the net written premiums of each member insurer. (b) The Commissioner may:(1) Require that the Association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this subchapter. Such notification shall be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient. (2) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the Commissioner may levy a fine on any member insurer which fails to pay an assessment when due. The fine shall not exceed five percent of the unpaid assessment per month, except that no fine shall be less than $500.00 per month. (3) Revoke the designation of any servicing facility if he or she finds claims are being handled unsatisfactorily. (c) Any final action or order of the Commissioner under this subchapter shall be subject to judicial review by the Superior Court for the county in which the aggrieved party resides, or if a corporation, in which the principal office of the corporation is located, or if a nonresident, by the Superior Court for the County of Washington. (Added 1969, No. 279 (Adj. Sess.),  9; amended 1973, No. 193 (Adj. Sess.),  3, eff. April 9, 1974; 1979, No. 18,  13, 14; 1995, No. 167 (Adj. Sess.),  3.) 
 3618. Effect of paid claims
(a) Any person recovering under this subchapter shall be deemed to have assigned his or her rights under the policy to the Association to the extent of his or her recovery from the Association. Every insured or claimant seeking the protection of this subchapter shall cooperate with the Association to the same extent as such person would have been required to cooperate with the insolvent insurer. The Association shall have no cause of action against the insured of the insolvent insurer for any sums it has paid out except such causes of action as the insolvent insurer would have had if such sums had been paid by the insolvent insurer. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the Association shall not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments. (b) The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the Association or a similar organization in another state. The court having jurisdiction shall grant such claims priority equal to that which the claimant would have been entitled in the absence of this subchapter against the assets of the insolvent insurer. The expenses of the Association or similar organization in handling claims shall be accorded the same priority as the liquidators expenses. (c) The Association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the Association, the expenses paid in the handling of paid or contested covered claims, estimates of anticipated claims on the Association, and estimates of the expenses of handling those anticipated claims, which shall preserve the rights of the Association against the assets of the insolvent insurer. (Added 1969, No. 279 (Adj. Sess.),  10; amended 1979, No. 18,  15.) 
 3619. Nonduplication of recovery
(a) Any person having a claim against an insurer under any provision in an insurance policy other than policy of an insolvent insurer which is also a covered claim, shall be required to exhaust first his or her right under such policy. Any amount payable on a covered claim under this subchapter shall be reduced by the amount of any recovery under such insurance policy. (b) Any person having a claim which may be recovered from more than one insurance guaranty association or its equivalent shall seek recovery first from the Association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, he or she shall seek recovery first from the association of the location of the property, and if it is a workers compensation claim, he or she shall seek recovery first from the association of the residence of the claimant. Any recovery under this subchapter shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent. (Added 1969, No. 279 (Adj. Sess.),  11; amended 1979, No. 18,  16; 1981, No. 165 (Adj. Sess.),  1.) 
 3620. Prevention of insolvencies
To aid in the detection and prevention of insurer insolvencies:(1) It shall be the duty of the Board of Directors, upon majority vote, to notify the Commissioner of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public. (2) The Board of Directors may, upon majority vote, request that the Commissioner order an examination of any member insurer which the Board in good faith believes may be in a financial condition hazardous to the policyholders or the public. Within 30 days of the receipt of such request, the Commissioner shall begin such examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the Commissioner designates. The cost of such examination shall be paid by the Association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the Board of Directors prior to its release to the public, but this shall not preclude the Commissioner from complying with subdivision (3) of this section. The Commissioner shall notify the Board of Directors when the examination is completed. The request for an examination shall be kept on file by the Commissioner but it shall not be open to public inspection prior to the release of the examination report to the public. (3) It shall be the duty of the Commissioner to report to the Board of Directors when he or she has reasonable cause to believe that any member insurer examined or being examined at the request of the Board of Directors may be insolvent or in a financial condition hazardous to the policyholders or the public. (4) The Board of Directors may, upon majority vote, make reports and recommendations to the Commissioner upon any matter germane to the solvency, liquidation, rehabilitation or conservation of any member insurer. Such reports and recommendations shall not be considered public documents. (5) The Board of Directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer insolvencies. (6) The Board of Directors shall, at the conclusion of any insurer insolvency in which the Association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the Association, and submit such report to the Commissioner. (Added 1969, No. 279 (Adj. Sess.),  12.) 
 3621. Examination of Association
The Association shall be subject to examination and regulation by the Commissioner. The Board of Directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year in a form approved by the Commissioner. (Added 1969, No. 279 (Adj. Sess.),  13.) 
 3622. Tax exemption
The Association shall be exempt from payment of all fees and all taxes levied by this State or any of its subdivisions except taxes levied on real or personal property. (Added 1969, No. 279 (Adj. Sess.),  14.) 
 3623. Recognition of assessments in rates
The rates and premiums charged for insurance policies to which this subchapter applies shall include amounts sufficient to recoup a sum equal to the amounts paid to the Association by the member insurer less any amounts returned to the member insurer by the Association and such rates shall not be deemed excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer. (Added 1969, No. 279 (Adj. Sess.),  15.) 
 3624. Immunity
There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer, the Association or its agents or employees, the Board of Directors, or the Commissioner or his or her representatives for any action taken by them in the performance of their powers and duties under this subchapter. (Added 1969, No. 279 (Adj. Sess.),  16.) 
 3625. Stay of proceedings; reopening of default judgment
All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this State shall be stayed for up to six months and such additional time thereafter as may be determined by the court from the date on which the insolvency is declared or an ancillary proceeding is instituted in the State, whichever is later, to permit proper defense by the Association of all pending causes of action. As to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, the Association either on its own behalf or on behalf of such insured may apply to have such judgment, order, decision, verdict, or finding set aside by the same court or administrator that made such judgment, order, decision, verdict, or finding and shall be permitted to defend against such claim on the merits. (Added 1969, No. 279 (Adj. Sess.),  17; amended 1979, No. 18,  17.) 
 3626. Prohibition against advertising of membership in Association
A person who makes, publishes, or circulates, or causes to be made, published or circulated, any statement which uses the existence of the Association for the purpose of sales, solicitation or inducement to purchase any form of insurance within the scope of this subchapter shall be subject to an administrative penalty of not more than $500.00 for each violation. (Added 1979, No. 18,  18; amended 1995, No. 167 (Adj. Sess.),  4.) 
 3634a. Credit for reinsurance
(a) Purpose. It is the purpose of this section to protect the interest of insureds, claimants, ceding insurers, assuming insurers, and the public generally. The General Assembly hereby declares its intent is to ensure adequate regulation of insurers and reinsurers and adequate protection for those to whom they owe obligations. In furtherance of that State interest, the General Assembly hereby provides a mandate that upon the insolvency of a non-U.S. insurer or reinsurer that provides security to fund its U.S. obligations in accordance with this section, the assets representing the security shall be maintained in the United States and claims shall be filed with and valued by the state insurance Commissioner with regulatory oversight, and the assets shall be distributed in accordance with the insurance laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic U.S. insurance companies. The General Assembly declares that the matters contained in this section are fundamental to the business of insurance in accordance with 15 U.S.C.  1011-1012. (b) Credit allowed a domestic ceding insurer. Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of subdivision (1), (2), (3), (4), (5), (6), or (7) of this subsection (b), provided that the Commissioner may adopt by rule or regulation pursuant to subdivision (e)(2) of this section specific additional requirements relating to any or all of the following: the valuation of assets or reserve credits, the amount and forms of security supporting reinsurance arrangements described in subdivision (e)(2) of this section, or the circumstances pursuant to which credit will be reduced or eliminated. Credit shall be allowed under subdivision (1), (2), or (3) of this subsection (b) only with respect to cessions of those kinds or classes of business that the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile or, in the case of a U.S. branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under subdivision (3) or (4) of this subsection (b) only if the applicable requirements of subdivision (8) of this subsection (b) have been satisfied. (1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this State. (2) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the Commissioner as a reinsurer in this State. An accredited reinsurer is one that: (A) files with the Commissioner evidence of its submission to this States jurisdiction;(B) submits to this States authority to examine its books and records;(C) is licensed to transact insurance or reinsurance in at least one state or, in the case of a U.S. branch of an alien assuming insurer, is entered through and licensed to transact insurance or reinsurance in at least one state; (D) files annually with the Commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; (E) files with the Commissioner its charter, bylaws, and any other material required by the Commissioner; (F) pays an initial fee of $500.00 and thereafter an annual fee of $200.00 on or before March 1 of each year; and (G) demonstrates to the satisfaction of the Commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement, provided that at the time of its application it: (i) maintains a surplus for policyholders that is not less than $20,000,000.00 and whose accreditation has not been denied by the Commissioner within 90 days following its submission; or (ii) maintains a surplus for policyholders in an amount less than $20,000,000.00 and whose accreditation has been approved the Commissioner. (3)(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled and licensed in, or in the case of a U.S. branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this statute and the assuming insurer or U.S. branch of an alien assuming insurer: (i) maintains a surplus for policyholders in an amount not less than $20,000,000.00; and(ii) submits to the authority of this State to examine its books and records.(B) The requirement of subdivision (3)(A)(i) of this subsection (b) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system. (4)(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified U.S. financial institution, as defined in subdivision (d)(2) of this section, for the payment of the valid claims of its U.S. ceding insurers, their assigns, and successors in interest. The assuming insurer shall report annually to the Commissioner information required by the Commissioner and substantially the same as that required to be reported on the National Association of Insurance Commissioners Annual Statement form by licensed insurers to enable the Commissioner to determine the sufficiency of the trust fund. The assuming insurer shall submit to examination of its books and records by the Commissioner and bear the expense of the examination. (B)(i) Credit for reinsurance shall not be granted under this subsection (b) unless the form of the trust and any amendments to the trust have been approved by: (I) the commissioner of the state where the trust is domiciled; or(II) the commissioner of another state who, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust. (ii) The form of the trust and any trust amendments also shall be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in its trustees for the benefit of the assuming insurers U.S. ceding insurers, their assigns, and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the Commissioner. (iii) The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. Not later than February 28 of each year the trustee of the trust shall report to the Commissioner in writing the balance of the trust and a list of the trusts investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the following December 31. (C) The following requirements shall apply to the following categories of assuming insurer:(i) In the case of a single assuming insurer, the trust fund shall consist of funds in trust in an amount not less than the assuming insurers liabilities attributable to reinsurance ceded by U.S. ceding insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than $20,000,000.00, except at any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements on the assuming insurers liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30 percent of the assuming insurers liabilities attributable to reinsurance ceded by U.S. ceding insurers covered by the trust. (ii)(I) In the case of a group including incorporated and individual unincorporated underwriters:(aa) for reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after January 1, 1993, the trust shall consist of a trusted account in an amount not less than the respective underwriters several liabilities attributable to business ceded by U.S. domiciled ceding insurers to any underwriter of the group; (bb) for reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992, and not amended or renewed after that date, notwithstanding the other provisions of this section, the trust shall consist of a trusteed account in an amount not less than the respective underwriters several insurance and reinsurance liabilities attributable to business written in the United States; and (cc) in addition to the trusts specified in subdivisions (aa) and (bb) of this subdivision (C)(ii)(I), the group shall maintain in trust a trusteed surplus of which $100,000,000.00 shall be held jointly for the benefit of U.S. domiciled ceding insurers of any member of the group for all years of the account. (II) The incorporated members of the group shall not engage in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the groups domiciliary regulator as are the unincorporated members. (III) Within 90 days after its financial statements are due to be filed with the groups domiciliary regulator, the group shall provide to the Commissioner an annual certification of the solvency of each underwriter member by the groups domiciliary regulator or, if certification is unavailable, financial statements prepared by independent public accountants of each underwriter member of the group. (iii) In the case of a group of incorporated insurers under common administration, the group shall: (I) have continuously transacted an insurance business outside the United States for at least three years immediately prior to making application for accreditation; (II) maintain aggregate policyholders surplus of at least $10,000,000,000.00;(III) maintain a trust fund in an amount not less than the groups several liabilities attributable to business ceded by U.S. domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of such group; (IV) maintain a joint trusteed surplus of which $100,000,000.00 shall be held jointly for the benefit of U.S. domiciled ceding insurers of any member of the group as additional security for liabilities; and (V) within 90 days after its financial statements are due to be filed with the groups domiciliary regulator, make available to the Commissioner an annual certification of each underwriter members solvency by the members domiciliary regulator and financial statements of each underwriter member of the group prepared by an independent public accountant. (5) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the Commissioner as a reinsurer in this State and secures its obligations in accordance with the requirements of this subdivision. (A) In order to be eligible for certification, the assuming insurer shall:(i) be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the Commissioner under subdivision (C) of this subdivision (5); (ii) maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the Commissioner by rule or regulation; (iii) maintain financial strength ratings from two or more rating agencies deemed acceptable by the Commissioner by rule or regulation; (iv) agree to submit to the jurisdiction of this State, appoint the Commissioner as its agent for service of process in this State, and agree to provide security for 100 percent of the assuming insurers liabilities attributable to reinsurance ceded by U.S. ceding insurers if it resists enforcement of a final U.S. judgment; (v) agree to meet applicable information filing requirements as determined by the Commissioner, both with respect to an initial application for certification and on an ongoing basis; and (vi) satisfy any other requirements for certification deemed relevant by the Commissioner.(B) An association, including incorporated and individual unincorporated underwriters, may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying the requirements of subdivision (A) of this subdivision (5): (i) The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents, net of liabilities, of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the Commissioner to provide adequate protection. (ii) The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the associations domiciliary regulator as are the unincorporated members. (iii) Within 90 days after its financial statements are due to be filed with the associations domiciliary regulator, the association shall provide to the Commissioner an annual certification by the associations domiciliary regulator of the solvency of each underwriter member or, if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association. (C) The Commissioner shall create and publish a list of qualified jurisdictions under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the Commissioner as a certified reinsurer. (i) In order to determine whether the domiciliary jurisdiction of a non-U.S. assuming insurer is eligible to be recognized as a qualified jurisdiction, the Commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and extent of reciprocal recognition afforded by the non-U.S. jurisdiction to reinsurers licensed and domiciled in the United States. A qualified jurisdiction shall agree to share information and cooperate with the Commissioner with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the Commissioner has determined that the jurisdiction does not adequately and promptly enforce final U.S. judgments and arbitration awards. Additional factors may be considered in the discretion of the Commissioner. (ii) A list of qualified jurisdictions shall be published through the NAIC committee process. The Commissioner shall consider this list in determining qualified jurisdictions. If the Commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the Commissioner shall provide thoroughly documented justification in accordance with criteria to be developed by rule or regulation. (iii) U.S. jurisdictions that meet the requirement for accreditation under the NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions. (iv) If a certified reinsurers domiciliary jurisdiction ceases to be a qualified jurisdiction, the Commissioner has the discretion to suspend the reinsurers certification indefinitely, in lieu of revocation. (D) The Commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable to the Commissioner by rule or regulation. The Commissioner shall publish a list of all certified reinsurers and their ratings. (E) A certified reinsurer shall secure obligations assumed from U.S. ceding insurers under this subsection (b) at a level consistent with its rating, as specified in rules or regulations adopted by the Commissioner. (i) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the Commissioner and consistent with the provisions of subsection (c) of this section or in a multibeneficiary trust in accordance with subdivision (4) of this subsection (b), except as otherwise provided in this subdivision. (ii) If a certified reinsurer maintains a trust to fully secure its obligations subject to subdivision (4) of this subsection (b) and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection (b) or comparable laws of other U.S. jurisdictions and for its obligations subject to subdivision (4) of this subsection. It shall be a condition to the grant of certification under this subdivision (5) of this subsection (b) that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the Commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account. (iii) The minimum trusteed surplus requirements provided in subdivision (4) of this subsection (b) are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subdivision (5)(E), except that such trust shall maintain a minimum trusteed surplus of $10,000,000.00. (iv) With respect to obligations incurred by a certified reinsurer under this subdivision (5)(E), if the security is insufficient, the Commissioner shall reduce the allowable credit by an amount proportionate to the deficiency and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurers obligations will not be paid in full when due. (v) For purposes of this subdivision (5), a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure 100 percent of its obligations. (I) As used in this subdivision (5), the term terminated refers to revocation, suspension, voluntary surrender, and inactive status. (II) If the Commissioner continues to assign a higher rating as permitted by other provisions of this section, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended. (F) If an applicant for certification has been certified as a reinsurer in an NAIC-accredited jurisdiction, the Commissioner has the discretion to defer to that jurisdictions certification and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this State. (G) A certified reinsurer that ceases to assume new business in this State may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection (b), and the Commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business. (6)(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth below: (i) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. As used in this section, reciprocal jurisdiction means a jurisdiction that meets one of the following: (I) a non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union. As used in this subdivision (b)(6), a covered agreement means an agreement entered into pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C.  313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this State or for allowing the ceding insurer to recognize credit for reinsurance; (II) a U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or (III) a qualified jurisdiction, as determined by the Commissioner pursuant to subdivision (5)(C) of this subsection (b), that is not otherwise described in subdivision (6)(A)(i)(I) or (6)(A)(i)(II) of this subsection (b) and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the Commissioner in rule or regulation. (ii) The assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in rule or regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to be set forth in rule or regulation. (iii) The assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which will be set forth in rule or regulation. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed. (iv) The assuming insurer must agree and provide adequate assurance to the Commissioner, in a form specified in rule or regulation by the Commissioner, of the following: (I) The assuming insurer must provide prompt written notice and explanation to the Commissioner if it falls below the minimum requirements set forth in subdivision (6)(A)(ii) or (6)(A)(iii) of this subsection (b) or if any regulatory action is taken against it for serious noncompliance with applicable law. (II) The assuming insurer must consent in writing to the jurisdiction of the courts of this State and to the appointment of the Commissioner as agent for service of process. The Commissioner may require that consent for service of process be provided to the Commissioner and included in each reinsurance agreement. Nothing in this subdivision (6)(A)(iv)(II) shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws. (III) The assuming insurer must consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, that have been declared enforceable in the jurisdiction where the judgment was obtained. (IV) Each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurers liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate. (V) The assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement that involves this States ceding insurers, and agree to notify the ceding insurer and the Commissioner and to provide security in an amount equal to 100 percent of the assuming insurers liabilities to the ceding insurer, should the assuming insurer enter into such a solvent scheme of arrangement. Such security shall be in a form consistent with the provisions of subdivision (b)(5) and subsection (c) of this section and as specified by the Commissioner in rule or regulation. (v) The assuming insurer or its legal successor must provide, if requested by the Commissioner, on behalf of itself and any legal predecessors, certain documentation to the Commissioner, as specified by the Commissioner in rule or regulation. (vi) The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements, pursuant to criteria set forth in rule or regulation. (vii) The assuming insurers supervisory authority must confirm to the Commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subdivisions (6)(A)(ii) and (6)(A)(iii) of this subsection (b). (viii) Nothing in this subdivision (b)(6)(A) precludes an assuming insurer from providing the Commissioner with information on a voluntary basis. (B) The Commissioner shall timely create and publish a list of reciprocal jurisdictions.(i) A list of reciprocal jurisdictions is published through the NAIC committee process. The Commissioners list shall include any reciprocal jurisdiction as defined under subdivisions (6)(A)(i)(I) and (6)(A)(i)(II) of this subsection (b) and shall consider any other reciprocal jurisdiction included on the NAIC list. The Commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed in rules or regulations adopted by the Commissioner. (ii) The Commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction, in accordance with a process set forth in rules or regulations adopted by the Commissioner, except that the Commissioner shall not remove from the list a reciprocal jurisdiction as defined under subdivisions (6)(A)(i)(I) and (6)(A)(i)(II) of this subsection (b). Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer that has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this section. (C) The Commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this subdivision (b)(6) and to which cessions shall be granted credit in accordance with this subdivision. The Commissioner may add an assuming insurer to such list if an NAIC-accredited jurisdiction has added such assuming insurer to a list of such assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the Commissioner as required under subdivision (6)(A)(iv) of this subsection (b) and complies with any additional requirements that the Commissioner may impose by rule or regulation, except to the extent that they conflict with an applicable covered agreement. (D) If the Commissioner determines that an assuming insurer no longer meets one or more of the requirements under this subdivision (b)(6), the Commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this subdivision in accordance with procedures set forth in rule or regulation. (i) While an assuming insurers eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurers obligations under the contract are secured in accordance with subsection (c) of this section. (ii) If an assuming insurers eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurers obligations under the contract are secured in a form acceptable to the Commissioner and consistent with the provisions of subsection (c) of this section. (E) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities. (F) Nothing in this subdivision (b)(6) shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this section or other applicable law, rule, or regulation. (G)(i) Credit may be taken under this subsection (b) only for reinsurance agreements entered into, amended, or renewed on or after January 1, 2021 and only with respect to losses incurred and reserves reported on or after the later of: (I) the date on which the assuming insurer has met all eligibility requirements pursuant to subdivision (b)(6)(A) of this section; and (II) the effective date of the new reinsurance agreement, amendment, or renewal.(ii) This subdivision (b)(6)(G) does not alter or impair a ceding insurers right to take credit for reinsurance, to the extent that credit is not available under this subdivision (b)(6), provided the reinsurance qualifies for credit under any other applicable provision of this section. (iii) Nothing in this subdivision (b)(6) shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement. (iv) Nothing in this subdivision (b)(6) shall limit, or in any way alter, the capacity of parties to any reinsurance agreement to renegotiate the agreement. (7) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of subdivision (1), (2), (3), (4), (5), or (6) of this subsection (b), but only as to the insurance of risks located in jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction. (8) If the assuming insurer is not licensed or accredited or certified to transact insurance or reinsurance in this State, the credit permitted by subdivisions (3) and (4) of this subsection (b) shall not be allowed unless the assuming insurer agrees in the reinsurance agreements: (A)(i) That in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give such court jurisdiction, and will abide by the final decision of such court or of any appellate court in the event of an appeal. (ii) To designate the Commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding company. (B) This subdivision (b)(8) is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement. (9) If the assuming insurer does not meet the requirements of subdivision (1), (2), (3), or (6) of this subsection (b), the credit permitted by subdivision (4) or (5) of this subsection (b) shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions: (A) Notwithstanding any other provisions in the trust instrument to the contrary, if the trust fund is inadequate because it contains an amount less than the amount required by subdivisions (4)(B)(D) of this subsection (b) or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight all of the assets of the trust fund. (B) The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies. (C) If the commissioner with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement. (D) The grantor shall waive any right otherwise available to it under U.S. law that is inconsistent with this subdivision (b)(9). (10) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the Commissioner may suspend or revoke the reinsurers accreditation or certification. (A) The Commissioner must give the reinsurer notice and opportunity for hearing. The Commissioner may suspend or revoke a reinsurers accreditation or certification without a hearing if: (i) the reinsurer waives its right to hearing;(ii) the Commissioners order is based on regulatory action by the reinsurers domiciliary jurisdiction or the voluntary surrender or termination of the reinsurers eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subdivision (5)(F) of this subsection (b); or (iii) the Commissioner finds that an emergency requires immediate action, and a court of competent jurisdiction has not stayed the Commissioners action. (B) While a reinsurers accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurers obligations under the contract are secured in accordance with subsection (c) of this section. If a reinsurers accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurers obligations under the contract are secured in accordance with subdivision (5)(E) of this subsection (b) or subsection (c) of this section. (11) Concentration risk.(A) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the Commissioner within 30 days after reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers exceeds 50 percent of the domestic ceding insurers last reported surplus to policyholders or after it is determined that reinsurance recoverables from any single assuming insurer or group of affiliated assuming insurers is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer. (B) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the Commissioner within 30 days after ceding to any single assuming insurer or group of affiliated assuming insurers more than 20 percent of the ceding insurers gross written premium in the prior calendar year or after it has determined that the reinsurance ceded to any single assuming insurer or group of affiliated assuming insurers is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer. (c) Asset or reduction from liability for reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of subsection (b) of this section. An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of subsection (b) of this section shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer, provided that the Commissioner may adopt by rule or regulation pursuant to subdivision (e)(2) of this section specific additional requirements relating to or setting forth any or all of the following: the valuation of assets or reserve credits, the amount and forms of security supporting reinsurance arrangements described in subdivision (e)(2) of this section, and the circumstances pursuant to which credit will be reduced or eliminated. The reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with such assuming insurer as collateral for the payment of obligations thereunder, if such collateral is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified U.S. financial institution, as defined in subdivision (d)(2) of this section. This security may be in the form of: (1) cash;(2) securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets; (3) clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified U.S. financial institution as defined in subdivision (d)(1) of this section, which are effective not later than December 31 of the year for which filing is being made, and in the possession of, or in trust for, the ceding company on or before the filing date of its annual statement; (4) letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance or confirmation shall, notwithstanding the issuing or confirming institutions subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever first occurs; or (5) any other form of collateral acceptable to the Commissioner.(d) Qualified U.S. financial institutions. (1) As used in subdivision (c)(3) of this section, a qualified U.S. financial institution means an institution that: (A) is organized or, in the case of a U.S. office of a foreign banking organization, licensed under the laws of the United States or any state thereof; (B) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies; and (C) has been determined by either the Commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Commissioner. (2) A qualified U.S. financial institution means, for purposes of those provisions of this section specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that is: (A) organized or, in the case of a U.S. branch or agency office of a foreign banking organization, licensed under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers; and (B) regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies. (e) Rules and regulations. (1) The Commissioner may adopt rules or regulations implementing the provisions of this section. (2)(A) The Commissioner may adopt rules or regulations applicable to reinsurance agreements. Such rules or regulations may apply only to reinsurance relating to: (i) life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits; (ii) universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period; (iii) variable annuities with guaranteed death or living benefits;(iv) long-term care insurance policies; or(v) such other life and health insurance and annuity products as to which the NAIC adopts model regulatory requirements with respect to credit for reinsurance. (B) A rule or regulation adopted pursuant to subdivision (2)(A)(i) or (ii) of this subsection (e) may apply to any treaty that contains: (i) policies issued on or after January 1, 2015; or(ii) policies issued prior to January 1, 2015, if risk pertaining to such pre-2015 policies is ceded in connection with the treaty, in whole or in part, on or after January 1, 2015; or both. (3) A rule or regulation adopted pursuant to subdivision (2) of this subsection (e) may require the ceding insurer, in calculating the amounts or forms of security required to be held under regulations promulgated under this authority, to use the Valuation Manual adopted by the NAIC under Section 11B(1) of the NAIC Standard Valuation Law, including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable. (4) A rule or regulation adopted pursuant to subdivision (2) of this subsection (e) shall not apply to cessions to an assuming insurer that: (A) meets the conditions set forth in subdivision (b)(6) of this section;(B) is certified in this State; or(C) maintains at least $250,000,000.00 in capital and surplus when determined in accordance with the NAIC Accounting Practices and Procedures Manual, including all amendments thereto adopted by the NAIC, excluding the impact of any permitted or prescribed practices; and is: (i) licensed in at least 26 states; or(ii) licensed in at least 10 states and licensed or accredited in a total of at least 35 states. (5) The authority to adopt rules or regulations pursuant to subdivision (2) of this subsection (e) does not limit the Commissioners general authority to adopt rules or regulations pursuant to subdivision (1) of this subsection (e). (f) Reinsurance agreements affected. This section shall apply to all cessions after the effective date of this section under reinsurance agreements that have an inception, anniversary, or renewal date not less than six months after the effective date of this section. (Added 1991, No. 249 (Adj. Sess.),  13; amended 1993, No. 12,  6, eff. April 26, 1993; 1993, No. 235 (Adj. Sess.),  1, eff. June 21, 1994; 1995, No. 180 (Adj. Sess.),  38(a); 2007, No. 49,  3; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 121 (Adj. Sess.),  1, eff. May 9, 2014; 2019, No. 103 (Adj. Sess.),  12, eff. Jan. 1, 2021; 2021, No. 139 (Adj. Sess.),  23, eff. May 27, 2022.) 
 3635. Insolvency of ceding company
(a) No credit shall be allowed, as an admitted asset or deduction from liability, to any ceding insurer for reinsurance, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be payable under contract or contracts reinsured by the assuming insurer on the basis of the claims allowed against the ceding insurer in the insolvency proceedings, without diminution because of the insolvency of the ceding insurer, directly to the ceding insurer or to its domiciliary liquidator or receiver except: (1) where the contract specifically provides for payment to the insured or his or her assignee or other persons or entity named in the insureds policy as a payee of such reinsurance in the event of the insolvency of the ceding insurer or (2) where the assuming insurer with the consent of the direct insured or insureds has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under such policies and in substitution for the obligations of the ceding insurer to such payees. (b) The domiciliary liquidator or receiver of an insolvent ceding insurer shall give written notice of the pendency of a claim against such ceding insurer on the contract reinsured within a reasonable time after such claim is filed in the insolvency proceeding. During the pendency of such claim any assuming insurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defenses which it deems available to the ceding insurer, its liquidator or receiver. Such expense shall be chargeable, subject to court approval, against the insolvent ceding insurer as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming insurer. Where two or more assuming insurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement as though such expense had been incurred by the ceding company. (Added 1985, No. 145 (Adj. Sess.),  5.) 
 3636. Reinsurance contract
In the event of the rehabilitation, receivership, or liquidation of a ceding insurer, no person shall have any rights against the reinsurer of such ceding insurer which are not specifically set forth in the contract of reinsurance or in a specific agreement between the reinsurer and the person. (Added 1985, No. 145 (Adj. Sess.),  5.) 
 3641. Claims, rights, title, and interests of nonresidents
When by the terms of any policy of insurance, annuity contract, or contract supplemental to any policy of insurance or annuity contract, issued by an insurance company organized under the laws of this State, any claim, right, title, or interest therein is vested in a person residing in another state or country, or in the estate of such nonresident person, such claim may be paid to, and such right, title, or interest may be transferred or released by, the administrator, executor, or guardian of such nonresident person or estate appointed in the State or country where the person resides or resided at the time of death, provided no administrator, executor, or guardian of such nonresident person or estate has been appointed in this State at the time of such payment, transfer, or claim. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 12,  1).) 
 3642. Liability for payments to nonresidents
An action shall not be maintained against any such insurance company upon any right of action arising out of an insurance policy, annuity contract, or contract supplemental to any insurance policy or annuity contract, issued by such company, vested in a person residing in another state or country, or in the estate of such nonresident person, if prior to actual notice of the appointment in this State of an administrator, executor, or guardian of the estate or person of such nonresident, such right of action has been discharged or released by the executor, administrator, or guardian of such nonresident person or estate appointed in the state of his or her residence, or by a transferee of such policy, annuity contract, contract supplemental to any policy of insurance, or annuity contract or right of action thereon. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 12,  2).) 
 3661. Cease and desist powers; prosecutions and penalties
(a) When the Commissioner believes that an insurer or an officer or agent thereof, or any other person, has violated the law, an administrative rule of the Department, or an order of the Commissioner relating to insurance, or has not complied with its requirements, he or she: (1) may issue an order to cease and desist such violation or activity. Such an order shall be subject to de novo judicial review in the Washington Superior Court, but such review shall not stay the enforcement of the Commissioners order while under review, unless the court shall so determine after a preliminary hearing that a stay of enforcement will not unduly injure the interests of the people of the State, in which case a stay of execution may be granted; (2) may report each violation with any information he or she has relating thereto to the Attorney General who shall prosecute therefor if he or she deems it advisable. The offender shall be fined not more than $2,000.00 as a result of any such prosecution by the Attorney General; and (3) may, after notice and opportunity for hearing, impose a civil administrative penalty of not more than $1,000.00 for each violation, and not more than $10,000.00 for each willful violation. (b) The powers vested in the Commissioner by this section shall be in addition to any other powers to enforce penalties, fines, or forfeitures authorized by law with respect to violations of the law relating to insurance, except that the Commissioner shall not impose an administrative penalty under subdivision (a)(3) of this section if the Commissioner may impose another administrative penalty authorized by law for the same violation. (c) An employer who makes a false statement or representation that results in a lower workers compensation premium, after notice and opportunity for hearing before the Commissioner, may be assessed an administrative penalty of not more than $20,000.00 in addition to any other appropriate penalty. In addition, an employer found to have violated this section is prohibited from contracting, directly or indirectly, with the State or any of its subdivisions for up to three years following the date the employer was found to have made a false statement or misrepresentation, as determined by the Commissioner in consultation with the Commissioner of Buildings and General Services or the Secretary of Transportation, as appropriate. Either the Secretary or the Commissioner, as appropriate, shall be consulted in any appeal relating to prohibiting the employer from contracting with the State or its subdivisions. (d) Any person who knowingly makes a false statement or representation in an application, petition, certification or verification made in accordance with the provisions of this title, or of 18 V.S.A. chapter 221, or a certification or other filing with the Interstate Insurance Product Regulation Commissioner under chapter 165 of this title, after notice and opportunity for hearing before the Commissioner of Financial Regulation may be assessed an administrative penalty of not more than $5,000.00. The authority granted to the Commissioner by this subsection shall be in addition to any other authority granted to the Commissioner by law. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 13,  1); amended 1983, No. 199 (Adj. Sess.); 2003, No. 105 (Adj. Sess.),  7; 2009, No. 42,  9; 2009, No. 54,  78, eff. June 1, 2009; 2009, No. 142 (Adj. Sess.),  5a; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 3662. Nonpayment of judgment; penalty
In addition to accrual of interest and costs under section 3665 of this title, if a judgment against an insurance company is not paid within 30 days after demand made upon an agent of such company, and notice thereof given to the Commissioner by the officer holding the execution, the Commissioner may suspend the right of the company to do business in this State until it is paid. If such company, or an agent thereof, after notice of such suspension, shall issue a policy in this State, such company and agent shall each be subject to an administrative penalty of not more than $10,000.00 for each policy. A policy so granted shall be valid against the company. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 13,  2); amended 1987, No. 106,  1; 1995, No. 167 (Adj. Sess.),  6.) 
 3663. Minimum limitation on actions; void policy provisions
A policy of fire, life, accident, liability, or burglary insurance, or an indemnity, surety, or fidelity contract or bond issued or delivered in this State by an insurance company doing business herein shall not contain a condition or clause limiting the time of commencement of an action on such policy or contract to a period less than 12 months from the occurrence of the loss, death, accident, or default, nor a condition or clause making an award by appraisers, fixing the amount of loss by the insured or beneficiary in such policy or contract, a condition precedent to bringing or maintaining an action on such policy or contract. Any such conditions or clauses shall be null and void. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 13,  3).) 
 3664. Forms; filing proof of loss and other documents, waiver of filing
Insurance companies, societies, or associations, or insurance adjusters appointed by said companies, societies, or associations shall furnish in form for completion by the claimant, as defined in section 3665a of this title, or beneficiary, as defined in section 3665b of this title, all documents as to proof of loss or other matter required by contract to be submitted to the companies. Failure to furnish said forms within a reasonable time after notice of loss or damage is received by said companies, societies, or associations shall be deemed a waiver of any requirement that proof of loss shall be filed with the insurer on said forms as a condition precedent to the recovery of losses or claims. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 1, subch. 13,  4); amended 2019, No. 103 (Adj. Sess.),  13.) 
 3665a. Timely payment of property and casualty insurance claims; interest
(a) This section applies to policies of property, casualty, surety, and title insurance, as defined in section 3301 of this title. It does not apply to workers compensation insurance. As used in this section, claimant means any person asserting a right to payment under an insurance policy or contract arising out of the occurrence of the contingency or loss covered by such policy or contract or any person asserting a claim against any other person or the interests insured under an insurance policy or contract, and includes a claimants designated legal representative and any member of the claimants immediate family designated in writing by the claimant. (b) Unless a different time period is specified in another section of this title, all payments of claims under policies of insurance shall be made within time periods provided by this section: (1) For claims under policies of insurance other than surety insurance and title insurance, within 10 business days after the date that settlement of the claim is agreed upon between the insurer, the claimant, and the loss payee, as applicable, and in accordance with rules adopted by the Commissioner. (2) For claims under policies of surety and title insurance, within 30 days after the date that settlement of the claim is agreed upon between the insurer, the claimant, and the loss payee, as applicable, and in accordance with rules adopted by the Commissioner. (3) If a claim is contested, within 30 days after the entry of a final nonappealable judgment against the insurer; the entry of a binding arbitration decision between the insurer, the claimant, the loss payee, and the Department, as applicable; or the execution of a settlement agreement between the insurer, the claimant, the loss payee, and the Department, as applicable. (c) If an insurer fails to pay a claim within the applicable time period set forth in subsection (b) of this section or any other time period provided by statute, it shall thereafter pay interest on the amount of the claim at the judgment rate allowed by law. Interest shall accrue from 30 days after the date the insurer receives a properly executed proof of loss. (Added 2019, No. 103 (Adj. Sess.),  15.) 
 3665b. Timely payment of life insurance claims and annuity death benefits; interest
(a) This section applies to policies of life insurance and contracts of annuity. As used in this section, a beneficiary means any person making a claim against a policy of life insurance or for death benefits provided under a contract of annuity. (b) A claim for payment of benefits under a policy of life insurance shall be paid within 30 days after the date that a properly executed proof of loss is received by the insurer. All payments of claims under policies of life insurance shall include interest accrued from the date of death of the insured to the date of payment. The interest rate shall be the rate paid on proceeds left on deposit or six percent, whichever is greater. (c) A claim for payment of benefits under a contract of annuity shall be paid within 30 days after the date that a properly executed proof of loss is received by the insurer. Payments of claims for death benefit proceeds under contracts of annuity shall include interest at the rate paid for proceeds left on deposit or six percent, whichever is greater. Interest shall accrue and be payable as follows: (1) For variable annuity contracts subject to the Securities and Exchange Commissions rules governing the liquidation of account values at the death of the beneficiary, from the eighth day following the date that a properly executed proof of loss is received by the insurer. (2) For all other contracts of annuity, from the date of death of the measuring life, unless the contract specifies that the contract remains in force until the date that a properly executed proof of loss is received by the insurer. For purposes of this section, the individual whose death triggers the death benefit proceeds is the measuring life. (d) If a claim is contested, it shall be paid within 30 days after the entry of a final nonappealable judgment against the insurer; the entry of a binding arbitration decision between the insurer, the beneficiary, and the Department, as applicable; or the execution of a settlement agreement between the insurer, the beneficiary, and the Department, as applicable. (e) If an insurer fails to pay a claim within the applicable time period set forth in subsection (b), (c), or (d) of this section, it shall thereafter pay interest on the amount of the claim at the judgment rate allowed by law. Interest shall accrue from 30 days after the date the insurer receives a properly executed proof of loss. (Added 2019, No. 103 (Adj. Sess.),  16.) 
 3665c. Damages
An insurance company, including a society and an association, is responsible for payment of any consequential damages, including all penalties or costs, caused by improper delay in payment or settlement of claims to claimants, loss payees, or beneficiaries under policies of insurance subject to section 3665a or 3665b of this title. Consequential damages for improper delay are not applicable when a policy expressly provides for periodic payments or when a claimant, loss payee, or beneficiary agrees to accept periodic payments, unless an insurer improperly delays making such periodic payments. (Added 2019, No. 103 (Adj. Sess.),  17.) 
 3666. Rules; methods of notice
Notwithstanding the requirements under sections 3883, 4226, and 4714 of this title, the Commissioner of Financial Regulation shall adopt rules specifying the methods by which a notice to a party required under section 3880, 3881, 4224, 4225, 4712, or 4713 of this title shall be given. (Added 2013, No. 199 (Adj. Sess.),  68.) 
 3671. Disclosure of information
(a) Upon written request, an insurance company, its agents, adjusters, or brokers, shall furnish to a law enforcement officer, States Attorney, or the Attorney General any and all information pertaining to a fire loss under investigation, including: (1) pertinent insurance policy information relevant to a fire loss under investigation and any application for such a policy; (2) policy premium payment records which are available;(3) history of previous claims made by the insured;(4) material relating to the investigation of the loss, including statements of any person, proof of loss, and any other evidence relevant to the investigation. (b) When an insurance company, its agents, adjusters, or brokers have reason to believe that a fire loss in which it has an interest may be of other than accidental cause, then for the purpose of notification and for having that fire loss investigated, the company, its agents, adjusters, or brokers shall notify the State Fire Marshal in writing, and provide him or her with any material developed during the inquiry into the fire loss. (Added 1981, No. 73, eff. May 4, 1981.) 
 3672. Immunity
An insurance company, its agents, adjusters, or brokers shall be immune from civil liability as a result of the furnishing in good faith of information to any law enforcement officer, States Attorney or the Attorney General in accordance with the provisions of section 3671 of this title. (Added 1981, No. 73, eff. May 4, 1981.) 
 3673. Penalty for noncompliance
In the event that an insurance company, its agents, adjusters, or brokers fail to comply with the provisions of section 3671 of this title, the Commissioner may suspend the right of the company to do business in this State until it does so comply and shall suspend the license of any agent, adjuster, or broker until such time as they comply with the provisions of section 3671. (Added 1981, No. 73, eff. May 4, 1981.) 
 3681. Definitions
As used in this subchapter:(1) Affiliate of, or person affiliated with, a specific person, means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. (2) Commissioner means the Commissioner of Financial Regulation or his or her deputies, as appropriate. (3) Control, including the terms controlling, controlled by, and under common control with, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection 3684(l) of this title that control does not exist in fact. The Commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making specific findings of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect. (4) Groupwide supervisor or supervisor means the regulatory official authorized to engage in conducting and coordinating groupwide supervision activities, as specified by the Commissioner under section 3696 of this subchapter. (5) Insurance holding company system or system means two or more affiliated persons, one or more of which is an insurer. (6) Insurer means a company qualified and licensed to transact the business of insurance in this State and shall include a health maintenance organization, a nonprofit hospital service corporation, and a nonprofit medical service corporation, except that it shall not include: (A) agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state; or (B) fraternal benefit societies.(7) Enterprise risk means any activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including anything that would cause the insurers risk-based capital to fall into company action level as set forth in section 8303 of this title or would cause the insurer to be in hazardous financial condition under Department Regulation I-93-2, sections 3-4. (8) Internationally active insurance group or group means an insurance holding company system that: (A) includes an insurer registered under section 3684 of this subchapter; and(B) meets the following criteria:(i) premiums written in at least three countries;(ii) the percentage of gross premiums written outside the United States is at least 10 percent of the systems total gross written premiums; and (iii) based on a three-year rolling average, the total assets of the system are at least $50,000,000,000.00, or the total gross written premiums of the system are at least $10,000,000,000.00. (9) Person means an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, any similar entity or any combination of the foregoing acting in concert, but shall not include any securities broker performing no more than the usual and customary brokers function. (10) Security holder of a specified person means one who owns any security of such person, including common stock, preferred stock, debt obligations, and any other security convertible into or evidencing the right to acquire any of the foregoing. (11) Subsidiary of a specified person means an affiliate controlled by such person directly, or indirectly through one or more intermediaries. (12) Voting security shall include any security convertible into or evidencing a right to acquire a voting security. (Added 1971, No. 72,  2; amended 1989, No. 225 (Adj. Sess.),  25(b); 1991, No. 249 (Adj. Sess.),  14; 1995, No. 180 (Adj. Sess.),  38(a); 1997, No. 159 (Adj. Sess.),  3, eff. April 29, 1998; 2003, No. 163 (Adj. Sess.),  40, eff. June 10, 2004; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 29,  27, eff. May 13, 2013; 2015, No. 15,  3, eff. May 1, 2015; 2019, No. 103 (Adj. Sess.),  20.) 
 3682. Subsidiaries of insurers
(a) Any domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries engaged in the following kinds of business: (1) any kind of insurance business authorized by the jurisdiction in which it is incorporated;(2) acting as an insurance broker or as an insurance agent for its parent or for any of its parents insurer subsidiaries; (3) investing, reinvesting or trading in securities for its own account, that of its parent, any subsidiary of its parent, or any affiliate or subsidiary; (4) management of any investment company subject to or registered pursuant to the Investment Company Act of 1940, as amended, including related sales and services. (5) acting as a broker-dealer subject to or registered pursuant to the Securities Exchange Act of 1934, as amended; (6) rendering investment advice to government agencies, corporations, or other organizations or groups; (7) rendering other services related to the operations of an insurance business including actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal, and collection services; (8) ownership and management of assets which the parent corporation could itself own or manage; (9) acting as administrative agent for a governmental instrumentality which is performing an insurance function; (10) financing of insurance premiums, agents, and other forms of consumer financing;(11) any other business activity determined by the Commissioner to be reasonably ancillary to an insurance business; and (12) owning a corporation or corporations engaged or organized to engage exclusively in one or more of the businesses specified in this section. (b) In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this title, a domestic insurer may also: (1) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of five percent of such insurers assets or 50 percent of such insurers surplus as regards policyholders, provided that after such investments the insurers surplus as regards policyholders will be reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments made under subsection (a) of this section shall be excluded for all insurers, except to the extent provided in subsection (f) of this section, and there shall be included: (A) total net monies or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary whether or not represented by the purchase of capital stock or issuance of other securities; and (B) all amounts expended in acquiring additional common stock, preferred stock, debt obligations, and other securities and all contributions to the capital or surplus, of a subsidiary subsequent to its acquisition or formation. (2) If the insurers total liabilities, as calculated for National Association of Insurance Commissioners annual statement purposes, are less than 10 percent of assets, invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, provided that after such investment the insurers surplus as regards policyholders, considering such investment as if it were a disallowed asset, will be reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs. (3) Invest any amount in common stock, preferred stock, debt obligations and other securities of one or more subsidiaries provided that each such subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (1) of this subsection or in sections 3681 through 3692 of this title applicable to the insurer. For the purpose of this subdivision, the total investment of the insurer shall include: (A) any direct investment by the insurer in an asset and(B) the insurers proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiarys investment by the percentage of the insurers ownership of such subsidiary. (4) With the approval of the Commissioner, invest any amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, provided that after such investment the insurers surplus as regards policyholders will be reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs. (5) Invest any amount in the common stock, preferred stock, debt obligations, or other securities of any subsidiary exclusively engaged in holding title to and managing or developing real or personal property, if after considering as a disallowed asset so much of the investment as is represented by subsidiary assets which if held directly by the insurer would be considered as a disallowed asset, the insurers surplus as regards policyholders will be reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs, and if following such investment all voting securities of such subsidiary would be owned by the insurer. (c) Investments in common stock, preferred stock, debt obligations or other securities of subsidiaries made pursuant to subsection (b) of this section shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this chapter applicable to such investments of insurers. (d) Whether any investment pursuant to subsection (b) of this section meets the applicable requirements thereof is to be determined immediately after such investment is made, taking into account the then outstanding principal balance on all previous investments in debt obligations, and the value of all previous investments in equity securities as of the date they were made. (e) If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further time as the Commissioner may prescribe, unless at any time after such investment shall have been made, such investment shall have met the requirements for investment under any other section of this title, and the insurer has notified the Commissioner thereof. (f) Nothing in this section shall modify or negate any contractual obligation undertaken by a mutual insurance holding company reorganizing under chapter 101, subchapter 3A of this title. (Added 1971, No. 72,  2; amended 1999, No. 84 (Adj. Sess.),  9, eff. April 19, 2000.) 
 3683. Acquisition of control of or merger with domestic insurer
(a) Filing requirements. (1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire, in the open market or otherwise, any voting security of a domestic insurer if, after the consummation thereof, such person would, directly or indirectly (or by conversion or by exercise of any right to acquire) be in control of such insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the Commissioner and has sent to such insurer, and such insurer has sent to its shareholders, a statement containing the information required by this section and such offer, request, invitation, agreement, or acquisition has been approved by the Commissioner in the manner hereinafter prescribed. (2) For purposes of this subsection, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer in any manner shall file with the Commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The Commissioner shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer will be required to file for and obtain approval of the transaction. The information shall remain confidential and not subject to public inspection and copying under the Public Records Act until the conclusion of the transaction unless the Commissioner, in his or her discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in subdivision (1) of this subsection is otherwise filed, this subdivision shall not apply. (3) With respect to a transaction subject to this section, the acquiring person must also file a preacquisition notification with the Commissioner, which shall contain the information set forth in subdivision 3683a(c)(1). A failure to file the notification may be subject to penalties specified in subsection 3683a(e) of this chapter. (4) For purposes of this section, a domestic insurer shall include any person controlling a domestic insurer unless the person, as determined by the Commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance. For the purposes of this section, person shall not include any securities broker holding, in the usual and customary brokers function, less than 20 percent of the voting securities of an insurance company or of any person which controls an insurance company. (b) Content of statement. The statement to be filed with the Commissioner hereunder shall be made under oath or affirmation and shall contain the following information: (1) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subsection (a) of this section is to be effected (hereinafter called acquiring party), and: (A) If such person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years. (B) If such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such persons subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subdivision (A) of this subdivision (1). (C) Whether such person is a depository institution or an affiliate of a depository institution.(2) The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction wherein funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration; provided, however, that where a source of such consideration is a loan made in the lenders ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests. (3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party (or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence), and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement. (4) Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure or management. (5) The number of shares of any security referred to in subsection (a) of this section which each acquiring party proposes to acquire, and the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section, and a statement as to the method by which the fairness of the proposal was arrived at. (6) The amount of each class of any security referred to in subsection (a) of this section which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party. (7) A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (a) of this section in which any acquiring party is involved, including transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered into. (8) A description of the purchase of any security referred to in subsection (a) of this section during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid therefor. (9) A description of any recommendations to purchase any security referred to in subsection (a) of this section made during the 12 calendar months preceding the filing of the statement, by any acquiring party, or by anyone based upon interviews or at the suggestion of such acquiring party. (10) Copies of all tender offers for, requests or invitations for tenders of, exchange offers for, and agreements to acquire or exchange any securities referred to in subsection (a) of this section, and (if distributed) of additional soliciting material relating thereto. (11) The terms of any agreement, contract or understanding made with any broker-dealer as to solicitation of securities referred to in subsection (a) of this section for tender, and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto. (12) An agreement by the person required to file the statement referred to in subsection (a) of this section that it will provide the annual report specified in subsection 3684(m) of this chapter, for so long as control exists. (13) An acknowledgment by the person required to file the statement referred to in subsection (a) of this section that the person and all subsidiaries within its control in the insurance holding company system will provide information to the Commissioner upon request as necessary to evaluate enterprise risk to the insurer. (14) Such additional information as the Commissioner may by rule prescribe as necessary or appropriate for the protection of policyholders and security holders of the insurer or in the public interest. (c) Filing by certain entities. If the person required to file the statement referred to in subsection (a) of this section is a partnership, limited partnership, syndicate, or other group, the Commissioner may require that the information called for by subdivisions (b)(1) through (12) of this section shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member or person is a corporation or the person required to file the statement referred to in subsection (a) of this section is a corporation, the Commissioner may require that the information called for by subdivisions (b)(1) through (14) of this section shall be given with respect to such corporation, each officer and director of such corporation, and each person who is directly or indirectly the beneficial owner of more than 10 percent of the outstanding voting securities of such corporation. (d) Material change to filing. If any material change occurs in the facts set forth in the statement filed with the Commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other material relevant to such change, shall be filed with the Commissioner and sent to such insurer within two business days after the person learns of such change. Such insurer shall send such amendment to its shareholders. (e) Alternative filing materials. If any offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section is proposed to be made by means of a registration statement under the Securities Act of 1933 or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize such documents in furnishing the information called for by that statement. (f) Approval by Commissioner; hearings. (1) The Commissioner shall hold a public hearing on any merger or other acquisition of control referred to in subsection (a) of this section if the Commissioner determines that the statement filed as required by this section does not demonstrate compliance with the standards referred to in subsection (b) of this section or if the Commissioner determines that such acquisition of control is likely to be hazardous or prejudicial to the insurance buying public, or at the request of the acquiring party. Holding a public hearing is otherwise optional at the discretion of the Commissioner. In the event the Commissioner determines that a public hearing is not required, the Commissioner shall require that notice of the transaction be published on the website maintained by the Department of Financial Regulation and in two daily newspapers of general jurisdiction in Vermont, as determined by the Commissioner. The notice shall describe the proposed transaction and state that members of the public and interested parties may file written comments on the proposed transaction with the Commissioner. The Commissioner shall consider all written comments received within 14 days after initial publication of the notice and may subsequently hold a public hearing in response to any comments received. The Commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless he or she finds that: (A) after the change of control the domestic insurer referred to in subsection (a) of this section would not be able to satisfy the requirements for the issuance of a license to write the line or lines of insurance for which it is presently licensed; (B) the effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this State or tend to create a monopoly. In applying the competitive standard in this subdivision: (i) the informational requirements of subdivision 3683a(c)(1) and the standards of subdivision 3683a(d)(2) of this chapter shall apply; (ii) the merger or other acquisition shall not be disapproved if the Commissioner finds that any of the situations meeting the criteria provided by subdivision 3683a(d)(3) of this chapter exist; and (iii) the Commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time; (C) the financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer, or prejudice the interest of its policyholders; (D) the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a) of this section are unfair and unreasonable to the security holders of the insurer; (E) the plans or proposals that the acquiring party has to liquidate the insurer, sell its assets or consolidate or merge it with any person, or to make any other material change in its business or corporate structure or management are unfair and unreasonable to policyholders of the insurer and not in the public interest; (F) the competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control; or (G) the acquisition is likely to be hazardous or prejudicial to the insurance-buying public.(2) The public hearing referred to in subdivision (1) of this subsection (f), if required, shall be held within 60 days after the statement required by subsection (a) of this section is filed, and at least 20 days notice thereof shall be given by the Commissioner to the person filing the statement. Not less than seven days notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the Commissioner. The insurer shall give such notice to its security holders. The Commissioner shall make a determination within 30 days after the conclusion of such hearing or, if a public hearing is not required, within 30 days after the comment period deadline; provided, however, that, if the insurer is or will be an affiliate of a depository institution or any affiliate thereof, the Commissioner shall issue a determination within the 60-day period preceding the effective date of the acquisition or change or continuation of control of an insurer. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interests may be affected thereby shall have the right to present evidence, examine, and cross-examine witnesses and offer oral and written arguments and in connection therewith shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the Superior Court of this State. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing. (3) If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a) of this section. Such person shall file the statement referred to in subsection (a) of this section with the NAIC within five days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing and shall provide notice to the applicant of the opt-out within 10 days of the receipt of the statement referred to in subsection (a) of this section. A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. Such commissioners shall hear and receive evidence. A commissioner may attend such hearing in person or by telecommunication. (4) In connection with a change of control of a domestic insurer, any determination by the Commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and rules of this State shall be made not later than 60 days after the date of notification of the change in control submitted pursuant to subdivision (a)(1) of this section. (5) The Commissioner may retain at the acquiring persons expense any attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioners staff as may be reasonably necessary to assist the Commissioner in reviewing the proposed acquisition of control. (g) Mailings to shareholders; payment of expenses. All statements, amendments, or other material filed pursuant to subsection (a) or (b) of this section, and all notices of public hearings held pursuant to subsection (d) of this section, shall be mailed by the insurer to its shareholders within five business days after the insurer has received such statements, amendments, other material, or notices. The expenses of mailing shall be borne by the person making the filing. As security for the payment of such expenses, such person shall file with the Commissioner an acceptable bond or other deposit in an amount to be determined by the Commissioner. (h) Exemptions. The provisions of this section shall not apply to:(1) [Repealed.](2) Any transaction which is subject to the provisions of subchapter 3 of this chapter dealing with the merger or consolidation of two or more insurers. (3) Any offer, request, invitation, agreement, or acquisition which the Commissioner by order shall exempt therefrom as: (A) not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer; or (B) as otherwise not comprehended within the purposes of this section.(4) The formation of a mutual holding company and reorganization of a mutual insurance company pursuant to section 3441 of this title or a merger pursuant to section 3442 of this title. (i) Violations. The following shall be violations of this section:(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsection (a) or (b) of this section; or (2) The effectuation or any attempt to effectuate an acquisition of control of, or merger with, a domestic insurer unless the Commissioner has given his or her approval thereto. (j) Jurisdiction; consent to service of process. The courts of this State are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this State who files a statement with the Commissioner under this section, and over all actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment of the Commissioner by such a person to be his or her true and lawful attorney upon whom may be served all lawful process in any action, suit or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the Commissioner and transmitted by registered or certified mail by the Commissioner to such person at his or her last known address. (k) Additional capital requirements. As a condition for approval under this section, the Commissioner may require the person that is acquiring control of an insurer domiciled in this State to maintain or restore capital in compliance with and under the time frame established under the provisions of 15 U.S.C.  6701(c)(2)(B). (Added 1971, No. 72,  2; amended 1973, No. 193 (Adj. Sess.),  3 eff. April 9, 1974; 1991, No. 101,  12; 1991, No. 249 (Adj. Sess.),  15; 1993, No. 12,  9, eff. April 26, 1993; 1995, No. 167 (Adj. Sess.),  29b; 2001, No. 71,  8-10, eff. June 16, 2001; 2013, No. 29,  28, eff. May 13, 2013; 2019, No. 103 (Adj. Sess.),  19.) 
 3683a. Acquisitions involving insurers not otherwise covered
(a) Definitions. For the purposes of this section:(1) Acquisition means any agreement, arrangement, or activity the consummation of which results in a person acquiring directly or indirectly the control of another person and includes the acquisition of voting securities and assets, bulk reinsurance, and mergers. (2) Highly concentrated market is a market in which the share of the four largest insurers is 75 percent or more of the market. (3) Insurer means a company licensed to do business in this State and includes any company or group of companies under common management, ownership, or control. (4) Involved insurer includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger. (5) Market means the relevant product and geographical markets. In determining the relevant product and geographical markets, the Commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, adopted by the NAIC and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this State, and the relevant geographical market is assumed to be this State. (6) Significant trend toward increased concentration means the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from any base year five to 10 years prior to the acquisition up to the time of the acquisition. (b) Covered acquisitions. Except as provided in this subsection, this section applies to any acquisition in which there is a change in control of an insurer licensed to do business in this State, but not domiciled in this State. This section shall not apply to the following: (1) A purchase of securities solely for investment purposes so long as the securities are not used by voting or otherwise to cause or attempt to cause the substantial lessening of competition in any insurance market in this State. If a purchase of securities results in a presumption of control under subdivision 3681(3) of this chapter, it is not solely for investment purposes unless the commissioner of the insurers state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the Commissioner of this State. (2) The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if preacquisition notification is filed with the Commissioner in accordance with subdivision (c)(1) of this section 30 days prior to the proposed effective date of the acquisition or if the acquisition would otherwise be excluded from this section by any other provision of this subsection. (3) The acquisition of already affiliated persons.(4) An acquisition if, as an immediate result of the acquisition:(A) in no market would the combined market share of the involved insurers exceed five percent of the total market; (B) there would be no increase in any market share; or(C) in no market would the combined market share of the involved insurers exceed 12 percent of the total market and the market share increase by more than two percent of the total market. For purposes of this subdivision, market means direct written insurance premium in this State for a line of business as contained in the annual statement required to be filed by insurers licensed to do business in this State. (5) An acquisition for which a preacquisition notification would be required under this section due solely to the resulting effect on the ocean marine insurance line of business. (6) An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition; there is a lack of feasible alternatives to improving such condition; the public benefits of improving the insurers condition through the acquisition exceed the public benefits that would arise from not lessening competition; and the findings are communicated by the domiciliary commissioner to the Commissioner of this State. (c) Preacquisition notification; waiting period. An insurer involved in an acquisition covered by subsection (b) of this section shall file a preacquisition notification with the Commissioner so that the Commissioner may determine whether the proposed acquisition, if consummated, would violate the competitive standard established under subsection (d) of this section. The Commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in section 3687 of this chapter. (1) The preacquisition notification shall be in such form and contain such information as prescribed by the NAIC relating to those markets which cause the acquisition to be covered under provisions of this section. The Commissioner may require such additional material and information as deemed necessary to carry out the purposes of this section. The required information may include an opinion of an economist as to the competitive impact of the acquisition in this State accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion. (2) The waiting period required shall begin on the date the Commissioner receives a preacquisition notification and shall end on the earlier of the 30th day after the date of receipt or termination of the waiting period by the Commissioner. Prior to the end of the waiting period, the Commissioner on a one-time basis may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the 30th day after the Commissioner receives the additional information or termination of the waiting period by the Commissioner. (d) Competitive standard. (1) The Commissioner may enter an order under subdivision (e)(1) of this section with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be to lessen substantially competition in any line of insurance in this State or may tend to create a monopoly. (2) In determining whether a proposed acquisition would violate the competitive standard of subdivision (1) of this subsection, the Commissioner shall consider the following: (A) Any acquisition covered under subsection (b) of this section involving two insurers competing in the same market is prima facie evidence of violation of the competitive standard if: (i) The market is highly concentrated and the involved insurers possess the following shares of the market: (I) insurer A a share of four percent and insurer B a share of four percent or more;(II) insurer A a share of 10 percent and insurer B a share of two percent or more; or(III) insurer A a share of 15 percent and insurer B a share of one percent or more.(ii) The market is not highly concentrated and the involved insurers possess the following shares of the market: (I) insurer A a share of five percent and insurer B a share of five percent or more;(II) insurer A a share of 10 percent and insurer B a share of four percent or more;(III) insurer A a share of 15 percent and insurer B a share of three percent or more; or(IV) insurer A a share of 19 percent and insurer B a share of one percent or more.(B) If more than two insurers competing in the same market are involved in any acquisition covered under subsection (b) of this section, then exceeding the total of the two figures set forth for insurer A and insurer B established under subdivision (A)(i) or (ii) of this subdivision (2) is prima facie evidence of violation of the competitive standard. For purposes of this subdivision (2), the insurer with the largest share of the market shall be considered to be insurer A. (C) Any acquisition covered under subsection (b) of this section involving two or more insurers competing in the same market is prima facie evidence of violation of the competitive standard in subdivision (1) of this subsection if: (i) there is a significant trend toward increased concentration in the market;(ii) one of the insurers involved is one of the insurers in a grouping of large insurers showing the requisite increase in the market share; and (iii) another involved insurers market is two percent or more.(3) If an acquisition is not prima facie violative of the competitive standard under subdivisions (A) through (C) of subdivision (2) of this subsection, the Commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. If an acquisition is prima facie violative of the competitive standard under subdivisions (A) through (C) of subdivision (2), a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this subdivision include the following: market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market. (4) The burden of showing prima facie evidence of violation of the competitive standard rests upon the Commissioner. (5) Percentages not provided in subdivisions (A) and (B) of subdivision (2) of this subsection are interpolated proportionately to the percentages that are provided. (6) An order may not be entered under subdivision (e)(1) of this section if:(A) the acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition; or (B) the acquisition will substantially increase the availability of insurance and the public benefits of the increase exceed the public benefits which would arise from not lessening competition. (e) Orders and penalties. (1) If an acquisition violates the competitive standard of subsection (d) of this section or if an involved insurer fails to file adequate information in compliance with subsection (c) of this section, the Commissioner may enter an order: (A) requiring an involved insurer to cease and desist from doing business in this State with respect to the line or lines of insurance involved in the violation; or (B) denying the application of an acquired or acquiring insurer for a license to do business in this State. (2) Such an order shall not be entered unless there is a hearing, notice of the hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing, and the hearing is concluded and the order is issued no later than 60 days after the date of the filing of the preacquisition notification with the Commissioner. (3) Every order shall be accompanied by a written decision of the Commissioner setting forth findings of fact and conclusions of law. An order under this subdivision shall not apply if the acquisition is not consummated. (4) Any person who violates a cease and desist order of the Commissioner under subdivision (1) of this subsection and while the order is in effect may, after notice and hearing and upon order of the Commissioner, be subject to a monetary penalty of not more than $10,000.00 for every day of violation or suspension or revocation of the persons license, in the discretion of the Commissioner. (5) Any insurer or other person who fails to make any filing required by this section and who also fails to demonstrate a good faith effort to comply with any filing requirement shall be subject to a fine of not more than $50,000.00. (f) Subsections 3689(b) and (c) of this title (regarding voting securities) and section 3691 of this title (regarding receivership) do not apply to acquisitions covered under subsection (b) of this section. (Added 2013, No. 29,  29, eff. May 13, 2013.) 
 3684. Registration of insurers
(a) Registration. Every insurer which is authorized to do business in this State and which is a member of an insurance holding company system shall register with the Commissioner, except a foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this section and section 3685 of this title. Any insurer which is subject to registration under this section shall register within 60 days after the effective date of this subchapter or 15 days after it becomes subject to registration, whichever is later, and annually thereafter by March 15 for the previous year ending December 31, unless the Commissioner for good cause shown extends the time for registration, and then within such extended time. The Commissioner may require any authorized insurer which is a member of a holding company system which is not subject to registration under this section to furnish a copy of the registration statement or other information filed by such insurance company with the insurance regulatory authority of its domiciliary jurisdiction. (b) Information and form required. Every insurer subject to registration shall file a registration statement on a form provided by the Commissioner, which shall contain current information about: (1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer. (2) The identity and relationship of every member of the insurance holding company system.(3) The following agreements in force, relationships subsisting, and transactions currently outstanding between such insurer and its affiliates: (A) loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates; (B) purchases, sales, or exchanges of assets;(C) transactions not in the ordinary course of business;(D) guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurers assets to liability; other than insurance contracts entered into in the ordinary course of the insurers business; (E) all management and service contracts and all cost sharing arrangements;(F) all reinsurance agreements;(G) dividends and other distributions to shareholders; and(H) consolidated tax allocation agreements.(4) Any pledge of the insurers stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system. (5) If requested by the Commissioner, financial statements of or within an insurance holding company system, including all affiliates. Financial statements may include annual audited financial statements filed with the U.S. Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as may be amended, or the Securities Exchange Act of 1934, as may be amended. An insurer required to file financial statements under this subdivision may satisfy the request by providing the Commissioner with the most recently filed parent corporation financial statements that have been filed with the SEC. (6) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the Commissioner. (7) Statements that the insurers board of directors oversees corporate governance and internal controls and that the insurers officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures. (8) Any other information required by the Commissioner by rule.(c) Summary of changes to registration statement. All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement. (d) Materiality. No information need be disclosed on the registration statement filed pursuant to subsection (b) of this section if such information is not material for the purposes of this section. Unless the Commissioner by rule or order provides otherwise, sales, purchases, exchanges, loans or extensions of credit, or investments involving one-half of one percent or less of an insurers admitted assets as of the 31st day of December next preceding shall not be deemed material for purposes of this section. (e) Reporting of dividends to shareholders. Subject to subsection 3685(d) of this chapter, each registered insurer shall report to the Commissioner all dividends and other distributions to shareholders within 15 business days following the declaration thereof. (f) Information of insurers. Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer where the information is reasonably necessary to enable the insurer to comply with the provisions of this section. (g) Amendments to registration statements. Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on amendment forms provided by the Commissioner within 15 days after the end of the month in which it learns of each such change or addition, provided, however, that subject to subsection 3685(c) of this title each registered insurer shall so report all dividends and other distributions to shareholders within two business days following the declaration thereto. (h) Termination of registration. The Commissioner shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system. (i) Consolidated filing. The Commissioner may require or allow two or more affiliated insurers subject to registration hereunder to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statements. (j) Alternative registration. The Commissioner may allow an insurer which is authorized to do business in this State and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (a) of this section and to file all information and material required to be filed under this section. (k) Exemptions. The provisions of this section shall not apply to any insurer, information, or transaction if and to the extent that the Commissioner by rule or order shall exempt the same from the provisions of this section. (l) Disclaimer. Any person may file with the Commissioner a disclaimer of affiliation with any authorized insurer, or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under this section which may arise out of the insurers relationship with such person unless and until the Commissioner disallows such a disclaimer. The Commissioner shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance. (m) Enterprise risk filing. The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall identify, to the best of the ultimate controlling persons knowledge and belief, the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners. (n) Violations. The failure to file a registration statement or any amendment thereto required by this section within the time specified for such filing shall be a violation of this section. (Added 1971, No. 72,  2; amended 1991, No. 101,  13; 1993, No. 235 (Adj. Sess.),  2, 3, eff. June 21, 1994; 2013, No. 29,  30, eff. May 13, 2013.) 
 3685. Standards and management of an insurer within an insurance holding company system
(a) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to the following standards: (1) the terms shall be fair and reasonable;(2) agreements for cost-sharing services and management shall include such provisions as required by rule adopted by the Commissioner; (3) charges or fees for services performed shall be reasonable;(4) expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied; (5) the books, accounts, and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions, including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties; and (6) the insurers surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs. (b) Adequacy of surplus. For purposes of this subchapter, in determining whether an insurers surplus as regards policyholders is reasonable in relation to the insurers outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered: (1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria. (2) The extent to which the insurers business is diversified among the several lines of insurance. (3) The number and size of risks insured in each line of business.(4) The extent of the geographical dispersion of the insurers insured risks.(5) The nature and extent of the insurers reinsurance program.(6) The quality, diversification, and liquidity of the insurers investment portfolio.(7) The recent past and projected future trend in the size of the insurers surplus as regards policyholders. (8) The surplus as regards policyholders maintained by other comparable insurers.(9) The adequacy of the insurers reserves.(10) The quality and liquidity of investments in subsidiaries made pursuant to section 3682 of this title. The Commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his or her judgment such investment so warrants. (c) Dividends and other distributions. No insurer subject to registration under section 3684 of this title shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until: (1) 30 days after the Commissioner has received notice of the declaration thereof and has not within such period disapproved such payment; or (2) the Commissioner shall have approved such payment within such 30-day period.(d) Limitation on dividends. (1) For purposes of this section, an extraordinary dividend or distribution includes any dividend or distribution of cash or other property whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the lesser of: (A) 10 percent of such insurers surplus as regards policyholders as of the 31st day of December next preceding; or (B) the net gains from operations of such insurer, if such insurer is a life insurer, or the net income, if such insurer is not a life insurer, not including realized capital gains, for the 12-month period ending the 31st day of December next preceding, but shall not include pro rata distributions of any class of the insurers own securities. (2) In determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two calendar years that has not already been paid out as dividends. This carry-forward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years. In determining whether a dividend or distribution is extraordinary, a life insurer may exclude dividends or distributions paid only from unassigned surplus that do not exceed the greater of subdivision (1)(A) or (B) of this subsection, provided that a life insurer relying on this provision shall notify the Commissioner of such dividend or distribution within five business days following declaration and at least 10 days, commencing from the date of receipt by the Commissioner, prior to the payment thereof. (e) Conditional dividends. Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution that is conditional upon the Commissioners approval thereof, and such a declaration shall confer no rights upon shareholders until the Commissioner has: (1) approved the payment of such dividend or distribution; or(2) not disapproved such payment within the 30-day period referred to in subsection (c) of this section. (f) The following transactions involving a domestic insurer and any person in its holding company system, including amendments or modifications of affiliate agreements previously filed under this section, which are subject to any materiality standards contained in subdivisions (1) through (7) of this subsection, may not be entered into unless the insurer has notified the Commissioner in writing of its intention to enter into such transaction at least 30 days prior thereto, or such shorter period as the Commissioner may permit, and the Commissioner has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported within 30 days after a termination of a previously filed agreement to the Commissioner for determination of the type of filing required, if any. Nothing herein contained shall be deemed to authorize or permit any transactions that in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law. (1) Sales, purchases, exchanges, loans, or extensions of credit or investments, provided such transactions are equal to or exceed: (A) with respect to nonlife insurers, the lesser of three percent of the insurers admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding; (B) with respect to life insurers, three percent of the insurers admitted assets; each as of the 31st day of December next preceding. (2) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in any affiliate of the insurer making such loans or extensions of credit, provided such transactions are equal to or exceed: (A) with respect to nonlife insurers, the lesser of three percent of the insurers admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding; (B) with respect to life insurers, three percent of the insurers admitted assets; each as of the 31st day of December next preceding. (3) Reinsurance agreements or modifications thereto, including:(A) all reinsurance pooling agreements;(B) agreements in which the reinsurance premium or a change in the insurers liabilities or the projected reinsurance premium or a change in the insurers liabilities in any of the next three years equals or exceeds five percent of the insurers surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements that may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of such assets will be transferred to one or more affiliates of the insurer. (4) Any material transactions, specified by regulation, that the Commissioner determines may adversely affect the interests of the insurers policyholders. (5) All management agreements, service contracts, and all cost-sharing arrangements.(6) Guarantees when made by a domestic insurer; provided, however, that a guarantee that is quantifiable as to amount is not subject to the notice requirements of this subsection unless it exceeds the lesser of one-half of one percent of the insurers admitted assets or 10 percent of surplus as regards policyholders as of the 31st day of December next preceding. All guarantees that are not quantifiable as to amount are subject to the notice requirements of this subdivision. (7) Direct or indirect acquisitions or investments in a person that controls the insurer or an affiliate of the insurer in an amount that together with its present holdings in such investments, exceeds two and one-half percent of the insurers surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to section 3682 of this chapter or authorized under any other section of this chapter or in nonsubsidiary insurance affiliates that are subject to the provisions of this chapter are exempt from this requirement. (g) A domestic insurer may not enter into transactions that are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the Commissioner determines that such separate transactions were entered into over any 12-month period for such purpose, he or she may exercise his or her authority under this title. (h) The Commissioner, in reviewing transactions pursuant to subsection (f) of this section, shall consider whether the transactions comply with the standards set forth in subsection (a) of this section and whether they may adversely affect the interests of policyholders. (i) The Commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds 10 percent of such corporations voting securities. (j) Management of domestic insurers subject to registration. (1) Notwithstanding the control of a domestic insurer by any person, the officers and directors of the insurer shall not thereby be relieved of any obligation or liability to which they would otherwise be subject by law, and the insurer shall be managed so as to ensure its separate operating identity consistent with this section. (2) Nothing in this section shall preclude a domestic insurer from having or sharing a common management or cooperative or joint use of personnel, property, or services with one or more other persons under arrangements meeting the standards of subsection (a) of this section. (3) Not less than one-third of the directors of a domestic insurer and not less than one-third of the members of each committee of the board of directors of any domestic insurer shall be persons who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or entity. At least one such person must be included in any quorum for the transaction of business at any meeting of the board of directors or any committee thereof. (4) The board of directors of a domestic insurer shall establish one or more committees composed of a majority of directors who are not officers or employees of the insurer or of any entity controlling, controlled by, or under common control with the insurer and who are not beneficial owners of a controlling interest in the voting stock of the insurer or any such entity. The committee or committees shall have responsibility for nominating candidates for director for election by shareholders or policyholders, evaluating the performance of officers deemed to be principal officers of the insurer, and recommending to the board of directors the selection and compensation of the principal officers. For purposes of this subsection, principal officers shall mean the chief executive officer, the president, and any chief operating officer. (5) The provisions of subdivisions (3) and (4) of this subsection shall not apply to a domestic insurer if the person controlling the insurer, such as an insurer, a mutual insurance holding company, or a publicly held corporation, has a board of directors and committees thereof that meet the requirements of subdivisions (3) and (4) of this subsection with respect to such controlling entity. (6) An insurer may make application to the Commissioner for a waiver from the requirements of this subsection if the insurers annual direct written and assumed premium, excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, is less than $300,000,000.00. An insurer may also make application to the Commissioner for a waiver from the requirements of this subsection based upon unique circumstances. The Commissioner may consider various factors, including the type of business entity, volume of business written, availability of qualified board members, or the ownership or organizational structure of the entity. (Added 1971, No. 72,  2; amended 1991, No. 101,  14-16; 1991, No. 249 (Adj. Sess.),  16; 1993, No. 12,  10, eff. April 26, 1993; 2013, No. 29,  31, eff. May 13, 2013; 2015, No. 70 (Adj. Sess.),  1, eff. April 8, 2016; 2021, No. 139 (Adj. Sess.),  1, eff. May 27, 2022.) 
 3686. Examination
(a) Power of Commissioner. Subject to the limitation contained in this section and in addition to the powers which the Commissioner has under subchapter 7 of this chapter relating to the examination of insurers, the Commissioner shall also have the power to examine any insurer registered under section 3684 of this chapter and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party or by any entity or combination of entities within the insurance holding company system or by the insurance holding company system on a consolidated basis. (b) Access to books and records. (1) The Commissioner may order any insurer registered under section 3684 of this chapter to produce such records, books, or papers in the possession of the insurer or its affiliates as are reasonably necessary to determine compliance with this chapter. (2) To determine compliance with this chapter, the Commissioner may order any insurer registered under section 3684 of this chapter to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to contractual relationships, statutory obligations, or other method. In the event the insurer cannot obtain the information requested by the Commissioner, the insurer shall provide the Commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of information. Whenever it appears to the Commissioner that the detailed explanation is without merit, the Commissioner may require, after notice and hearing, the insurer to pay a penalty of up to $1,000.00 for each days delay or may suspend or revoke the insurers license. (c) Purpose and limitation of examination. The Commissioner shall exercise his or her power under subsections (a) and (b) of this section only if the examination of the insurer under subchapter 7 of this chapter is inadequate or the interests of the policyholders of such insurer may be adversely affected. (d) Use of consultants. The Commissioner may retain at the registered insurers expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioners staff as shall be reasonably necessary to assist in the conduct of the examination under subsection (a) of this section. Any persons so retained shall be under the direction and control of the Commissioner and shall act in a purely advisory capacity. (e) Expenses. Each registered insurer producing for examination records, books, and papers pursuant to subsection (a) of this section shall be liable for and shall pay the expense of such examination in accordance with section 3563 of this title. (f) Compelling production. In the event the insurer fails to comply with an order, the Commissioner shall have the power to examine the affiliates to obtain the information. The Commissioner also shall have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the Commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the State. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in the Superior Court of this State, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses and their testimony shall be itemized and charged against and be paid by the company being examined. (Added 1971, No. 72,  2; amended 2013, No. 29,  32, eff. May 13, 2013.) 
 3687. Confidential treatment
(a) Documents, materials, or other information in the possession or control of the Department that are obtained by or disclosed to the Commissioner or any other person in the course of an examination or investigation made pursuant to section 3686 of this title and all information reported pursuant to subdivisions 3683(b)(12) and (13), section 3684, and section 3685 of this title shall be given confidential treatment, shall not be subject to subpoena, shall not be subject to public inspection and copying under the Public Records Act, shall not be subject to discovery or admissible in evidence in any private civil action, and shall not be made public by the Commissioner or any other person. However, the 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 Commissioners official duties. The Commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer to which it pertains unless the Commissioner, after giving the insurer and its affiliates who would be affected thereby notice and opportunity to be heard, determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event he or she may publish all or any part thereof in such manner as he or she may deem appropriate. (b) Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner or with whom such documents, materials, or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this section. (c) In order to assist in the performance of the Commissioners duties, the Commissioner:(1) may share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this section, with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, including members of any supervisory college described in section 3695 of this title, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information and has verified in writing the legal authority to maintain confidentiality; (2) notwithstanding subdivision (1) of this subsection, may only share confidential and privileged documents, material, or information reported pursuant to subsection 3684(m) of this chapter with commissioners of states having statutes or regulations substantially similar to subsection (a) of this section and who have agreed in writing not to disclose such information; (3) may receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and 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; and (4) shall enter into written agreements with the NAIC governing sharing and use of information provided under this chapter consistent with this subsection that shall: (A) specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC and its affiliates and subsidiaries pursuant to this section, including procedures and protocols for sharing by the NAIC with other state, federal, or international regulators; (B) specify that ownership of information shared with the NAIC and its affiliates and subsidiaries pursuant to this section remains with the Commissioner and the NAICs use of the information is subject to the direction of the Commissioner; (C) require prompt notice be given to an insurer whose confidential information in the possession of the NAIC under this section is subject to a request or subpoena to the NAIC for disclosure or production; and (D) require the NAIC and its affiliates and subsidiaries to consent to intervention by an insurer in any judicial or administrative action in which the NAIC and its affiliates and subsidiaries may be required to disclose confidential information about the insurer shared with the NAIC and its affiliates and subsidiaries pursuant to this section. (d) The sharing of information by the Commissioner pursuant to this section shall not constitute a delegation of regulatory authority or rulemaking, and the Commissioner is solely responsible for the administration, execution, and enforcement of the provisions of this section. (e) 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 subsection (c) of this section. (f) Documents, materials, or other information in the possession or control of the NAIC pursuant to this section shall be confidential by law and privileged, shall not be subject to public inspection and copying under the Public Records Act, shall not be subject to subpoena, shall not be subject to discovery or admissible in evidence in any private civil action, and shall not be made public by the Commissioner or any other person. (Added 1971, No. 72,  2; amended 2013, No. 29,  33, eff. May 13, 2013.) 
 3688. Rules and regulations
The Commissioner may, upon notice and opportunity for all interested persons to be heard, issue such rules, regulations, and orders as shall be necessary to carry out the provisions of this subchapter. (Added 1971, No. 72,  2.) 
 3689. Injunctions; prohibitions against voting securities; sequestration of voting securities
(a) Injunctions. Whenever it appears to the Commissioner that any insurer or any director, officer, employee, or agent thereof has committed or is about to commit a violation of this subchapter or of any rule, regulation, or order issued by the Commissioner hereunder, the Commissioner may apply to the Superior Court for the county in which the principal office of the insurer is located or if such insurer has no such office in this State then to the Superior Court for Washington County for an order enjoining such insurer or such director, officer, employee, or agent thereof from violating or continuing to violate this subchapter or any such rule, regulation or order, and for such other equitable relief as the nature of the case and the interests of the insurers policyholders, creditors, and shareholders or the public may require. (b) Voting of securities, when prohibited. No security which is the subject of any agreement regarding acquisition, or which is acquired or to be acquired, in contravention of the provisions of this subchapter or of any rule, regulation or order issued by the Commissioner hereunder may be voted at any shareholders meeting, or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities, unless the action would materially affect control of the insurer or unless the courts of this State have so ordered. If an insurer or the Commissioner has reason to believe that any security of the insurer has been or is about to be acquired in contravention of the provisions of this subchapter or of any rule, regulation or order issued by the Commissioner hereunder the insurer or the Commissioner may apply to the Superior Court for the county in which the insurer has its principal place of business or to the Superior Court for Washington County to enjoin any offer, request, invitation, agreement or acquisition made in contravention of section 3685 of this title or any rule, regulation, or order issued by the Commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders, and for such other equitable relief as the nature of the case and the interests of the insurers policyholders, creditors and shareholders or the public may require. (c) Sequestration of voting securities. In any case where a person has acquired or is proposing to acquire any voting securities in violation of this subchapter or any rule, regulation, or order issued by the Commissioner hereunder, the Superior Court for the county in which the insurer has its principal place of business or the Superior Court of Washington County may, on such notice as the court deems appropriate, upon the application of the insurer or the Commissioner, seize or sequester any voting securities of the insurer owned directly or indirectly by such person, and issue such orders with respect thereto as may be appropriate to effectuate the provisions of this subchapter. Notwithstanding any other provisions of law, for the purposes of this subchapter the situs of the ownership of the securities of domestic insurers shall be deemed to be in this State. (Added 1971, No. 72,  2; amended 1973, No. 193 (Adj. Sess.),  3, eff. April 9, 1974.) 
 3690. Sanctions
(a) Any insurer failing, without just cause, to file any registration statement as required in this subchapter shall be required, after notice and hearing, to pay a penalty of not more than $1,000.00 for each days delay, to be recovered by the Commissioner of Financial Regulation and the penalty so recovered shall be paid into the General Revenue Fund of this State. The maximum penalty under this section is $150,000.00. The Commissioner may reduce the penalty if the insurer demonstrates to the Commissioner that the imposition of the penalty would constitute a financial hardship to the insurer. (b) Every director or officer of an insurance holding company system who knowingly violates, participates in, or assents to, or who knowingly shall permit any of the officers or agents of the insurer to engage in transactions or make investments which have not been properly reported or submitted pursuant to subsection 3684(a), 3685(c), or 3685(f) of this title, or which violate this subchapter, shall pay, in their individual capacity, an administrative penalty of not more than $5,000.00 per violation, after notice and hearing before the Commissioner. In determining the amount of the penalty, the Commissioner shall take into account the appropriateness of the penalty with respect to the gravity of the violation, the history of previous violations, and such other matters as justice may require. (c) Whenever it appears to the Commissioner that any insurer subject to this subchapter or any director, officer, employee, or agent thereof has engaged in any transaction or entered into a contract which is subject to section 3685 of this subchapter and which would not have been approved had such approval been requested, the Commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing, the Commissioner may also order the insurer to void any such contracts and restore the status quo if such action is in the best interest of the policyholders, creditors, or the public. (d) Any person who willfully violates any section of this subchapter shall be fined not more than $25,000.00 or imprisoned not more than three years, or both. (e) Any insurer, officer, director, or employee of an insurance holding company system who willfully subscribes to, makes, or causes to be made any false statement, report, or filing under this subchapter shall be imprisoned for not more than three years or fined not more than $25,000.00, or both. Any fines imposed shall be paid by the officer, director, or employee in his or her individual capacity. (f) Whenever it appears to the Commissioner that any person has committed a violation of section 3681 of this chapter which prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision under section 7041 of this title. (Added 1971, No. 72,  2; amended 1991, No. 249 (Adj. Sess.),  17; 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 29,  34, eff. May 13, 2013.) 
 3691. Receivership
Whenever it appears to the Commissioner that any person has committed a violation of this subchapter which so impairs the financial condition of a domestic insurer as to threaten insolvency or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, then the Commissioner may proceed as provided in chapter 145 of this title. (Added 1971, No. 72,  2; amended 1993, No. 12,  7, eff. April 26, 1993.) 
 3692. Revocation, suspension, or nonrenewal of insurers license
Whenever it appears to the Commissioner that any person has committed a violation of this subchapter which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the Commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew such insurers license or authority to do business in this State for such period as he or she finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law. (Added 1971, No. 72,  2.) 
 3693. Judicial review
(a) Any person aggrieved by any act, determination, rule, regulation, or order or any other action of the Commissioner pursuant to this subchapter may appeal therefrom to the Superior Court. The Court shall conduct its review without a jury and by trial de novo, except that if all parties, including the Commissioner, so stipulate, the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating. (b) The filing of an appeal pursuant to this section shall stay the application of any such rule, regulation, order or other action of the Commissioner to the appealing party unless the Court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, shareholders, creditors, or the public. (c) Any person aggrieved by any failure of the Commissioner to act or make a determination required by this subchapter may file a complaint in the Superior Court for an order directing the Commissioner to act or make such determination forthwith. (Added 1971, No. 72,  2; amended 1973, No. 193 (Adj. Sess.),  3, eff. April 9, 1974.) 
 3694. Recovery
(a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer where the distribution or payment pursuant to subdivision (1) or (2) of this subsection is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c) and (d) of this section: (1) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock; or (2) any payment in the form of a bonus, termination settlement or extraordinary lump sum salary adjustment made by the insurer or its subsidiaries to a director, officer, or employee. (b) No such distribution shall be recoverable if the parent or affiliate shows that when paid such distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that such distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (c) Any person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) of this section received by such person. Any person who otherwise controlled the insurer at the time such distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable. (d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds. (e) To the extent that any person liable under subsection (c) of this section is insolvent or otherwise fails to pay claims due from it pursuant to such subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the person liable under subsection (c) of this section. (Added 1991, No. 101,  17.) 
 3695. Supervisory colleges
(a) Power of Commissioner. With respect to any insurer registered under section 3684 of this title and in accordance with subsection (c) of this section, the Commissioner shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this chapter. The powers of the Commissioner with respect to supervisory colleges include the following: (1) initiating the establishment of a supervisory college;(2) clarifying the membership and participation of other supervisors in the supervisory college; (3) clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor; (4) coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing; and (5) establishing a crisis management plan.(b) Expenses. Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the Commissioners participation in a supervisory college in accordance with subsection (c) of this section, including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the Commissioner may establish a regular assessment on the insurer for the payment of these expenses. (c) Supervisory college. In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes and as part of the examination of individual insurers in accordance with section 3686 of this chapter, the Commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The Commissioner may enter into agreements in accordance with subsection 3687(c) of this chapter providing the basis for cooperation between the Commissioner and the other regulatory agencies and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the Commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction. (Added 2013, No. 29,  35, eff. May 13, 2013, eff. May 13, 2013.) 
 3696. Groupwide supervisor; internationally active insurance group
(a)(1) The Commissioner is authorized to act as the groupwide supervisor for any internationally active insurance group. The Commissioner, however, may acknowledge another regulatory official as the supervisor, provided the group: (A) does not have substantial insurance operations in the United States;(B) has substantial insurance operations in the United States, but not in Vermont; or(C) has substantial insurance operations in the United States and in Vermont, but the Commissioner has determined, pursuant to the factors in subsections (b) and (g) of this section, that such other regulatory official is the appropriate supervisor. (2) An insurance holding company system that does not otherwise qualify as an internationally active insurance group under subdivision 3681(8) of this subchapter may request that the Commissioner make a determination or acknowledgment as to a supervisor pursuant to this section. (b)(1) In cooperation with other state, federal, and international regulatory agencies, the Commissioner shall identify a single groupwide supervisor for a group. The Commissioner may determine that he or she is the appropriate supervisor for a group if the group conducts substantial insurance operations in Vermont, or the Commissioner may acknowledge that a regulatory official from another jurisdiction is the appropriate supervisor for such group. The Commissioner shall consider the following factors when making a determination or acknowledgment under this subsection: (A) the place of domicile of the insurers within the group that hold the largest share of the groups written premiums, assets, or liabilities; (B) the place of domicile of the top-tiered insurers in the insurance holding company system of the group; (C) the location of the executive offices or largest operational offices of the group;(D) whether another regulatory official is acting or is seeking to act as the supervisor under a regulatory system the Commissioner determines to be: (i) substantially similar to the system of regulation provided under Vermont law; or(ii) otherwise sufficient in terms of providing for supervision, enterprise risk analysis, and cooperation with other regulatory officials; and (E) whether another regulatory official acting or seeking to act as the supervisor provides the Commissioner with reasonably reciprocal recognition and cooperation. (2) A commissioner identified under this subsection as the groupwide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the groupwide supervisor. The acknowledgment of the supervisor shall be made after consideration of the factors listed in subdivisions (A) through (E) of this subdivision, and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of the members of the group, and in consultation with the group itself. (c) Notwithstanding any other provision of law to the contrary, when another regulatory official is acting as the groupwide supervisor of an internationally active insurance group, the Commissioner shall acknowledge such official as the supervisor. However, the Commissioner shall make a determination or acknowledgment as to the appropriate supervisor for such group pursuant to subsection (b) of this section in the event of a material change in the group that results in: (1) the groups insurers domiciled in Vermont holding the largest share of the groups premiums, assets, or liabilities; or (2) Vermonts becoming the place of domicile of the top-tiered insurers in the insurance holding company system of the group. (d) Pursuant to section 3686 of this subchapter, the Commissioner is authorized to collect from any insurer registered under section 3684 of this subchapter all information necessary to determine whether the Commissioner shall act as the groupwide supervisor of an internationally active insurance group or, instead, acknowledge another regulatory official to act as supervisor. (e) Prior to issuing a determination that a group is subject to supervision by the Commissioner, the Commissioner shall notify the insurer registered pursuant to section 3684 of this subchapter of the pending determination, including the ultimate controlling person within the group. The group shall have not less than 30 days to provide the Commissioner with any additional information it deems relevant to the determination. The Commissioner shall publish on its website the identity of internationally active insurance groups subject to supervision by him or her. (f) If the Commissioner is the supervisor for a group, the Commissioner is authorized to engage in any of the following groupwide supervision activities: (1) Assess the enterprise risks within the group to ensure that:(A) the material financial condition and liquidity risks to the members of group engaged in the business of insurance are identified by management; and (B) reasonable and effective mitigation measures are in place.(2) Request, from any member of a group subject to the Commissioners supervision, information necessary and appropriate to assess enterprise risk, including information about the members of the group regarding: (A) governance, risk assessment, and management;(B) capital adequacy; and(C) material intercompany transactions.(3) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the group are domiciled, compel development and implementation of reasonable measures designed to ensure that the group is able to timely recognize and mitigate enterprise risks to members of the group engaged in the business of insurance. (4) Communicate with other state, federal, and international regulatory agencies of members within group and share relevant information, subject to the confidentiality provisions of section 3687 of this subchapter, through supervisory colleges as provided in section 3695 of this subchapter or otherwise. (5) Enter into agreements with or obtain documentation from any insurer registered under section 3684 of this subchapter, any member of the group, and any other state, federal, and international regulatory agencies of members of the group, providing the basis for or otherwise clarifying the Commissioners role as groupwide supervisor, including provisions for resolving disputes with other regulatory officials. Such agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in Vermont is doing business in Vermont or is otherwise subject to Vermont jurisdiction. (6) Engage in other groupwide supervision activities, consistent with this subsection, as deemed necessary by the Commissioner. (g) If the Commissioner acknowledges another regulatory official from a jurisdiction not accredited by the NAIC as the groupwide supervisor, the Commissioner is authorized to reasonably cooperate, through supervisory colleagues or otherwise, with groupwide supervision undertaken by the supervisor, provided: (1) The Commissioners cooperation is in compliance with Vermont law.(2) The regulatory official acknowledged as the supervisor also recognizes and cooperates with the Commissioners activities as a groupwide supervisor for other internationally active insurance groups where applicable. When such recognition and cooperation is not reasonably reciprocal, the Commissioner is authorized to refuse recognition and cooperation. (h) The Commissioner is authorized to enter into agreements with or obtain documentation from any insurer registered under section 3684 of this subchapter, any affiliate of the insurer, and other state, federal, and international regulatory agencies for members of the internationally active insurance group that provide the basis for or otherwise clarify a regulatory officials role as groupwide supervisor. (i) The Commissioner may adopt rules necessary for the administration of this section.(j) A registered insurer subject to this section is liable for and shall pay the reasonable expenses of the Commissioners participation in the administration of this section, including the engagement of attorneys, actuaries, and any other professionals, as well as all reasonable travel expenses. (Added 2015, No. 15,  4, eff. May 1, 2015.) 
 3700. Statutory purposes
The statutory purpose of the exemption for annuity considerations in section 3718 of this title is to avoid reciprocity from other states. (Added 2013, No. 200 (Adj. Sess.),  17.) 
 3701. Discriminations prohibited
A life insurance company doing business in the State shall not make or permit to be made any distinction or unfair discrimination between individual insureds of the same class and of equal expectation of life as to: (1) the amount of the premiums or the terms of payment thereof; or(2) the rate charged for policies of life or endowment insurance, or(3) the dividends or other benefits payable thereon; or(4) any of the terms and conditions of the policies it issues. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  1).)
 3702. Other prohibited practices
A life insurance company doing business in the State or an agent thereof shall not:(1) issue a policy of insurance or make an agreement other than that plainly expressed in the policy issued to the insured; (2) pay or allow, or offer to pay or allow, as an inducement to insurance, a rebate or premium payable on the policy; (3) grant a special favor or advantage in the dividends or other benefits to accrue thereon; or (4) provide any valuable consideration or inducement not specified in the policy. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  2).)
 3703. Penalties
A person violating sections 3701 and 3702 of this title may be subject to an administrative penalty of not more than $2,000.00; and the license of such person or company may be suspended by the Commissioner for not less than three months nor more than six months, and for a second offense such license shall be revoked. Such person or company shall not thereafter be licensed for one year from the date of such revocation. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  3); amended 1995, No. 167 (Adj. Sess.),  7.) 
 3704. Trust agreements
A life insurance company chartered by and doing business in this State shall have power and authority to hold in trust or otherwise the proceeds of any life insurance policy or annuity issued by it upon such terms and subject to such conditions and limitations as may be agreed upon in writing by such company and the owner of the policy or the purchaser of the annuity. The contract, policy, or trust instrument may provide that no payments of interest or of principal shall be in any way subject to the claims of the creditors of the person entitled to any part of the proceeds so held or to his or her debts, contracts, or engagements, or to any judicial process to levy upon or attach such proceeds for payment of such claims or demands, and that the person entitled to any of the proceeds so held shall not be permitted to commute, anticipate, encumber, alienate, or assign the same or any part thereof or the interest thereon. Such life insurance company shall not be required to segregate the funds so held but may hold them as a part of its general corporate assets. Nothing in this section or in the trust or other provisions herein contemplated shall subject such life insurance company to the provisions of the law of this State relative to banks or trust companies. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  4).) 
 3705. Spendthrift provisions; creditors of beneficiary
When a contract of annuity, a policy of insurance, or other contract of a life insurance company authorized to do business in this State is entered into with any person for the benefit of another, and such contract so provides, a beneficiary entitled to any of the proceeds retained thereunder by such company or to interest thereon shall not be permitted to commute, anticipate, encumber, alienate, or assign the principal or interest thereon, or any part thereof, nor, if such contract so provides, shall any part of such principal or interest be subject to the claims of creditors of any such beneficiary, nor be in any way subject to such beneficiarys debts, contracts, or engagements, or to any judicial process to levy upon or attach such proceeds for payment of such claims or demands. Contracts so providing shall be valid and enforceable. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  5).) 
 3706. Exemption of proceedsLife insurance
(a) If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his or her own life, or on another life, in favor of a person other than himself or herself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance or executors or administrators of such insured or the person so effecting such insurance, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted, and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person, and such proceeds and avails shall be exempt from all liability for any debt of the beneficiary existing at the time the policy is made available for his or her use: Provided, that subject to the statute of limitations, the amount of any premiums for such insurance paid with intent to defraud creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy; but the insurer issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless, before such payment, the insurer shall have received written notice at its home office, by or in behalf of a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors, with specification of the amount claimed along with such facts as will assist the insurer to identify the particular policy. (b) For the purposes of subsection (a) of this section, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by such clause. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  6).) 
 3707. Disability benefits
Except as may otherwise be expressly provided by the policy or contract, the proceeds or avails of all policies or contracts providing benefits on account of the insureds disability which are supplemental to life insurance or annuity contracts heretofore or hereafter effected shall be exempt from all liability for any debt of the insured, and from any debt of the beneficiary existing at the time the proceeds are made available for his or her use. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  7).) 
 3708. Group insurance
(a) A policy of group life insurance or group disability insurance or the proceeds thereof payable to the individual insured or to the beneficiary thereunder, shall not be liable, either before or after payment, to be applied by any process to pay any debt or liability of such insured individual or his or her beneficiary or of any other person having a right under the policy. The proceeds thereof, when not made payable to a named beneficiary or to a third person pursuant to a facility-of-payment clause, shall not constitute a part of the estate of the individual insured for the payment of his or her debts. (b) This section shall not apply to group insurance issued to a creditor covering his or her debtors, to the extent that such proceeds are applied to payment of the obligation for the purpose of which the insurance was so issued. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  8).) 
 3709. Annuity contractsAssignability of rights
(a) The benefits, rights, privileges, and options which under any annuity contract heretofore or hereafter issued are due or prospectively due the annuitant, shall not be subject to execution nor shall the annuitant be compelled to exercise any such rights, powers, or options, nor shall creditors be allowed to interfere with or terminate the contract, except: (1) As to considerations paid for any such annuity with intent to defraud creditors, with interest thereon, and of which the creditor has given the insurer written notice at its home office prior to the making of the payments to the annuitant out of which the creditor seeks to recover. Any such notice shall specify the amount claimed or such facts as will enable the insurer to ascertain such amount and shall set forth such facts as will enable the insurer to ascertain the annuity contract, the annuitant and the payments sought to be avoided on the ground of fraud. (2) The total exemption of benefits presently due and payable to any annuitant periodically or at stated times under all annuity contracts under which he or she is an annuitant, shall not at any time exceed $350.00 per month for the length of time represented by such installments, and that such periodic payments in excess of $350.00 per month shall be subject to garnishee execution. (3) If the total benefits presently due and payable to any annuitant under all annuity contracts under which he or she is an annuitant, shall at any time exceed payment at the rate of $350.00 per month, then the court may order such annuitant to pay to a judgment creditor or apply on the judgment, in installments, such portion of such excess benefits as to the court may appear just and proper, after due regard for the reasonable requirements of the judgment debtor and his or her family if dependent upon him or her, as well as any payments required to be made by the annuitant to other creditors under prior court orders. (b) If the contract so provides, the benefits, rights, privileges, or options accruing under such contract to a beneficiary or assignee shall not be transferable nor subject to commutation, and if the benefits are payable periodically or at stated times, the same exemptions and exceptions contained herein for the annuitant, shall apply with respect to such beneficiary or assignee. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  9).) 
 3710. Power to contractPurchase of annuities or insurance by minors
(a) Any person of competent legal capacity may contract for insurance.(b) Any minor not less than 15 years of age, notwithstanding his or her minority, may contract for or own annuities or insurance or affirm by novation or otherwise preexisting contracts for annuities or insurance upon his or her own life, body, health, property, liabilities, or other interests, or on the person of another in whom the minor has an insurable interest. Such a minor shall, notwithstanding such minority, be deemed competent to exercise all rights and powers with respect to or under (i) any contract for annuity or for insurance upon his or her own life, body or health, or (ii) any contract such minor effected upon his or her own property, liabilities or other interests, or (iii) any contract effected or owned by the minor, on the person of another, as might be exercised by a person of full legal age, and may at any time surrender his or her interest in any such contracts and give valid discharge for any benefit accruing or money payable thereunder. Such a minor shall not, by reason of his or her minority, be entitled to rescind, avoid, or repudiate the contract, nor to rescind, avoid, or repudiate any exercise of a right or privilege thereunder, except that such a minor not otherwise emancipated, shall not be bound by any unperformed agreement to pay by promissory note or otherwise, any consideration or premium on any such annuity or insurance contract. (c) Any annuity contract or policy of life or disability insurance procured by or for a minor under subsection (b) of this section shall be made payable either to the minor or his or her estate or to a person having an insurable interest in the life of the minor. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  10).) 
 3711. Charitable life gifts
(a) A life insurance contract may be entered into in which a person paying the consideration for such insurance has no insurable interest in the life of the individual insured, provided that a charitable, benevolent, educational, or religious institution or its agency or any other organization that qualifies under Section 501(c)(3) of the Internal Revenue Code is irrevocably designated as the owner and beneficiary of the contract. (b) In making such a contract, both the owner and the insured shall make and sign the joint application. The person paying the premium shall irrevocably designate a charitable, benevolent, educational, or religious institution, or an agency of such an institution or any other organization that qualifies under Section 501(c)(3) of the Internal Revenue Code, as the irrevocable owner and beneficiary of such contract. (c) If a prospective insured applies jointly for a life insurance policy which irrevocably names a 501(c)(3) organization or nonprofit as owner and beneficiary then, at the time of such joint application, an insurable interest is created for the entity in the prospective insureds life. Before an application may be made for such a policy, the insurer shall provide the prospective insured with a written disclosure to remind the prospective insured to consider his or her current state of health and to consult with a tax advisor or estate planner. (d) Nothing in this section shall prohibit any combination of the applicant, premium payer, owner, and beneficiary from being the same person. (e) This section does not alter the insurable interest requirements of any other law. (Added 2003, No. 20,  1.)
 3712. Payment discharges insurer
Whenever the proceeds of or payments under a life or disability insurance policy or annuity contract heretofore or hereafter issued become payable in accordance with the terms of such policy or contract, or the exercise of any right or privilege thereunder, and the insurer makes payment thereof in accordance therewith or in accordance with any written assignment thereof, the person then designated as being entitled thereto shall be entitled to receive such proceeds or payments and to give full acquittance therefor, and such payments shall fully discharge the insurer from all claims under the policy or contract unless, before payment is made, the insurer has received at its home office written notice by or on behalf of some other person that such other person claims to be entitled to such payment or some interest in the policy or contract. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  12).) 
 3713. Assignment of insurance policies or annuity contracts
(a) A policy of insurance or an annuity contract may be assignable or not assignable, as provided by its terms. Subject to its terms relating to assignability, any such policy or contract, whether heretofore or hereafter issued, under the terms of which the beneficiary may be changed upon the sole request of the insured or owner, may be assigned either by pledge or transfer of title, by an assignment executed by the insured or owner alone and delivered to the insurer, whether or not the pledgee or assignee is the insurer. Any such assignment shall entitle the insurer to deal with the assignee as the owner or pledgee of the policy or contract in accordance with the terms of the assignment, until the insurer has received at its home office written notice of termination of the assignment or pledge, or written notice by or on behalf of some other person claiming some interest in the policy or contract in conflict with the assignment. (b) Notwithstanding any provision of law, a person whose life is insured under any policy of group life insurance may make an assignment of all or any part of his or her incidents of ownership in the insurance, including any right to designate a beneficiary or beneficiaries thereunder and any right to have an individual policy issued in lieu of such group insurance coverage upon termination either of employment or of the policy of group life insurance, provided that the insurer and the group policy holder may prohibit or restrict such an assignment by appropriate policy provisions. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  13); amended 1971, No. 58.) 
 3714. Life policy as separate property of married woman
Every policy of life insurance heretofore or hereafter made payable to or for the benefit of a married woman, or after its issue heretofore or hereafter assigned, transferred or in any way made payable to a married woman, or to any person in trust for her or for her benefit, whether procured by herself, her husband, or any other person, and whether the assignment or transfer is made by her husband, or by any other person, shall, unless contrary to the terms of the policy, inure to her separate use and benefit. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  14).) 
 3715. Forms for proof of loss to be furnished
An insurer shall furnish upon written request of any person claiming to have a loss under an insurance policy issued by such insurer, forms of proof of loss for completion by such person, but such insurer shall not, by reason of the requirement so to furnish forms, have any responsibility for or with reference to the completion of such proof or the manner of any such completion or attempted completion. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  15).) 
 3716. Claims administration not waiver
Without limitation of any right or defense of an insurer otherwise, none of the following acts by or on behalf of an insurer shall be deemed to constitute a waiver of any provision of a policy or of any defense of the insurer thereunder: (1) Acknowledgment of the receipt of notice of loss or claim under the policy.(2) Furnishing forms for reporting a loss or claim, for giving information relative thereto, or for making proof of loss, or receiving or acknowledging receipt of any such forms or proofs completed or uncompleted. (3) Investigating any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  16).) 
 3717. Annuity contracts
A company authorized to transact the business of life insurance may grant annuities. An annuity is a contract issued for a valuable consideration under which the obligations are assumed with respect to periodic payments for a specified term or terms or where the making or continuance of all or of some of such payments, or the amount of any such payments, is dependent upon the continuance of human life. Such a contract which includes extra benefits of the kind set forth in subdivisions 3301(a)(1) and (2) of this title relating to life and health insurance shall nevertheless be deemed to be an annuity if such extra benefits constitute a subsidiary or incidental part of the entire contract. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  17).) 
 3718. Annuity considerations
Insurers shall be subject to taxation according to the provisions of Title 32; provided, however, that no tax shall be due or payable as to considerations received for annuity contracts. Payment by an insurer of the tax as in Title 32 required shall be in lieu of all taxes imposed by the State upon premiums or upon income, and of franchise, privilege or other taxes measured by income of the insurer. The provisions of this section shall not be modified or repealed by any law of general application hereafter enacted unless expressly referred to or expressly repealed therein. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 1,  18).) 
 3718a. Charitable gift annuities
(a) Charitable gift annuity is not insurance. The issuance of a charitable gift annuity by a qualified charitable organization does not constitute engaging in the business of insurance in this State. (b) Not unfair or deceptive trade practice. The issuance of a charitable gift annuity does not constitute a violation of section 4724 of this title. (Added 2001, No. 37,  1.) 
 3719. Valuation of bonds, etc
Bonds or other evidences of debt having a fixed term and rate held by a life insurance company, assessment life association, or fraternal beneficiary association authorized to do business in this State, if amply secured and not in default as to principal and interest, shall be valued as follows: At their market value on December 31 preceding the filing of its return with the Commissioner; or, at the option of the company, as follows: If purchased at par, at the par value; if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made; provided, that the purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase; and provided, further, that the Commissioner shall have full discretion in determining the method of calculating values according to the foregoing rule. A company having selected one of the foregoing methods of valuation shall not change such method without the consent and approval of the Commissioner. At any time, in his or her discretion, the Commissioner may require any insurance corporation, other than a life insurance corporation, authorized to do business in this State, to value its bonds or other evidences of debt in accordance with the foregoing rule. Provided, however, that any valuation method used shall be consistent with the valuation method promulgated by the National Association of Insurance Commissioners. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 3,  1); amended 1993, No. 12,  12, eff. April 26, 1993.) 
 3731. Standard provisions required
No policy of life insurance, other than group and pure endowments with or without return of premiums or of premiums and interest, shall be delivered or issued for delivery in this State unless it contains in substance all of the applicable provisions required by this subchapter or corresponding provisions which in the opinion of the Commissioner are more favorable to the policyholder. This subchapter shall not apply to any provision of a life insurance policy, or contract supplemental thereto, relating to disability benefits or to additional benefits in the event of death by accident or accidental means; and any of such provisions or portions thereof not applicable to single premium or nonparticipating or term policies shall to that extent not be incorporated therein. (1) Payment of premiums. There shall be a provision relating to the time and place of payment of premiums.(2) Grace period. There shall be a provision that a grace period of 30 days, or, at the option of the insurer, of one month of not less than 30 days, or of four weeks in the case of industrial life insurance policies the premiums for which are payable more frequently than monthly, shall be allowed within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force; but if a claim arises under the policy during such period of grace the amount of any premium due or overdue may be deducted from the policy proceeds. (3) Entire contract. There shall be a provision that, except as otherwise expressly provided by law, the policy and the application therefor, if a copy of such application is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the parties, and that all statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties. (4) Incontestability. There shall be a provision that the policy (exclusive of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means) shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue. (5) Misstatement of age. There shall be a provision that if the age of the insured or of any other person whose age is considered in determining the premium or benefit has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages. (6) Dividends. (A) There shall be a provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy provided the policy is in force and all premiums to that date are paid. Except as hereinafter provided, any dividend becoming payable shall at the option of the party entitled to elect such option be either: (i) Payable in cash.(ii) Applied to any one of such other dividend options as may be provided by the policy. If any such other dividend options are provided, the policy shall further state which option shall be automatically effective if such party shall not have elected some other option. If the policy specifies a period within which such other dividend option may be elected, such period shall be not less than 30 days following the date on which such dividend is due and payable. The annually apportioned dividend shall be deemed to be payable in cash within the meaning of subdivision (i) of this subdivision (6)(A) even though the policy provides that payment of such dividend is to be deferred for a specified period, provided such period does not exceed six years from the date of apportionment and that interest will be added to such dividend at a specified rate; and provided, further, that upon maturity, surrender or other expiry of the policy, any such dividend and interest thereon shall not be forfeited to the insurer. (B) In participating industrial life insurance policies, in lieu of the provisions required in subdivision (i) of this subdivision (6)(A), there shall be a provision that, beginning not later than the end of the fifth policy year, the policy shall participate annually in the divisible surplus, if any, in the manner set forth in the policy. (C) If a participating policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under such nonforfeiture provision shall be applied in the manner set forth in the policy. (7) Policy loans. (A) There shall be a provision that after three full years premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will advance, on the sole security thereof, an amount equal to or, at the option of the party entitled thereto, less than the loan value of the policy at a policy loan interest rate with respect to which a policy shall contain one of the following policy loan interest rate provisions. (i) There may be a provision that a policy loan shall bear interest at a specified rate not exceeding eight percent per annum. (ii) There may be a provision that all loans under a policy issued prior to April 9, 1982, including outstanding loans, shall bear interest at a variable rate not exceeding eight percent per annum, specified from time to time by the insurer. The effective date of any change in the variable rate shall be not less than one year after the effective date of the establishment of the previous rate. If the interest rate is increased, the amount of the increase shall not exceed one percent per annum. With respect to policies providing for a variable rate under this subdivision, the insurer shall: (I) When a loan is made and when notification of interest due is furnished, give notice of the variable rate currently effective. (II) As to any loans outstanding 40 days before the effective date of any increase in the variable rate, give notice of any such increase at least 30 days before the effective date. (III) As to any loans made during the 40 days before the effective date of the increase, give notice of the increase when the loan is made. The notice shall be given to the policy owner and any assignee as shown on the records of the insurer at its home office. (iii) There may be in policies issued on or after April 9, 1982, a provision permitting an adjustable maximum interest rate established from time to time by the life insurer as permitted by law. (B) The rate of interest charged on a policy loan made under subdivision (A)(iii) of this subdivision (7) shall not exceed the higher of the following: (i) the Published Monthly Average for the calendar month ending two months before the date on which the rate is determined; or (ii) the rate used to compute the cash surrender values under the policy during the applicable period plus one percent per annum. (C) If the maximum rate of interest is determined pursuant to subdivision (A)(iii) of this subdivision (7), the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy. (D) The maximum rate for each policy providing an adjustable interest rate pursuant to subdivision (A)(iii) of this subdivision (7) must be determined at regular intervals at least once every 12 months, but not more frequently than once in any three month period. At the intervals specified in the policy: (i) the rate being charged may be increased whenever such increase as determined under subdivision (B) of this subdivision (7) would increase that rate by one-half percent or more per annum; (ii) the rate being charged must be reduced whenever such reduction as determined under subdivision (B) of this subdivision (7) would decrease that rate by one-half percent or more per annum. (E) The life insurer, with respect to any policy providing an adjustable interest rate pursuant to subdivision (A)(iii) of this subdivision (7), shall: (i) notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan; (ii) notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan, but notice need not be given to the policyholder when a further premium loan is added, except as provided in (iii) of this subdivision (7)(E); (iii) send to policyholders with loans reasonable advance notice of any increase in the rate; and (iv) include in the notices required above the substance of the pertinent provisions of subdivisions (A) and (C) of this subdivision (7). (F) No policy providing for an adjustable interest rate pursuant to subdivision (A)(iii) of this subdivision (7) shall terminate in a policy year as the sole result of a change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year. (G) The substance of the pertinent provisions of subdivisions (A) and (C) of this subdivision (7) shall be set forth in the policies to which they apply. (H) For purposes of this section:(i) the rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy; (ii) the term policy loan includes any premium loan made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due; (iii) the term policyholder includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer; (iv) the term policy includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans; (v) Published Monthly Average means:(I) Moodys Corporate Bond Yield AverageMonthly Average Corporates as published by Moodys Investors Service, Inc. or any successor thereto; or (II) in the event that Moodys Corporate Bond Yield AverageMonthly Average Corporates is no longer published, a substantially similar average, established by regulation issued by the Commissioner. (I) No other provision of law shall apply to policy loan interest rates unless made specifically applicable to such rates. (J) None of the above provisions shall prevent an insurer from charging less than the rate of interest specified therein. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, and the insurer may deduct, either from such loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining such cash surrender value including any interest then accrued but not due, and unpaid balance of the premium for the current policy year, and interest which may be allowable on the loan to the end of the current policy year. The policy may also provide that if interest on any indebtedness is not paid when due it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value thereof, then the policy shall, except as provided in subdivision (F) of this subdivision (7), terminate and become void, but not until at least 30 days notice has been mailed by the insurer to the last address, of record with the insurer, of the insured or other policy owner and of any assignee of record at the insurers home office. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for six months after application therefor. (K) This subdivision shall not apply to term policies, or to term insurance benefits provided by rider or supplemental policy provisions or to industrial life insurance policies. (8) Table of installments. In case the policy provides that the proceeds may be payable in installments which are determinable at issue of the policy, there shall be a table showing the amounts of the guaranteed installments. (9) Reinstatement. There shall be a provision that unless:(A) the policy has been surrendered for its cash surrender value; or(B) its cash surrender value has been exhausted; or(C) the paid-up term insurance, if any, has expired; the policy will be reinstated at any time within three years (or two years in the case of industrial life insurance policies) from the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all premiums in arrears, with interest at a rate not exceeding six percent per annum, and the payment or reinstatement of any other indebtedness to the insurer upon the policy, with interest compounded annually at the rate set forth in the policy for policy loan interest. (10) Payment of claims. There shall be a provision that when the benefits under the policy shall become payable by reason of the death of the insured, settlement shall be made upon receipt of due proof of death and, at the insurers option, surrender of the policy and/or proof of the interest of the claimant. If an insurer shall specify a particular period prior to the expiration of which settlement shall be made, such period shall not exceed 30 days from the receipt of such proofs. (11) Beneficiary industrial policies. An industrial life insurance policy shall have the name of the beneficiary designated thereon or in the application or other form if attached to the policy, with a reservation of the right to designate or change the beneficiary after the issuance of the policy, unless such beneficiary be irrevocably designated. The policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, and that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. The policy may also provide that if the beneficiary designated in the policy does not make a claim under the policy or does not surrender the policy with due proof of death within the period stated in the policy, which shall not be less than 30 days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give a valid release, then the insurer may make any payment thereunder to the executor or administrator of the insured, or to any relative of the insured by blood or legal adoption or connection by civil marriage, or to any person appearing to the insurer to be equitably entitled thereto by reason of having been named beneficiary, or by reason of having incurred expense for the maintenance, medical attention or burial of the insured. The policy may also include a similar provision applicable to any other payment due under the policy. (12) Title. There shall be a title on the policy, briefly describing the same. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 2,  1-13); amended 1977, No. 45,  1, eff. April 19, 1977; 1981, No. 144 (Adj. Sess.), eff. April 9, 1982; 2009, No. 3,  12a, eff. Sept. 1, 2009; 2019, No. 103 (Adj. Sess.),  18.)
 3732. Industrial life insurance defined
For the purposes of this subchapter industrial life insurance is that form of life insurance written under policies of face amount of $1,000.00 or less bearing the words industrial policy imprinted on the face thereof as part of the descriptive matter, and under which premiums are payable monthly or more often. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 2,  14).) 
 3733. Excluded or restricted coverage in life insurance policies
A clause in any policy of life insurance providing that such policy shall be incontestable after a specified period shall preclude only a contest of the validity of the policy, and shall not preclude the assertion at any time of defenses based upon provisions in the policy which exclude or restrict coverage, whether or not such restrictions or exclusions are excepted in such clause. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 2,  15).) 
 3734. Incontestability and limitation of liability after reinstatement
(a) A reinstated policy of life insurance or annuity contract may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contestability after original issuance. (b) When any life insurance policy or annuity contract is reinstated, such reinstated policy or contract may exclude or restrict liability to the same extent that such liability could have been or was excluded or restricted when the policy or contract was originally issued, and such exclusion or restriction shall be effective from the date of reinstatement. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 2,  16).) 
 3735. Application as evidence
(a) No application for the issuance of any life or disability insurance policy or annuity contract shall be admissible in evidence in any action relative to such policy or contract, unless a true copy of the application was attached to or otherwise made a part of the policy or contract when issued. This provision shall not apply to industrial life insurance policies. (b) If any policy of life or disability insurance delivered in this State is reinstated or renewed, and the insured or the beneficiary or assignee of the policy makes written request to the insurer for a copy of the application, if any, for such reinstatement or renewal, the insurer shall, within 15 days after receipt of such request at its home office, deliver or mail to the person making such request a copy of such application reproduced by any legible means. If such copy is not so delivered or mailed after having been so requested, the insurer shall be precluded from introducing the application in evidence in any action or proceeding based upon or involving the policy or its reinstatement or renewal. In the case of such a request from a beneficiary, the time within which the insurer is required to furnish a copy of such application shall not begin to run until after receipt of evidence satisfactory to the insurer of the beneficiarys vested interest in the policy or contract. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 2,  17).) 
 3736. Representations in applications
All statements and descriptions in any application for a life insurance policy or annuity contract, by or in behalf of the insured or annuitant, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either: (1) fraudulent; or(2) material either to the acceptance of the risk, or to the hazard assumed by the insurer; or (3) the insurer in good faith would either not have issued the policy or contract, or would not have issued it at the same premium rate, or would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 2,  18).) 
 3750. Standard nonforfeiture law for individual deferred annuities
(a) This section shall be known as the Standard Nonforfeiture Law for Individual Deferred Annuities. (b) This section shall not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract that shall be delivered outside this State through an agent or other representative of the company issuing the contract. (c) In the case of contracts issued on or after the operative date of this section as defined in subdivision (1) of this subsection, no contract of annuity, except as stated in subsection (b) of this section, shall be delivered or issued for delivery in this State unless it contains in substance the following provisions, or corresponding provisions that in the opinion of the Commissioner are at least as favorable to the contractholder, upon cessation of payment of considerations under the contract: (1) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (e), (f), (g), (h), and (j) of this section. (2) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (e), (f), (h), and (j) of this section. The company shall reserve the right to defer the payment of such cash surrender benefit for a period of six months after demand therefor with surrender of the contract. (3) A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of such benefits. (4)(A) A statement that any paid-up annuity, cash surrender, or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract. (B) Notwithstanding the requirements of this subsection, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than $20.00 monthly, the company may at its option terminate such contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract. (d) The minimum values as specified in subsections (e), (f), (g), (h), and (j) of this section of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this section. (1)(A) The minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest as indicated in subdivision (C) of this subdivision (1) of the net considerations (as hereinafter defined) paid prior to such time decreased by the sum of: (i) any prior withdrawals from or partial surrenders of the contract accumulated at rates of interest as indicated in subdivision (C) of this subdivision (1); (ii) the amount of any indebtedness to the company on the contract, including interest due and accrued; and (iii) an annual contract charge of $50.00, accumulated at rates of interest as indicated in subdivision (C) of this subdivision (1). (B) The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to 87 and one-half percent of the corresponding gross considerations credited to the contract during that contract year. (C) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as the lesser of three percent per annum and the following, which shall be specified in the contract if the interest will be reset: (i) The five-year Constant Maturity Treasury Rate reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest one-twentieth of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under subdivision (iv) of this subdivision (C). (ii) Reduced by 125 basis points.(iii) Where the resulting interest rate is not less than 0.15 percent.(iv) The interest rate shall apply for an initial period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the five-year Constant Maturity Treasury Rate to be used at the redetermination date. (D) During the period or term that a contract provides substantive participation in an equity indexed benefit, it may increase the reduction described in subdivision (C)(ii) of this subdivision (1) by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed the market value of the benefit. The Commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. Lacking such a demonstration that is acceptable to the Commissioner, the Commissioner may disallow or limit the additional reduction. (E) The Commissioner may adopt rules to implement the provisions of subdivision (D) of this subdivision (1) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the Commissioner determines adjustments are justified. (2) With respect to contracts providing for fixed scheduled considerations, minimum nonforfeiture amounts shall be calculated on the assumption that considerations are paid annually in advance and shall be defined as for contracts with flexible considerations that are paid annually with two exceptions: (A) The portion of the net consideration for the first contract year to be accumulated shall be the sum of 65 percent of the net consideration of the first contract year plus 22 and one-half percent of the excess of the net consideration for the first contract year over the lesser of the net considerations for the second and third contract years. (B) The annual contract charge shall be the lesser of:(i) $30.00; or(ii) 10 percent of the gross annual consideration.(3) With respect to contracts providing for a single consideration, minimum nonforfeiture amounts shall be defined as for contracts with flexible considerations except that the percentage of net consideration used to determine the minimum nonforfeiture amount shall be equal to 90 percent and the net consideration shall be the gross consideration less a contract charge of $75.00. (e) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract. (f) For contracts that provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit that would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit. (g) For contracts that do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present values being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts that do not provide any death benefits prior to the commencement of any annuity payments, such present value shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time. (h) For the purpose of determining the benefits calculated under subsections (f) and (g) of this section, in the case of annuity contracts under which any election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract but shall not be deemed to be later than the anniversary of the contract next following the annuitants 70th birthday or the 10th anniversary of the contract, whichever is later. (i) Any contract that does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided. (j) Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs. (k) For any contract that provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (e), (f), (g), (h), and (j) of this section, additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits, or (3) as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits that may be required by this section. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits. (l) After the effective date of this section, any company may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before the second anniversary of the effective date of this section. After the filing of such notice, then upon such specified date, which shall be the operative date of this section for such company, this section shall become operative with respect to annuity contracts thereafter issued by such company. If a company makes no such election, the operative date of this section for such company shall be the second anniversary of the effective date of this section. (Added 1981, No. 43,  10, eff. April 21, 1981; amended 2003, No. 11,  1, eff. May 6, 2003; 2003, No. 11,  2, eff. Jan. 1, 2005; 2003, No. 105 (Adj. Sess.),  17; 2021, No. 139 (Adj. Sess.),  9, eff. May 27, 2022.) 
 3760. Title
This subchapter shall be known as the Standard Nonforfeiture Law for Life Insurance. (Added 2015, No. 63,  2, eff. June 17, 2015.)
 3761. Definitions
As used in this subchapter, operative date of the Valuation Manual means January 1 of the first calendar year that the Valuation Manual as defined in subchapter 4a of this chapter is effective. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3762. Nonforfeiture benefits
(a) In the case of policies issued on or after the effective date of this subchapter, as defined in section 3773 of this subchapter, a policy of life insurance, except as stated in section 3772 of this subchapter, shall not be delivered or issued for delivery in this State unless it contains in substance the following provisions, or corresponding provisions that, in the opinion of the Commissioner, are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this section and are essentially in compliance with section 3771 of this subchapter. (1) In the event of default in any premium payment, the company shall grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of such amount as may be specified in this section. In lieu of the stipulated paid-up nonforfeiture benefit, the company may substitute, upon proper request not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or earlier payment of endowment benefits. (2) Upon surrender of the policy within 60 days after the due date of any premium payment in default after premiums have been paid for at least three full years in the case of ordinary insurance or five full years in the case of industrial insurance, the company shall pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of an amount as may be specified in this section. (3) A specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make the election elects another available option not later than 60 days after the due date of the premium in default. (4) If the policy becomes paid-up by completion of all premium payments or if it is continued under any paid-up nonforfeiture benefit that became effective on or after the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the company shall pay upon surrender of the policy within 30 days after any policy anniversary, a cash surrender value of an amount as may be specified in this section. (5) If a policy causes, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums, or provides an option for changes in benefits or premiums, other than a change to a new policy, the company shall provide the policyholder a statement of the mortality table, interest rate, and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy. In the case of all other policies, a company shall provide to its policyholders a statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary either during the first 20 policy years or during the term of the policy, whichever is shorter, such values and benefits to be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the company on the policy. (6) A company shall provide statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance law of the state in which the policy is delivered; an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy; if a detailed statement of the method of computation of the values and benefits shown in the policy is not stated therein, a statement that such method of computation has been filed with the insurance supervisory official of the state in which the policy is delivered; and a statement of the method to be used in calculating the cash surrender value and a paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which values and benefits are consecutively shown in the policy. (b) Any of the provisions in subsection (a) of this section, or portions thereof not applicable by reason of the plan of insurance may be omitted from the policy, to the extent inapplicable. (c) The company shall reserve the right to defer the payment of any cash surrender value for a period of six months after demand therefor with surrender of the policy. (d) No individual policy of life insurance covering an individual 64 years of age or older that has been in force for at least one year shall be canceled for nonpayment of premium unless, after expiration of the grace period and not less than 21 days before the effective date of any such cancellation, the insurer has mailed a notice of impending cancellation in coverage to the policyholder and to a specified secondary addressee if such addressee has been designated by name and address in writing by the policyholder. An insurer shall notify the applicant of the right to designate a secondary addressee at the time of application for the policy on a form provided by the insurer, and annually thereafter, and the policyholder shall have the right to designate a secondary addressee, in writing, by name and address, at any time the policy is in force, by submitting such written notice to the insurer. If a life insurance policy provides a grace period longer than 51 days for nonpayment of premium, the notice of cancellation in coverage required by this subsection shall be mailed to the policyholder and to the secondary addressee not less than 21 days prior to the expiration of the grace period provided in such policies. (Added 2015, No. 63,  2, eff. June 17, 2015; amended 2017, No. 80,  1.) 
 3763. Computation of cash surrender value
(a) Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary, whether or not required by section 3762 of this subchapter, shall be an amount not less than the excess, if any, of the present value, on the anniversary, of the future guaranteed benefits that would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of: (1) the then present value of the adjusted premiums as defined in sections 3765-3768 of this subchapter, corresponding to premiums which would have fallen due on and after the anniversary; and (2) the amount of any indebtedness to the company on the policy.(b) Notwithstanding subsection (a) of this section, for a policy issued on or after the operative date of section 3768 of this subchapter that provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value referred to in subsection (a) of this section shall be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without the rider or supplemental policy provision and the cash surrender value as defined in subsection (a) of this section for a policy which provides only the benefits otherwise provided by such rider or supplemental policy provision. (c) For a family policy issued on or after the operative date of section 3768 of this subchapter that defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse turns 71 years of age, the cash surrender value referred to in subsection (a) of this section shall be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without term insurance on the life of the spouse and the cash surrender value as defined in subsection (a) of this section for a policy that provides only the benefits otherwise provided by term insurance on the life of the spouse. (d) A cash surrender value available within 30 days after any policy anniversary under any policy paid up by completion of all premium payments or any policy continued under any paid-up nonforfeiture benefit, whether or not required under section 3762 of this subchapter, shall be an amount not less than the present value, on the anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the company on the policy. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3764. Computation of paid-up nonforfeiture benefits
A paid-up nonforfeiture benefit available under a policy in the event of default in a premium payment due on any policy anniversary shall be such that its present value as of the anniversary shall be at least equal to the cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value that would have been required under this subchapter in the absence of the condition that premiums shall have been paid for at least a specified period. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3765. Calculation of adjusted premiums
(a)(1) This section shall not apply to policies issued on or after the operative date of section 3768 of this subchapter. Except as provided in subsection (c) of this section, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts stated in the policy as extra premiums to cover impairments or special hazards, that the present value, at the date of issue of the policy, of all such adjusted premiums shall be equal to the sum of: (A) the then present value of the future guaranteed benefits provided for by the policy;(B) two percent of the amount of insurance, if the insurance be uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy; (C) 40 percent of the adjusted premium for the first policy year; and(D) 25 percent of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less. (2) In applying the percentages specified in subdivisions (a)(1)(C) and (D) of this section, no adjusted premium shall be deemed to exceed four percent of the amount of insurance or level amount equivalent. The date of issue of a policy for the purpose of this section shall be the date as of which the rated age of the insured is determined. (b) In the case of a policy providing an amount of insurance varying with duration of the policy, the equivalent level amount for the purpose of this section shall be deemed to be the level amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the inception of the insurance as the benefits under the policy. (c)(1) The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provision shall be equal to: (A) the adjusted premiums for an otherwise similar policy issued at the same age without such term insurance benefits, increased, during the period for which premiums for such term insurance benefits are payable, by (B) the adjusted premiums for such term insurance,(2) Subdivisions (1)(A) and (B) of this subsection shall be calculated separately except that, for purposes of subdivisions (a)(1)(B)-(D) of this section, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in subsection (a)(1)(B) of this section shall be equal to the excess of the corresponding amount determined for the entire policy over the amount used in the calculation of the adjusted premiums in subdivision (1) of this subsection (c). (d) Except as otherwise provided in sections 3766 and 3767 of this subchapter, all adjusted premiums and present values referred to in this subchapter shall for all policies of ordinary insurance be calculated on the basis of the Commissioners 1941 Standard Ordinary Mortality Table, provided that for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to any age not more than three years younger than the actual age of the insured and such calculations for all policies of industrial insurance shall be made on the basis of the 1941 Standard Industrial Mortality Table. All calculations shall be made on the basis of the rate of interest, not exceeding three and one-half percent per annum, specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits. Provided, however, that in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than 130 percent of the rates of mortality according to the applicable table. Provided, further, that for insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on such other table of mortality as may be specified by the company and approved by the Commissioner. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3766. Calculation of adjusted premiums; ordinary policies
(a) This section does not apply to ordinary policies issued on or after the operative date of section 3768 of this subchapter. In the case of ordinary policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in this subchapter shall be calculated on the basis of the Commissioners 1958 Standard Ordinary Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits, provided that such rate of interest shall not exceed three and one-half percent per annum, except that a rate of interest not exceeding four percent per annum may be used for policies issued on or after April 12, 1973, and prior to January 1, 1980, and a rate of interest not exceeding five and one-half percent per annum may be used for policies issued on or after January 1, 1980, except that for any single premium whole life or endowment insurance policy, a rate of interest not exceeding six and one-half percent per annum may be used, provided that for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may not be more than those shown in the Commissioners 1958 Extended Term Insurance Table. For insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on such other table of mortality as may be specified by the company and approved by the Commissioner. (b) After the effective date of this section, any company may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1966. After the filing of such notice, upon the specified date (which shall be the operative date of this section for that company), this section shall become operative with respect to the ordinary policies thereafter issued by the company. If a company makes no election, the operative date of this section for the company shall be January 1, 1966. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3767. Calculation of adjusted premiums; industrial policies
(a) This section does not apply to industrial policies issued on or after the operative date of section 3768 of this subchapter. In the case of industrial policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in this subchapter shall be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits provided that such rate of interest shall not exceed three and one-half percent per annum, except that a rate of interest not exceeding four percent per annum may be used for policies issued on or after April 12, 1973, and prior to January 1, 1980, and a rate of interest not exceeding five and one-half percent per annum may be used for policies issued on or after January 1, 1980, except that for any single premium whole life or endowment insurance policy, a rate of interest not exceeding six and one-half percent per annum may be used. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1961 Industrial Extended Term Insurance Table. For insurance issued on a substandard basis, the calculations of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the company and approved by the Commissioner. (b) After the effective date of this section, any company may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1968. After the filing of such notice, upon the specified date, which shall be the operative date of this section for that company, this section shall become operative with respect to the industrial policies thereafter issued by the company. If a company makes no election, the operative date of this section for the company shall be January 1, 1968. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3768. Calculations of adjusted premiums by the nonforfeiture net level premium method
(a)(1) This section shall apply to all policies issued on or after the operative date of this section. Except as provided in subsection (g) of this section. the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments or special hazards and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums shall be equal to the sum of: (A) the then present value of the future guaranteed benefits provided for by the policy;(C) 125 percent of the nonforfeiture net level premium as defined in this section.(2) In applying the percentage specified in subdivision (1)(C) of this subsection, no nonforfeiture net level premium shall be deemed to exceed four percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years. The date of issue of a policy for the purpose of this section shall be the date as of which the rated age of the insured is determined. (B) one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and (b) The nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one per annum payable on the date of issue of the policy and on each anniversary of the policy on which a premium falls due. (c) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums, other than a change to a new policy, the adjusted premiums and present values shall be calculated initially on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change. (d) Except as otherwise provided in subsection (g) of this section, the recalculated future adjusted premiums for any policy shall be the uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards, and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all such future adjusted premiums shall be equal to the excess of: (1) The sum of:(A) the then present value of the then future guaranteed benefits provided for by the policy, and (B) the additional expense allowance, if any, over(2) the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under this policy. (e) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of: (1) one percent of the excess, if positive, of the average amount of insurance at the beginning of each of the first 10 policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first 10 policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and (2) 125 percent of the increase, if positive, in the nonforfeiture net level premium.(f) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing the sum arrived at under subdivision (1) of this subsection by the value specified in subdivision (2) of this subsection. (1) As used in this subsection, sum means:(A) the nonforfeiture net level premium applicable prior to the change times the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred; plus (B) the present value of the increase in future guaranteed benefits provided for by the policy. (2) As used in this subsection, value means the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due. (g) Notwithstanding any other provisions of this section to the contrary, in the case of a policy issued on a substandard basis which provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which provides higher uniform amount of insurance, adjusted premiums and present values for the substandard policy may be calculated as if it were issued to provide higher uniform amounts of insurance on the standard basis. (h) All adjusted premiums and present values referred to in this subchapter shall for all policies of ordinary insurance be calculated on the basis of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election of the company, for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, shall for all policies of industrial insurance be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table, and shall for all policies issued in a particular calendar year be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate as defined in this section, for policies issued in that calendar year, provided that: (1) At the option of the company, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this section, for policies issued in the immediately preceding calendar year. (2) Under a paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by section 3762 of this subchapter, shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of such paid-up nonforfeiture benefit and paid-up dividend additions, if any. (3) A company may calculate the amount of any guaranteed paid-up nonforfeiture benefit including any paid-up additions under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values. (4) In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance. (5) For insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables. (6)(A) For policies issued prior to the operative date of the Valuation Manual defined in subchapter 4a or this chapter, any Commissioners Standard Ordinary Mortality Tables, adopted after 1980 by the National Association of Insurance Commissioners, approved by rule adopted by the Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without 10-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. (B) For policies issued on or after the operative date of the Valuation Manual the Valuation Manual shall provide the Commissioners Standard Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without 10-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. If the Commissioner adopts by rule a Commissioners Standard Ordinary Mortality Table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (7)(A) For policies issued prior to the operative date of the Valuation Manual, any Commissioners Standard Industrial Mortality Tables, adopted after 1980 by the NAIC, approved by rule adopted by the Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. (B) For policies issued on or after the operative date of the Valuation Manual the Valuation Manual shall provide the Commissioners Standard Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. If the Commissioner adopts by rule a Commissioners Standard Industrial Mortality Table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (i) The nonforfeiture interest rate is defined as follows:(1) For policies issued prior to the operative date of the Valuation Manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to 125 percent of the calendar year statutory valuation interest rate for such policy as defined under subchapter 4a of this chapter, rounded to the nearer one quarter of one percent, provided the nonforfeiture interest rate shall not be less than four percent. (2) For policies issued on and after the operative date of the Valuation Manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be provided by the Valuation Manual. (j) Notwithstanding any other provision of law to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provisions of that policy form. (k) After the effective date of this section, any company may file with the Commissioner a written notice of its election to comply with the provision of this section after a specified date before January 1, 1989, which shall be the operative date of this section for the company. If a company makes no election, the operative date of this section for the company shall be January 1, 1989. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3769. Nonforfeiture benefits for indeterminate premium plans
In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on estimates of future experience, or in the case of any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in sections 3762-3768 of this subchapter: (1) The Commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by sections 3762-3768 of this subchapter. (2) The Commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds. (3) The cash surrender values and paid-up nonforfeiture benefits provided by such plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this Standard Nonforfeiture Law for Life Insurance, as determined by subchapter 4a of this chapter and any rules adopted thereunder. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3770. Proration of values; net value of paid-up additions
Any cash surrender value and any paid-up nonforfeiture benefit available under a policy in the event of default in a premium payment due at any time other than on the policy anniversary shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in sections 3763-3768 of this subchapter may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, shall not be less than the amounts used to provide such additions. Notwithstanding the provisions of section 3763 of this subchapter, additional benefits shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required under this subchapter, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits. As used in this section, additional benefits means benefits payable: (1) in the event of death or dismemberment by accident or accidental means;(2) in the event of total and permanent disability;(3) as reversionary annuity or deferred reversionary annuity benefits;(4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this subchapter would not apply; (5) as term insurance in the life on a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child turns 26 years of age, is uniform in amount after the childs age is one year of age, and has not become paid-up by reason of the death of a parent of the child; or (6) as other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3771. Consistency of progression of cash surrender values with increasing policy duration
(a) This section, in addition to all other applicable sections of this chapter, shall apply to all policies issued on or after January 1, 1987. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be in an amount which does not differ by more than two tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of: (1) the greater of zero and the basic cash value specified in this section; and(2) the present value of any existing paid-up additions less the amount of any indebtedness to the company under the policy. (b) The basic cash value shall be equal to the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the company, if there had been no default, less the then present value of the nonforfeiture factors, as defined in this subchapter, corresponding to premiums which would have fallen due on and after the anniversary. The effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in section 3763 or 3765 of this subchapter, whichever is applicable, shall be the same as the effects specified in those sections, as applicable, on the cash surrender values defined therein. (c) The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in section 3765 or section 3768 of this subchapter, as applicable, except that the percentage: (1) must be the same percentage for each policy year between the second policy anniversary and the later of: (A) the fifth policy anniversary; or(B) the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and (2) must be such that no percentage after the later of the two policy anniversaries specified in subsection (a) of this section may apply to fewer than five consecutive policy years. (d) Basic cash value shall not be less than the value which would be obtained if the adjusted premiums for the policy, as defined in section 3768 of this subchapter, were substituted for the nonforfeiture factors in the calculation of the basic cash value. (e) All adjusted premiums and present values referred to in this section shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policys compliance with the other sections of this subchapter. The cash surrender values referred to in this section shall include any endowment benefits provided for by the policy. (f) A cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in sections 3762, 3763, 3764, 3768, and 3770 of this subchapter. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed subdivisions 3770(1)-(6) of this subchapter shall conform with the principles of this section. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3772. Exceptions
(a) This subchapter shall not apply to:(1) reinsurance;(2) group insurance;(3) pure endowment;(4) an annuity or reversionary annuity contract;(5) a term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of 20 years or less expiring before 71 years of age, for which uniform premiums are payable during the entire term of the policy; (6) a term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in section 3765, 3766, 3767, or 3768 of this subchapter, is less than the adjusted premium so calculated, on a term policy of uniform amount, or renewal thereof, that provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of 20 years or less expiring before 71 years of age, for which uniform premiums are payable during the entire term of the policy; (7) a policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in section 3763, 3764, 3765, 3766, 3767, or 3768 of this subchapter, exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year; nor (8) a policy delivered outside this State through an agent or other representative of the company issuing the policy. (b) For purposes of determining the applicability of this subchapter, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3773. Effective date; applicability
After the effective date of this subchapter, any company may file with the Commissioner a written notice of its election to comply with the provisions of this subchapter after a specified date before January 1, 1948. After the filing of such notice, then upon the specified date (which shall be the operative date for the company), this subchapter shall become operative with respect to the policies thereafter issued by the company. If a company makes no such election, the operative date of this subchapter for the company shall be January 1, 1948. (Added 2015, No. 63,  2, eff. June 17, 2015.) 
 3791. Title
This subchapter shall be known as the Standard Valuation Law. (Added 2015, No. 63,  1, eff. June 17, 2015.)
 3791a. Definitions
As used in this subchapter:(1) Accident and health insurance means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the Valuation Manual. (2) Appointed actuary means a qualified actuary who is appointed in accordance with the Valuation Manual to prepare the actuarial opinion required in subsection 3791c(b) of this subchapter. (3) Company means an entity that:(A) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and has at least one such policy in force or on claim; or (B) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this State. (4) Deposit-type contract means contracts that do not incorporate mortality or morbidity risks and as may be specified in the Valuation Manual. (5) Life insurance means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the Valuation Manual. (6) NAIC means the National Association of Insurance Commissioners.(7) Policyholder behavior means any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this subchapter including, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract. (8) Principle-based valuation means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with section 3791o of this subchapter as specified in the Valuation Manual. (9) Qualified actuary means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements and who meets the requirements specified in the Valuation Manual. (10) Tail risk means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude. (11) Valuation Manual means the manual of valuation instructions adopted by the NAIC as specified in this subchapter or as subsequently amended. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791b. Reserve valuation
(a)(1) Policies and contracts issued prior to the operative date of the Valuation Manual. The Commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance policies and annuity and pure endowment contracts of every life company doing business in this State issued on or after the effective date of July 1, 1968 and prior to the operative date of the Valuation Manual. In calculating reserves, the Commissioner may use group methods and approximate averages for fractions of a year or otherwise. In making a valuation, the Commissioner may use the Departments actuary or employ an actuary for that purpose, and the reasonable compensation and expenses of the actuary, at a rate approved by the Commissioner, upon demand by the Commissioner supported by an itemized statement of such compensation and expenses, shall be paid by the insurer. In lieu of the valuation of the reserves required of a foreign or alien company, the Commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this subchapter. (2) The provisions set forth in sections 3791d-3791m of this subchapter shall apply to all policies and contracts, as appropriate, subject to this subchapter issued on or after July 1, 1968 and prior to the operative date of the Valuation Manual and the provisions set forth in sections 3791n and 3791o of this subchapter shall not apply to any such policies and contracts. (3) The minimum standard for the valuation of policies and contracts issued prior to July 1, 1968 shall be that provided by the laws in effect immediately prior to that date. (b)(1) Policies and contracts issued on or after the operative date of the Valuation Manual. The Commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the Valuation Manual. In making a valuation, the Commissioner may use the Departments actuary or employ an actuary for that purpose, and the reasonable compensation and expenses of the actuary, at a rate approved by the Commissioner, upon demand by the Commissioner supported by an itemized statement of such compensation and expenses, shall be paid by the insurer. In lieu of the valuation of the reserves required of a foreign or alien company, the Commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this subchapter. (2) The provisions set forth in sections 3791n and 3791o of this subchapter shall apply to all policies and contracts issued on or after the operative date of the Valuation Manual. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791c. Actuarial opinion of reserves
(a) Actuarial Opinion of Reserves after the Operative Date of the Valuation Manual; General. Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the Commissioner shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this State. The Valuation Manual will prescribe the specifics of this opinion, including any items deemed to be necessary to its scope. (b) Actuarial analysis of reserves and assets supporting reserves. Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the Commissioner, except as exempted in the Valuation Manual, shall also annually include in the opinion required by subsection (a) of this section, an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the Valuation Manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the companys obligations under the policies and contracts, including the benefits under and expenses associated with the policies and contracts. (c)(1) Requirements for opinions subject to this section. Each opinion required by this section, in a form and substance as specified in the Valuation Manual, and acceptable to the Commissioner, shall be prepared to support each actuarial opinion. (2) If the company fails to provide a supporting memorandum at the request of the Commissioner within a period specified in the Valuation Manual or the Commissioner determines that the supporting memorandum provided by the company fails to meet the standards prescribed by the Valuation Manual or is otherwise unacceptable to the Commissioner, the Commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the Commissioner. (d)(1) Requirement for all opinions subject to this section. Every opinion shall be in form and substance as specified in the Valuation Manual and acceptable to the Commissioner. (2) The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the Valuation Manual. (3) The opinion shall apply to all policies and contracts subject to subsection (b) of this section, plus other actuarial liabilities as may be specified in the Valuation Manual. (4) The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor, and on such additional standards as may be prescribed in the Valuation Manual. (5) In the case of an opinion required to be submitted by a foreign or alien company, the Commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the Commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State. (6) Except in cases of fraud or willful misconduct, the appointed actuary shall not be liable for damages to any person, other than the company and the Commissioner, for any act, error, omission, decision, or conduct with respect to the appointed actuarys opinion. (7) Disciplinary action by the Commissioner against the company or the appointed actuary shall be defined in rules adopted by the Commissioner. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791d. Computation of minimum standard
Except as provided in sections 3791e, 3791f, and 3791m of this subchapter, the minimum standard for the valuation of policies and contracts issued prior to the effective date of this subchapter shall be that provided by the laws in effect immediately prior to that date. Except as otherwise provided in sections 3791e, 3791f, and 3791m of this subchapter, the minimum standard for the valuation of all policies and contracts issued on or after July 1, 1968 shall be the Commissioners reserve valuation methods defined in sections 3791g, 3791h, 3791k, and 3791m of this subchapter, three and one-half percent interest, or in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after April 12, 1973, four percent interest for policies issued prior to January 1, 1980, five and one-half percent interest for single premium life insurance policies and four and one-half percent interest, and for all other policies issued on and after January 1, 1980, and the following tables: (1) For ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies: the Commissioners 1941 Standard Ordinary Mortality Table for policies issued prior to the operative date of section 3766 of this chapter, the Commissioners 1958 Standard Ordinary Mortality Table for policies issued on or after the operative date of section 3766 of this chapter and prior to the operative date of section 3768 of this chapter provided that for any category of policies issued on female risks, all modified net premiums and present values referred to in this subchapter may be calculated according to an age not more than six years younger than the actual age of the insured; and for policies issued on or after the operative date of section 3768 of this chapter: (A) the Commissioners 1980 Standard Ordinary Mortality Table;(B) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors; or (C) any ordinary mortality table, adopted after 1980 by the NAIC, that is approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for such policies. (2) For industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies: the 1941 Standard Industrial Mortality Table for policies issued prior to the operative date of section 3767 of this chapter, and for policies issued on or after the operative date of section 3767 of this chapter, the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the NAIC that is approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for the policies. (3) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies: the 1937 Standard Annuity Mortality Table, or at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Commissioner. (4) For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies: the Group Annuity Mortality Table for 1951, a modification of the table approved by the Commissioner, or at the option of the company, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts. (5) For total and permanent disability benefits in or supplementary to ordinary policies or contracts: for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates adopted after 1980 by the NAIC, that are approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for those policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either those tables or, at the option of the company, the Class 3 Disability Table of 1926; and for policies issued prior to January 1, 1961, the Class 3 Disability Table of 1926. Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies. (6) For accidental death benefits in or supplementary to policies issued on or after January 1, 1966: the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the NAIC approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for those policies, for policies issued on or after January 1, 1961, and prior to January 1, 1966, either that table or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table for calculating the reserves for life insurance policies. (7) For group life insurance, life insurance issued on the substandard basis and other special benefits: tables approved by the Commissioner. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791e. Computation of minimum standard for annuities
(a) Except as provided in section 3791f of this subchapter, the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after the effective date of this section and for annuities and pure endowments purchased on or after the operative date under group annuity and pure endowment contracts, shall be the Commissioners reserve valuation methods defined in sections 3791g and 3791h of this subchapter and the following tables and interest rates: (1) for individual annuity and pure endowment contracts issued prior to January 1, 1980, excluding any disability and accidental death benefits in those contracts: the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the Commissioner, and six percent interest for single premium immediate annuity contracts and four percent interest for all other individual annuity and pure endowment contracts; (2) for individual single premium immediate annuity contracts issued on or after January 1, 1980, excluding any disability and accidental death benefits in those contracts: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC that is approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for these contracts, or any modification of these tables approved by the Commissioner, and seven and one-half percent interest; (3) for individual annuity and pure endowment contracts issued on or after January 1, 1980, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in those contracts: the 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC, that is approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for those contracts, or any modification of these tables approved by the Commissioner, and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other individual annuity and pure endowment contracts; (4) for annuities and pure endowments purchased prior to January 1, 1980, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under those contracts: the 1971 Group Annuity Mortality Table or any modification of this table approved by the Commissioner, and six percent interest; and (5) for annuities and pure endowments purchased on or after January 1, 1980, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under those contracts: the 1971 Group Annuity Mortality Table, or any group annuity mortality table adopted after 1980 by the NAIC approved by rule adopted by the Commissioner for use in determining the minimum standard of valuation for annuities and pure endowments, or any modification of these tables approved by the Commissioner, and seven and one-half percent interest. (b) After April 12, 1973, any company may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1979, which shall be the operative date of this section for that company. If a company makes no election, the operative date of this section for that company shall be January 1, 1979. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791f. Computation of minimum standard by calendar year of issue
(a) The interest rates used in determining the minimum standard for the valuation of the following shall be the calendar year statutory valuation interest rates as defined in this section: (1) life insurance policies issued in a particular calendar year, on or after the operative date of section 3768 of this chapter; (2) individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1984; (3) annuities and pure endowments purchased in a particular calendar year on or after January 1, 1984 under group annuity and pure endowment contracts; and (4) the net increase, if any, in a particular calendar year after January 1, 1984 in amounts held under guaranteed interest contracts. (b) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearer one-quarter of one percent: (1) For life insurance:  I = .03 + W(R1 - .03) + W/2(R2 - .09). I = .03 + W(R - .03)  R2 is the greater of R and .09; R is the reference interest rate defined in this section; and W is the weighting factor defined in this section.(3) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in subdivision (2) of this section, the formula for life insurance stated in subdivision (1) of this section shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years and the formula for single premium immediate annuities stated in subdivision (2) of this section shall apply to annuities and guaranteed interest contracts with guarantee duration of 10 years or less. (4) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in subdivision (2) of this section shall apply. (5) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in this section shall apply. (6) Notwithstanding any provisions to the contrary in this subsection (b), if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980 (using the reference interest rate defined for 1979) and shall be determined for each subsequent calendar year regardless of when section 3768 of this chapter becomes operative. (c) The weighting factors referred to in the formulas stated above are given in the following tables: (1) Weighting Factors for Life Insurance:For life insurance, the guarantee duration is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy. (2) Weighting factors for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options. (3) Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subdivision (2) of this section, shall be as specified in tables (A), (B), and (C) of this section, according to the rules and definitions in (D), (E), and (F) of this section. (A) For annuities and guaranteed interest contracts valued on an issue year basis:(B) For annuities and guaranteed interest contracts valued on a change in fund basis, the factors shown in subdivision (A) increased by: (C) For annuities and guaranteed interest contracts valued on an issue year basis (other than those with no cash settlement options) which do not guarantee interest on considerations received more than one year after issue or purchase and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on consideration received more than 12 months beyond the valuation date, the factors shown in subdivision (A) or derived in subdivision (B) increased by: (D) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence. (E) As used in the above tables:(i) Plan Type A means that at any time the policyholder may withdraw funds only:(I) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; (II) without such adjustment but in installments over five years or more;(III) as an immediate life annuity; or(IV) no withdrawal permitted.(ii) Plan Type B means that, before expiration of the interest rate guarantee, the policyholder may withdraw funds only: (I) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; (II) without such adjustment but in installments over five years or more;(III) no withdrawal permitted; or(IV) at the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than five years. (iii) Plan Type C means a policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either: (I) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company; or (II) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund. (F) A company may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue year basis. As used in this section, an issue year basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract, and the change in fund basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund. (d) The Reference Interest Rate referred to in subsection (b) of this section shall be defined as follows: (1) For life insurance, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year next preceding the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moodys Investors Service, Inc. (2) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or year of purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moodys Investors Service, Inc. (3) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision (2) of this subsection, with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moodys Investors Services, Inc. (4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision (2) of this subsection, with guaranteed duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moodys Investors Services, Inc. (5) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moodys Investors Service, Inc. (6) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in subdivision (2) of this subsection, the average over a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moodys Investors Service, Inc. (7) Alternative Method for Determining Reference Interest Rates. In the event that the monthly average of the composite yield on seasoned corporate bonds is no longer published by Moodys Investors Service, Inc., or in the event that the NAIC determines that the monthly average of the composite yield on seasoned corporate bonds as published by Moodys Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate adopted by the NAIC and approved by rule adopted by the Commissioner may be substituted. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791g. Reserve valuation methodlife insurance and endowment benefits
(a) Except as otherwise provided in sections 3791g, 3791h, and 3791m of this subchapter, reserves according to the Commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by those policies, over the then present value of any future modified net premiums therefor. The modified net premiums for a policy shall be the uniform percentage of the respective contract premiums for the benefits such that the present value, at the date of issue of the policy, of all modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the policy and the excess of subdivision (1) over subdivision (2) of this subsection, as follows: (1) A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of the policy on which a premium falls due. However, the net level annual premium shall not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of the policy. (2) A net one-year term premium for the benefits provided for in the first policy year.(b) For a life insurance policy issued on or after January 1, 1997, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value or a combination in an amount greater than the excess premium, the reserve according to the Commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date defined as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium shall, except as otherwise provided in section 3791k of this subchapter, be the greater of the reserve as of the policy anniversary calculated as described in subsection (a) and the reserve as of the policy anniversary calculated as described in subsection (a) of this section, but with: (1) The value defined in subsection (a) of this section being reduced by 15 percent of the amount of such excess first year premium. (2) All present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date. (3) The policy being assumed to mature on that date as an endowment.(4) The cash surrender value provided on that date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in sections 3791d and 3791e of this subchapter shall be used. (c) Reserves according to the Commissioners reserve valuation method shall be calculated by a method consistent with the principles of the preceding subsections of this section for: (1) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums; (2) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as may be amended; (3) disability and accidental death benefits in all policies and contracts; and(4) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791h. Reserve valuation methodannuity and pure endowment benefits
(a) This section shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as may be amended. (b) Reserves according to the Commissioners annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by the contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contract, that become payable prior to the end of the respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values. (Added 2015, No. 63,  1.) 
 3791i. Minimum reserves
(a) In no event shall a companys aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after July 1, 1968 be less than the aggregate reserves calculated in accordance with the methods set forth in sections 3791g, 3791h, 3791k, and 3791l of this subchapter and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies. (b) In no event shall the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined by the appointed actuary to be necessary to render the opinion required by section 3791c of this subchapter. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791j. Optional reserve calculation
(a) Reserves for policies and contracts issued prior to July 1, 1968 may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to that date. (b) Reserves for any category of policies, contracts or benefits established by the Commissioner, issued on or after July 1, 1968 may be calculated, at the option of the company, according to any standards that produce greater aggregate reserves for the category than those calculated according to the minimum standard provided herein, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be greater than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided in the policies or contracts. (c) A company, which adopts at any time a standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided under this subchapter, may adopt a lower standard of valuation with the approval of the Commissioner, but not lower than the minimum provided herein; provided that, for the purposes of this section, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by section 3791c of this subchapter shall not be deemed to be the adoption of a higher standard of valuation. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791k. Reserve calculationvaluation net premium exceeding the gross premium charged
(a) If in any contract year the gross premium charged by a company on a policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for the policy or contract, or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in sections 3791d and 3791f of this subchapter. (b) For a life insurance policy issued on or after January 1, 1987, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value or a combination in an amount greater than the excess premium, the provisions of this section shall be applied as if the method actually used in calculating the reserve for the policy were the method described in section 3791g of this subchapter, ignoring the subsection 3791g(b) of this subchapter. The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with section 3791g of this subchapter, including the subsection (b) of that section, and the minimum reserve calculated in accordance with this section. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791l. Reserve calculationindeterminate premium plans
In the case of a plan of life insurance that provides for future premium determination, the amounts of which are to be determined by the company based on then estimates of future experience, or in the case of a plan of life insurance or annuity that is of such a nature that the minimum reserves cannot be determined by the methods described in sections 3791g, 3791h, and 3791k of this subchapter, the reserves that are held under the plan shall: (1) be appropriate in relation to the benefits and the pattern of premiums for that plan; and (2) be computed by a method that is consistent with the principles of this Standard Valuation Law, as determined by rules adopted by the Commissioner. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791m. Minimum standard for accident and health insurance contracts
For accident and health insurance contracts issued on or after the operative date of the Valuation Manual, the standard prescribed in the Valuation Manual is the minimum standard of valuation required under subsection 3791b(b) of this subchapter. For disability, accident and sickness, accident and health insurance contracts issued on or after July 1, 1968 and prior to the operative date of the Valuation Manual the minimum standard of valuation is the standard adopted by the Commissioner by rule. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791n. Valuation manual for policies issued on or after the operative date of the valuation manual
(a) For policies issued on or after the operative date of the Valuation Manual, the standard prescribed in the Valuation Manual is the minimum standard of valuation required under subsection 3791b(b) of this subchapter, except as provided under subsection (e) or (g) of this section. (b) The operative date of the Valuation Manual is January 1 of the first calendar year following the first July 1 as of which all of the following have occurred: (1) The Valuation Manual has been adopted by the NAIC by an affirmative vote of at least 42 members, or three-fourths of the members voting, whichever is greater. (2) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than 75 percent of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident and health annual statements; health annual statements; or fraternal annual statements. (3) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions: The 50 states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam, and Puerto Rico. (c) Unless a change in the Valuation Manual specifies a later effective date, changes to the Valuation Manual shall be effective on January 1 following the date when the change to the Valuation Manual has been adopted by the NAIC by an affirmative vote representing: (1) at least three-fourths of the members of the NAIC voting, but not less than a majority of the total membership, and (2) members of the NAIC representing jurisdictions totaling greater than 75 percent of the direct premiums written as reported in the following annual statements most recently available prior to the vote in subdivision (1) of this subsection: life, accident and health annual statements, health annual statements, or fraternal annual statements. (d) The Valuation Manual must specify all of the following:(1) Minimum valuation standards for and definitions of the policies or contracts subject to subsection 3791b(b) of this subchapter. Such minimum valuation standards shall be: (A) the Commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to subsection 3791b(b) of this subchapter; (B) the Commissioners annuity reserve valuation method for annuity contracts subject to subsection 3791b(b) of this subchapter; and (C) minimum reserves for all other policies or contracts subject to subsection 3791b(b) of this subchapter. (2) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in subsection 3791o(a) of this subchapter and the minimum valuation standards consistent with those requirements. (3) For policies and contracts subject to a principle-based valuation under section 3791o of this subchapter: (A) requirements for the format of reports to the Commissioner under subdivision 3791o(b)(3) of this subchapter and which shall include information necessary to determine if the valuation is appropriate and in compliance with this subchapter; (B) assumptions shall be prescribed for risks over which the company does not have significant control or influence; and (C) procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures. (4) For policies not subject to a principle-based valuation section 3791o of this subchapter, the minimum valuation standard shall either: (A) be consistent with the minimum standard of valuation prior to the operative date of the Valuation Manual; or (B) develop reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring. (5) Other requirements including those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandum, transition rules, and internal controls. (6) The data and form of the data required under section 3791p of this subchapter with whom the data must be submitted, and may specify other requirements including data analyses and reporting of analyses. (e) In the absence of a specific valuation requirement or if a specific valuation requirement in the Valuation Manual is not, in the opinion of the Commissioner, in compliance with this subchapter, then the company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the Commissioner by rule. (f) The Commissioner may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a companys compliance with any requirement of this subchapter. The Commissioner may rely upon the opinion, regarding provisions contained within this subchapter, of a qualified actuary engaged by the Commissioner of another state, district, or territory of the United States. As used in this subsection, the term engage includes employ or contract with. (g) The Commissioner may require a company to change any assumption or method that in the opinion of the Commissioner is necessary in order to comply with the requirements of the Valuation Manual or this subchapter; and the company shall adjust the reserves as required by the Commissioner. The Commissioner may take other disciplinary action he or she deems appropriate. (Added 2015, No. 63,  1.) 
 3791o. Requirements of a principle-based valuation
(a) A company must establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the Valuation Manual: (1) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk. (2) Incorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those used within the companys overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods. (3) Incorporate assumptions that are derived in one of the following manners:(A) The assumption is prescribed in the Valuation Manual.(B) For assumptions that are not prescribed, the assumptions shall:(i) be established using the companys available experience, to the extent it is relevant and statistically credible; or (ii) to the extent that company data is not available, relevant, or statistically credible, be established using other relevant, statistically credible experience. (4) Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve. (b) A company using a principle-based valuation for one or more policies or contracts subject to this section as specified in the Valuation Manual shall: (1) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the Valuation Manual. (2) Provide to the Commissioner and its Board of Directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the Valuation Manual. The certification shall be based on the controls in place as of the end of the preceding calendar year. (3) Develop and file with the Commissioner, upon request, a principle-based valuation report that complies with standards prescribed in the Valuation Manual. (c) A principle-based valuation may include a prescribed formulaic reserve component. (Added 2015, No. 63,  1, eff. June 17, 2015.)
 3791p. Experience reporting for policies in force on or after the operative date of the valuation manual
A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the Valuation Manual. (Added 2015, No. 63,  1.) 
 3791q. Confidentiality
(a) As used in this subchapter, confidential information means:(1) a memorandum in support of an opinion submitted under section 3791c of this subchapter and any other documents, materials, and information including all working papers and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in connection with such memorandum; (2) all documents, materials, and other information including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in the course of an examination made under subsection 3791n(f) of this subchapter; provided, however, that if an examination report or other material prepared in connection with an examination made under chapter 101, subchapter 7 of this title is not held as private and confidential information under such subchapter, an examination report or other material prepared in connection with an examination made under subsection 3791n(f) of this subchapter shall not be confidential information to the same extent as if such examination report or other material had been prepared under chapter 101, subchapter 7 of this title; (3) any reports, documents, materials, and other information developed by a company in support of, or in connection with, an annual certification by the company under subdivision 3791o(b)(2) of this subchapter evaluating the effectiveness of the companys internal controls with respect to a principle-based valuation and any other documents, materials, and other information including all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in connection with such reports, documents, materials, and other information; (4) any principle-based valuation report developed under subdivision 3791o(b)(3) of this subchapter and any other documents, materials, and other information including all working papers and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in connection with such report; and (5) any documents, materials, data, and other information submitted by a company under section 3791p of this subchapter collectively, experience data and any other documents, materials, data, and other information, including all working papers and copies thereof, created or produced in connection with such experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the Commissioner, together with any experience data, and other experience materials, and any other documents, materials, data, and other information including all working papers and copies thereof, created, produced, or obtained by or disclosed to the Commissioner or any other person in connection with such experience materials.(b) Except as provided in this section, a companys confidential information is confidential by law and privileged, and shall be exempt from public inspection and copying under the Public Records Act, shall not be subject to subpoena and shall not be subject to discovery or admissible in evidence in any private civil action; provided, however, that the Commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the Commissioners official duties. (c) Neither the Commissioner nor any person who received confidential information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential information. (d) In order to assist in the performance of the Commissioners duties, the Commissioner may share confidential information: (1) with other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries; and (2) in the case of confidential information specified in subdivisions (a)(1) and (a)(4) of this section only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with State, federal, and international law enforcement officials; in the case of this subdivision and subdivision (1) of this subsection (d), provided that such recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the Commissioner. (e) The Commissioner may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions and from the Actuarial Board for Counseling and Discipline, or its successor, and shall maintain as confidential or privileged any document, material, data, or other 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 other information. (f) The Commissioner may enter into agreements governing sharing and use of information consistent with subsection (b) of this section. (g) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the Commissioner under this section or as a result of sharing as authorized in subdivision (b)(3) of this section. (h) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this subsection (b) of this section shall be available and enforced in any proceeding in, and in any court of, this State. (i) As used in this section, regulatory agency, law enforcement agency, and the NAIC include their employees, agents, consultants, and contractors. (j) Notwithstanding any provision in this section to the contrary, any confidential information specified in subdivision (a)(1) or (a)(4) of this section: (1) may be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under section 3791c of this subchapter or principle-based valuation report developed under subdivision 3791o(b)(3) of this subchapter by reason of an action required by this subchapter or by rules adopted hereunder; (2) may otherwise be released by the Commissioner with the written consent of the company; and (3) once any portion of a memorandum in support of an opinion submitted under section 3791c of this subchapter or a principle-based valuation report developed under subdivision 3791o(b)(3) of this subchapter is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3791r. Single state exemption
(a) The Commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in Vermont from the requirements of section 3791n of this subchapter provided: (1) the Commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing; and (2) the company computes reserves using assumptions and methods used prior to the operative date of the Valuation Manual in addition to any requirements established by rule adopted by the Commissioner. (b) For any company granted an exemption under this section, sections 3791c-3791m of this subchapter shall be applicable. With respect to any company applying this exemption, any reference to section 3791n found in sections 3791c-3791m of this subchapter shall not be applicable. (Added 2015, No. 63,  1, eff. June 17, 2015.) 
 3801. Scope of subchapterShort title
This subchapter applies only to group life insurance and may be known and cited as the Group Life Insurance Law. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  1).) 
 3802. Group contracts must meet group requirements
(a) No life insurance policy shall be delivered or issued for delivery in this State insuring the lives of more than one individual unless to one of the groups as provided for in sections 3803-3810a of this title, and unless in compliance with the other applicable provisions of this subchapter. (b) Subsection (a) of this section shall not apply to life insurance policies:(1) insuring only individuals related by blood, civil marriage, or legal adoption; or(2) insuring only individuals having a common interest through ownership of a business enterprise, or a substantial legal interest or equity therein, and who are actively engaged in the management thereof; or (3) insuring only individuals otherwise having an insurable interest in each others lives. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  2); amended 1993, No. 55,  11, eff. June 3, 1993; 2009, No. 3,  12a, eff. Sept. 1, 2009.)
 3803. Employee groups
The lives of a group of individuals may be insured under a policy issued to an employer, or to the trustees of a fund established by an employer, which employer or trustees shall be deemed the policyholder, to insure employees of the employer for the benefit of persons other than the employer, subject to the following requirements: (1) The employees eligible for insurance under the policy shall be all of the employees of the employer, or all of any class or classes thereof determined by conditions pertaining to their employment. The policy may provide that the term employees shall include the employees of one or more subsidiary corporations, and the employees, individual proprietors, and partners of one or more affiliated corporations, proprietors, or partnerships if the business of the employer and of such affiliated corporations, proprietors, or partnerships is under common control through stock ownership, contract, or otherwise. The policy may provide that the term employees shall include the individual proprietor or partners if the employer is an individual proprietor or a partnership. The policy may provide that the term employees shall include retired employees. No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation, by performing services other than the usual duties of a director. No individual proprietor or partner shall be eligible for insurance under the policy unless he or she is actively engaged in and devotes a substantial part of his or her time to the conduct of the business of the proprietor or partnership. A policy issued to insure the employees of a public body may provide that the term employees shall include elected or appointed officials. (2) The premium for the policy shall be paid by the policyholder, either wholly from the employers funds or funds contributed by him or her, or partly from such funds and partly from funds contributed by the insured employees. No policy may be issued on which the entire premium is to be derived from funds contributed by the insured employees. A policy on which no part of the premium is to be derived from funds contributed by the insured employees must insure all eligible employees, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer. (3) The policy must cover at least two employees at date of issue.(4) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the employees or by the employer or trustees. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  3); amended 2005, No. 36,  7, eff. June 1, 2005; 2009, No. 137 (Adj. Sess.),  5.) 
 3804. Labor union groups
The lives of a group of individuals may be insured under a policy issued to a labor union, which shall be deemed the policyholder, to insure members of such union for the benefit of persons other than the union or any of its officials, representatives, or agents, subject to the following requirements: (1) The members eligible for insurance under the policy shall be all of the members of the union, or all of any class or classes thereof determined by conditions pertaining to their employment or to membership in the union, or both. (2) The premium for the policy shall be paid by the policyholder, either wholly from the unions funds, or partly from such funds and partly from funds contributed by the insured members specifically for their insurance. No policy may be issued on which the entire premium is to be derived from funds contributed by the insured members specifically for their insurance. A policy on which part of the premium is to be derived from funds contributed by the insured members specifically for their insurance may be placed in force only if at least 75 percent of the then eligible members excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions. A policy on which no part of the premium is to be derived from funds contributed by the insured members specifically for the insurance must insure all eligible members, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer. (3) The policy must cover at least 10 members at date of issue.(4) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the members or by the union. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  4).) 
 3805. Debtor groups
The lives of a group of individuals may be insured under a policy issued to a creditor or to the trustees of a fund established by one or more creditors, which creditor or trustees shall be deemed the policyholder, to insure debtors of the creditor or creditors subject to the following requirements: (1) The debtors eligible for insurance under the policy shall be all of the debtors of the creditor or creditors or all of any class or classes thereof determined by conditions pertaining to the indebtedness or to the purchase giving rise to the indebtedness. The policy may provide that the term debtors shall include the debtors of one or more subsidiary corporations, and the debtors of one or more affiliated corporations, proprietors, or partnerships if the business of the policyholder and of such affiliated corporations, proprietors, or partnerships, is under common control through stock ownership, contract, or otherwise. (2) The premium for the policy shall be paid by the policyholder, either from the creditors or creditors funds, or from charges collected from the insured debtors, or from both. A policy on which part or all of the premium is to be derived from the collection from the insured debtors of identifiable charges not required of uninsured debtors shall not include, in the class or classes of debtors eligible for insurance, debtors under obligations outstanding at its date of issue without evidence of individual insurability unless at least 75 percent of the then eligible debtors elect to pay the required charges. A policy on which no part of the premium is to be derived from the collection of such identifiable charges must insure all eligible debtors, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer. (3) The policy may be issued only if the group of eligible debtors is then receiving new entrants at the rate of at least 100 persons yearly, or may reasonably be expected to receive at least 100 new entrants during the first policy year, and only if the policy reserves to the insurer the right to require evidence of individual insurability if less than 75 percent of the new entrants become insured. The policy may exclude from the classes eligible for insurance classes of debtors determined by age. (4) The amount of insurance on the life of any debtor shall at no time exceed the amount owed to the creditor, or creditors or $70,000.00 whichever is less, except that the amount of such insurance on the life of a debtor who has secured a debt by a mortgage on real estate shall at no time exceed $140,000.00, or the amount owed, whichever is less. Where the insurance is in connection with an educational or agricultural credit transaction commitment, the amount owed by the debtor to any creditor may be deemed to include the portion of the loan commitment that has not been advanced by the creditor. (5) The insurance shall be payable to the policyholder or creditor. Such payment shall reduce or extinguish the unpaid indebtedness of the debtor to the extent of such payment. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  5); amended 1973, No. 222 (Adj. Sess.),  3, eff. April 3, 1974; 1989, No. 249 (Adj. Sess.),  2, eff. June 16, 1990; 2009, No. 42,  10.) 
 3806. Licensed lenders; charges for insurance
In the case of a debtor under section 2201 et seq. of this title the collection of identifiable charges by the lender shall not be deemed a violation of said chapter if: (1) The identifiable charge to the debtor is consistent with the actual cost of such insurance to the lender. The identifiable charge to the debtor shall be deemed consistent with the actual cost of the insurance to the lender if the aggregate of all such identifiable charges to all debtors of the same class, determined by conditions pertaining to the debt, is not greater than the premiums charged by the insurer, as computed at the time the charge to the debtor is determined; (2) The payment of such identifiable charge is optional with the debtor; and(3) Upon discharge of the debt, whether through prepayment, renewal or refinancing, the debtor is paid a pro rata refund of the identifiable charge paid by the debtor computed according to a schedule to be approved by the Commissioner of Financial Regulation. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  6); amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 3807. Public employee groups
The lives of a group of individuals may be insured under a policy issued to the departmental head of any department or agency of the State of Vermont, its political subdivisions or to an association of public employees formed for purposes other than obtaining insurance and having, when the policy is placed in force, a membership in the classes eligible for insurance of not less than 75 percent of the number of employees eligible for membership in such classes, which association or departmental head shall be deemed the policyholder, to insure members of such association or public employees for the benefit of persons other than the departmental head, the association or any of its officials, subject to the following requirements: (1) The persons eligible for insurance under the policy shall be all of the members of the association or employees of the department, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the association, or both. The policy may provide that the term employee shall include retired employees. (2) The premium for the policy shall be paid by the policyholder, either from the associations own funds, or from charges collected from the insured members or employees specifically for the insurance, or from both, or as may otherwise be authorized by existing or future legislation. Any charges collected from the insured members or employees specifically for the insurance, and the dues of the association if they include the cost of insurance, shall be collected through deductions by the employer from salaries of the members or employees. Such deductions from salary may be paid by the employer to the association or directly to the insurer. No policy may be placed in force unless and until at least 75 percent of the then eligible members of the association or employees of the department, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, have elected to be covered and have authorized their employer to make the required deductions from salary. (3) Charges collected from the insured members or employees specifically for the insurance, and the dues of the association if they include the cost of insurance, shall be determined according to each attained age or in not less than four reasonably spaced attained age groups. In no event shall the rate of such dues or charges be level for all members or employees regardless of attained age. (4) The policy must cover at least 10 persons at the date of issue.(5) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the members, employees, or by the association. (6) As used herein, employees means employees of the U.S. government, or of any state, or of any political subdivision or instrumentality of any of them. (7) This section does not preclude the insuring of public employees under any other applicable provision of this subchapter or law of this State. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  7).) 
 3808. Trustee groups
The lives of a group of individuals may be insured under a policy issued to the trustees of a fund established by, adopted by, or participated in by two or more employers, or by one or more labor unions, or by one or more employers and one or more labor unions, which trustees shall be deemed the policyholder, to insure employees of the employers or members of the unions for the benefit of persons other than the employers or the unions, subject to the following requirements: (1) No policy may be issued to insure employees of any employer whose eligibility to participate in the fund as an employer arises out of considerations directly related to the employer being a commercial correspondent or business client or patron of another employer, except where such other employer exercises substantial control over the business operations of the participating employers. (2) The persons eligible for insurance shall be all of the employees of the employers or all of the members of the unions, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the unions, or to both. The policy may provide that the term employees shall include retired employees, former employees, and the individual proprietor or partners if an employer is an individual proprietor or a partnership. No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. No individual proprietor or partner shall be eligible for insurance under the policy unless he or she is actively engaged in and devotes a substantial part of his or her time to the conduct of the business of the proprietor or partnership. The policy may provide that the term employees shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship. (3) The premium for the policy shall be paid by the trustees wholly from funds contributed by the employer or employers of the insured persons, or by the union or unions, or by both, or partly from such funds and partly from funds contributed by the insured persons. A policy on which no part of the premium is to be derived from funds contributed by the insured persons specifically for their insurance must insure all eligible persons, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer. (4) The policy must cover at date of issue at least 100 persons; and it must cover an average of not less than three persons per employer unit unless the policy is issued to the trustees of a fund established by employers which have assumed obligations through a collective bargaining agreement and are participating in the fund either pursuant to those obligations with regard to one or more classes of their employees which are encompassed in the collective bargaining agreement or as a method of providing insurance benefits for other classes of their employees, or unless the policy is issued to the trustees of a fund established by one or more labor unions. (5) The amount of insurance under the policy must be based upon some plan precluding individual selection either by the insured persons or by the policyholder, employers, or unions. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  8); amended 2009, No. 137 (Adj. Sess.),  6.) 
 3809. Association of employers groups
The lives of a group of individuals may be insured under a policy issued to an association of two or more employers, which association shall be deemed the policyholder, to insure employees of such employers for the benefits of persons other than the association or the employers, subject to the following requirements: (1) The policy may be issued only if:(A) the association has been in existence for at least five years and was formed for purposes other than obtaining the insurance; and (B) the participating employers constitute at date of issue at least fifty percent of the total employers eligible to participate, unless the total number of persons covered at date of issue exceeds 600, in which event such participating employers must constitute at least 25 percent of such total employers, in either case omitting from consideration any employer whose employees are already covered for group life insurance. (2) The persons eligible for insurance under the policy shall be all of the employees of the participating employers, or all of any class or classes thereof determined by conditions pertaining to their employment. The policy may provide that the term employees shall include the individual proprietor or partners whenever a participating employer is an individual proprietor or a partnership. The policy may provide that the term employees shall include retired employees. The policy may provide that the term employees shall include the employees of the association to which the policy is issued. (3) The premium for the policy shall be paid by the association, either wholly from the associations funds or funds contributed by the employers, or partly from such funds and partly from funds contributed by the insured employees. No policy may be issued on which the entire premium payable by the policyholder is to be derived from funds contributed by the insured employees. A policy on which part of the premium so payable is to be derived from funds contributed by the insured employees may be placed in force only if at least 75 percent of the then eligible employees of each participating employer, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions. A policy on which no part of the premiums so payable is to be derived from funds contributed by the insured employees must insure all eligible employees, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer. (4) The policy must cover at least 100 employees at date of issue.(5) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the employees or by the policyholder or the employer. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  9).) 
 3810. Credit union groups
The lives of a group of individuals may be insured under a policy issued to a credit union or to the trustees of a fund established by one or more credit unions, which credit union or trustees shall be deemed the policyholder to insure members of such credit union or credit unions for the benefit of persons other than the credit union or credit unions or trustees or any of their officials, subject to the following requirements: (1) The members eligible for insurance shall be all of the members of the credit union or credit unions, or all of any class or classes thereof determined by conditions pertaining to membership in the credit union or credit unions. (2) The premium for the policy shall be paid by the policyholder, either wholly from the funds of the credit union or credit unions, or partly from such funds and partly from funds contributed by the insured members specifically for their insurance, or wholly from funds contributed by the insured members specifically for their insurance. A policy on which all or a part of the premium is to be derived from funds contributed by the insured members specifically for their insurance may be placed in force only if at least 75 percent of the then eligible members of each credit union, excluding any as to whom evidence of insurability is not satisfactory to the insurer, elect to make the required contributions. A policy on which no part of the premium is to be derived from funds contributed by the insured members specifically for their insurance must insure all eligible members, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer. (3) The policy must cover at least 25 members at date of issue.(4) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the members or by the credit union or credit unions. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  10).) 
 3810a. Associations and discretionary groups
(a) The lives of a group of individuals may be insured under a policy issued to an association, or to the trustees of a fund established or maintained for the benefit of members of an association, which association or trustees shall be deemed the policyholder, to insure members of such association for the benefit of persons other than the association, trustees, or their officials, subject to the following requirements: (1) The association shall have a minimum of 100 members at the time of incorporation or formation if it has been incorporated or formed outside this State, and a minimum of 25 members at the time of incorporation or formation if it has been incorporated or formed in this State. (2) The association shall have been organized and maintained in good faith for purposes other than that of obtaining insurance. (3) The association shall have been in active existence for at least five years.(4) The association shall have articles of association and bylaws which provide that:(A) the association holds regular meetings not less than annually to further purposes of the members; (B) the association collects dues or solicits contributions from members; and(C) the members have voting privileges and representation on the governing board and committees.(5)(A) The premium for the policy shall be paid from funds contributed by the association, or by members, or by both, or from funds contributed by the covered persons or from both the covered persons and the association members. (B) Except as provided in subdivision (5)(C) of this subsection, a policy on which no part of the premium is to be derived from funds contributed by the covered persons specifically for the insurance must insure all eligible persons, except those who reject such coverage in writing. (C) An insurer may exclude or limit the coverage on any person as to whom evidence of individual insurability is not satisfactory to the insurer. (6) The amount of insurance under the policy must be based upon some plan precluding anti-selection either by the members or the association. (b) The lives of a group of individuals may be insured under a policy issued to any other group determined in the discretion of the Commissioner to be substantially similar to those described in this chapter. (c) The lives of individuals insured under a group policy authorized by this subchapter may continue to be insured following termination of employment, membership, or other affiliation of the individual with the group under a portability group approved by the Commissioner, provided that the group policy complies with all the applicable requirements of this subchapter. (Added 1993, No. 55,  9, eff. June 3, 1993; amended 2009, No. 137 (Adj. Sess.),  7.) 
 3811. Dependents coverage
Any group life policy issued under section 3803 (employee groups) or 3804 (labor union groups) or 3807 (public employee groups) or 3808 (trustee groups) or 3809 (employer association groups) or 3810a (associations and discretionary groups) of this title may be extended to insure the employees or members against loss due to the death of their spouses and children, or any class or classes thereof, subject to the following requirements: (1) The premium for the insurance shall be paid by the policyholder, either from the employers, unions, or associations funds or funds contributed by them or from funds contributed by the insured employees or members, or from both. If any part of the premium is to be derived from funds contributed by the insured employees or members, the insurance with respect to spouses and children may be placed in force only if at least 75 percent of the then eligible employees or members who then have eligible dependents, excluding any as to whose family members evidence of insurability is not satisfactory to the insurer, elected to make the required contribution. If no part of the premium is to be derived from funds contributed by the employees or members, all eligible employees or members, excluding any as to whose family members evidence of insurability is not satisfactory to the insurer, must be insured with respect to their spouses and children. (2) The amounts of insurance must be based upon some plan precluding individual selection either by the employees or members or by the policyholder, employer, or union, and shall not exceed the amount of insurance available to the employee or member with respect to any spouse or child. (3) Upon termination of the insurance with respect to the members of the family of any employee or member by reason of the employees or members termination of employment, termination of membership in the class or classes eligible for coverage under the policy, or death, the spouse shall be entitled to have issued by the insurer, without evidence of insurability, an individual policy of life insurance, without disability or other supplementary benefits, providing application for the individual policy shall be made, and the first premium paid to the insurer, within 31 days after such termination, subject to the requirements of subdivisions 3820(1), (2), and (3) of this title. If any group policy terminates or is amended so as to terminate the insurance of any class of employees or members and the employee or member is entitled to have issued an individual policy, under section 3821 of this title, the spouse shall also be entitled to have issued by the insurer an individual policy, subject to the conditions and limitations provided above and in section 3821 of this title. If the spouse dies within the period during which he or she would have been entitled to have an individual policy issued in accordance with this provision, the amount of life insurance which he or she would have been entitled to have issued under such 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 therefor has been made. (4) Notwithstanding section 3819 of this title, only one certificate need be issued for delivery to an insured person if a statement concerning any dependents coverage is included in such certificate. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  11); amended 1987, No. 136 (Adj. Sess.), eff. April 8, 1988; 1993, No. 55,  12, eff. June 3, 1993.) 
 3812. Provisions required in group contracts
No policy of group life insurance shall be delivered in this State unless it contains in substance the provisions set forth in sections 3813 through 3822 of this title 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; except, however, that: (1) Sections 3818 to 3822 inclusive shall not apply to policies issued to a creditor to insure debtors of such creditor. (2) The standard provisions required for individual life insurance policies shall not apply to group life insurance policies. (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, but 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. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  12).) 
 3813. Grace period
The group life insurance policy shall contain a provision that the policyholder is entitled to a grace period of 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 shall have given the insurer written notice of discontinuance in advance of the date of discontinuance 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 such grace period. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  13).) 
 3814. Incontestability
The group life insurance policy shall contain a provision that the validity of the policy shall not be contested, except for nonpayment of premium, after it has been in force for two 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 such statement was made after such insurance has been in force prior to the contest for a period of two years during such persons lifetime nor unless it is contained in a written instrument signed by him or her. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  14).) 
 3815. Application; statements deemed representations
The group life insurance policy shall contain a provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued and become a part of the contract; 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 such person or to his beneficiary. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  15).) 
 3816. Insurability
The group life insurance 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 or her coverage. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  16).) 
 3817. Misstatement of age
The group life insurance policy shall contain a provision specifying an equitable adjustment of premiums or of benefits or of both to be made in the event the age of a person insured has been misstated, such provision to contain a clear statement of the method of adjustment to be used. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  17).) 
 3818. Payment of benefits
The group life insurance 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, subject to the provisions of the policy in the event there is no designated beneficiary as to all or any part of such 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 such sum not exceeding $500.00 to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  18).) 
 3819. Certificate
The group life insurance policy shall contain a provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he or she is entitled, to whom the insurance benefits are payable and the rights and conditions set forth in sections 3820, 3821, and 3822 of this title. (1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  19).) 
 3820. Conversion on termination of eligibility
There shall be a provision that if the insurance or any portion of it, on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such 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 31 days after such termination, and provided further that: (1) The individual policy shall, at the option of such person, be on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for the amount applied for. (2) The individual policy shall be in an amount not in excess of the amount of life insurance which ceases because of such termination less the amount of any life insurance for which such person is or becomes eligible under the same or any other group policy within 31 days after such termination, provided that any amount of insurance which shall have matured on or before the date of such 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 which is considered to cease because of such termination. (3) The premium on the individual policy shall be at the insurers then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to his or her age attained on the effective date of the individual policy. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  20).) 
 3821. Conversion on termination of policy
The group life insurance 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 such termination whose insurance terminates and who has been so insured for at least five years prior to such termination date shall be entitled to have issued to him or her by the insurer an individual policy of life insurance, subject to the same conditions and limitations as are provided by section 3820 of this title except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of: (1) the amount of the persons life insurance protection ceasing because of the termination or amendment of the group policy, less the amount of any life insurance for which he or she is or becomes eligible under any group policy issued or reinstated by the same or another insurer within 31 days after such termination; or (2) $2,000.00. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  21).)
 3822. Death pending conversion
The group life insurance policy shall contain a provision that if a person insured under the policy dies during the period within which he or she would have been entitled to have an individual policy issued to him or her in accordance with section 3820 or 3821 of this title and before such an individual policy shall have become effective, the amount of life insurance which he or she would have been entitled to have issued to him or her under such 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 therefor has been made. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  22).) 
 3823. Notice as to conversion right
If any individual insured under a group life insurance policy hereafter delivered in this State becomes entitled under the terms of such policy to have an individual policy of life insurance issued to him or her without evidence of insurability, subject to making of application and payment of the first premium within the period specified in such policy, and if such individual is not given notice of the existence of such right at least 15 days prior to the expiration date of such period, then, in such event the individual shall have an additional period within which to exercise such right, but nothing herein contained shall be construed to continue any insurance beyond the period provided in such policy. This additional period shall expire 15 days next after the individual is given such notice but in no event shall such additional period extend beyond 60 days next after the expiration date of the period provided in such policy. Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder shall constitute notice for the purpose of this section. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  23).) 
 3824. Readjustment of premium
Any group life insurance contract may provide for a readjustment of the premium rate based upon the experience thereunder. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  24).) 
 3825. Application of dividends, rate reductions
If a policy dividend is hereafter declared or a reduction in rate is hereafter made or continued for the first or any subsequent year of insurance under any policy of group life insurance heretofore or hereafter issued to any policyholder, the excess, if any, of the aggregate dividends or rate reductions under such policy and all other group insurance policies of the policyholder over the aggregate expenditure for insurance under such policies made from funds contributed by the policyholder, or by an employer of insured persons, or by a union or association to which the insured persons belong, including expenditures made in connection with administration of such policies, shall be applied by the policyholder for the sole benefit of insured employees or members. (Added 1967, No. 344 (Adj. Sess.),  1 (ch. 2, subch. 6,  25).) 
 3835. Definitions
As used in this subchapter:(1) Advertising means any written, electronic, or printed communication or any communication by means of recorded telephone messages or that is transmitted on radio, television, the Internet, or similar communications media, including film strips, motion pictures, and videos, that are published, disseminated, circulated, or placed directly before the public in this State for the purpose of creating an interest in or inducing a person to sell, assign, devise, bequest, or transfer the death benefit or ownership of a life insurance policy pursuant to a life settlement contract. (2) Business of life settlements means an activity involved in, but not limited to, the offering, soliciting, negotiating, procuring, effectuating, financing, monitoring, tracking, administering, underwriting, selling, transferring, assigning, pledging, hypothecating, or in any other manner acquiring an interest in a life insurance policy by means of a life settlement contract. (3) Chronically ill means:(A) being unable to perform at least two activities of daily living, including eating, toileting, transferring, bathing, dressing, or continence; (B) requiring substantial supervision to protect the individual from threats to health and safety due to intellectual disability; or (C) having a level of disability similar to that described in subdivision (A) of this subdivision (3) as determined by the appropriate administrator of a state or federal public disability insurance or benefit program. (4) Commissioner means the Commissioner of Financial Regulation.(5)(A) Financing entity means an insurance underwriter, placement agent, lender, purchaser of securities, purchaser of a policy or certificate from a life settlement provider, credit enhancer, or any entity that has a direct ownership in a policy or certificate that is the subject of a life settlement contract, but: (i) whose principal activity related to the transaction is providing funds to effect the life settlement or purchase of one or more policies subject to a life settlement contract; and (ii) who has an agreement with one or more licensed life settlement providers to finance the acquisition of life settlement contracts. (B) Financing entity does not include a life settlement purchaser.(C) Financing entity includes an accredited investor as defined by Rule 501 as promulgated under the Federal Securities Act of 1933, as amended. (6) Fraudulent life settlement act includes:(A) acts or omissions committed by any person who knowingly or who reasonably should know and, for the purpose of depriving another of property or for pecuniary gain, commits or permits its employees or its agents to engage in acts, including: (i) presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by a life settlement provider, life settlement broker, financing entity, insurer, insurance producer, or any other person false material information or concealing material information, as part of, in support of, or concerning a fact material to one or more of the following: (I) an application for the issuance of a life settlement contract or insurance policy;(II) the underwriting of a life settlement contract or insurance policy;(III) a claim for payment or benefit pursuant to a life settlement contract or insurance policy; (IV) premiums paid on an insurance policy;(V) payments and changes in ownership or beneficiary made in accordance with the terms of a life settlement contract or insurance policy; (VI) the reinstatement or conversion of an insurance policy;(VII) the solicitation, offer, effectuation, or sale of a life settlement contract or insurance policy; (VIII) the issuance of written evidence of a life settlement contract or insurance; or(IX) a financing transaction; and(ii) employing any plan, financial structure, device, scheme, or artifice to defraud related to policies subject to a life settlement contract. (B) any person in the furtherance of a fraudulent settlement act or to prevent the detection of a fraudulent settlement act committing or permitting its employees or its agents to: (i) remove, conceal, alter, destroy, or sequester from the Commissioner the assets or records of a licensee or other person engaged in the business of life settlements; (ii) misrepresent or conceal the financial condition of a licensee, financing entity, insurer, or other person; (iii) transact the business of life settlements in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of life settlements; or (iv) file with the Commissioner or the equivalent chief insurance regulatory official of another jurisdiction a document that contains false information or that otherwise conceals information about a material fact from the Commissioner; (C) embezzlement, theft, misappropriation, or conversion of monies, funds, premiums, credits, or other property of a life settlement provider, insurer, insured, policy owner, insurance policy owner, or any other person engaged in the business of life settlements or insurance; (D) recklessly entering into, negotiating, brokering, or otherwise dealing in a life settlement contract, the subject of which is a life insurance policy that was obtained by presenting false information concerning any fact material to the policy or by concealing, for the purpose of misleading another, information concerning any fact material to the policy, where the person or the persons intended to commit a fraudulent settlement act with respect to the policys issuer, the life settlement provider, or the owner; (E) facilitating the change of state of ownership of a policy or certificate or the state of residency of a policy owner to a state or jurisdiction that does not have a law similar to this subchapter for the express purposes of evading or avoiding the provisions of this subchapter; (F) attempting to commit, assisting, aiding, or abetting in the commission of or conspiracy to commit the acts or omissions specified in this subdivision (6). (7) Life insurance producer means any person licensed in this State as a resident or nonresident insurance producer who has received qualification to sell life insurance coverage or a life line of coverage pursuant to chapter 131 of this title. (8) Life settlement broker means a natural person who is working exclusively on behalf of a policy owner and, for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and one or more life settlement providers. Notwithstanding the manner in which the life settlement broker is compensated, a life settlement broker is deemed to represent only the policy owner and not the insurer or the life settlement provider and to owe a fiduciary duty to the policy owner to act according to the policy owners instructions and in the best interest of the policy owner. The term does not include an attorney or a certified public accountant who is retained to represent the policy owner and whose compensation is not paid directly or indirectly by the life settlement provider or purchaser. (9)(A) Life settlement contract means a written agreement between a policy owner and a life settlement provider or any affiliate of the life settlement provider establishing the terms under which compensation or anything of value is or will be paid, which compensation or value is less than the expected death benefits of the policy, in return for the policy owners present or future assignment, transfer, sale, devise, or bequest of the death benefit or ownership of any portion of the insurance policy or certificate of insurance. (B) Life settlement contract includes a premium finance loan made for a life insurance policy by a lender to a policy owner on, before, or after the date of issuance of the policy where: (i) the policy owner or the insured receives on the date of the premium finance loan a guarantee of a future life settlement value of the policy; or (ii) the policy owner or the insured agrees on the date of the premium finance loan to sell the policy or any portion of its death benefit on any date following the issuance of the policy. (C) Life settlement contract does not include:(i) a policy loan or accelerated death benefit made by the insurer pursuant to the policys terms; (ii) loan proceeds that are used solely to pay:(I) premiums for the policy;(II) the costs of the loan, including, without limitation, interest, arrangement fees, utilization fees and similar fees, closing costs, legal fees and expenses, trustee fees and expenses, and third party collateral provider fees and expenses, including fees payable to letter of credit issuers; (iii) a loan made by a bank or other licensed financial institution in which the lender takes an interest in a life insurance policy solely to secure repayment of a loan or, if there is a default on the loan and the policy is transferred, the transfer of such a policy by the lender, provided that the default itself is not pursuant to an agreement or understanding with any other person for the purpose of evading regulation under this subchapter; (iv) a loan made by a lender that does not violate chapter 143 of this title, provided that the premium finance loan is not described in subdivision (B) of this subdivision (9); (v) an agreement where all the parties are closely related to the insured by blood or law; or have a lawful substantial economic interest in the continued life, health, and bodily safety of the person insured, or are trusts established primarily for the benefit of such parties; (vi) any designation, consent, or agreement by an insured who is an employee of an employer in connection with the purchase by the employer, or trust established by the employer, of life insurance on the life of the employee; (vii) a bona fide business succession planning arrangement:(I) between two or more shareholders in a corporation or between a corporation and one or more of its shareholders or one or more trusts established by its shareholders; (II) between two or more partners in a partnership or between a partnership and one or more of its partners or one or more trusts established by its partners; or (III) between two or more members in a limited liability company or between a limited liability company and one or more of its members or one or more trusts established by its members; (viii) an agreement entered into by a service recipient, or a trust established by the service recipient and a service provider, or a trust established by the service provider who performs significant services for the service recipients trade or business; or (ix) any other contract, transaction, or arrangement exempted from the definition of life settlement contract by the Commissioner by rule or order based on a determination that the contract, transaction, or arrangement is not of the type intended to be regulated by this subchapter. (10) Life settlement investment agent means a person who is an appointed or contracted agent of a licensed life settlement provider who solicits or arranges the funding for the purchase of a life settlement by a life settlement purchaser and who is acting on behalf of a life settlement provider. (11)(A) Life settlement provider means a person other than a policy owner that solicits, enters into, or effectuates a life settlement contract with a policy owner resident in this State. (B) Life settlement provider does not include:(i) a bank, savings bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a life insurance policy solely as collateral for a loan; (ii) a premium finance company making premium finance loans and exempted by the Commissioner from the licensing requirement under the premium finance laws that takes an assignment of a life insurance policy solely as collateral for a loan; (iii) the issuer of the life insurance policy;(iv) an authorized or eligible insurer that provides stop loss coverage or financial guaranty insurance to a life settlement provider, purchaser, financing entity, special purpose entity, or related provider trust; (v) a financing entity;(vi) a special purpose entity;(vii) a related provider trust;(viii) a life settlement purchaser; or(ix) any other person that the Commissioner determines by rule or order is not the type of person intended to be covered by the definition of life settlement provider. (12)(A) Life settlement purchaser means a person who provides a sum of money as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy, or a person who owns or acquires or is entitled to a beneficial interest in a trust that owns a life settlement contract or is the beneficiary of a life insurance policy that has been or will be the subject of a life settlement contract, for the purpose of deriving an economic benefit. (B) Life settlement purchaser does not include:(i) an accredited investor or qualified institutional buyer as defined, respectively, in Rule 501(a) or Rule 144A promulgated under the Federal Securities Act of 1933, as amended; (ii) a financing entity;(iii) a special purpose entity; or(iv) a related provider trust.(13) Policy means an individual or group policy, group certificate, contract, or arrangement of life insurance owned by a resident of this State, regardless of whether delivered or issued for delivery in this State. (14)(A) Policy owner means the owner of a life insurance policy or a certificate holder under a group policy who resides in this State and enters or seeks to enter into a life settlement contract. For the purposes of this subchapter, a policy owner shall not be limited to an owner of a life insurance policy or a certificate holder under a group policy insuring the life of an individual with a terminal or chronic illness or condition. If there is more than one policy owner on a single policy and the policy owners are residents of different states, the transaction shall be governed by the law of the state in which the policy owner having the largest percentage ownership resides or, if the policy owners hold equal ownership, the state of residence of one policy owner agreed upon in writing by all the policy owners. (B) Policy owner does not include a:(i) qualified institutional buyer as defined in Rule 144A promulgated under the Federal Securities Act of 1933, as amended; (ii) a financing entity;(iii) a special purpose entity;(iv) a related provider trust;(v) a purchaser of a purchased policy.(15) Purchased policy means a life insurance policy or certificate that has been acquired by a life settlement provider pursuant to a life settlement contract. (16) Related provider trust means a titling trust or other trust established by a licensed life settlement provider or a financing entity for the sole purpose of holding the ownership or beneficial interest in purchased policies in connection with a financing transaction. The trust shall have a written agreement with the licensed life settlement provider under which the licensed life settlement provider is responsible for ensuring compliance with all statutory and regulatory requirements and under which the trust agrees to make all records and files related to life settlement transactions available to the Commissioner as if those records and files were maintained directly by the licensed life settlement provider. (17) Special purpose entity means a corporation, partnership, trust, limited liability company, or other similar entity formed solely to provide either directly or indirectly access to institutional capital markets: (A) for a financing entity or licensed life settlement provider; or(B)(i) in connection with a transaction in which the securities in the special purposes entity are acquired by the owner or by qualified institutional buyers as defined in Rule 144A promulgated under the Securities Act of 1933, as amended, and in which the securities are sold in compliance with 9 V.S.A. chapter 150 (the Vermont Uniform Securities Act) and the orders and rules adopted or issued thereunder; or (ii) in connection with a transaction in which the securities pay a fixed rate of return commensurate with established asset-backed institutional capital markets and in which the securities are sold in compliance with 9 V.S.A. chapter 150 (the Vermont Uniform Securities Act) and the orders and rules adopted or issued thereunder. (18) Stranger-originated life insurance, or STOLI, means an act or acts, practice or an arrangement to initiate a life insurance policy in the name of a resident of this State for the benefit of a third party who, at the time of policy origination, has no insurable interest under the laws of this State in the life of the insured. STOLI practices include cases in which life insurance is purchased with resources or guarantees from or through a person or entity who, at the time of policy inception, could not lawfully initiate the policy himself, herself, or itself and where, at the time of policy inception, there is an arrangement or agreement, whether verbal or written, to directly or indirectly transfer the ownership of the policy or the policy benefits to a third party. Trusts that are created to give the appearance of insurable interest and are used to initiate policies for investors violate insurable interest laws and the prohibition against wagering on life. STOLI arrangements do not include those practices set forth in subdivision (9)(C) of this section. (19) Terminally ill means having an illness or sickness that can reasonably be expected to result in death in 24 months or less. (20) Viator means any person who owns, controls, or has rights to the benefits or values of a life insurance policy or who owns, is covered by, controls, or has rights to the benefits or values of a group policy, either of which insures the life of a person who is terminally or chronically ill or has a life-threatening illness or condition and who enters into an agreement under which the life settlement provider will pay compensation or anything of value, which compensation or value is less than the expected death benefit of the insurance policy or certificate, in return for the assignment, transfer, sale, devise, or bequest of the death benefit or ownership of the insurance policy or certificate to the life settlement provider. (Added 2009, No. 53,  1, eff. Jan. 1, 2010; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 96 (Adj. Sess.),  16.) 
 3836. License and bond requirements
(a) Life settlement providers. (1) No person shall operate as a life settlement provider without first obtaining a license from the Commissioner. (2) Application for a life settlement provider license shall be made to the Commissioner by the applicant on a form prescribed by the Commissioner, and the application shall be accompanied by an application fee of $50.00 and a license fee of $400.00. (3) Licenses may be renewed from year to year on a date prescribed by the Commissioner of the odd-numbered year next following the date of issuance upon payment of a biennial renewal fee of $400.00. Failure to pay the fee by the renewal date shall result in expiration of the license. (4) The applicant shall provide information on forms required by the Commissioner. The Commissioner shall have authority at any time to require the applicant to disclose fully the identity of all stockholders, partners, officers, members, and employees, and the Commissioner may, in the exercise of the Commissioners discretion, refuse to issue a license in the name of a legal entity if not satisfied that any officer, employee, stockholder, partner, or member thereof who may materially influence the applicants conduct meets the standards of this subchapter. (5) Upon the filing of an application and the payment of the license fee, the Commissioner shall make an investigation of each applicant and issue a license if the Commissioner finds that the applicant: (A) Has provided a detailed and sound plan of operation.(B) Is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for. (C) Has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied for. (D) Has demonstrated evidence of financial responsibility in a format and in substance as prescribed by the Commissioner through a surety bond executed and issued by an insurer authorized to issue surety bonds in this State in the amount set forth below, or a letter of credit in the amount set forth below on a form and in a manner approved by the Commissioner, or such other amount as the Commissioner may require. The Commissioner may ask for evidence of financial responsibility at any time the Commissioner deems necessary. Any surety bond or letter of credit issued pursuant to this subdivision shall be solely in the favor of this state and shall specifically authorize recovery by the Commissioner on behalf of any person in this State who sustained damages as the result of erroneous acts, failure to act, conviction of fraud, or conviction of unfair practices by the life settlement provider. The minimum amount of the bond or letter of credit shall be based on the annual aggregate life settlement payments attributable to the licensee to policy owners in Vermont, as follows. The Commissioner may adjust by rule the ranges established below if necessary to be consistent with the aggregate payment data filed in annual statements pursuant to section 3839 of this title: (i) $0.00 to $1,000,000.00, a bond or letter of credit not less than $50,000.00;(ii) $1,000,000.01 to $15,000,000.00, a bond or letter of credit not less than $100,000.00;(iii) $15,000,000.00 or more, a bond or letter of credit not less than $150,000.00.(E) Has provided an anti-fraud plan that meets the requirements of section 3847 of this subchapter. (6) The Commissioner shall not issue a license to a nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the Secretary of State or the applicant has filed with the Commissioner the applicants written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the Secretary of State, in accordance with 11 V.S.A.  1633. (7) A life settlement provider shall provide to the Commissioner new or revised information about officers, stockholders holding 10 percent or more, partners, directors, members, or designated employees within 30 days of the change. (b) Life settlement broker. (1) A person shall not operate as a life settlement broker without first obtaining a license from the Commissioner. (2) A person licensed as an attorney or certified public accountant who is retained to represent the policy owner and whose compensation is not paid directly or indirectly by the life settlement provider may negotiate life settlement contracts on behalf of the policy owner without having to obtain a license as a life settlement broker. (3) Application for a life settlement broker license shall be made to the Commissioner by the applicant on a form prescribed by the Commissioner, and the application shall be accompanied by an application fee of $30.00 and a license fee of $100.00. (4) Licenses may be renewed by the Commissioner on the even-numbered year next following the date of issuance upon payment of a biennial renewal fee of $100.00. Failure to pay the fee by the renewal date shall result in expiration of the license. (5) The applicant shall provide information on forms required by the Commissioner.(6) Upon the filing of an application and the payment of the license fee, the Commissioner shall make an investigation of each applicant and issue a license if the Commissioner finds that the applicant: (A) Is competent and trustworthy.(B) Has a good business reputation and has had at least two years prior experience as a licensed life insurance producer. (C) Has demonstrated evidence of financial responsibility in a format and in substance as prescribed by the Commissioner through a surety bond executed and issued by an insurer authorized to issue surety bonds in this State in the amount set forth below, or a letter of credit in the amount set forth below on a form and in a manner approved by the Commissioner, or such other amount as the Commissioner may require. The Commissioner may ask for evidence of financial responsibility at any time the Commissioner deems necessary. Any surety bond or letter of credit issued pursuant to this subdivision shall be solely in the favor of this State and shall specifically authorize recovery by the Commissioner on behalf of any person in this State who sustained damages as the result of erroneous acts, failure to act, conviction of fraud, or conviction of unfair practices by the life settlement broker. The minimum amount of the bond or letter of credit shall be based on the annual aggregate life settlement payments attributable to the licensee to policy owners in Vermont, as follows. The Commissioner may adjust by rule the ranges established below if necessary to be consistent with the aggregate payment data filed in annual statements pursuant to section 3839 of this title: (i) $0.00 to $2,000,000.00, a bond or letter of credit not less than $25,000.00;(ii) $2,000,000.01 to $5,000,000.00, a bond or letter of credit not less than $50,000.00;(iii) $5,000,000.01 to $15,000,000.00, a bond or letter of credit not less than $75,000.00; and (iv) $15,000,000.01 and more, a bond or letter of credit not less than $100,000.00.(7) The Commissioner shall not issue a license to a nonresident applicant unless a written designation of an agent for service of process is filed and maintained with the Commissioner or the applicant has filed with the Commissioner the applicants written irrevocable consent that any action against the applicant may be commenced against the applicant by service of process on the Secretary of State, in accordance with 11 V.S.A.  1633. (8) An individual licensed as a life settlement broker shall complete on a biennial basis an additional 15 hours of life insurance producer training related to life settlements and life settlement transactions as determined by the Commissioner. Such additional training requirements shall be approved for education under section 4800a of this title. Any person failing to meet the requirements of this subsection shall be subject to the penalties imposed by the Commissioner. (9) No life settlement broker may charge or receive a fee, a commission, or other valuable consideration in excess of two percent of the amount paid by the life settlement company to the policy owner on a policy that is the subject of the life settlement brokers services. Upon the written request of the life settlement broker and after conferring with the policy owner, the Commissioner may approve another rate of compensation as reasonable and appropriate under highly unusual circumstances. (c) The insurer that issued the policy subject to a life settlement shall not be responsible for any act or omission of a life settlement broker or life settlement provider arising out of or in connection with the life settlement transaction unless the insurer receives compensation for the placement of a life settlement contract from the life settlement provider or life settlement broker in connection with the life settlement contract. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3837. License revocation and denial
(a) Life settlement providers. The Commissioner may suspend or revoke and may refuse to issue or renew the license of a life settlement provider if the Commissioner finds that: (1) there was any material misrepresentation in the application for the license;(2) the licensee or any officer, partner, member, or key management personnel have been convicted of fraudulent or dishonest practices or are subject to a civil judicial adjudication under federal, foreign, or State law or to an administrative action issued by any jurisdiction showing the licensee or any officer, partner, member, or key management personnel to be untrustworthy or incompetent; (3) the licensee demonstrates a pattern of unreasonable payments to policy owners;(4) the licensee or any officer, partner, member, or key management personnel have been found guilty of or have pleaded guilty or nolo contendere to any felony or to a misdemeanor involving fraud or moral turpitude, regardless of whether a judgment of conviction has been entered by the court; (5) the licensee has entered into any life settlement contract that has not been approved pursuant to this subchapter; (6) the licensee has failed to honor contractual obligations set out in a life settlement contract; (7) the licensee no longer meets the requirements for initial licensure;(8) the licensee has assigned, transferred, or pledged a policy subject to a life settlement contract to a person other than a life settlement provider licensed in this state, an accredited investor or qualified institutional buyer as defined respectively in Rule 501(a) or Rule 144A promulgated under the Federal Securities Act of 1933, as amended, a financing entity, a special purpose entity, or a related provider trust; (9) the licensee or any officer, partner, member, or key management personnel has violated any provision of this subchapter or a rule adopted or order issued under this subchapter; (10) the licensee or any officer, partner, member, or key management personnel have violated any provision of 9 V.S.A. chapter 150 (the Vermont Uniform Securities Act); or (11) the licensee has, in the conduct of his or her affairs, used fraudulent, coercive, or dishonest practices or has shown himself or herself to be incompetent, untrustworthy or financially irresponsible. (b) Life settlement brokers. The Commissioner may refuse to issue or renew or may suspend or revoke the license of a life settlement broker if the Commissioner finds that: (1) there was any material misrepresentation in the application for the license;(2) the licensee has been convicted of fraudulent or dishonest practices or is subject to a civil judicial adjudication under federal, foreign, or State law or to an administrative action issued by any jurisdiction showing the licensee or any officer, partner, member, or key management personnel to be untrustworthy or incompetent; (3) the licensee has been found guilty of or has pleaded guilty or nolo contendere to any felony or to a misdemeanor involving fraud, dishonesty, breach of trust, or moral turpitude, regardless of whether a judgment of conviction has been entered by the court; (4) the licensee no longer meets the requirements for initial licensure;(5) the licensee has engaged in any one or more of the acts or conditions set forth in subsection 4804(a) of this title; (6) the licensee has violated any provision of this subchapter or a rule adopted or order issued under this subchapter; (7) the licensee or any officer, partner, member, or key management personnel have violated any provision of 9 V.S.A. chapter 150 (the Vermont Uniform Securities Act); or (8) the licensee has otherwise engaged in bad-faith conduct with one or more policy owners. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.)
 3838. Approval of life settlement contracts, disclosure statements, and related forms
(a) A person shall not use a life settlement contract form or related form or provide to a policy owner in this State any of the disclosure statement forms required by subsections 3841(a), (b), and (c) of this title unless such forms are first filed with and approved by the Commissioner. Related forms include the statement of attending physician required by subdivision 3843(a)(1)(A) of this title; the medical records release form required by subdivision 3843(a)(1)(B) of this title; the policy owners statement of understanding form required by subdivision 3843(a)(5) of this title; any application form to be used by the policy owner to request a life settlement; any advertising material that the Commissioner, in his or her discretion, requires to be filed; and such other forms as the Commissioner may prescribe by rule or order. (b) The Commissioner shall disapprove a life settlement contract form, disclosure statement form, or related form if, in the Commissioners judgment, the contract or provisions contained therein fail to meet the requirements of sections 3841, 3843, 3846, and subsection 3847(b) of this title or are unreasonable, contrary to the interests of the public, or otherwise misleading or unfair to the policy owner. Any notice of disapproval of such form shall state the grounds therefore and shall state that a hearing will be granted within 20 days upon request of the filer who requests a hearing within 30 days of the date of the notice of disapproval. (c) Any life settlement contract form, disclosure statement form, or related form filed with the Commissioner shall be deemed approved if it has not been disapproved within 60 days of the filing. The Commissioner may extend by not more than 30 additional days the period within which affirmative approval or disapproval of any such form may be given by notifying the life settlement provider or life settlement broker of such extension before expiration of the initial 60-day period. (d) The Commissioner may at any time, after notice and for cause shown, withdraw approval of a previously approved contract form, disclosure statement form, or related form. Any order of the Commissioner withdrawing a previous approval shall state the grounds therefor in such detail as reasonably to inform the filer thereof. Any such withdrawal of a previously approved form shall be effective at the expiration of such period not less than 30 days after the giving of notice of withdrawal as the commissioner shall in such notice prescribe. Any demand for a hearing relative to the Commissioners withdrawal of approval of a form which has been received by the Commissioner prior to the effective date of such withdrawal shall stay such action pending the hearing thereon. (e) The forms required to be filed by this section shall be filed in a manner prescribed by the Commissioner. Filings shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 for each form submitted. (Added 2009, No. 53,  1, eff. Jan. 2010.) 
 3839. Reporting requirements and privacy
(a) Each life settlement provider shall file with the Commissioner on or before March 1 of each year an annual statement containing such information as the Commissioner may prescribe by rule or order. Information relating to life settlement transactions shall be limited to only those transactions where the policy owner is a resident of this State. Upon proper request by the filer, the Commissioner shall keep confidential trade secret information exempt from public inspection and copying under 1 V.S.A.  317(c)(9). The annual statement shall not contain individually identifiable life settlement transaction information, but such information shall be provided to the Commissioner pursuant to section 3840 of this title. If available to the provider because of the providers business relationship or affiliation with one or more life settlement purchasers, the annual statement shall also include such information as the Commissioner may prescribe by rule or by order concerning life settlement purchase agreements or similar investment contracts entered into by residents of this State. (b) A life settlement provider, life settlement broker, insurance company, life insurance producer, information bureau, rating agency or company, or any other person with actual knowledge of an insureds or a policy owners identity shall be subject to the departments Regulation No. IH-2001-I Privacy of Consumer Financial and Health Information, as amended. (Added 2009, No. 53,  1, eff. Jan. 1, 2010; amended 2015, No. 29,  8.) 
 3840. Investigations and examinations
(a) The Commissioner, in addition to all powers granted pursuant to chapter 1 of this title, may examine the business and affairs of any licensee or applicant for a license whenever he or she deems it to be prudent for the protection of policyholders or the public. The Commissioner shall have the authority to examine any person and to order the production of any records, books, files or other information reasonably necessary to ascertain whether the licensee or applicant is acting or has acted in violation of the law or otherwise contrary to the interests of the public. The expenses incurred in conducting any examination shall be paid by the licensee or applicant. (b) A person required to be licensed by this subchapter shall for five years following the death of the insured retain copies of all: (1) proposed, offered, or executed contracts, purchase agreements, underwriting documents, policy forms, and applications from the date of the proposal, offer, or execution of the contract or purchase agreement, whichever is later; (2) all checks, drafts, or other evidence and documentation related to the payment, transfer, deposit, or release of funds from the date of the transaction; and (3) all other records and documents related to the requirements of this subchapter.(c) Except as otherwise provided in this subchapter, all examination reports, working papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an examination or investigation made under this subchapter or in the course of analysis or investigation by the Commissioner of the financial condition or market conduct of a licensee shall be confidential by law and privileged, shall not be subject to disclosure as a public record under 1 V.S.A.  317, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The Commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the Commissioners official duties. (d) The expense incurred in conducting any examination shall be paid by the licensee or applicant. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3841. Disclosure to policy owner
(a) With each application for a life settlement, a life settlement provider or a life settlement broker shall provide the policy owner with at least the following disclosures not less than 10 days prior to the time the application for the life settlement contract is signed by all parties. The disclosures shall be provided in a separate document that is signed by the policy owner and the life settlement provider or life settlement broker and shall include the following information: (1) There are possible alternatives to life settlement contracts, including any accelerated death benefits or policy loans offered under the policy owners life insurance policy. (2) That a life settlement broker represents exclusively the policy owner and not the insurer or the life settlement provider and owes a fiduciary duty to the policy owner, including a duty to act according to the policy owners instructions and in the best interest of the policy owner. (3) Some or all of the proceeds of the life settlement may be taxable under federal income tax and state franchise and income tax laws, and assistance should be sought from a professional tax advisor. (4) Proceeds of the life settlement could be subject to the claims of creditors.(5) Receipt of the proceeds of a life settlement may adversely affect the policy owners eligibility for Medicaid or other government benefits or entitlements, and advice should be obtained from the appropriate government agencies. (6) The policy owner has the right to rescind a life settlement contract before 30 calendar days after the date upon which the life settlement contract is executed by all parties. Rescission, if exercised by the policy owner, is effective only if both notice of the rescission is given and the policy owner repays all proceeds and any premiums, loans, and loan interest paid on account of the life settlement within the rescission period. If the insured dies during the rescission period, the life settlement contract shall be deemed to have been rescinded, subject to repayment by the policy owner or the policy owners estate of all life settlement proceeds and any premiums, loans, and loan interest on the life settlement within 60 days of the insureds death. (7) Funds will be sent to the policy owner within three business days after the life settlement provider has received the insurer or group administrators written acknowledgment that ownership of the policy or interest in the certificate has been transferred and that the beneficiary has been designated. (8) Entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate, to be forfeited by the policy owner. Assistance should be sought from an independent, qualified professional with experience in these matters. (9) Disclosure to a policy owner shall include distribution of a brochure approved by the Commissioner describing the process of life settlements. (10) The disclosure document shall contain the following language: All medical, financial, or personal information solicited or obtained by a life settlement provider or life settlement broker about an insured, including the insureds identity or the identity of family members, a spouse or party to a civil union or a significant other may be disclosed as necessary to effect the life settlement between the policy owner and the life settlement provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase who may not be obligated to protect and keep the information confidential. You may be asked to renew your permission to share information every two years. (11) Following execution of a life settlement contract, the insured may be contacted for the purpose of determining the insureds health status and to confirm the insureds residential or business street address and telephone number, or as otherwise provided in this subchapter. This contact shall be limited to once every three months if the insured has a life expectancy of six months or more, and no more than once every two months if the insured has a life expectancy of six months or less. All such contracts shall be made only by a life settlement provider licensed in the state in which the policy owner resided at the time of the life settlement or by the authorized representative of such duly licensed life settlement provider. (12) No broker shall have a financial relationship or affiliation with a life settlement provider unless the broker fully discloses such relationship or affiliation, and the manner and amount of the brokers compensation. A broker shall not participate in or form a financial arrangement or affiliation with a life settlement provider if such arrangement or affiliation conflicts with the brokers fiduciary duty to the policy owner. (b)(1) A life settlement provider shall provide the policy owner with at least the following disclosures no later than 10 days before the date the life settlement contract is signed by all parties. The disclosures shall be conspicuously displayed in the life settlement contract or in a separate document signed by the policy owner and provide the following information: (A) unless previously disclosed under subsection (a) of this section, the affiliation, if any, between the life settlement provider and the issuer of the insurance policy to be subject to the life settlement contract; (B) the name, business address, and telephone number of the life settlement provider;(C) any affiliations or contractual arrangements between the life settlement provider and the life settlement purchaser. (2) If an insurance policy subject to a life settlement contract has been issued as a joint policy or involves family riders or any coverage of a life other than the insured under the policy to be subject to a life settlement contract, the policy owner or owners shall be informed of the possible loss of coverage on the other lives under the policy and shall be advised to consult with his or her or their insurance producer or the insurer issuing the policy for advice on the proposed life settlement. (3) The document shall state the dollar amount of the current death benefit payable to the life settlement provider under the policy or certificate. The life settlement provider shall also disclose the availability, if known, of any additional guaranteed insurance benefits, the dollar amount of any accidental death and dismemberment benefits under the policy or certificate, and the extent to which the policy owners interest in those benefits will be transferred as a result of the life settlement contract. (4) The document shall state whether the funds will be escrowed with an independent third party or placed in trust during the transfer process. If an escrow account is used, the document shall provide the name, business address, and telephone number of the independent third party escrow agent. If a trust account is used, the document shall identify the state or federally chartered institution. The document shall state that the policy owner may inspect or receive copies of the relevant escrow or trust agreements or documents. (c) A life settlement broker shall provide the policy owner with at least the following disclosures no later than 10 days before the date the life settlement contract is signed by all parties. The disclosures shall be conspicuously displayed in the life settlement contract or in a separate document signed by the policy owner and provide the following information: (1) the name, business address, and telephone number of the life settlement broker;(2) a full, complete, and accurate description of all offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract; (3) a written disclosure of any affiliations or contractual arrangements between the life settlement broker and any person making an offer in connection with the proposed life settlement contracts; (4) the amount and method of calculating the brokers compensation, which term includes anything of value paid or given to a life settlement broker for the placement of a policy; and (5) where any portion of the life settlement brokers compensation, as defined in subdivision (4) of this subsection, is taken from a proposed life settlement offer, a disclosure of the total amount of the life settlement offer and the percentage of the life settlement offer constituted by the life settlement brokers compensation. (d) If the life settlement provider transfers ownership or changes the beneficiary of the insurance policy, the provider shall communicate in writing the change in ownership or beneficiary to the insured within 20 days after the change. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3842. Disclosure to insurer
Thirty days prior to the execution of a life settlement contract or the execution or other affirmation of an agreement or arrangement to enter into a life settlement contract, a life settlement provider shall provide notice to the insurer that issued or has assumed the policy, provided the contract, agreement or arrangement is executed or otherwise affirmed prior to, or during the first five years after issuance of a policy. The notice shall contain information identifying the policy and the policy owner, if applicable, and a copy of the proposed life settlement contract. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3843. General rules
(a)(1) A life settlement provider entering into a life settlement contract shall first obtain:(A) if the policy owner is the insured, a written statement from a licensed attending physician that the policy owner is of sound mind and under no constraint or undue influence to enter into a life settlement contract; and (B) if the medical records of the insured are intended or required to be released in connection with a proposed life settlement transaction, a document in which the insured consents to the release of his or her medical records to a licensed life settlement provider, life settlement broker, the insurance company that issued the life insurance policy covering the life of the insured, and any other person to whom the medical records will be released. (2) Within 20 days after a policy owner executes documents necessary to transfer any rights under an insurance policy or within 20 days of entering any agreement, option, promise, or any other form of understanding, expressed or implied, to subject the policy to a life settlement contract, the life settlement provider shall give written notice to the insurer that issued that insurance policy that the policy has or will become a policy subject to a life settlement contract. The notice shall be accompanied by the documents required by subdivision (3) of this subsection. (3) The life settlement provider shall deliver a copy of the medical release required under subdivision (1)(B) of this subsection, a copy of the policy owners application for the life settlement contract, the notice required under subdivision (2) of this subsection, and a request for verification of coverage to the insurer that issued the life policy that is the subject of the life settlement transaction. A form for verification of coverage approved by the Commissioner shall be used. (4) The insurer shall respond to a request for verification of coverage submitted on an approved form by a life settlement provider or life settlement broker within 30 calendar days of the date the request is received and shall indicate whether, based on the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the insurance contract or possible insurance or life settlement fraud. The insurer shall accept a request for verification of coverage made on a form approved by the Commissioner. The insurer shall accept an original or facsimile or electronic copy of such request and any accompanying authorization signed by the policy owner. Failure by the insurer to meet its obligations under this subsection shall be a violation of sections 3844 and 3848 of this title. (5) Prior to or at the time of execution of the life settlement contract, the life settlement provider shall obtain a witnessed document in which the policy owner consents to the life settlement contract, represents that the policy owner has a full and complete understanding of the life settlement contract and of the benefits of the life insurance policy, acknowledges that he or she is entering into the life settlement contract freely and voluntarily, has received the disclosures required in section 3841 of this title and, for persons with a terminal or chronic illness or condition, acknowledges that the insured has a terminal or chronic illness and that the terminal or chronic illness or condition was diagnosed after the life insurance policy was issued. (6) If a life settlement broker performs any of these activities required of the life settlement provider, the provider is deemed to have fulfilled such requirement. (b) All medical information solicited or obtained by any licensee shall be subject to the applicable provisions of state law relating to confidentiality of medical information and to the departments Regulation No. IH-2001-I, Privacy of Consumer Financial and Health Information. (c) All life settlement contracts entered into in this State shall provide the policy owner with an absolute right to rescind the contract before 30 calendar days after the date upon which the life settlement contract is executed by all parties. Rescission by the policy owner may be conditioned upon the policy owners both giving notice and repaying to the life settlement provider within the rescission period all proceeds of the settlement and any premiums, loans, and loan interest paid by or on behalf of the life settlement provider in connection with or as a consequence of the life settlement. If the insured dies during the rescission period, the life settlement contract shall be deemed to have been rescinded, subject to repayment to the life settlement provider or purchaser of all life settlement proceeds and any premiums, loans, and loan interest that have been paid by the life settlement provider or purchaser, which shall be paid within 60 calendar days of the death of the insured. In the event of any rescission, if the life settlement provider has paid commissions or other compensation to a life settlement broker in connection with the rescinded transaction, the life settlement broker shall refund all such commissions and compensation to the life settlement provider within five business days following receipt of written demand from the life settlement provider, which demand shall be accompanied by either the policy owners notice of rescission if rescinded at the election of the policy owner or notice of the death of the insured if rescinded by reason of the death of the insured within the applicable rescission period. (d) The life settlement provider shall instruct the policy owner to send the executed documents required to effect the change in ownership, assignment, or change in beneficiary directly to an independent escrow agent. Within three business days after the date the escrow agent receives the document (or from the date the life settlement provider receives the documents, if the policy owner erroneously provides the documents directly to the provider), the provider shall pay or transfer the proceeds of the life settlement into an escrow or trust account maintained in a state- or federally chartered financial institution whose deposits are insured by the Federal Deposit Insurance Corporation. Upon payment of the settlement proceeds into the escrow account, the escrow agent shall deliver the original change in ownership, assignment, or change in beneficiary forms to the life settlement provider or related provider trust or other designated representative of the life settlement provider. Upon the escrow agents receipt of the acknowledgment of the properly completed transfer of ownership, assignment, or designation of beneficiary from the insurance company, the escrow agent shall pay the settlement proceeds to the policy owner. (e) Failure to tender consideration to the policy owner for the life settlement contract within the time set forth in the disclosure pursuant to subdivision 3841(a)(7) of this title renders the life settlement contract voidable by the policy owner for lack of consideration until the time consideration is tendered to and accepted by the policy owner. Funds shall be deemed sent by a life settlement provider to a policy owner as of the date that the escrow agent either releases funds for wire transfer to the policy owner or places a check for delivery to the policy owner via the U. S. Postal Service or another nationally recognized delivery service. (f) Contacts with the insured for the purpose of determining the health status of the insured by the life settlement provider or life settlement broker after the life settlement has occurred shall only be made by the life settlement provider or broker licensed in this State or its authorized representatives and shall be limited to once every three months for insureds with a life expectancy of more than six months and to no more than once every two months for insureds with a life expectancy of six months or less. The provider or broker shall explain the procedure for these contacts at the time the life settlement contract is entered into. The limitations set forth in this subsection shall not apply to any contacts with an insured for reasons other than determining the insureds health status. Life settlement providers and life settlement brokers shall be responsible for the actions of their authorized representatives. (g)(1) In order to assure that terminally ill policy owners receive a reasonable return for entering into a life settlement contract, the following shall be minimum payouts; provided that upon request of the policy owner the Commissioner may waive the requirements of this subdivision: (2) The expected death benefit is the death benefit provided under the terms of the policy subject to the life settlement contract, assuming the death of the insured were to occur on the date the life settlement contract is signed. (3) The payout shall be increased by 100 percent of any net cash surrender value of the insurance at the time the life settlement contract is issued. (4) Payouts may be reduced by the minimum premium, including premiums payable for additional benefits retained at the option of the terminally ill policy owner, if any, required to keep the contract in force for the duration of the terminally ill policy owners remaining life expectancy. Other than this allowable reduction in payout, there shall be no other retention for expenses or brokers fees. At the time of settlement, the life settlement provider shall place in trust a sum equal to the amount the payout was reduced for future premiums. Sums placed in trust under this section shall only be reduced by the life settlement provider upon payment of policy premiums as they come due. If the terminally ill policy owner dies with a sum held in trust under this section, the sum remaining in trust shall become the property of the life settlement provider. (5) If the life settlement provider becomes insolvent or is the subject of a bankruptcy or other insolvency proceeding during the life of the terminally ill policy owner whose policy had riders retained, the life settlement provider shall notify the terminally ill policy owner and other insureds of the insolvency or initiation of insolvency proceedings. Persons with an interest in the continuation of riders retained may pay any premiums required to keep riders retained in force. (6) In computing the minimum percentage of expected death benefit (net of loans and cash surrender value) the death benefit value of any accidental death benefit rider shall not be included. There shall be no minimum percentage payment required for the transfer of an accidental death benefit rider to the life settlement company. (7) Life expectancy shall be determined by a physician selected by the terminally ill policy owner, on the basis of medical records. The physician selected will send life expectancy information to the life settlement provider. If the life settlement provider disagrees with the life expectancy estimate of the physician selected by the terminally ill policy owner, the terminally ill policy owner will select a second physician to make an estimate of life expectancy, based on medical records. The second physicians decision shall be final. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3844. Prohibited practices
(a) It is a violation of this subchapter for any person to:(1) Commit any fraudulent life settlement acts.(2) Enter into any practice, agreement, arrangement, or transaction which results in or is intended to result in the issuance of stranger-originated life insurance or STOLI. (3) Enter, within a five-year period commencing with the date of issuance of the insurance policy or certificate, into a life settlement contract unless the policy owner certifies to the life settlement provider that one or more of the following conditions have commenced or occurred after the date of issuance of the insurance policy or certificate and within the five-year period: (A) The policy was issued upon the policy owners exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least 60 months. The time covered under a group policy shall be calculated without regard to any change in insurance carriers, provided the coverage has been continuous and under the same group sponsorship. (B) The policy owner submits independent evidence to the life settlement provider that one or more of the following conditions have commenced or occurred after the date of issuance of the insurance policy or certificate and within the five-year period: (i) the policy owner or insured is terminally or chronically ill;(ii) the policy owners spouse dies;(iii) the policy owner divorces his or her spouse;(iv) the policy owner retires from full-time employment;(v) the policy owner becomes physically or mentally disabled and a physician determines that the disability prevents the policy owner from maintaining full-time employment; (vi) a final order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor of the policy owner, adjudicating the policy owner bankrupt or insolvent or approving a petition seeking reorganization of the policy owner or appointing a receiver, trustee, or liquidator to all or a substantial part of the policy owners assets; or (vii) the policy owner has suffered a significant economic reversal, as demonstrated by a 50 percent decline in the policy owners annual adjusted gross income, or by a 50 percent decline in the policy owners net worth, or as demonstrated by other facts and circumstances approved by the Commissioner. (C) The policy owner enters into a life settlement contract more than two years after the date of issuance of a policy and, with respect to the policy, at all times prior to the date that is two years after policy issuance, the following conditions are met: (i) policy premiums have been funded exclusively with unencumbered assets, including an interest in the life insurance policy being financed only to the extent of its net cash surrender value, provided by or with full recourse liability incurred by the insured or a person described in subdivision 3835(9)(C)(v) of this title; (ii) there is no agreement or understanding with any other person to guarantee any such liability or to purchase or stand ready to purchase the policy, including through an assumption or forgiveness of the loan; and (iii) a life settlement provider or a life settlement broker has not conducted a life expectancy evaluation of the insured in connection with a proposed settlement of the policy, and the insured has not undergone a life expectancy evaluation for settlement in connection with the issuance of the policy. (b) Copies of the independent evidence described in subdivision (a)(3)(B) of this section and documents required by section 3842 of this title shall be submitted to the insurer when the life settlement provider or other party entering into a life settlement contract with a policy owner submits a request to the insurer for verification of coverage. The copies shall be accompanied by a letter of attestation from the life settlement provider that the copies are true and correct copies of the documents received by the life settlement provider. (c) No insurer may, as a condition of responding to a request for verification of coverage or effecting the transfer of a policy pursuant to a life settlement contract, require that the policy owner, insured, life settlement provider, or life settlement broker sign any forms or disclosures of consent or waiver that have not been expressly approved by the Commissioner for use in connection with life settlement contracts in this State. (d) Upon receipt of a properly completed request for change of ownership or beneficiary of a policy, the insurer shall respond in writing within 30 calendar days with written acknowledgment confirming that the change has been effected or specifying the reasons why the requested change cannot be processed. The insurer shall not unreasonably delay effecting change of ownership or beneficiary and shall not otherwise seek to interfere with any life settlement contract lawfully entered into in this state. (e) It shall be a violation of this section to enter into a life settlement contract in reliance on the conditions established in subdivision (a)(3)(B) of this section if such condition commenced or occurred prior to the issuance of the insurance policy or certificate. (f) The Commissioner shall adopt rules regulating the marketing and solicitation of life settlement products. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3845. Prohibited practices and conflicts of interest
(a) With respect to any life settlement contract or insurance policy, no life settlement broker shall solicit an offer from, effectuate a life settlement with, or make a sale to any life settlement provider, financing entity, or related provider trust that is controlling, controlled by, or under common control with such life settlement broker. (b) No broker shall have a financial relationship or affiliation with a life settlement provider unless the broker fully discloses such relationship or affiliation. A broker shall not participate in or form a financial arrangement or affiliation with a life settlement provider if such arrangement or affiliation conflicts with the brokers fiduciary duty to the policy owner. (c) With respect to any life settlement contract or insurance policy, no life settlement provider shall knowingly enter into a life settlement contract with a policy owner if, in connection with such life settlement contract, anything of value will be paid to a life settlement broker that is controlling, controlled by, or under common control with such life settlement provider, the life settlement purchaser, life settlement investment agent, a financing entity, or a related provider trust that is involved in such life settlement contract. (d) A violation of subsection (a), (b), or (c) of this section shall be deemed a fraudulent life settlement act. (e) No life settlement provider shall enter into a life settlement contract unless the life settlement promotional, advertising, and marketing materials, as may be prescribed by regulation, have been filed with the Commissioner. In no event shall any marketing materials expressly reference that the insurance is free for any period of time. The inclusion of any reference in the marketing materials that would cause a policy owner to reasonably believe that the insurance is free for any period of time shall be considered a violation of this subchapter. (f) No life insurance producer, insurance company, life settlement broker, or life settlement provider shall make any statement or representation to the applicant or policyholder in connection with the sale or financing of a life insurance policy to the effect that the insurance is free or without cost to the policyholder for any period of time unless provided in the policy. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3846. Advertising for life settlements
(a) No person engaged in the business of life settlements shall make, issue, circulate, or cause to be made, issued, or circulated, or placed before the public, in a newspaper, magazine, or other publication, in the form of a notice, circular, pamphlet, letter, or poster or over any radio station or television station, or by Internet, or in any other way, any estimate, illustration, circular, statement, sales presentation, omission, or comparison, which: (1) Misrepresents or fails to adequately disclose the benefits, advantages, conditions, exclusions, limitations, or terms of any life settlement contract. (2) Uses any name or title of any life settlement contract or class of life settlement contracts misrepresenting the true nature thereof. (3) Is a misrepresentation for the purpose of inducing or tending to induce a policy owner to enter into a life settlement contract in violation of the provisions of this chapter. (4) Is inaccurate, untruthful, deceptive or misleading in fact or by implication. The form and content of an advertisement of a life settlement contract shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive. Whether an advertisement has the capacity or tendency to mislead or deceive shall be determined from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed. (5) Directly or indirectly markets, advertises, solicits, or otherwise promotes the purchase of a policy for the purpose or, or with an emphasis on entering into a life settlement contract. (6) Uses the word free, no cost, without cost, no additional cost, at no extra cost, or words of similar import in the marketing, advertising, soliciting, or otherwise promoting of the purchase of a policy. (b) Every life settlement licensee shall establish and at all times maintain a system of control over the content, form, and method of dissemination of all advertisements of its contracts, products, and services. All advertisements, regardless of who wrote, created, designed, or presented them, shall be the responsibility of the life settlement licensees as well as the individual who created or presented the advertisement. A system of control shall include regular routine notification, at least once a year, to agents and others authorized by the life settlement licensee who disseminate advertisements of the requirements and procedures for approval by the life settlement licensee prior to the use of any advertisements not furnished by the life settlement licensee. (c) The name of the life settlement licensee shall be clearly identified in all advertisements about the licensee or its life settlement contract, products, or services, and if any specific life settlement contract is advertised, the life settlement contract shall be identified either by form number or some other appropriate description. If an application is part of the advertisement, the name of the life settlement provider shall be shown on the application. (d) If the advertising emphasizes the dollar amounts available to policy owners, the advertising shall disclose the average purchase price as a percent of face value obtained by policy owners contracting with the licensee during the past six months. (e) The fact that the life settlement contract offered is made available for inspection prior to consummation of the sale, or that an offer is made to refund the payment if the policy owner is not satisfied, or that the life settlement contract includes a free look period that satisfies or exceeds legal requirements does not remedy any inaccurate, untruthful, deceptive or misleading statements. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3847. Fraud prevention and control
(a)(1) A person shall not commit a fraudulent life settlement act.(2) A person shall not knowingly or with reason to know interfere with the enforcement of the provisions of this subchapter or investigations of suspected or actual violations of this subchapter. (3) It shall be a violation of this subchapter for a person in the business of life settlements who with knowledge or who reasonably should know to permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements. (b)(1) Life settlement contracts and applications for life settlements, regardless of the form of transmission, shall contain the following statement or a substantially similar statement: Any person who knowingly presents false information in an application for insurance or life settlement contract may be guilty of a crime and may be subject to fines and confinement in prison. (2) The lack of a statement as required in subdivision (1) of this subsection does not constitute a defense in any prosecution for a fraudulent life settlement act. (c)(1) Any person engaged in the business of life settlements having knowledge or a reasonable suspicion that a fraudulent life settlement act is being, will be, or has been committed shall immediately provide to the Commissioner such information as required and in a manner prescribed by the Commissioner by rule or order. (2) Any other person having knowledge or a reasonable belief that a fraudulent life settlement act is being, will be, or has been committed may provide to the Commissioner such information required and in a manner prescribed by the Commissioner by order or rule. (d)(1) No civil liability shall be imposed on and no cause of action shall arise from a persons furnishing information concerning suspected, anticipated, or completed fraudulent life settlement acts or suspected or completed fraudulent insurance acts if the information is provided to or received from: (A) the Commissioner or the Commissioners employees, agents, or representatives;(B) federal, State, or local law enforcement or regulatory officials or their employees, agents, or representatives; (C) a person involved in the prevention and detection of fraudulent viatical settlement acts or that persons agents, employees, or representatives; (D) the National Association of Insurance Commissioners, the Financial Industry Regulatory Authority (FINRA), the North American Securities Administrators Association (NASAA), or their employees, agents, or representatives, or another regulatory body overseeing life insurance, life settlements, or securities or investment fraud; or (E) the life insurer that issued the life insurance policy covering the life of the insured.(2) Subdivision (1) of this subsection shall not apply to statements made with actual malice. In an action brought against a person for filing a report or furnishing other information concerning a fraudulent life settlement act, the party bringing the action shall plead specifically any allegation that subdivision (1) of this subsection does not apply because the person filing the report or furnishing the information did so with actual malice. (3) A person furnishing information as identified in subdivision (1) of this subsection shall be entitled to an award of attorneys fees and costs if he or she is the prevailing party in a civil cause of action for libel, slander, or any other relevant tort arising out of activities in carrying out the provisions of this subchapter and if the party bringing the action was not substantially justified in doing so. For the purposes of this section, a proceeding is substantially justified if it had a reasonable basis in law or fact at the time that it was initiated. However, such an award does not apply to any person furnishing information concerning his or her own fraudulent life settlement acts. (4) This section does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person described in subdivision (1) of this subsection. (5) Confidentiality.(A) The documents and evidence provided pursuant to this subsection or obtained by the Commissioner in an investigation of suspected or actual fraudulent life settlement acts shall be privileged and confidential and shall not be a public record and shall not be subject to discovery or subpoena in any private civil action. (B) Subdivision (A) of this subdivision does not prohibit release by the Commissioner of documents and evidence obtained in an investigation of suspected or actual fraudulent life settlement acts: (i) in administrative or judicial proceedings to enforce laws administered by the Commissioner;(ii) to federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraudulent viatical settlement acts, or to the National Association of Insurance Commissioners; or (iii) at the discretion of the Commissioner, to a person in the business of life settlements that is aggrieved by a fraudulent life settlement act. (C) Release of documents and evidence under subdivision (B) of this subdivision does not abrogate or modify the privilege granted in subdivision (A) of this subdivision. (6) This subchapter shall not:(A) preempt the authority or relieve the duty of other law enforcement or regulatory agencies to investigate, examine, and prosecute suspected violations of law; (B) prevent or prohibit a person from disclosing voluntarily or otherwise information concerning life settlement fraud to a law enforcement or regulatory agency other than the Department of Financial Regulation; or (C) limit the powers granted elsewhere by the laws of this State to the Commissioner or an insurance fraud unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers. (7)(A) Life settlement providers shall have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent fraudulent life settlement acts. The Commissioner may, at his or her discretion, order or a licensee may request and the Commissioner may grant such modifications of the required initiatives listed in subdivision (B) of this subdivision (7) as necessary to ensure an effective antifraud program. The modifications may be more or less restrictive than the required initiatives so long as the modifications may reasonably be expected to accomplish the purpose of this section. (B) Antifraud initiatives shall include:(i) The use of fraud investigators, who may be life settlement provider employees or independent contractors. (ii) An antifraud plan, which shall be submitted to the Department at the request of the Commissioner. The antifraud plan shall include: (I) a description of the procedures for detecting and investigating possible fraudulent life settlement acts and procedures for resolving material inconsistencies between medical records and insurance applications; (II) a description of the procedures for reporting possible fraudulent life settlement acts to the Commissioner; (III) a description of the plan for antifraud education and training of underwriters and other personnel; and (IV) a description or chart outlining the organizational arrangement of the antifraud personnel who are responsible for the investigation and reporting of possible fraudulent life settlement acts and investigating unresolved material inconsistencies between medical records and insurance applications. (e) Antifraud plans submitted to the Commissioner shall be privileged and confidential and shall not be a public record and shall not be subject to discovery or subpoena in a civil or criminal action. (Added 2009, No. 53,  1, eff. Jan. 1, 2010; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 3848. Civil remedies, penalties, and enforcement
In addition to any other civil and administrative remedies, penalties, and enforcement authority provided for by law: (1) A violation of this subchapter or of a rule or order adopted or issued under this subchapter, including the commission of a fraudulent life settlement act, shall constitute an unfair trade practice under chapter 129 of this title (Insurance Trade Practices) and shall be subject to the remedies, penalties, and enforcement authority provided for in chapter 129 of this title. The Commissioner may report any violation of this subchapter to the Attorney General, who may prosecute therefor if he or she deems desirable. (2) The Commissioner may issue a cease and desist order upon a person that violates any provision of this subchapter, any rule or order adopted or issued by the Commissioner, or any written agreement with a licensee entered into with the Commissioner. (3) When the Commissioner finds that an activity in violation of this subchapter or of a rule or order adopted or issued by the Commissioner presents an immediate danger to the public that requires an immediate final order, the Commissioner may issue an emergency cease and desist order reciting with particularity the facts underlying the findings. The emergency cease and desist order is effective immediately upon service of a copy of the order on the respondent and remains effective for 90 days. If the Commissioner begins nonemergency cease and desist proceedings, the emergency cease and desist order remains effective absent a petition by the respondent and an order by a Superior Court of Washington County vacating the Commissioners emergency order. (4) A Commissioners order under this subsection may require a person found to be in violation of this subchapter to make restitution to persons aggrieved by violations of this subchapter or to take further actions necessary to remedy violations of this subchapter. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3849. Adoption of rules
The Commissioner may:(1) Adopt rules necessary to carry out the purposes of this subchapter.(2) Establish standards for evaluating reasonableness of payments under life settlement contracts for persons who are terminally or chronically ill. This authority includes the regulation of discount rates used to determine the amount paid in exchange for assignment, transfer, sale, devise, or bequest of a benefit under a life insurance policy insuring the life of a person who is chronically or terminally ill. (3) Adopt rules governing the relationships and responsibilities of insurers, life settlement providers, and life settlement brokers during life settlement transaction. (Added 2009, No. 53,  1, eff. Jan. 1, 2010.) 
 3855. Establishment of accounts
(a) A domestic life insurer may establish one or more separate accounts and may allocate thereto amounts, including without limitation proceeds applied under optional modes of settlement or under dividend options, to provide for life insurance or annuities, and benefits incidental thereto, payable in fixed or variable amounts, or both, subject to the following: (1) The income, gains, and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account, without regard to other income, gains or losses of the company. (2) Except as may be provided with respect to reserves for guaranteed benefits and funds referred to in subdivision (3) of this subsection: (A) amounts allocated to any separate account and accumulations thereon may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this State governing the investments of domestic insurers; (B) the investments in such separate account or accounts may not be taken into account in applying the investment limitations otherwise applicable to the investments of the company; and (C) uniform investment policies shall not be required for each of the separate accounts established by a life insurer. (3) Except with the approval of the Commissioner and under such conditions as to investments and other matters as he or she may prescribe, which shall recognize the guaranteed nature of the benefits provided, reserves for benefits guaranteed as to dollar amount and duration and funds guaranteed as to principal amount or stated rate of interest may not be maintained in a separate account. (4) Unless otherwise approved by the Commissioner, assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then as provided under the terms of the contract or the rules or other written agreement applicable to such separate account; provided, that unless otherwise approved by the Commissioner, the portion of any of the assets of such separate account equal to the insurers reserve liability with regard to the guaranteed benefits and funds referred to in subdivision (3) of this subsection shall be valued in accordance with the rules otherwise applicable to the insurers assets. (5) Amounts allocated to a separate account in the exercise of the power granted by this subchapter are owned by the insurer, and the insurer may not be, nor hold itself out to be, a trustee with respect to such amounts, if and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the insurer may conduct. (6) No sale, exchange, or other transfer of assets may be made by such insurer between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made, and unless such transfer, whether into or from a separate account is made by a transfer of cash, or by a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the Commissioner. The Commissioner may approve other transfers among such accounts if, in his or her opinion, such transfers would not be inequitable. (7) To the extent such insurer deems it necessary to comply with any applicable federal or state laws, such insurer, with respect to any separate account, including without limitation any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of such account, including without limitation special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account. (b) The corporate charter of every domestic life insurance company is deemed amended to authorize it to do anything which is herein provided. (Added 1971, No. 106  1, eff. April 22, 1971.) 
 3856. Required contents of policy
Any contract providing benefits payable in variable amounts delivered or issued for delivery in this State shall contain a statement of the essential features of the procedures to be followed by the insurer in determining the dollar amount of such variable benefits. Any such contract under which the benefits vary to reflect investment experience, including a group contract and any certificate in evidence of variable benefits issued thereunder, shall state that such dollar amount will so vary and shall contain on its first page a statement to the effect that the benefits thereunder are on a variable basis. (Added 1971, No. 106,  2, eff. April 22, 1971.) 
 3857. Licensing
(a) No company shall deliver or issue for delivery within this State variable contracts unless it is licensed or organized to do a life insurance or annuity business in this State, and the Commissioner is satisfied that its condition or method of operation in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this state. In this connection, the Commissioner shall consider among other things: (1) the history and financial condition of the company;(2) the character, responsibility and fitness of the officers and directors of the company; and (3) the law and regulation under which the company is authorized in the state of domicile to issue variable contracts. (b) If the company is a subsidiary of an admitted life insurer, or affiliated with such insurer through common management or ownership, it may be deemed by the Commissioner to have met the provisions of this section if either it or the parent or the affiliated insurer meets the requirements hereof. (Added 1971, No. 106,  3, eff. April 22, 1971.) 
 3858. Powers of Commissioner
Notwithstanding any other provision of law, the Commissioner has sole authority to regulate the issuance and sale of variable contracts and to issue such reasonable rules and regulations as may be appropriate to carry out the purposes and provisions of this subchapter. (Added 1971, No. 106,  4, eff. April 22, 1971.) 
 3859. Grace; reinstatement; nonforfeiture
(a) Except for subdivisions 3731(2), (7), (8), and (9), sections 3760-3773, inclusive, section 3813 of this title in the case of a variable life insurance policy, and section 3750 of this title in the case of a variable annuity contract, and except as otherwise provided in this subchapter, all pertinent provisions of this title apply to separate accounts and contracts relating thereto. Any individual variable life insurance contract delivered or issued for delivery in this State shall contain grace, reinstatement, and nonforfeiture provisions appropriate to such a contract. Any group variable life insurance contract delivered or issued for delivery in this State shall contain grace provisions appropriate to such a contract. (b) The reserve liability for variable contracts shall be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees. (Added 1971, No. 106,  5, eff. April 22, 1971; amended 1981, No. 43,  11, eff. April 21, 1981; 2019, No. 103 (Adj. Sess.),  21.) 
 3861. Discrimination and rebates prohibited
A fire or casualty insurance company doing business in the State shall not make or permit any distinction or discrimination in favor of individuals, between insureds of the same class, in the amount or payment of premiums, or rates charged for policies of insurance, or in the dividends or other benefits payable thereon, or in any of the terms and conditions of the contracts it makes; nor shall a fire or casualty insurance company doing business in this State or an agent thereof make a contract of insurance, or agreement as to such contract, other than as plainly expressed in the policy issued thereon; nor shall such company or agent pay or allow, or offer to pay or allow, and no person shall accept as an inducement to insurance, a rebate or premium payable on the policy, or a special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement not specified in the policy contract of insurance. A person who violates any of the provisions of this section shall be subject to an administrative penalty of not more than $2,000.00. (Amended 1995, No. 167 (Adj. Sess.),  8.) 
 3862. Minimum capital stock
A domestic stock fire insurance company shall not be organized with a capital stock less than $200,000.00 paid in, in cash. (Amended 1965, No. 65, eff. May 19, 1965.) 
 3864. Penalty for violation of sections 3463 and 3862
Such an insurance company failing to comply with the requirements of sections 3463 and 3862 of this title, within 60 days after notice from the Commissioner, shall reinsure its outstanding risks and proceed to liquidate its affairs, or the Commissioner may apply to the Superior Court for an injunction against such company and its officers. Subsequent proceedings shall be had in accordance with the general provisions of law relating to insurance companies. 
 3865. Mill mutual; fees
A mutual fire insurance company of another state which insures only factories or mills, or property connected with such factories or mills, may be admitted to transact business in this State upon complying with the conditions set forth in the statutory laws of this State, except that in lieu of all other taxes, licenses, and fees whatsoever, it shall pay to the Commissioner: (1) for filing its charter and bylaws, a fee of $30.00;(2) for filing a statement under oath of its president and secretary, showing its financial condition and standing upon forms furnished by him or her, a fee of $20.00; and annually thereafter on or before March 31, it shall pay to the Commissioner a fee of $20.00 for the filing of its annual statement and an annual license fee of $5.00; (3) its fire marshal tax.
 3866. Returns, rate of tax, exemption
Such companies shall also make annual returns to the Commissioner of Taxes in form satisfactory to him or her, and shall pay to the Commissioner of Taxes annually, in the month of February, a tax at the rate of two percent on gross premium deposits upon policies on risks located in this State in force on December 31 next preceding, after deducting the unabsorbed portion of such premium deposits computed at the average rate of return actually made on annual policies expiring during such year. However, none of the requirements of any resident agent law of this State shall apply to such a company so long as it insures only factories or mills, or property connected with such factories or mills. 
 3867. Proof of loss
A fire insurance policy shall not be void by reason of failure to make and deliver a proof of loss to the insurer, until the insurer notifies the insured in writing to make and deliver proof of loss in accordance with the terms of the policy and the insured fails to make and deliver such proof of loss within 30 days from the time of receiving such notice. An omission or defect in such proof of loss shall not render the policy void or constitute a defense to an action thereon, unless the insurer notifies the insured thereof in writing within 10 days after receiving such proof of loss, particularly specifying in such notice all the omissions and defects in such proof of loss and the insured neglects for 30 days after receiving such notice to make and deliver a new proof of loss wherein such omissions and defects are corrected. 
 3868. When loss due and payable
The amount of the loss under a fire insurance policy shall be due and payable in 60 days after receipt by the insuring company of satisfactory proofs, and the insured may commence an action after the expiration of that time to recover the same. 
 3869. Contracts considered made in Vermont
Every fire insurance contract written on any property located in this State shall be deemed to be made, executed, and delivered in this State. 
 3879. Cancellation of fire and casualty insurance
(a) A notice of cancellation of a policy, to which section 3880 of this title applies, unless that policy is otherwise controlled by chapter 113, subchapter 2 of this title, shall be effective only if it is based on one or more of the following reasons: (1) nonpayment of premium; or(2) fraud or material misrepresentation affecting the policy or in the presentation of a claim thereunder, or violation of any of the terms or conditions of the policy; or (3) substantial increase in hazard provided that cancellation for this reason shall be effective only after prior approval of the Commissioner. (b) This section shall not apply to any policy or coverage which has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy. (c) This section shall not apply to nonrenewal. (Added 1977, No. 223 (Adj. Sess.),  4.)
 3880. Notice of cancellation
(a) No notice of cancellation of a fire, casualty, marine, or multi-peril policy of insurance, unless otherwise provided and controlled by chapter 113, subchapter 2 of this title, shall be effective unless mailed or delivered by the insurer to the named insured at least 45 days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium or substantial increase in hazard at least 15 days notice of cancellation shall be given. In all instances, the reason or reasons for cancellation shall accompany or be included in the notice of cancellation. An insurer shall not be held liable in any claim or suit for damages arising solely from the insurers compliance with the requirement that the reason for cancellation be specified. This section shall not apply to workers compensation policies. (b) The Commissioner shall have the authority to waive any provision of subsection (a) of this section upon the written request of an insurer specifying the reasons therefor. (c) This section shall not apply to nonrenewal. (Added 1977, No. 223 (Adj. Sess.),  5; amended 1981, No. 165 (Adj. Sess.),  1; 1989, No. 171 (Adj. Sess.),  1, eff. Sept. 1, 1990.)
 3881. Notice of nonrenewal
No insurer shall refuse to renew a policy of insurance at its expiration or anniversary if written for a term of more than one year unless such insurer or its agent shall mail or deliver to the named insured at the address shown in the policy, at least 45 days advance notice of its intention not to renew. This section shall not apply if other provisions of chapter 113, subchapter 2 of this title are applicable and controlling or if the insurer has manifested its willingness to renew, or in case of nonpayment of premium, or if the insured fails to pay any advance premium required by the insurer for renewal. However, notwithstanding the failure of an insurer to comply with this section, the policy shall terminate on the effective date of any other insurance policy with respect to any property designated in both policies. Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal. (Added 1977, No. 223 (Adj. Sess.),  6; amended 1989, No. 171 (Adj. Sess.),  2, eff. Sept. 1, 1990.) 
 3882. Renewal policies
(a) If the insurer has the necessary information to issue the renewal policy, the insurer shall confirm in writing at least 45 days prior to expiration its intention to renew the policy and the premium at which the policy is to be renewed. The insured shall have the right to renew the policy at this premium. (b) An insurer not complying with subsection (a) of this section shall grant its insured renewal coverage at the rate or premium in effect under the expiring or expired policy or at rates lawfully in effect on the expiration date, which have been approved by the Commissioner. This shall be done on a pro rata basis and shall continue for 45 days after the insurer confirms renewal coverage and premium. This subsection shall not apply if the insured accepts the renewal policy. (c) An insurer may transfer a policy to an affiliate, as defined by subdivision 3681(1) of this title, upon expiration of the policy without providing notice of nonrenewal, provided that: (1) the rating by A. M. Best or a similarly qualified rating service of the affiliate is equal to or better than the transferring insurer; (2) there is no diminution in the terms and conditions of coverage; and(3) notice of the transfer is provided to the insured at least 45 days prior to the transfer by first class mail, and in connection with such notice the insurer: (A) complies with any requirements of federal law relating to notice of adverse credit determination; (B) includes in the notice of transfer a telephone number of the insurer, or the producer, if any, and a toll free telephone number of the insurer in the case of personal lines policies, where the insured can learn additional information concerning the transfer and the reasons for the transfer; and (C) complies with the other provisions of this section relating to renewal policies. (Added 1977, No. 223 (Adj. Sess.),  7; amended 1989, No. 171 (Adj. Sess.),  3, eff. Sept. 1, 1990; 2007, No. 135 (Adj. Sess.),  1.)
 3883. Notice requirements
When notice required under section 3880 or 3881 of this title is provided by mail, such notice shall be by certified mail, except that in the case of cancellation for nonpayment of premium, notice shall be by certified mail or certificate of mailing. (Added 1989, No. 171 (Adj. Sess.),  5, eff. Sept. 1, 1990.) 
 3884. Required renewals; continuation of agents contracts and brokers accounts
(a) In the event of an insurers cancellation of an agents contract or a brokers account placement authority with such insurer, each policyholder of such an agent or broker shall be entitled to renew his or her policy, upon timely payment of premium, for one additional annual policy period commencing at the next annual anniversary date of the policy; except that an insurer shall have the right to cancel such policy pursuant to section 3879 and chapter 128, subchapter 3 of this title. (b) The terminated agent or broker shall be entitled to receive commissions on account of all business continued or written pursuant to this section at the insurers prevailing commission rate for such line of insurance. However, this subsection shall not apply to an agent who agrees to represent exclusively one insurer or a group of insurers under common management or an agent or broker whose license has been revoked by the commissioner or whose contract or account has been terminated for insolvency, abandonment, gross and willful misconduct, or failure to pay over to the insurer monies due to the insurer after receipt of a written demand therefor. (c) If, after hearing, the Commissioner finds that the financial condition of the insurer is insecure to the extent that continuation of agents contracts and brokers accounts represent a potential hazard to the policyholders in this State, or that any other condition of the insurer represents such a hazard, the Commissioner may issue an order relieving the insurer from its obligation to provide the renewal policies otherwise required by subsection (a) of this section. (Added 1985, No. 230 (Adj. Sess.),  1.) 
 3885. Penalties
A person who violates a provision of section 3879, 3880, 3881, 3882, 3883, or 3884 of this title may be subject to an administrative penalty of $2,000.00 for each violation. (Added 1995, No. 167 (Adj. Sess.),  8a.) 
 3911. Incorporators
Sixty or more persons residing in the State of Vermont who shall each own in good faith real estate of not less than $20,000.00 in value, and collectively own in good faith insurable real estate in the State of Vermont to the value of $1,200,000.00 or more, may apply to become a cooperative insurance corporation on filing with the Commissioner a declaration as hereinafter provided. (Amended 1981, No. 6,  1.) 
 3912. Contents of declaration
Such declaration shall be executed and acknowledged by each of such persons and shall state their intention to form a cooperative insurance corporation for the purpose of engaging in the business of insurance, pursuant to the following provisions, shall show that such persons own in good faith real estate to the amount required and shall also state the town and county in which its principal office is to be located and its corporate name which shall include the word cooperative. (Amended 1981, No. 6,  2.) 
 3913. Bylaws to be filed
There shall be filed with such declaration a copy of the bylaws of such corporation, together with the names and post office addresses of the officers and directors thereof for the first year, and such other information as the Commissioner shall require. 
 3914. Statement as to applications
At the time of such filing, or within one year thereafter, such persons, or those who have been designated as the president and the secretary of such corporation, may file with the Commissioner a sworn statement to the effect that applications for insurance in the amounts respectively indicated in section 3920 of this title have been made in good faith to such corporation. Such statement shall give the names and addresses of such applicants and the amount of insurance applied for by each. In case such corporation charges advance premiums such statement shall show that the premium, specifying the amount, has been paid in full by each such applicant. (Amended 1981, No. 6,  3.) 
 3915. Issuance of certificate of authority
If all the requirements of law have been complied with and the Commissioner is satisfied, after investigation, that such statement is true, he or she shall thereupon file such declaration and cause it to be recorded in his or her office in a book to be kept for that purpose and shall thereupon issue to such corporation a certified copy of the papers so recorded, together with a certificate authorizing such corporation to carry on the business of insurance as indicated in such declaration. A duplicate copy of the certificate so issued shall be filed by the Commissioner with the Secretary of State. 
 3916. Name, status and powers
Corporations to which certificates of authority are so issued shall be known as cooperative insurance corporations and may write the kinds of insurance enumerated in subdivisions 3301(a)(2)-(a)(8), and (a)(10) of this title, provided the corporations surplus shall not be less than $500,000.00 and provided that such company shall first secure approval from the Commissioner to do so, which approval may be upon such terms and conditions as the Commissioner may prescribe. (Amended 1981, No. 6,  4.) 
 3920. Doing business as an assessment cooperative corporation or a nonassessment cooperative corporation
(a) An assessment cooperative corporation shall not be authorized or permitted to begin or do business until it has bona fide applications for insurance on property whose total aggregate dollar exposure value at risk amounts to not less than $2,500,000.00. (b) A nonassessment cooperative insurance corporation is one that has received approval of the Commissioner and has met the requirements of subsections 3930(a) and (b) of this title. (Amended 1981, No. 6,  5.) 
 3925. Bylaws; compulsory provisions
The bylaws of a cooperative insurance corporation to which a certificate of authority is issued shall include substantially the following provisions: (1) The corporate powers of such corporation shall be exercised by a board of directors, who shall be not less than five in number. Such directors shall be divided into classes and a portion only elected each year. They shall be elected for a term of not more than four years each and shall choose a president, a secretary, and such other officers as may be deemed necessary. After the first year, the directors shall be chosen at an annual meeting to be held on the second Tuesday of January, unless some other day is designated in such bylaws, at which meeting each person insured shall have one vote and may be entitled to vote by proxy under such rules and regulations as may be prescribed by the bylaws. (2) Such corporation shall keep proper books, including a policy register, in which the secretary shall enter the complete record of all its transactions and those of the board of directors and executive committee. Such books shall at all times show fully and truly the condition, affairs, and business of such corporation and shall be open for inspection by every person insured, each day from nine oclock in the forenoon to four oclock in the afternoon, Saturdays, Sundays, and legal holidays excepted. (3) If authorized as an assessment cooperative insurance corporation as outlined in subsection 3920(a) of this title, such corporation may assess for the purposes specified in section 3927 of this title, and the bylaws shall specify the manner of giving notice of such assessments, which may be either personal or by mail, and, if by mail, shall be deemed complete if such notice is deposited, postage prepaid, in the post office at the place where the principal office of the corporation is located, directed to the person insured at his or her last known place of residence or business. A person insured who neglects or refuses to pay his or her assessments, for that reason or for any other reason satisfactory to the board of directors or its executive committee, may be excluded from such corporation and, when thus excluded, the secretary shall cancel or withdraw his or her policy or policies, subject to the cancellation provisions in sections 3879 through 3882 and chapter 113, subchapter 2 of this title, provided that such person shall remain liable for his or her pro rata share of losses and expenses incurred on or before the date of his or her exclusion and for the penalty herein provided, in case an action is brought against him or her. If a member of such corporation is so excluded and his or her policy so canceled, the secretary shall forthwith enter such cancellation and the date thereof on the records kept in the office of the corporation and serve notice of such cancellation on the person so excluded, as provided herein for the service of notice of assessment. However, in such event, the person so excluded or whose policy is so canceled shall be entitled to the repayment of an equitable portion of the unearned paid premium on such policy. The officers of such corporation shall proceed to collect all assessments within 30 days after the expiration of the notice to pay the same. Neglect or refusal on their part so to proceed or to perform any of the duties imposed on them by law shall render them individually liable for the amount lost to any person, due to such neglect or refusal, and an action may be maintained by such person against such officers to collect such amount. An action may be brought by the corporation against a person insured therein to recover all assessments which he or she may neglect or refuse to pay, and there may be recovered from him or her in such action both the amount so assessed, with lawful interest thereon, and, as a penalty for such neglect or refusal, 50 percent of such assessment in addition thereto. (4) Any person insured by an assessment cooperative insurance corporation may withdraw therefrom at any time by giving written notice to the corporation, stating the date of withdrawal, paying his or her share of all claims then existing against such corporation, and surrendering his or her policy or policies. (5) Any person insured by a nonassessment cooperative insurance corporation may withdraw from it at any time by giving written notice to the corporation stating the date of withdrawal and surrendering his or her policy or policies. (6) Persons residing or owning property within any state where the corporation is authorized to do business may be insured upon the same terms and conditions as original members and such other terms as may be prescribed in the bylaws of the corporation. (7) The bylaws of such corporation may be amended at any time. (Amended 1981, No. 6,  7; 1991, No. 184 (Adj. Sess.); 2003, No. 20,  2; 2017, No. 80,  8.)
 3926. Policy provisions
The policies issued by a cooperative insurance corporation shall conform to the regulations prescribed therefor by the Commissioner. Each such policy shall indicate clearly, in words prominently displayed at the top of the first page or across the page thereof, that such policy is issued on the cooperative plan; and if issued on an assessment plan, shall include a provision in the body of the policy to the effect that its acceptance by the person insured shall bind him or her to pay all assessments which may be levied thereon. The face of each such policy shall display in not less than 10 point bold type the following statement: THIS POLICY MAY BE SUBJECT TO FUTURE SPECIAL ASSESSMENT OF ADDITIONAL PREMIUM UP TO A MAXIMUM OF ONE-HALF THE REGULAR ANNUAL ASSESSMENT. Each such policy shall include a copy of the bylaws of such corporation or such other matter as the Commissioner shall prescribe. (Amended 1981, No. 6,  8.) 
 3927. Assessment cooperative insurance corporations
The following provisions shall affect such corporations doing business on the assessment plan: (1) Such corporation may issue policies of insurance as enumerated in section 3916 of this title. (2) Such corporation may classify risks covered under these types of insurance at the time of the issuance of the policy, or at subsequent times and issue policies under different rates, and it may collect regular assessments on such risks either on an annual basis or for whatever length of time the policy may be issued. The amounts of such regular assessments shall be sufficient to pay for the period assessed, each members pro rata share, based on the risk classification and amount of insurance, of the estimated amount necessary to cover losses, expenses, repayment of debt, and contribution to surplus as may be permitted by the bylaws. (3) Such corporation may borrow, on the credit of the corporation, such funds as are required to pay for extraordinary losses or expenses subject to the approval of the board of directors or as may be provided in the bylaws of such corporation, subject to the maximum limit stated in subdivision (4) of this section. If deemed for the best interest of the corporation, it may estimate the amount necessary to pay all losses and expenses and contributions to surplus for the current year and to supply any deficiency in the preceding year, subject to the maximum limit stated in subdivision (4) of this section, and assess and collect the same from the members. Each assessment shall be made upon all policyholders in proportion to each policyholders regular annual assessment. The expense of collecting assessments may be regulated by the bylaws. (4) Such corporation may levy a special assessment to pay for such members pro rata share of unexpected losses, expenses and contributions to surplus, based upon the risk classification and amount of insurance at the time of the assessment, as may be permitted by the bylaws, however, in no case shall the sum total of all special assessments during any one year exceed 50 percent of the equivalent of one annual regular assessment. The expense of collecting assessments may be regulated by the bylaws. (Amended 1981, No. 6,  9.) 
 3929. Loss payment
A nonassessment cooperative insurance corporation may borrow on the credit of the corporation sufficient funds to pay any loss. (Amended 1981, No. 6,  10.) 
 3930. Nonassessment cooperative insurance corporations to commence business
(a) When a cooperative insurance corporation reaches and thereafter maintains an unimpaired free surplus position of no less than $1,000,000, it may apply to the Commissioner for relief from the provisions of subdivisions 3925(3)-(5) and sections 3926 and 3927 of this title and may request approval to become nonassessable. The Commissioner may apply the same standards for admission as are found in chapter 101 of this title applicable to the formation of a domestic mutual insurer. Upon the Commissioners acceptance of revised articles of incorporation, revised bylaws, and a special financial statement for the calendar year period ending with the last calendar quarter before the request, the Commissioner may allow the corporation to operate as a nonassessment cooperative insurance corporation. The Commissioner may require a statutory financial examination to be conducted at the companys expense prior to final approval. (b) The Commissioner may prescribe additional surplus, if he or she determines that the kind of insurance to be transacted so requires. (Added 1981, No. 6,  11.) 
 3931. Application of provisions
(a) All the provisions of this part, insofar as consistent with the provisions of this subchapter, shall apply to cooperative insurance corporations. (b) Cooperative fire insurance corporations formed and operated under the provisions set forth in chapter 105, subchapter 2 of this title shall be considered to be mutual insurance companies for the purpose of engaging in any or all of the transactions authorized by chapter 101 of this title, including those provisions set forth in subchapters 3 and 3A of that chapter. (Added 1981, No. 6,  12; amended 1999, No. 86 (Adj. Sess.),  7, eff. April 27, 2000.) 
 3932. Definitions
For the purposes of this subchapter:(1) Regular assessment shall mean that amount charged to members, in advance or arrears, to pay ordinary losses and expenses for one year or the term of the policy and to make a contribution to surplus. (2) Assessment cooperative insurance corporation means a corporation meeting the financial requirements of section 3916 of this title, which charges its insureds regular assessments necessary to pay losses, meet expenses, and contribute to surplus. (3) Nonassessment cooperative insurance corporation means a corporation meeting the financial requirements of sections 3916, 3930, and 3931 of this title, which charges its insureds premiums in advance necessary to pay losses, meet expenses, and contribute to surplus. (4) Special assessment means an additional charge to the policyholder, beyond the regular assessment or premium charge, to satisfy unexpected losses or expenses, or contributions to surplus. (Added 1981, No. 6,  13.) 
 3961. Valuation of property
Whenever a fire insurance company shall write a policy covering a building in this State and shall attach thereto the so-called co-insurance clause, or any similar clause requiring the insured to carry insurance in amount equal to any percentage of the value of such building, the insured may ask for a valuation of such building insured, which valuation may be agreed upon in writing by the insuring company and the insured, and shall be the valuation of the property insured for the purpose of fixing the liability of the company during the life of the policy. 
 3962. Application to Commissioner
In case the insuring company and the insured do not agree on the valuation, as provided in section 3961 of this title, the insured may file with the Commissioner a request for a valuation, which shall contain a complete description of the building showing location, the name of the company, and the agent, if any, through whom the insurance is placed and the date of the policy. 
 3963. Time and place for making valuation
Upon the receipt of such a request, the Commissioner shall appoint a time and place for making such valuation which shall be not later than 15 days thereafter, unless an earlier date is agreed upon by the parties interested, and he or she shall give proper notice thereof to all concerned. 
 3964. Appointment of appraisers to determine valuation
The owner of a building and the insurance company or agent shall each file with the Commissioner a list of not less than three disinterested persons competent to act as appraisers of the building described in the notice. The Commissioner shall select one person from each of the lists so submitted who shall together act as appraisers of the property, and, in case these two cannot agree, he or she shall select a third competent and disinterested person who shall act as third appraiser only as to matters regarding which the two appraisers first appointed cannot agree. 
 3965. Appraisers award and expenses
An award in writing of any two appraisers, when filed with the Commissioner, shall determine the sound value of the building. Each of the two appraisers first appointed shall be paid by the party nominating him or her and the third appraiser shall be paid by the parties equally. 
 3966. Duration of valuation fixed
The value of any building fixed as provided in sections 3964 and 3965 of this title shall be considered the true value of the building during the term for which any fire insurance policy is issued to cover thereon, if issued within three years from the date of such award, and such value shall continue as the basis of valuation for the purpose of ascertaining the amount of insurance required under a co-insurance clause until a new valuation has been made on an application by the insured or by the company, or agent placing the insurance thereon, provided that a new valuation shall not be required oftener than once in three years. 
 3967. Effect on rate
The rate charged for a fire insurance policy covering a building valued in accordance with the provisions of section 3964 of this title shall not be increased above the rate fixed for the same form of policy, containing or having attached thereto a co-insurance clause, where no request has been made to have the value of the property fixed. 
 3968. Penalty for violations
If an insurance company violates a provision of sections 3961-3967 of this title or if the Commissioner is satisfied, after a hearing, that a company declines or refuses to write insurance on any building because of the requirement that the value of such building shall be agreed upon as provided in section 3964 of this title, the Commissioner shall suspend its authority to do business in this State for such period, not exceeding one year, as he or she may deem advisable. 
 4001. Assessments; accumulations; limitation
Domestic mutual fire insurance companies, in any year in which the assessments required to pay losses and expenses would not equal five percent of the face of its premium notes, may lay assessments not to exceed five percent and carry the amount not necessary to pay losses and expenses of such year to a surplus account for the payment of future fire losses and expenses. Such surplus shall at no time exceed 10 percent of the face of the premium notes then in force. 
 4002. Use of fund
In a year in which the fire losses and expenses of a company accumulating a surplus under the provisions of section 4001 of this title shall exceed the amount of a three percent assessment on the face of the premium notes assessable for such losses and expenses, such excess, to an amount not exceeding three percent by such premium notes, in the discretion of the directors of such company, may be taken from such surplus and applied towards the payment of such excess of losses and expenses. 
 4061. Definition
The term health insurance as used herein includes any policy or contract covering the kind or kinds of insurance described in subdivision 3301(a)(2) of this title. 
 4062. Filing and approval of policy forms and premiums
(a)(1) No policy of health insurance or certificate under a policy filed by an insurer offering health insurance as defined in subdivision 3301(a)(2) of this title, a nonprofit hospital or medical service corporation, a health maintenance organization, or a managed care organization and not exempted by subdivision 3368(a)(4) of this title shall be delivered or issued for delivery in this State, nor shall any endorsement, rider, or application that becomes a part of any such policy be used, until a copy of the form and of the rules for the classification of risks has been filed with the Department of Financial Regulation and a copy of the premium rates has been filed with the Green Mountain Care Board; and the Green Mountain Care Board has issued a decision approving, modifying, or disapproving the proposed rate. (2)(A) The Green Mountain Care Board shall review rate requests and shall approve, modify, or disapprove a rate request within 90 calendar days after receipt of an initial rate filing from an insurer. If an insurer fails to provide necessary materials or other information to the Board in a timely manner, the Board may extend its review for a reasonable additional period of time, not to exceed 30 calendar days. (B) Prior to the Boards decision on a rate request, the Department of Financial Regulation shall provide the Board with an analysis and opinion on the impact of the proposed rate on the insurers solvency and reserves. (3) The Board shall determine whether a rate is affordable, promotes quality care, promotes access to health care, protects insurer solvency, and is not unjust, unfair, inequitable, misleading, or contrary to the laws of this State. In making this determination, the Board shall consider the analysis and opinion provided by the Department of Financial Regulation pursuant to subdivision (2)(B) of this subsection. (b)(1) In conjunction with a rate filing required by subsection (a) of this section, an insurer shall file a plain language summary of the proposed rate. All summaries shall include a brief justification of any rate increase requested, the information that the Secretary of the U.S. Department of Health and Human Services (HHS) requires for rate increases over 10 percent, and any other information required by the Board. The plain language summary shall be in the format required by the Secretary of HHS pursuant to the Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, and shall include notification of the public comment period established in subsection (c) of this section. In addition, the insurer shall post the summaries on its website. (2)(A) In conjunction with a rate filing required by subsection (a) of this section, an insurer shall disclose to the Board: (i) for all covered prescription drugs, including generic drugs, brand-name drugs excluding specialty drugs, and specialty drugs dispensed at a pharmacy, network pharmacy, or mail-order pharmacy for outpatient use: (I) the percentage of the premium rate attributable to prescription drug costs for the prior year for each category of prescription drugs; (II) the year-over-year increase or decrease, expressed as a percentage, in per-member, per-month total health plan spending on each category of prescription drugs; and (III) the year-over-year increase or decrease in per-member, per-month costs for prescription drugs compared to other components of the premium rate; and (ii) the specialty tier formulary list.(B) The insurer shall provide, if available, the percentage of the premium rate attributable to prescription drugs administered by a health care provider in an outpatient setting that are part of the medical benefit as separate from the pharmacy benefit. (C) The insurer shall include information on its use of a pharmacy benefit manager, if any, including which components of the prescription drug coverage described in subdivisions (A) and (B) of this subdivision (2) are managed by the pharmacy benefit manager, as well as the name of the pharmacy benefit manager or managers used. (3)(A) Upon request, in conjunction with a rate filing required by subsection (a) of this section, an insurer shall provide to the Board detailed information about the insurers payments to specific providers, which may include fee schedules, payment methodologies, and other payment information specified by the Board. (B) Confidential business information and trade secrets received from an insurer pursuant to subdivision (A) of this subdivision (3) shall be exempt from public inspection and copying under 1 V.S.A.  317(c)(9) and shall be kept confidential, except that the Board may disclose or release information publicly in summary or aggregate form if doing so would not disclose confidential business information or trade secrets. (C) Notwithstanding 1 V.S.A. chapter 5, subchapter 2 (Vermont Open Meeting Law), the Board may examine and discuss confidential information outside a public hearing or meeting. (c)(1) The Board shall provide information to the public on the Boards website about the public availability of the filings and summaries required under this section. (2)(A) The Board shall post the rate filings pursuant to subsection (a) of this section and summaries pursuant to subsection (b) of this section on the Boards website within five calendar days following filing. The Board shall also establish a mechanism by which members of the public may request to be notified automatically each time a proposed rate is filed with the Board. (B) The Board shall provide an electronic mechanism for the public to comment on all rate filings. The Board shall accept public comment on each rate filing from the date on which the Board posts the rate filing on its website pursuant to subdivision (A) of this subdivision (2) until 15 calendar days after the Board posts on its website the analyses and opinions of the Department of Financial Regulation and of the Boards consulting actuary, if any, as required by subsection (d) of this section. The Board shall review and consider the public comments prior to issuing its decision. (3)(A) In addition to the public comment provisions set forth in this subsection, the Office of the Health Care Advocate established in 18 V.S.A. chapter 229, acting on behalf of health insurance consumers in this State, may, within 30 calendar days after the Board receives an insurers rate request pursuant to this section, submit to the Board, in writing, suggested questions regarding the filing for the Board to provide to its contracting actuary, if any. (B) The Office of the Health Care Advocate may also submit to the Board written comments on an insurers rate request. The Board shall post the comments on its website and shall consider the comments prior to issuing its decision. (d)(1) No later than 60 calendar days after receiving an insurers rate request pursuant to this section, the Green Mountain Care Board shall make available to the public the insurers rate filing, the Departments analysis and opinion of the effect of the proposed rate on the insurers solvency, and the analysis and opinion of the rate filing by the Boards contracting actuary, if any. (2) The Board shall post on its website, after redacting any confidential or proprietary information relating to the insurer or to the insurers rate filing: (A) all questions the Board poses to its contracting actuary, if any, and the actuarys responses to the Boards questions; and (B) all questions the Board, the Boards contracting actuary, if any, or the Department poses to the insurer and the insurers responses to those questions. (e) Within the time period set forth in subdivision (a)(2)(A) of this section, the Board shall: (1) conduct a public hearing, at which the Board shall:(A) call as witnesses the Commissioner of Financial Regulation or designee and the Boards contracting actuary, if any, unless all parties agree to waive such testimony; and (B) provide an opportunity for testimony from the insurer; the Office of the Health Care Advocate; and members of the public; (2) at a public hearing, announce the Boards decision of whether to approve, modify, or disapprove the proposed rate; and (3) issue its decision in writing.(f)(1) The insurer shall notify its policyholders of the Boards decision in a timely manner, as defined by the Board by rule. (2) Rates shall take effect on the date specified in the insurers rate filing.(3) If the Board has not issued its decision by the effective date specified in the insurers rate filing, the insurer shall notify its policyholders of its pending rate request and of the effective date proposed by the insurer in its rate filing. (g) An insurer, the Office of the Health Care Advocate, and any member of the public with party status, as defined by the Board by rule, may appeal a decision of the Board approving, modifying, or disapproving the insurers proposed rate to the Vermont Supreme Court. (h)(1) The authority of the Board under this section shall apply only to the rate review process for policies for major medical insurance coverage and shall not apply to the policy forms for major medical insurance coverage or to the rate and policy form review process for policies for specific disease, accident, injury, hospital indemnity, dental care, vision care, disability income, long-term care, student health insurance coverage, Medicare supplemental coverage, or other limited benefit coverage; to short-term, limited-duration health insurance coverage; or to benefit plans that are paid directly to an individual insured or to his or her assigns and for which the amount of the benefit is not based on potential medical costs or actual costs incurred. Premium rates and rules for the classification of risk for Medicare supplemental insurance policies shall be governed by sections 4062b and 4080e of this title. (2) The policy forms for major medical insurance coverage, as well as the policy forms, premium rates, and rules for the classification of risk for the other lines of insurance described in subdivision (1) of this subsection shall be reviewed and approved or disapproved by the Commissioner. In making his or her determination, the Commissioner shall consider whether a policy form, premium rate, or rule is affordable and is not unjust, unfair, inequitable, misleading, or contrary to the laws of this State; and, for a policy form for major medical insurance coverage, whether it ensures equal access to appropriate mental health care in a manner equivalent to other aspects of health care as part of an integrated, holistic system of care. The Commissioner shall make his or her determination within 30 days after the date the insurer filed the policy form, premium rate, or rule with the Department. At the expiration of the 30-day period, the form, premium rate, or rule shall be deemed approved unless prior to then it has been affirmatively approved or disapproved by the Commissioner or found to be incomplete. The Commissioner shall notify an insurer in writing if the insurer files any form, premium rate, or rule containing a provision that does not meet the standards expressed in this subsection. In such notice, the Commissioner shall state that a hearing will be granted within 20 days upon the insurers written request. (3) [Repealed.](i) Notwithstanding the procedures and timelines set forth in subsections (a) through (e) of this section, the Board may establish, by rule, a streamlined rate review process for certain rate decisions, including proposed rates affecting fewer than a minimum number of covered lives and proposed rates for which a de minimis increase, as defined by the Board by rule, is sought. (Amended 1983, No. 238 (Adj. Sess.),  4; 1989, No. 106,  3; 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 48,  15, eff. Jan. 1, 2012; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2011, No. 171 (Adj. Sess.),  25, eff. May 16, 2012; 2013, No. 79,  5c, eff. Jan. 1, 2014; 2013, No. 144 (Adj. Sess.),  5, eff. May 27, 2014; 2013, No. 179 (Adj. Sess.),  E.345.1; 2015, No. 54,  31; 2017, No. 131 (Adj. Sess.),  1, eff. May 16, 2018; 2017, No. 193 (Adj. Sess.),  7, eff. May 30, 2018; 2017, No. 200 (Adj. Sess.),  11; 2019, No. 159 (Adj. Sess.),  6, eff. Nov. 1, 2020.) 
 4062a. Filing fees
Each filing of a policy, contract, or document form or premium rates or rules, submitted pursuant to section 4062 of this title, shall be accompanied by payment to the Commissioner or the Green Mountain Care Board, as appropriate, of a nonrefundable fee of $150.00. (Added 1985, No. 236 (Adj. Sess.),  6; amended 1991, No. 166 (Adj. Sess.),  2; 2013, No. 79,  5d, eff. Jan. 1, 2014.) 
 4062b. Medicare supplemental health insurance
(a) Within five days of receiving a request for approval of any composite average rate increase in excess of three percent, or any other coverage changes which the Commissioner determines will have a comparable impact on cost or availability of coverage for a Medicare supplemental insurance policy issued by any group or nongroup health insurance company, hospital or medical service organization, or health maintenance organization, with 5,000 or more total lives in the Vermont Medicare supplement market, the Commissioner shall notify the Department of Disabilities, Aging, and Independent Living of the proposed premium increase. A composite average rate is the enrollment-weighted average rate increase of all plans offered by a carrier. (b) Within five days after receiving notification pursuant to subsection (a) of this section, the Department of Disabilities, Aging, and Independent Living shall inform the members of the Advisory Board established pursuant to 33 V.S.A.  505 of the proposed premium increase. (c)(1) The Commissioner shall not approve any request to increase Medicare supplemental insurance premium rates unless the amount of the rate increase complies with the statutory standards for approval under sections 4062, 4513, 4584, and 5104 of this title. Any approved rate increase shall not be based on an unreasonable change in loss ratio from the previous year, unless the Commissioner makes written findings that such change is necessary to prevent a substantial adverse impact on the financial condition of the insurer. In acting on such rate increase requests, the Commissioner may deny the request, approve the rate increase as requested, or approve a rate increase in an amount different from the increase requested. A decision by the Commissioner other than an approval of the rate requested may be appealed by the insurer, provided that the burden of proof shall be on the insurer to show that the approved rate does not meet the statutory standards established under this subsection. (2) Before acting on the rate increase requested, the Commissioner may make such examination or investigation as he or she deems necessary, including where applicable the review process set forth in subdivision (3) of this subsection. (3) In reviewing any Medicare supplement rate increase for which an independent analysis has been performed pursuant to 33 V.S.A.  6706 and wherein the carriers requested composite average increase, the independent experts recommended composite average rate increase, or the Department actuarys recommended composite average rate increase differ by two percentage points or more, the Commissioner shall hold a public hearing where the insurer, the Departments actuary, the independent expert, any intervenor, and the public will have the opportunity to present written and oral testimony and will be available to answer questions of the Commissioner and those present. The hearing shall be noticed and held at a time and place so as to facilitate public participation, and shall be recorded and become part of the record before the Commissioner. In the Commissioners discretion, the hearing may be conducted through interactive television. If the carriers requested composite average increase, the independent experts recommended composite average increase, or the Department actuarys recommended composite average increase differs by less than two percentage points, the Department and the parties shall confer by conference call, or by any other available media, to review the rate requests and recommendations. However, a public hearing may be held at the Commissioners discretion for good cause shown. (4) In any review held in accordance with this subsection, the Commissioner shall permit intervention by any person that the Commissioner determines will materially advance the interests of the insured individuals. The intervenor shall have access to, and may use the information of the independent expert appointed under 33 V.S.A.  6706. The reasonable and necessary cost of intervention as determined by the Commissioner shall be paid by the affected policyholders or certificate holders. The maximum payment shall be $2,500.00 except when waived by the Commissioner for good cause shown. The $2,500.00 maximum amount may be adjusted to reflect, at the Commissioners discretion, appropriate inflation factors. (5) Nonproprietary, relevant information in any Medicare supplement rate filing, including any analysis by the Departments actuary and the independent expert, shall be made available to the public upon request. (Added 1997, No. 13,  1; amended 1999, No. 43,  1; 2003, No. 18,  1.) 
 4062c. Compliance with federal law
(a) Except as otherwise provided in this title, health insurers, hospital and medical service corporations, and health maintenance organizations that issue, sell, renew, or offer health insurance coverage in Vermont shall comply with the requirements of the Health Insurance Portability and Accountability Act of 1996, as amended from time to time (42 U.S.C., Chapter 6A, Subchapter XXV), and the Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152. The Commissioner shall enforce such requirements pursuant to the Commissioners authority under this title. (b)(1) Health insurers, hospital and medical service corporations, health maintenance organizations, and health care providers, as that term is defined in 18 V.S.A.  9432, shall comply with the requirements of the No Surprises Act, Pub. L. No. 116-260, Division BB, Title I, as amended from time to time. (2) The Commissioner shall enforce the requirements of the No Surprises Act as they apply to health insurers, hospital and medical service corporations, health maintenance organizations, and health care providers, to the extent permitted under federal law, pursuant to the Commissioners authority under this title. The Commissioner may also refer cases of noncompliance to the U.S. Department of Health and Human Services under the terms of a collaborative enforcement agreement, or to the Office of the Vermont Attorney General. (Added 1997, No. 24,  1; amended 2009, No. 42,  32; 2009, No. 128 (Adj. Sess.),  9, eff. May 27, 2010; 2021, No. 137 (Adj. Sess.),  1, eff. July 1, 2022.) 
 4062e. Compliance with Medicaid recovery provisions
A health insurer as defined in 33 V.S.A.  1900 that issues, sells, renews, or offers health insurance coverage in Vermont or who is required to be licensed or registered with the Department shall comply with the requirements of 33 V.S.A.  1907, 1908, 1909, and 1910. The Commissioner shall enforce such requirements pursuant to his or her authority under this title. (Added 2007, No. 65,  110e; amended 2015, No. 97 (Adj. Sess.),  13.) 
 4062f. Discretionary clauses prohibited
(a) The purpose of this section is to ensure that health insurance benefits, disability income protection coverage, and life insurance benefits are contractually guaranteed and to avoid the conflict of interest that may occur when the carrier responsible for providing benefits has discretionary authority to decide what benefits are due. Nothing in this section shall be construed to impose any requirement or duty on any person other than a health insurer or an insurer offering disability income protection coverage or life insurance. (b) As used in this section:(1) Disability income protection coverage means a policy, contract, certificate, or agreement that provides for weekly, monthly, or other periodic payments for a specified period during the continuance of disability resulting from illness, injury, or a combination of illness and injury. (2) Health care services means services for the diagnosis, prevention, treatment, cure, or relief of a health condition, illness, injury, or disease. (3) Health insurer means an insurance company that provides health insurance as defined in subdivision 3301(a)(2) of this title, a nonprofit hospital or medical service corporation, a managed care organization, a health maintenance organization, and, to the extent permitted under federal law, any administrator of an insured, self-insured, or publicly funded health care benefit plan offered by a public or private entity; as well as entities offering policies for specific disease, accident, injury, hospital indemnity, dental care, disability income, long-term care, and other limited benefit coverage. (4) Life insurance means a policy, contract, certificate, or agreement that provides life insurance as defined in subdivision 3301(a)(1) of this title. (c) No policy, contract, certificate, or agreement offered or issued in this State by a health insurer to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services may contain a provision purporting to reserve discretion to the health insurer to interpret the terms of the contract or to provide standards of interpretation or review that are inconsistent with the laws of this State, and on and after July 1, 2012, any such provision in a policy, contract, certificate, or agreement shall be null and void. (d) No policy, contract, certificate, or agreement offered or issued in this State providing for disability income protection coverage may contain a provision purporting to reserve discretion to the insurer to interpret the terms of the contract or to provide standards of interpretation or review that are inconsistent with the laws of this State, and on and after July 1, 2012, any such provision in a policy, contract, certificate, or agreement shall be null and void. (e) No policy, contract, certificate, or agreement of life insurance offered or issued in this State may contain a provision purporting to reserve discretion to the insurer to interpret the terms of the contract or to provide standards of interpretation or review that are inconsistent with the laws of this State, and on and after July 1, 2012, any such provision in a policy, contract, certificate, or agreement shall be null and void. (Added 2011, No. 171 (Adj. Sess.),  31.) 
 4063. Form and contents of policy
No policy of individual health insurance shall be delivered or issued for delivery to any person in this State unless: (1) the entire money and other considerations therefor are expressed therein;(2) the time at which the insurance takes effect and terminates is expressed therein;(3) it purports to insure only one person, except that a policy may insure, originally or by subsequent amendment, upon the application of an adult member of a family who shall be deemed the policyholder, any two or more eligible members of that family, including husband, wife, dependent children or any children under a specified age which shall not exceed 19 years, and any other person dependent upon the policyholder; (4) the style, arrangement, and overall appearance of the policy give no undue prominence to any portion of the text, and unless every printed portion of the text of the policy and of any endorsements or attached papers is plainly printed in light-faced type of a style in general use, the size of which shall be uniform and not less than 10-point with a lower-case unspaced alphabet length not less than 120-point (the text shall include all printed matter except the name and address of the insurer, name or title of the policy, the brief description if any, and captions and subcaptions); (5) the exceptions and reductions of indemnity are set forth in the policy and, except those which are set forth in sections 4065 and 4066 of this title, are printed, at the insurers option, either included with the benefit provision to which they apply, or under an appropriate caption such as EXCEPTIONS, or EXCEPTIONS AND REDUCTIONS, provided that if an exception or reduction specifically applies only to a particular benefit of the policy, a statement of such exception or reduction shall be included with the benefit provision to which it applies; (6) each such form, including riders and endorsements, shall be identified by a form number in the lower left-hand corner of the first page thereof; (7) it contains no provision purporting to make any portion of the charter, rules, constitution, or bylaws of the insurer a part of the policy unless such portion is set forth in full in the policy, except in the case of the incorporation, or reference to, a statement of rates or classification of risks, or short-rate table filed with the Commissioner; and (8) there is prominently printed on the first page thereof or is attached thereto a notice to the effect that during a period of 30 days from the date the policy is delivered to persons eligible for Medicare by reason of age and 10 days from the date of delivery to all other persons, the policy may be surrendered to insurer together with written request for cancellation of the policy, and in such event the insurer will refund any premium paid therefor including any policy fees or other charges; provided, however, that this subdivision shall not apply to single premium nonrenewable policies insuring against accident only or medical costs or accidental bodily injury only. (Amended 1959, No. 157; 1981, No. 19.) 
 4063a. Coverage for civil unions
(a) As used in this section:(1) Dependent coverage means family coverage or coverage for one or more persons.(2) Party to a civil union is defined for purposes of this section as under 15 V.S.A.  1201.(3) Insurer shall mean a health insurer as defined in 18 V.S.A.  9402.(b) Notwithstanding any law to the contrary, insurers shall provide dependent coverage to parties to a civil union that is equivalent to that provided to married insureds. An individual or group health insurance policy which provides coverage for a spouse or family member of the insured shall also provide the equivalent coverage for a party to a civil union. (Added 1999, No. 91 (Adj. Sess.),  18, eff. Jan. 1, 2001.) 
 4063b. Coverage for employees of an employer domiciled outside Vermont
(a) As used in this section:(1) Health insurance shall have the same meaning as group health insurance policy or subscriber contract in section 4091a of this title. (2) Marriage shall have the same meaning as in 15 V.S.A.  8.(3) Party to a civil union shall have the same meaning as in 15 V.S.A.  1201.(b) To the extent permitted under federal law, health insurance coverage provided to Vermont residents who work for an employer domiciled outside Vermont shall not distinguish between parties to a civil union, married same-sex couples, and married opposite-sex couples. (Added 2013, No. 35,  1.) 
 4064. Provisions applying to policies delivered in another state
If any policy is issued by an insurer domiciled in this State for delivery to a person residing in another state, and if the official having responsibility for the administration of the insurance laws of such other state shall have advised the Commissioner that any such policy is not subject to approval or disapproval by such official, the Commissioner may by ruling require that such policy meet the standards set forth in sections 4065, 4066, and 4067 of this title. 
 4065. Required standard policy provisions
Except as provided in section 4067 of this title, each such policy delivered or issued for delivery to any person in this State shall contain the provisions specified in this section in the words in which the same appear in this section; provided, however, that the insurer may, at its option, substitute for one or more of such provisions corresponding provisions of different wording approved by the Commissioner which are in each instance not less favorable in any respect to the insured or the beneficiary. Such provisions shall be preceded individually by the caption appearing in this section or, at the option of the insurer, by such appropriate individual or group captions or subcaptions as the Commissioner may approve: (1) ENTIRE CONTRACT; CHANGES: This policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. No change in this policy shall be valid until approved by an executive officer of the insurer and unless such approval be endorsed hereon or attached hereto. No agent has authority to change this policy or to waive any of its provisions. (2) TIME LIMIT ON CERTAIN DEFENSES: (a) After three years from the date of issue of this policy no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy, shall be used to void the policy or to deny a claim for loss incurred or disability (as defined in the policy) commencing after the expiration of such three year period. After this policy has been in force for a period of three years during the lifetime of the insured (excluding any period during which the insured is disabled), it shall become incontestable as to the statements contained in the application.) (b) No claim for loss incurred or disability (as defined in the policy) commencing after three years from the date of issue of this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy. (3) GRACE PERIOD: A grace period of . . . . (insert a number not less than 7 for weekly premium policies, 10 for monthly premium policies and 31 for all other policies) days will be granted for the payment of each premium falling due after the first premium, during which grace period the policy shall continue in force. (A policy which contains a cancellation provision may add, at the end of the above provision, subject to the right of the insurer to cancel in accordance with the cancellation provision hereof, A policy in which the insurer reserves the right to refuse any renewal shall have, at the beginning of the above provision, Unless not less than five days prior to the premium due date the insurer has delivered to the insured or has mailed to his or her last address as shown by the records of the insurer written notice of its intention not to renew this policy beyond the period for which the premium has been accepted.) (4) REINSTATEMENT: If any renewal premium be not paid within the time granted the insured for payment, a subsequent acceptance of premium by the insurer or by any agent duly authorized by the insurer to accept such premium, without requiring in connection therewith an application for reinstatement, shall reinstate the policy; provided, however, that if the insurer or such agent requires an application for reinstatement and issues a conditional receipt for the premium tendered, the policy will be reinstated upon approval of such application by the insurer or, lacking such approval, upon the 45th day following the date of such conditional receipt unless the insurer has previously notified the insured in writing of its disapproval of such application. The reinstated policy shall cover only loss resulting from such accidental injury as may be sustained after the date of reinstatement and loss due to such sickness as may begin more than ten days after such date. In all other respects the insured and insurer shall have the same rights thereunder as they had under the policy immediately before the due date of the defaulted premium, subject to any provisions endorsed hereon or attached hereto in connection with the reinstatement. Any premium accepted in connection with a reinstatement shall be applied to a period for which premium has not been previously paid, but not to any period more than sixty days prior to the date of reinstatement. (The last sentence of the above provision may be omitted from any policy which the insured has the right to continue in force subject to its terms by the timely payment of premiums (1) until at least age 50, or (2) in the case of a policy issued after age 44, for at least five years from its date of issue.) (5) NOTICE OF CLAIM: Written notice of claim must be given to the insurer within 20 days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary to the insurer at . . . . (insert the location of such office as the insurer may designate for the purpose), or to any authorized agent of the insurer, with information sufficient to identify the insured, shall be deemed notice to the insurer. (In a policy providing a loss-of-time benefit which may be payable for at least two years, an insurer may at its option insert the following between the first and second sentences of the above provision: Subject to the qualifications set forth below, if the insured suffers loss of time on account of disability for which indemnity may be payable for at least two years, he or she shall, at least once in every six months after having given notice of claim, give to the insurer notice of continuance of said disability, except in the event of legal incapacity. The period of six months following any filing of proof by the insured or any payment by the insurer on account of such claim or any denial of liability in whole or in part by the insurer shall be excluded in applying this provision. Delay in the giving of such notice shall not impair the insureds right to any indemnity which would otherwise have accrued during the period of six months preceding the date on which such notice is actually given.) (6) CLAIM FORMS: The insurer, upon receipt of a notice of claim, will furnish to the claimant such forms as are usually furnished by it for filing proofs of loss. If such forms are not furnished within 15 days after the giving of such notice the claimant shall be deemed to have complied with the requirements of this policy as to proof of loss upon submitting, within the time fixed in the policy for filing proofs of loss, written proof covering the occurrence, the character and the extent of the loss for which claim is made. (7) PROOFS OF LOSS: Written proof of loss must be furnished to the insurer at its said office in case of claim for loss for which this policy provides any periodic payment contingent upon continuing loss within 90 days after the termination of the period for which the insurer is liable and in case of claim for any other loss within 90 days after the date of such loss. Failure to furnish such proof within the time required shall not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later than one year from the time proof is otherwise required. (8) TIME OF PAYMENT OF CLAIMS: Indemnities payable under this policy for any loss other than loss for which this policy provides any periodic payment will be paid immediately upon receipt of due written proof of such loss. Subject to due written proof of loss, all accrued indemnities for loss for which this policy provides periodic payment will be paid . . . . (insert period for payment which must not be less frequently than monthly) and any balance remaining unpaid upon the termination of liability will be paid immediately upon receipt of due written proof.(9) PAYMENT OF CLAIMS: Indemnity for loss of life will be payable in accordance with the beneficiary designation and the provisions respecting such payment which may be prescribed herein and effective at the time of payment. If no such designation or provision is then effective, such indemnity shall be payable to the estate of the insured. Any other accrued indemnities unpaid at the insureds death may, at the option of the insurer, be paid either to such beneficiary or to such estate. All other indemnities will be payable to the insured. (The following provisions, or either of them, may be included with the foregoing provision at the option of the insurer: If any indemnity of this policy shall be payable to the estate of the insured, or to an insured or beneficiary who is a minor or otherwise not competent to give a valid release, the insurer may pay such indemnity, up to an amount not exceeding $. . . . . . (insert an amount which shall not exceed $1,000.00), to any relative by blood or connection by civil marriage of the insured or beneficiary who is deemed by the insurer to be equitably entitled thereto. Any payment made by the insurer in good faith pursuant to this provision shall fully discharge the insurer to the extent of such payment.Subject to any written direction of the insured in the application or otherwise all or a portion of any indemnities provided by this policy on account of hospital, nursing, medical, or surgical services may, at the insurers option and unless the insured requests otherwise in writing not later than the time of filing proofs of such loss, be paid directly to the hospital or person rendering such services; but it is not required that the service be rendered by a particular hospital or person.) (10) PHYSICAL EXAMINATIONS AND AUTOPSY: The insurer at its own expense shall have the right and the opportunity to examine the person of the insured when and as often as it may reasonably require during the pendency of a claim hereunder and to make an autopsy in case of death where it is not forbidden by law. (11) LEGAL ACTIONS: No action at law or in equity shall be brought to recover on this policy prior to the expiration of 60 days after written proof of loss has been furnished in accordance with the requirements of this policy. No such action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished. (12) CHANGE OF BENEFICIARY: Unless the insured makes an irrevocable designation of beneficiary, the right to change of beneficiary is reserved to the insured and the consent of the beneficiary or beneficiaries shall not be requisite to surrender or assignment of this policy or to any change of beneficiary or beneficiaries, or to any other changes in this policy. (The first clause of this provision, relative to the irrevocable designation of beneficiary, may be omitted at the insurers option.) (Amended 2009, No. 3,  12a, eff. Sept. 1, 2009.) 
 4066. Optional standard policy provisions
Except as provided in section 4067 of this title, no such policy delivered or issued for delivery to any person in this State shall contain provisions respecting the matters set forth below unless such provisions are in the words in which the same appear in this section; provided, however, that the insurer may, at its option, use in lieu of any such provision a corresponding provision of different wording approved by the Commissioner which is not less favorable in any respect to the insured or the beneficiary. Any such provision contained in the policy shall be preceded individually by the appropriate caption appearing in this section or, at the option of the insurer, by such appropriate individual or group captions or subcaptions as the Commissioner may approve: (1) CHANGE OF OCCUPATION: If the insured be injured or contract sickness after having changed his or her occupation to one classified by the insurer as more hazardous than that stated in this policy or while doing for compensation anything pertaining to an occupation so classified, the insurer will pay only such portion of the indemnities provided in this policy as the premium paid would have purchased at the rates and within the limits fixed by the insurer for such more hazardous occupation. If the insured changes his or her occupation to one classified by the insurer as less hazardous than that stated in this policy, the insurer, upon receipt of proof of such change of occupation, will reduce the premium rate accordingly, and will return the excess pro rata unearned premium from the date of change of occupation or from the policy anniversary date immediately preceding receipt of such proof, whichever is the more recent. In applying this provision, the classification of occupational risk and the premium rates shall be such as have been last filed by the insurer prior to the occurrence of the loss for which the insurer is liable or prior to date of proof of change in occupation with the state official having supervision of insurance in the state where the insured resided at the time this policy was issued; but if such filing was not required, then the classification of occupational risk and the premium rates shall be those last made effective by the insurer in such state prior to the occurrence of the loss or prior to the date of proof of change in occupation. (2) MISSTATEMENT OF AGE: If the age of the insured has been misstated, all amounts payable under this policy shall be such as the premium paid would have purchased at the correct age. (3) OTHER INSURANCE IN THIS INSURER: If an accident or sickness or accident and sickness policy or policies previously issued by the insurer to the insured be in force concurrently herewith, making the aggregate indemnity for .... (insert type of coverage or coverages) in excess of $ .................... (insert maximum limit of indemnity or indemnities) the excess insurance shall be void and all premiums paid for such excess shall be returned to the insured or to his or her estate. Insurance effective at any one time on the insured under a like policy or policies in this insurer is limited to the one such policy elected by the insured, his or her beneficiary or his or her estate, as the case may be, and the insurer will return all premiums paid for all other such policies. (4) INSURANCE WITH OTHER INSURERS: If there be other valid coverage, not with this insurer, providing benefits for the same loss on a provision of service basis or on an expense incurred basis and of which this insurer has not been given written notice prior to the occurrence or commencement of loss, the only liability under any expense incurred coverage of this policy shall be for such proportion of the loss as the amount which would otherwise have been payable hereunder plus the total of the like amounts under all such other valid coverages for the same loss of which this insurer had notice bears to the total like amounts under all valid coverages for such loss, and for the return of such portion of the premiums paid as shall exceed the pro rata portion for the amount so determined. For the purpose of applying this provision when other coverage is on a provision of service basis, the like amount of such other coverage shall be taken as the amount which the services rendered would have cost in the absence of such coverage. (If the foregoing policy provision is included in a policy which also contains the next following policy provision there shall be added to the caption of the foregoing provision the phrase EXPENSE INCURRED BENEFITS. The insurer may, at its option, include in this provision a definition of other valid coverage, approved as to form by the Commissioner, which definition shall be limited in subject matter to coverage provided by organizations subject to regulation by insurance law or by insurance authorities of this or any other state of the United States or any province of Canada, and by hospital or medical service organizations, and to any other coverage the inclusion of which may be approved by the Commissioner. In the absence of such definition such term shall not include group insurance, automobile medical payments insurance, or coverage provided by hospital or medical service organizations or by union welfare plans or employer or employee benefit organizations. For the purpose of applying the foregoing policy provision with respect to any insured, any amount of benefit provided for such insured pursuant to any compulsory benefit statute (including any workers compensation or employers liability statute) whether provided by a governmental agency or otherwise shall in all cases be deemed to be other valid coverage of which the insurer has had notice. In applying the foregoing policy provision no third party liability coverage shall be included as other valid coverage.) (5) INSURANCE WITH OTHER INSURERS: If there be other valid coverage, not with this insurer, providing benefits for the same loss on other than an expense incurred basis and of which this insurer has not been given written notice prior to the occurrence or commencement of loss, the only liability for such benefits under this policy shall be for such proportion of the indemnities otherwise provided hereunder for such loss as the like indemnities of which the insurer had notice (including the indemnities under this policy) bear to the total amount of all like indemnities for such loss, and for the return of such portion of the premium paid as shall exceed the pro rata portion for the indemnities thus determined. (If the foregoing policy provision is included in a policy which also contains the next preceding policy provision there shall be added to the caption of the foregoing provision the phrase OTHER BENEFITS. The insurer may, at its option, include in this provision a definition of other valid coverage, approved as to form by the Commissioner, which definition shall be limited in subject matter to coverage provided by organizations subject to regulation by insurance law or by insurance authorities of this or any other state of the United States or any province of Canada, and to any other coverage the inclusion of which may be approved by the Commissioner. In the absence of such definition such term shall not include group insurance, or benefits provided by union welfare plans or by employer or employee benefit organizations. For the purpose of applying the foregoing policy provision with respect to any insured, any amount of benefit provided for such insured pursuant to any compulsory benefit statute (including any workers compensation or employers liability statute) whether provided by a governmental agency or otherwise shall in all cases be deemed to be other valid coverage of which the insurer has had notice. In applying the foregoing policy provision no third party liability coverage shall be included as other valid coverage.) (6) RELATION OF EARNINGS TO INSURANCE: If the total monthly amount of loss of time benefits promised for the same loss under all valid loss of time coverage upon the insured, whether payable on a weekly or monthly basis, shall exceed the monthly earnings of the insured at the time disability commenced or his or her average monthly earnings for the period of two years immediately preceding a disability for which claim is made, whichever is the greater, the insurer will be liable only for such proportionate amount of such benefits under this policy as the amount of such monthly earnings or such average monthly earnings of the insured bears to the total amount of monthly benefits for the same loss under all such coverage upon the insured at the time such disability commences and for the return of such part of the premiums paid during such two years as shall exceed the pro rata amount of the premiums for the benefits actually paid hereunder; but this shall not operate to reduce the total monthly amount of benefits payable under all such coverage upon the insured below the sum of $200.00 or the sum of the monthly benefits specified in such coverages, whichever is the lesser, nor shall it operate to reduce benefits other than those payable for loss of time. (The foregoing policy provision may be inserted only in a policy which the insured has the right to continue in force subject to its terms by the timely payment of premiums (1) until at least age 50; or (2) in the case of a policy issued after age 44, for at least five years from its date of issue. The insurer may, at its option, include in this provision a definition of valid loss of time coverage, approved as to form by the Commissioner, which definition shall be limited in subject matter to coverage provided by governmental agencies or by organizations subject to regulation by insurance law or by insurance authorities of this or any other state of the United States or any province of Canada, or to any other coverage the inclusion of which may be approved by the Commissioner or any combination of such coverages. In the absence of such definition such term shall not include any coverage provided for such insured pursuant to any compulsory benefit statute (including any workers compensation or employers liability statute), or benefits provided by union welfare plans or by employer or employee benefit organizations.) (7) UNPAID PREMIUM: Upon the payment of a claim under this policy, any premium then due and unpaid or covered by any note or written order may be deducted therefrom. (8) CANCELLATION: The insurer may cancel this policy at any time by written notice delivered to the insured, or mailed to his or her last address as shown by the records of the insurer, stating when, not less than five days thereafter, such cancellation shall be effective; and after the policy has been continued beyond its original term the insured may cancel this policy at any time by written notice delivered or mailed to the insurer, effective upon receipt or on such later date as may be specified in such notice. In the event of cancellation, the insurer will return promptly the unearned portion of any premium paid. If the insured cancels, the earned premium shall be computed by the use of the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation. (9) CONFORMITY WITH STATE STATUTES: Any provision of this policy which, on its effective date, is in conflict with the statutes of the state in which the insured resides on such date is hereby amended to conform to the minimum requirements of such statutes. (10) ILLEGAL OCCUPATION: The insurer shall not be liable for any loss to which a contributing cause was the insureds commission of or attempt to commit a felony or to which a contributing cause was the insureds being engaged in an illegal occupation. (11) [Repealed.] (Amended 1981, No. 165 (Adj. Sess.),  1; 2001, No. 121 (Adj. Sess.),  6, eff. June 5, 2002.)
 4067. Omission of inapplicable or inconsistent standard provisions
If any provision of sections 4065 and 4066 of this title is in whole or in part inapplicable to or inconsistent with the coverage provided by a particular form of policy the insurer, with the approval of the Commissioner, shall omit from such policy any inapplicable provision or part of a provision, and shall modify any inconsistent provision or part of the provision in such manner as to make the provision as contained in the policy consistent with the coverage provided by the policy. 
 4068. Order of standard policy provisions
The provisions which are the subject of sections 4065 and 4066 of this title, or any corresponding provisions which are used in lieu thereof in accordance with such sections, shall be printed in the consecutive order of the provisions in such sections or, at the option of the insurer, any such provision may appear as a unit in any part of the policy, with other provisions to which it may be logically related, provided the resulting policy shall not be in whole or in part unintelligible, uncertain, ambiguous, abstruse, or likely to mislead a person to whom the policy is offered, delivered, or issued. 
 4069. Third party ownership
The word insured, as used in this chapter, shall not be construed as preventing a person other than the insured with proper insurable interest from making application for and owning a policy covering the insured or from being entitled under such a policy to any indemnities, benefits, and rights provided therein. 
 4070. Requirements of other jurisdictions
(a) Any policy of a foreign or alien insurer, when delivered or issued for delivery to any person in this State, may contain any provision which is not less favorable to the insured or the beneficiary than the provisions of this chapter and which is prescribed or required by the law of the state under which the insurer is organized. (b) Any policy of a domestic insurer may, when issued for delivery in any other state or country, contain any provision permitted or required by the laws of such other state or country. 
 4071. Regulations on filing policies
The Commissioner may make such reasonable rules and regulations concerning the procedure for the filing or submission of policies subject to sections 4063-4066 of this title as are necessary, proper, or advisable to the administration of these sections. This provision shall not abridge any other authority granted the Commissioner by law. 
 4072. Nonconforming policies
(a) No policy provision which is not subject to section 4065 or 4066 of this title shall make a policy, or any portion thereof, less favorable in any respect to the insured or the beneficiary than the provisions thereof which are subject to these sections. (b) A policy delivered or issued for delivery to any person in this State in violation of sections 4065 and 4066 of this title shall be held valid but shall be construed as provided in this chapter. When any provision in a policy subject to sections 4065 and 4066 is in conflict with any provision therein, the rights, duties, and obligations of the insurer, the insured and the beneficiary shall be governed by the provisions of such sections. 
 4073. Applications for insurance
(a) The insured shall not be bound by any statement made in an application for a policy unless a copy of such application is attached to or endorsed on the policy when issued as a part thereof. If any such policy delivered or issued for delivery to any person in this State shall be reinstated or renewed, and the insured or the beneficiary or assignee of such policy shall make written request to the insurer for a copy of the application, if any, for such reinstatement or renewal, the insurer shall within 15 days after the receipt of such request at its home office or any branch office of the insurer, deliver or mail to the person making such request a copy of such application. If such copy shall not be so delivered or mailed, the insurer shall be precluded from introducing such application as evidence in any action or proceeding based upon or involving such policy or its reinstatement or renewal. (b) No alteration of any written application for any such policy shall be made by any person other than the applicant without his or her written consent, except that insertions may be made by the insurer, for administrative purposes only, in such manner as to indicate clearly that such insertions are not to be ascribed to the applicant. (c) The falsity of any statement in the application for any such policy may not bar the right to recovery thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer. 
 4074. Notice as waiver
The acknowledgment by any insurer of the receipt of notice given under any such policy, or the furnishing of forms for filing proofs of loss, or the acceptance of such proofs, or the investigation of any claim thereunder shall not operate as a waiver of any of the rights of the insurer in defense of any claim arising under such policy. 
 4075. Age limits
If any such policy contains a provision establishing, as an age limit or otherwise, a date after which the coverage provided by the policy will not be effective, and if such date falls within a period for which premium is accepted by the insurer or if the insurer accepts a premium after such date, the coverage provided by the policy will continue in force subject to any right of cancellation until the end of the period for which a premium has been accepted. In the event the age of the insured has been misstated and if, according to the correct age of the insured, the coverage provided by the policy would not have become effective, or would have ceased prior to the acceptance of such premium or premiums, then the liability of the insurer shall be limited to the refund, upon request, of all premiums paid for the period not covered by the policy. 
 4076. Policies not affected
Nothing in sections 4063-4075 of this title shall apply to or affect:(1) any policy of workers compensation insurance or any policy of liability insurance with or without supplementary coverage therein; (2) any policy or contract of reinsurance;(3) any blanket or group policy of insurance enumerated in sections 4079-4082 of this title, except to the extent provided therein; or (4) life insurance, endowment or annuity contracts, or contracts supplemental thereto which contain only such provisions relating to accident and sickness insurance as: (A) provide additional benefits in case of death or dismemberment or loss of sight by accident; or (B) operate to safeguard such contracts against lapse, or to give a special surrender value or special benefit or an annuity in the event that the insured or annuitant shall become totally and permanently disabled, as defined by the contract or supplemental contract. (Amended 1981, No. 165 (Adj. Sess.),  1.) 
 4077. Termination; comprehensive major medical policies; grace period
(a) A comprehensive major medical insurance policy issued by a health insurance company, nonprofit hospital or medical service corporation, or health maintenance organization that insures employees, members, or subscribers for hospital and medical insurance on an expense-incurred, service, or prepaid basis shall: (1) provide notice to the policyholder or other responsible party of any premium payment due on a policy at least 21 days before the due date; and (2) provide a grace period of at least one month for the payment of each premium falling due after the first premium, during which grace period the policy shall continue in force and the issuer of the policy shall be liable for valid claims for covered losses incurred prior to the end of the grace period. (b) If the issuer of a policy described in subsection (a) of this section does not receive payment by the due date, the issuer shall send a termination notice to the policyholder at least 21 days prior to termination notifying the policyholder that the issuer may terminate the policy if payment is not received by the termination date. (c) The termination date of a policy described in subsection (a) of this section shall not be earlier than the day following the last day of the grace period set forth in subdivision (a)(1) of this section. (Added 2021, No. 25,  19, eff. May 12, 2021.) 
 4079. Group insurance policies; definitions
Group health insurance is hereby declared to be that form of health insurance covering one or more persons, with or without their dependents, and issued upon the following basis: (1)(A) Under a policy issued to an employer, who shall be deemed the policyholder, insuring at least one employee of such employer, for the benefit of persons other than the employer. The term employees, as used in this section, shall be deemed to include the officers, managers, and employees of the employer; the partners, if the employer is a partnership; the officers, managers, and employees of subsidiary or affiliated corporations of a corporation employer; and the individual proprietors, partners, and employees of individuals and firms, the business of which is controlled by the insured employer through stock ownership, contract, or otherwise. The term employer, as used in this section, may be deemed to include any municipal or governmental entity or officer, or the appropriate officer for an unincorporated town or gore or for the Unified Towns and Gores of Essex County, as well as private individuals, partnerships, and corporations. (B) In accordance with section 3368 of this title, an employer domiciled in a jurisdiction other than Vermont that has more than 25 certificate-holder employees whose principal worksite and domicile is in Vermont and that is defined as a large group in its own jurisdiction and under the Patient Protection and Affordable Care Act, Pub. L. No. 111-148,  1304, as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, may purchase insurance in the large group health insurance market for its Vermont-domiciled certificate-holder employees. (2)(A) Under a policy issued:(i) to an association, a trust, or one or more trustees of a fund established by one or more associations otherwise eligible for the issuance of a policy under this subdivision (2) and maintained, directly or indirectly, by one or more associations for the benefit of its members or a contract or plan issued by such an association or trust; or (ii) by a multiple employer welfare arrangement as defined in the Employee Retirement Income Security Act of 1974, as amended. (B)(i) The association or associations shall have:(I) a minimum of 100 persons at the time of incorporation or formation;(II) been organized and maintained in good faith for purposes other than that of obtaining insurance; (III) been in active existence for at least one year; and(IV) a constitution and bylaws that provide that:(aa) the association or associations hold regular meetings not less than annually to further purposes of the members; (bb) except for credit unions, the association or associations collect dues or solicit contributions from members; and (cc) the members constitute a majority of the voting power of the association for all purposes and have representation on the governing board and committees. (ii)(I) The association or associations shall not be controlled by an insurer, as evidenced by the operation of the association or associations. (II) The following factors may be used as evidence to determine whether an association is an insurer-operated association; provided, however, that the presence or absence of one or more of these factors shall not serve to limit or be dispositive of such a determination: (aa) common board members, officers, executives, or employees;(bb) common ownership of the insurer and the association, or of the association and another eligible group; and (cc) common use of office space or equipment used by the insurer to transact insurance.(C) An associations members shall have a shared or common purpose that is not primarily a business or customer relationship. (D)(i) A policy issued by an association shall not insure persons other than the members or employees of the association or associations, or employees of members, or all of any class or classes of employees of the association, associations, or members, together, in each case, with the employees or members dependents, as applicable, for the benefit of persons other than the employees employer. (ii) A policy issued by an association shall insure all eligible persons, except those who reject coverage in writing. (E) An association shall not use the solicitation of insurance as the primary method of obtaining new members. (F) If an insurer collects membership fees or dues on behalf of an association, the insurer shall disclose to the members of the association that the insurer is billing and collecting membership fees and dues on behalf of the association. (3)(A) Under a policy issued to a trust, or to one or more trustees of a fund established and maintained, directly or indirectly, by: (i) two or more employers;(ii) one or more labor unions or similar employee organizations; or(iii) one or more employers and one or more labor unions or similar employee organizations.(B)(i) A policy under this subdivision must be issued to the trust or trustees for the purpose of insuring all of the employees of the employers or all of the members of the unions or organizations, or all of any class or classes of employees or members, together, in each case, with the employees or members dependents, as applicable, for the benefit of persons other than the employers or the unions or organizations. (ii) A policy issued to a trust shall insure all eligible persons, except those who reject coverage in writing. (4) Under a policy issued to any other substantially similar group that, in the discretion of the Commissioner, may be subject to the issuance of a group accident and sickness policy or contract. (Amended 1989, No. 106,  4, eff. Sept. 1, 1989; 1991, No. 52,  2, eff. June 6, 1991; 2013, No. 79,  1, eff. Oct. 1, 2013; 2021, No. 137 (Adj. Sess.),  3, eff. July 1, 2022.) 
 4079a. Association health plans
(a) As used in this section, association health plan means a policy issued to an association; to a trust; or to one or more trustees of a fund established, created, or maintained for the benefit of the members of one or more associations or a contract or plan issued by an association or trust or by a multiple employer welfare arrangement as defined in the Employee Retirement Income Security Act of 1974, 29 U.S.C.  1001 et seq. (b) The Commissioner shall adopt rules pursuant to 3 V.S.A. chapter 25 regulating association health plans in order to protect Vermont consumers and promote the stability of Vermonts health insurance markets, to the extent permitted under federal law, including rules regarding licensure, solvency and reserve requirements, and rating requirements. (c) The provisions of section 3661 of this title shall apply to association health plans.(d)(1) An association health plan that provided coverage for the 2019 plan year may be renewed for coverage of existing association employer members for subsequent plan years, to the extent permitted under federal law. An association health plan that provided coverage for the 2019 plan year shall not enroll any new employer members for coverage after the 2019 plan year; provided, however, that new employees of existing association employer members may enroll in the plan in a subsequent plan year pursuant to an offer of coverage from their employer. (2) No new association health plans shall be offered or issued for coverage in this State for plan years 2020 and after. (3) This subsection does not apply to association health plans that were formed or could have been formed under the Employee Retirement Income Security Act of 1974, 29 U.S.C.  1901, et. seq., and accompanying U.S. Department of Labor regulations and guidance, in each case, as in effect as of January 19, 2017. (Added 2017, No. 131 (Adj. Sess.),  2, eff. May 16, 2018; amended 2019, No. 63,  7, eff. June 17, 2019; 2019, No. 103 (Adj. Sess.),  25.) 
 4080. Required policy provisions
(a) No group insurance policy shall contain any provision relative to notice of claim, proofs of loss, time of payment of claims, or time within which legal action must be brought upon the policy that, in the opinion of the Commissioner, is less favorable to the persons insured than would be permitted by the provisions set forth in section 4065 of this title. In addition, each such policy shall contain in substance the following provisions: (1) A provision that the policy; the application of the policyholder, if such application or copy thereof is attached to such policy; and the individual applications, if any, submitted in connection with such policy by the employees or members shall constitute the entire contract between the parties, and that all statements, in the absence of fraud, made by any applicant or applicants shall be deemed representations and not warranties, and that no such statement shall avoid the insurance or reduce benefits thereunder unless contained in a written application of which a copy is attached to the policy. (2) A provision that the insurer will furnish to the policyholder, for delivery to each employee or member of the insured group, an individual certificate setting forth in summary form a statement of the essential features of the insurance coverage of such employee or member and to whom benefits thereunder are payable. If dependents are included in the coverage, only one certificate need be issued for each family unit. (3) A provision that to the group originally insured may be added from time to time eligible new employees or members or dependents, as the case may be, in accordance with the terms of the policy. (4) [Repealed.](5) A provision that the insurer shall not exclude part-time employees and shall offer the same group health benefits to part-time employees as it offers to the employee groups of which the part-time employees would be members if they were full-time employees. The insurer shall offer to include the part-time employees as part of the employers employee group, at the full rate to be paid by the employer and the employee, at a rate prorated between the employer and the employee or at the employees expense. Part-time employee means any employee who works a minimum of at least 17 1/2 hours per week. (b)(1) Preexisting condition exclusions. A group insurance policy shall not contain any provision that excludes, restricts, or otherwise limits coverage under the policy for one or more preexisting health conditions. (2) Annual limitations on cost sharing. (A)(i) The annual limitation on cost sharing for self-only coverage for any year shall be the same as the dollar limit established by the federal government for self-only coverage for that year in accordance with 45 C.F.R.  156.130. (ii) The annual limitation on cost sharing for other than self-only coverage for any year shall be twice the dollar limit for self-only coverage described in subdivision (i) of this subdivision (A). (B)(i) In the event that the federal government does not establish an annual limitation on cost sharing for any plan year, the annual limitation on cost sharing for self-only coverage for that year shall be the dollar limit for self-only coverage in the preceding calendar year, increased by any percentage by which the average per capita premium for health insurance coverage in Vermont for the preceding calendar year exceeds the average per capita premium for the year before that. (ii) The annual limitation on cost sharing for other than self-only coverage for any year in which the federal government does not establish an annual limitation on cost sharing shall be twice the dollar limit for self-only coverage described in subdivision (i) of this subdivision (B). (3) Ban on annual and lifetime limits. A group insurance policy shall not establish any annual or lifetime limit on the dollar amount of essential health benefits, as defined in Section 1302(b) of the Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, and applicable regulations and federal guidance, for any individual insured under the policy, regardless of whether the services are provided in-network or out-of-network. (4) No cost sharing for preventive services. (A) A group insurance policy shall not impose any co-payment, coinsurance, or deductible requirements for: (i) preventive services that have an A or B rating in the current recommendations of the U.S. Preventive Services Task Force; (ii) immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved; (iii) with respect to infants, children, and adolescents, evidence-informed preventive care and screenings as set forth in comprehensive guidelines supported by the federal Health Resources and Services Administration; and (iv) with respect to women, to the extent not included in subdivision (i) of this subdivision (4)(A), evidence-informed preventive care and screenings set forth in binding comprehensive health plan coverage guidelines supported by the federal Health Resources and Services Administration. (B) Subdivision (A) of this subdivision (4) shall apply to a high-deductible health plan only to the extent that it would not disqualify the plan from eligibility for a health savings account pursuant to 26 U.S.C.  223. (5) Definition of group insurance policy. As used in this subsection, group insurance policy has the same meaning as group health plan and shall be subject to the same excepted benefits, in each case, as set forth in 45 C.F.R.  146.145, as in effect as of December 31, 2017. (Amended 1989, No. 34,  1; 2007, No. 70,  20; 2015, No. 97 (Adj. Sess.),  87; 2019, No. 63,  4, eff. Jan. 1, 2020; 2019, No. 103 (Adj. Sess.),  26; 2021, No. 20,  7; 2021, No. 105 (Adj. Sess.),  156, eff. July 1, 2022.) 
 4080d. Coordination of insurance coverage with Medicaid
Any insurer as defined in section 4100b of this title is prohibited from considering the availability or eligibility for medical assistance in this or any other state under 42 U.S.C.  1396a (Section 1902 of the Social Security Act), herein referred to as Medicaid, when considering eligibility for coverage or making payments under its plan for eligible enrollees, subscribers, policyholders, or certificate holders. (Added 1993, No. 231 (Adj. Sess.),  1; amended 2005, No. 191 (Adj. Sess.),  17; 2013, No. 79,  6, eff. Jan. 1, 2014.) 
 4080e. Medicare supplemental health insurance policies; community rating; disability
(a) A health insurance company, hospital or medical service corporation, or health maintenance organization shall use a community rating method acceptable to the Commissioner for determining premiums for Medicare supplemental insurance policies. (b) The Commissioner shall adopt rules for standards and procedure for permitting health insurance companies, hospital or medical service organizations, or health maintenance organizations that issue Medicare supplemental insurance policies to use one or more risk classifications in their community rating method. The premium charged shall not deviate from the community rate and the rules shall not permit medical underwriting and screening, except that a health insurance company, hospital or medical service corporation, or health maintenance organization may set different community rates for persons eligible for Medicare by reason of age and persons eligible for Medicare by reason of disability. (c) A health insurance company, hospital or medical service corporation, or health maintenance organization that issues Medicare supplemental insurance policies or certificates to a person eligible for Medicare by reason of age shall make available, to persons eligible for Medicare by reason of disability, the same policies or certificates that are offered and sold to persons eligible for Medicare by reason of age. This subsection does not apply to persons eligible for Medicare by reason of end stage renal disease. The initial enrollment period for any such policies or certificates shall be at least six months following the date the individual becomes eligible for Medicare by reason of disability. Any additional enrollment periods as required by law and offered to individuals eligible by reason of age shall be offered to individuals eligible by reason of disability. (d) The Department of Financial Regulation shall collaborate with health insurers, advocates for older Vermonters and for other Medicare-eligible adults, and the Office of the Health Care Advocate to educate the public about the benefits and limitations of Medicare supplemental insurance policies and Medicare Advantage plans, including information to help the public understand issues relating to coverage, costs, and provider networks. (Added 1997, No. 13,  2; amended 2001, No. 96 (Adj. Sess.),  1, eff. May 8, 2002; 2021, No. 99 (Adj. Sess.),  1, eff. April 27, 2022.) 
 4080g. Grandfathered plans
(a) Application. Notwithstanding the provisions of 33 V.S.A.  1811, on and after January 1, 2014, the provisions of this section shall apply to an individual, small group, or association plan that qualifies as a grandfathered health plan under Section 1251 of the Patient Protection and Affordable Care Act (Public Law 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152) (Affordable Care Act). In the event that a plan no longer qualifies as a grandfathered health plan under the Affordable Care Act, the provisions of this section shall not apply and the provisions of 33 V.S.A.  1811 shall govern the plan. (b) Small group plans. (1) Definitions. As used in this subsection:(A) Small employer means an employer who, on at least 50 percent of its working days during the preceding calendar quarter, employs at least one and no more than 50 employees. The term includes self-employed persons. Calculation of the number of employees of a small employer shall not include a part-time employee who works fewer than 30 hours per week. The provisions of this subsection shall continue to apply until the plan anniversary date following the date that the employer no longer meets the requirements of this subdivision. (B) Small group means:(i) a small employer; or(ii) an association, trust, or other group issued a health insurance policy subject to regulation by the Commissioner under subdivision 4079(2), (3), or (4) of this title. (C) Small group plan means a group health insurance policy, a nonprofit hospital or medical service corporation service contract, or a health maintenance organization health benefit plan offered or issued to a small group, including common health care plans approved by the Commissioner under subdivision (5) of this subsection. The term does not include disability insurance policies, accident indemnity or expense policies, long-term care insurance policies, student or athletic expense or indemnity policies, dental policies, policies that supplement the Civilian Health and Medical Program of the Uniformed Services, or Medicare supplemental policies. (D) Registered small group carrier means any person except an insurance agent, broker, appraiser, or adjuster who issues a small group plan and who has a registration in effect with the Commissioner as required by this subsection. (2) No person may provide a small group plan unless the plan complies with the provisions of this subsection. (3) No person may provide a small group plan unless such person is a registered small group carrier. The Commissioner, by rule, shall establish the minimum financial, marketing, service, and other requirements for registration. Such registration shall be effective upon approval by the Commissioner and shall remain in effect until revoked or suspended by the Commissioner for cause or until withdrawn by the carrier. A small group carrier may withdraw its registration upon at least six months prior written notice to the Commissioner. A registration filed with the Commissioner shall be deemed to be approved unless it is disapproved by the Commissioner within 30 days of filing. (4)(A) A registered small group carrier shall guarantee acceptance of all small groups for any small group plan offered by the carrier. A registered small group carrier shall also guarantee acceptance of all employees or members of a small group and each dependent of such employees or members for any small group plan it offers. (B) Notwithstanding subdivision (A) of this subdivision (b)(4), a health maintenance organization shall not be required to cover: (i) a small employer which is not physically located in the health maintenance organizations approved service area; or (ii) a small employer or an employee or member of the small group located or residing within the health maintenance organizations approved service area for which the health maintenance organization: (I) is not providing coverage; and(II) reasonably anticipates and demonstrates to the satisfaction of the Commissioner that it will not have the capacity within its network of providers to deliver adequate service because of its existing group contract obligations, including contract obligations subject to the provisions of this subsection and any other group contract obligations. (5) A registered small group carrier shall offer one or more common health care plans approved by the Commissioner. The Commissioner, by rule, shall adopt standards and a process for approval of common health care plans that ensure that consumers may compare the costs of plans offered by carriers and that ensure the development of an affordable common health care plan, providing for deductibles, coinsurance arrangements, managed care, cost containment provisions, and any other term, not inconsistent with the provisions of this title, deemed useful in making the plan affordable. A health maintenance organization may add limitations to a common health care plan if the Commissioner finds that the limitations do not unreasonably restrict the insured from access to the benefits covered by the plans. (6) A registered small group carrier shall offer a small group plan rate structure which at least differentiates between single-person, two-person, and family rates. (7)(A) A registered small group carrier shall use a community rating method acceptable to the Commissioner for determining premiums for small group plans. Except as provided in subdivision (B) of this subdivision (7), the following risk classification factors are prohibited from use in rating small groups, employees or members of such groups, and dependents of such employees or members: (i) demographic rating, including age and gender rating;(ii) geographic area rating;(iii) industry rating;(iv) medical underwriting and screening;(v) experience rating;(vi) tier rating; or(vii) durational rating.(B)(i) The Commissioner shall, by rule, adopt standards and a process for permitting registered small group carriers to use one or more risk classifications in their community rating method, provided that the premium charged shall not deviate above or below the community rate filed by the carrier by more than 20 percent and provided further that the Commissioners rules may not permit any medical underwriting and screening. (ii) The Commissioners rules shall permit a carrier, including a hospital or medical service corporation and a health maintenance organization, to establish rewards, premium discounts, split benefit designs, rebates, or otherwise waive or modify applicable co-payments, deductibles, or other cost-sharing amounts in return for adherence by a member or subscriber to programs of health promotion and disease prevention. The Commissioner shall consult with the Commissioner of Health, the Director of the Blueprint for Health, and the Commissioner of Vermont Health Access in the development of health promotion and disease prevention rules that are consistent with the Blueprint for Health. Such rules shall: (I) limit any reward, discount, rebate, or waiver or modification of cost-sharing amounts to not more than a total of 15 percent of the cost of the premium for the applicable coverage tier, provided that the sum of any rate deviations under subdivision (i) of this subdivision (7)(B) does not exceed 30 percent; (II) be designed to promote good health or prevent disease for individuals in the program and not be used as a subterfuge for imposing higher costs on an individual based on a health factor; (III) provide that the reward under the program is available to all similarly situated individuals and complies with the nondiscrimination provisions of the federal Health Insurance Portability and Accountability Act of 1996; and (IV) provide a reasonable alternative standard to obtain the reward to any individual for whom it is unreasonably difficult due to a medical condition or other reasonable mitigating circumstance to satisfy the otherwise applicable standard for the discount and disclose in all plan materials that describe the discount program the availability of a reasonable alternative standard. (iii) The Commissioners rules shall include:(I) standards and procedures for health promotion and disease prevention programs based on the best scientific, evidence-based medical practices as recommended by the Commissioner of Health; (II) standards and procedures for evaluating an individuals adherence to programs of health promotion and disease prevention; and (III) any other standards and procedures necessary or desirable to carry out the purposes of this subdivision (7)(B). (C) The Commissioner may require a registered small group carrier to identify that percentage of a requested premium increase which is attributed to the following categories: hospital inpatient costs, hospital outpatient costs, pharmacy costs, primary care, other medical costs, administrative costs, and projected reserves or profit. Reporting of this information shall occur at the time a rate increase is sought and shall be in the manner and form as directed by the Commissioner. Such information shall be made available to the public in a manner that is easy to understand. (D) The Commissioner may exempt from the requirements of this subsection an association as defined in subdivision 4079(2) of this title which: (i) offers a small group plan to a member small employer which is community rated in accordance with the provisions of subdivisions (A) and (B) of this subdivision (b)(7). The plan may include risk classifications in accordance with subdivision (B) of this subdivision (7); (ii) offers a small group plan that guarantees acceptance of all persons within the association and their dependents; and (iii) offers one or more of the common health care plans approved by the Commissioner under subdivision (5) of this subsection. (E) The Commissioner may revoke or deny the exemption set forth in subdivision (D) of this subdivision (7) if the Commissioner determines that: (i) because of the nature, size, or other characteristics of the association and its members, the employees or members are in need of the protections provided by this subsection; or (ii) the association exemption has or would have a substantial adverse effect on the small group market. (8) A registered small group carrier shall file with the Commissioner an annual certification by a member of the American Academy of Actuaries of the carriers compliance with this subsection. The requirements for certification shall be as the Commissioner by rule prescribes. (9) A registered small group carrier shall provide, on forms prescribed by the Commissioner, full disclosure to a small group of all premium rates and any risk classification formulas or factors prior to acceptance of a small group plan by the group. (10) A registered small group carrier shall guarantee the rates on a small group plan for a minimum of six months. (11)(A) A registered small group carrier may require that 75 percent or less of the employees or members of a small group with more than 10 employees participate in the carriers plan. A registered small group carrier may require that 50 percent or less of the employees or members of a small group with 10 or fewer employees or members participate in the carriers plan. A small group carriers rules established pursuant to this subdivision shall be applied to all small groups participating in the carriers plans in a consistent and nondiscriminatory manner. (B) For purposes of the requirements set forth in subdivision (A) of this subdivision (11), a registered small group carrier shall not include in its calculation an employee or member who is already covered by another group health benefit plan as a spouse or dependent or who is enrolled in Medicaid or Medicare. Employees or members of a small group who are enrolled in the employers plan and receiving premium assistance under the Health Insurance Premium Payment Program established pursuant to Section 1906 of the Social Security Act, 42 U.S.C.  1396e, shall be considered to be participating in the plan for purposes of this subsection. If the small group is an association, trust, or other substantially similar group, the participation requirements shall be calculated on an employer-by-employer basis. (C) A small group carrier may not require recertification of compliance with the participation requirements set forth in this subdivision (11) more often than annually at the time of renewal. If, during the recertification process, a small group is found not to be in compliance with the participation requirements, the small group shall have 120 days to become compliant prior to termination of the plan. (12) This subsection shall apply to the provisions of small group plans. This subsection shall not be construed to prevent any person from issuing or obtaining a bona fide individual health insurance policy; provided that no person may offer a health benefit plan or insurance policy to individual employees or members of a small group as a means of circumventing the requirements of this subsection. The Commissioner shall adopt, by rule, standards and a process to carry out the provisions of this subsection. (13) The guaranteed acceptance provision of subdivision (4) of this subsection shall not be construed to limit an employers discretion in contracting with his or her employees for insurance coverage. (14) Registered small group carriers, except nonprofit medical and hospital service organizations and nonprofit health maintenance organizations, shall form a reinsurance pool for the purpose of reinsuring small group risks. This pool shall not become operative until the Commissioner has approved a plan of operation. The Commissioner shall not approve any plan which he or she determines may be inconsistent with any other provision of this subsection. Failure or delay in the formation of a reinsurance pool under this subsection shall not delay implementation of this subdivision. The participants in the plan of operation of the pool shall guarantee, without limitation, the solvency of the pool, and such guarantee shall constitute a permanent financial obligation of each participant, on a pro rata basis. (c) Nongroup health benefit plans. (1) Definitions. As used in this subsection:(A) Individual means a person who is not eligible for coverage by group health insurance as defined by section 4079 of this title. (B) Nongroup plan means a health insurance policy, a nonprofit hospital or medical service corporation service contract, or a health maintenance organization health benefit plan offered or issued to an individual, including common health care plans approved by the Commissioner under subdivision (5) of this subsection. The term does not include disability insurance policies, accident indemnity or expense policies, long-term care insurance policies, student or athletic expense or indemnity policies, Medicare supplemental policies, and dental policies. The term also does not include hospital indemnity policies or specified disease indemnity or expense policies, provided such policies are sold only as supplemental coverage when a common health care plan or other comprehensive health care policy is in effect. (C) Registered nongroup carrier means any person, except an insurance agent, broker, appraiser, or adjuster, who issues a nongroup plan and who has a registration in effect with the Commissioner as required by this subsection. (2) No person may provide a nongroup plan unless the plan complies with the provisions of this subsection. (3) No person may provide a nongroup plan unless such person is a registered nongroup carrier. The Commissioner, by rule, shall establish the minimum financial, marketing, service, and other requirements for registration. Registration under this subsection shall be effective upon approval by the Commissioner and shall remain in effect until revoked or suspended by the Commissioner for cause or until withdrawn by the carrier. A nongroup carrier may withdraw its registration upon at least six months prior written notice to the Commissioner. A registration filed with the Commissioner shall be deemed to be approved unless it is disapproved by the Commissioner within 30 days of filing. (4)(A) A registered nongroup carrier shall guarantee acceptance of any individual for any nongroup plan offered by the carrier. A registered nongroup carrier shall also guarantee acceptance of each dependent of such individual for any nongroup plan it offers. (B) Notwithstanding subdivision (A) of this subdivision, a health maintenance organization shall not be required to cover: (i) an individual who is not physically located in the health maintenance organizations approved service area; or (ii) an individual residing within the health maintenance organizations approved service area for which the health maintenance organization: (I) is not providing coverage; and(II) reasonably anticipates and demonstrates to the satisfaction of the Commissioner that it will not have the capacity within its network of providers to deliver adequate service because of its existing contract obligations, including contract obligations subject to the provisions of this subsection and any other group contract obligations. (5) A registered nongroup carrier shall offer two or more common health care plans approved by the Commissioner. The Commissioner, by rule, shall adopt standards and a process for approval of common health care plans that ensure that consumers may compare the cost of plans offered by carriers. At least one plan shall be a low-cost common health care plan that may provide for deductibles, coinsurance arrangements, managed care, cost-containment provisions, and any other term not inconsistent with the provisions of this title that are deemed useful in making the plan affordable. A health maintenance organization may add limitations to a common health care plan if the Commissioner finds that the limitations do not unreasonably restrict the insured from access to the benefits covered by the plan. (6) A registered nongroup carrier shall offer a nongroup plan rate structure which at least differentiates between single-person, two-person, and family rates. (7) For a 12-month period from the effective date of coverage, a registered nongroup carrier may limit coverage of preexisting conditions which exist during the 12-month period before the effective date of coverage; provided that a registered nongroup carrier shall waive any preexisting condition provisions for all individuals and their dependents who produce evidence of continuous health benefit coverage during the previous nine months substantially equivalent to the carriers common health care plan approved by the Commissioner. If an individual has a preexisting condition excluded under a subsequent policy, such exclusion shall not continue longer than the period required under the original contract or 12 months, whichever is less. Credit shall be given for prior coverage that occurred without a break in coverage of 63 days or more. For an eligible individual as such term is defined in Section 2741 of Title XXVII of the Public Health Service Act, a registered nongroup carrier shall not limit coverage of preexisting conditions. (8)(A) A registered nongroup carrier shall use a community rating method acceptable to the Commissioner for determining premiums for nongroup plans. Except as provided in subdivision (B) of this subsection, the following risk classification factors are prohibited from use in rating individuals and their dependents: (i) demographic rating, including age and gender rating;(ii) geographic area rating;(iii) industry rating;(iv) medical underwriting and screening;(v) experience rating;(vi) tier rating; or(vii) durational rating.(B)(i) The Commissioner shall, by rule, adopt standards and a process for permitting registered nongroup carriers to use one or more risk classifications in their community rating method, provided that the premium charged shall not deviate above or below the community rate filed by the carrier by more than 20 percent and provided further that the Commissioners rules may not permit any medical underwriting and screening and shall give due consideration to the need for affordability and accessibility of health insurance. (ii) The Commissioners rules shall permit a carrier, including a hospital or medical service corporation and a health maintenance organization, to establish rewards, premium discounts, and rebates or otherwise waive or modify applicable co-payments, deductibles, or other cost-sharing amounts in return for adherence by a member or subscriber to programs of health promotion and disease prevention. The Commissioner shall consult with the Commissioner of Health and the Commissioner of Vermont Health Access in the development of health promotion and disease prevention rules. Such rules shall: (I) limit any reward, discount, rebate, or waiver or modification of cost-sharing amounts to not more than a total of 15 percent of the cost of the premium for the applicable coverage tier, provided that the sum of any rate deviations under subdivision (B)(i) of this subdivision (8) does not exceed 30 percent; (II) be designed to promote good health or prevent disease for individuals in the program and not be used as a subterfuge for imposing higher costs on an individual based on a health factor; (III) provide that the reward under the program is available to all similarly situated individuals; and (IV) provide a reasonable alternative standard to obtain the reward to any individual for whom it is unreasonably difficult due to a medical condition or other reasonable mitigating circumstance to satisfy the otherwise applicable standard for the discount and disclose in all plan materials that describe the discount program the availability of a reasonable alternative standard. (iii) The Commissioners rules shall include:(I) standards and procedures for health promotion and disease prevention programs based on the best scientific, evidence-based medical practices as recommended by the Commissioner of Health; (II) standards and procedures for evaluating an individuals adherence to programs of health promotion and disease prevention; and (III) any other standards and procedures necessary or desirable to carry out the purposes of this subdivision (8)(B). (iv) The Commissioner may require a registered nongroup carrier to identify that percentage of a requested premium increase which is attributed to the following categories: hospital inpatient costs, hospital outpatient costs, pharmacy costs, primary care, other medical costs, administrative costs, and projected reserves or profit. Reporting of this information shall occur at the time a rate increase is sought and shall be in the manner and form directed by the Commissioner. Such information shall be made available to the public in a manner that is easy to understand. (9) Notwithstanding subdivision (8)(B) of this subsection, the Commissioner shall not grant rate increases, including increases for medical inflation, for individuals covered pursuant to the provisions of this subsection that exceed 20 percent in any one year; provided that the Commissioner may grant an increase that exceeds 20 percent if the Commissioner determines that the 20 percent limitation will have a substantial adverse effect on the financial safety and soundness of the insurer. In the event that this limitation prevents implementation of community rating to the full extent provided for in subdivision (8) of this subsection, the Commissioner may permit insurers to limit community rating provisions accordingly as applicable to individuals who would otherwise be entitled to rate reductions. (10) A registered nongroup carrier shall file with the Commissioner an annual certification by a member of the American Academy of Actuaries of the carriers compliance with this subsection. The requirements for certification shall be as the Commissioner by rule prescribes. (11) A registered nongroup carrier shall guarantee the rates on a nongroup plan for a minimum of 12 months. (12) Registered nongroup carriers, except nonprofit medical and hospital service organizations and nonprofit health maintenance organizations, shall form a reinsurance pool for the purpose of reinsuring nongroup risks. This pool shall not become operative until the Commissioner has approved a plan of operation. The Commissioner shall not approve any plan which he or she determines may be inconsistent with any other provision of this subsection. Failure or delay in the formation of a reinsurance pool under this subsection shall not delay implementation of this subdivision. The participants in the plan of operation of the pool shall guarantee, without limitation, the solvency of the pool, and such guarantee shall constitute a permanent financial obligation of each participant, on a pro rata basis. (13) The Commissioner shall disapprove any rates filed by any registered nongroup carrier, whether initial or revised, for nongroup insurance policies unless the anticipated loss ratios for the entire period for which rates are computed are at least 70 percent. For the purpose of this subdivision, anticipated loss ratio shall mean a comparison of earned premiums to losses incurred plus a factor for industry trend where the methodology for calculating trend shall be determined by the Commissioner by rule. (Added 2011, No. 171 (Adj. Sess.),  4, eff. Jan. 1, 2013; amended 2013, No. 79,  7, eff. Jan. 1, 2014.) 
 4081. Blanket health insurance
Blanket health insurance is hereby declared to be that form of health insurance which is supplemental to comprehensive health insurance, or which provides coverage other than the payment of all or a portion of the cost of health care services or products, and covering special groups of persons set forth as follows: (1) under a policy or contract issued to any common carrier, which shall be deemed the policyholder, covering a group defined as all persons who may become passengers on such common carrier; (2) under a policy or contract issued to an employer, who shall be deemed the policyholder, covering any group of employees defined by reference to exceptional hazards incident to such employment; (3) under a policy or contract issued to a college, school, or other institution of learning or to the head or principal thereof, who or which shall be deemed the policyholder, covering students or teachers; (4) under a policy or contract issued in the name of any volunteer fire department, first aid, or other such volunteer group, which shall be deemed the policyholder, covering all of the members of such department or group in connection with their department or group activities; or (5) under a policy or contract issued to any other substantially similar group which, in the discretion of the Commissioner and after the prior approval by the Commissioner of the group, may be subject to the issuance of a blanket health policy or contract. (Amended 2009, No. 137 (Adj. Sess.),  24.) 
 4082. Blanket insurance; policy contents
(a) No such blanket health insurance policy shall contain any provision relative to notice of claim, proofs of loss, time of payment of claims, or time within which legal action must be brought upon the policy which, in the opinion of the Commissioner, is less favorable to the persons insured than would be permitted by the provisions set forth in section 4065 of this title. An individual application shall not be required from a person covered under a blanket health policy or contract, nor shall it be necessary for the insurer to furnish each person a certificate. All benefits under any blanket health policy shall, unless for hospital and physician service or surgical benefits, be payable to the person insured, or to his or her designated beneficiary or beneficiaries, or to his or her estate, except that if the person insured be a minor, such benefits may be made payable to his or her parent, guardian, or other person actually supporting him or her. Nothing contained in this section or section 4081 of this title shall be deemed to affect the legal liability of policyholders for the death of, or injury to, any such members of such group. (b) No such blanket health insurance policy which provides coverage for the payment of all or a portion of the cost of health care services or products shall contain any provision not in compliance with a requirement of this title, or a rule adopted pursuant to this title applicable to health insurance, other than those requirements applicable to nongroup health insurance or small group health insurance. The Commissioner may waive the application to a blanket insurance policy of one or more of the health insurance requirements of this title, or a rule adopted pursuant to this title, if such requirement is not relevant to the types of risks and duration of risks insured against in such blanket insurance policy. (Amended 2009, No. 137 (Adj. Sess.),  25.) 
 4083. Discrimination prohibited
No insurer doing in this State the business specified in subdivision 3301(a)(2) of this title shall make or permit any unfair discrimination between individuals of substantially the same hazard in the amount of premium rates charged for any policy or contract of such insurance or in the benefits payable thereunder. This section shall not prohibit different premium rates, different benefits, or different underwriting procedure for individuals insured under group, family expense, franchise, or blanket plans of insurance. 
 4084. Advertising practices
No company doing business in this State, and no insurance agent or broker shall use in connection with the solicitation of health insurance any advertising copy or advertising practice or any plan of solicitation which is materially misleading or deceptive. An advertising copy or advertising practice or plan of solicitation shall be considered to be materially misleading or deceptive if by implication or otherwise it transmits information in such manner or of such substance that a prospective applicant for health insurance may be misled thereby to his or her material damage. If the Commissioner finds that any such advertising copy or advertising practice or plan of solicitation is materially misleading or deceptive he or she shall order the company or the agent or broker using such copy or practice or plan to cease and desist from such use. Before making any such finding and order, the Commissioner shall give notice, not less than 10 days in advance, and a hearing to the company, agent, or broker affected. If the Commissioner finds, after due notice and hearing, that any authorized insurer, licensed insurance agent, or licensed insurance broker has wilfully violated any such order to cease and desist he or she may suspend or revoke the license of such insurer, agent, or broker. 
 4084a. Short-term, limited-duration health insurance
(a) As used in this section, short-term, limited-duration health insurance means health insurance that provides medical, hospital, or major medical expense benefits coverage pursuant to a policy or contract with an insurer and that has an expiration date specified in the policy or contract that is three months or less after the original effective date of the policy or contract. (b) An insurer shall not provide short-term, limited-duration health insurance coverage unless the insurer has a certificate of authority from the Commissioner to offer health insurance as defined in subdivision 3301(a)(2) of this title or is licensed or registered with the Commissioner as a nonprofit hospital or medical service corporation, health maintenance organization, or managed care organization, unless the insurer is exempted by subdivision 3368(a)(4) of this title. (c) A short-term, limited-duration health insurance policy or contract shall be nonrenewable, and an insurer shall not issue a short-term, limited-duration health insurance policy or contract to any person if the issuance would result in the person being covered by short-term, limited-duration health insurance coverage for more than three months in any 12-month period. (d) A policy or contract for short-term, limited-duration health insurance coverage shall display prominently in the policy or contract and in any application materials provided in connection with enrollment in that coverage, in at least 14-point type, certain disclosures regarding the scope of short-term, limited-duration health insurance coverage, including the types of benefits and consumer protections that are and are not included. The Commissioner shall determine the specific disclosure language that shall be used in all short-term, limited-duration health insurance policies, contracts, and application materials and shall provide the language to the insurers offering that coverage. (e) The Commissioner shall adopt rules pursuant to 3 V.S.A. chapter 25:(1) establishing the minimum financial, marketing, service, and other requirements for registration of an insurer to provide short-term, limited-duration health insurance coverage to individuals in this State; (2) requiring an insurer seeking to provide short-term, limited-duration health insurance coverage to individuals in this State to file its rates and forms with the Commissioner for his or her approval; (3) requiring an insurer seeking to provide short-term, limited-duration health insurance coverage to individuals in this State to file its advertising materials with the Commissioner for his or her approval; and (4) establishing such other requirements as the Commissioner deems necessary to protect Vermont consumers and promote the stability of Vermonts health insurance markets. (f) The provisions of section 4089f of this title, and any rules adopted under that section, shall apply to short-term, limited-duration health insurance coverage. (Added 2017, No. 131 (Adj. Sess.),  3, eff. May 16, 2018.) 
 4085. Rebates and commissions prohibited for nongroup and small group policies and plans offered through the Vermont Health Benefit Exchange
(a) No insurer doing business in this State and no insurance agent or broker shall offer, promise, allow, give, set off, or pay, directly or indirectly, any rebate of or part of the premium payable on a plan issued pursuant to section 4080g of this title or 33 V.S.A.  1811 or earnings, profits, dividends, or other benefits founded, arising, accruing or to accrue thereon or therefrom, or any special advantage in date of policy or age of issue, or any paid employment or contract for services of any kind or any other valuable consideration or inducement to or for insurance on any risk in this State, now or hereafter to be written, or for or upon any renewal of any such insurance, which is not specified in the policy contract of insurance, or offer, promise, give, option, sell, purchase any stocks, bonds, securities, or property or any dividends or profits accruing or to accrue thereon, or other thing of value whatsoever as inducement to insurance or in connection therewith, or any renewal thereof, which is not specified in the plan. (b) No person insured under a plan issued pursuant to section 4080g of this title or 33 V.S.A.  1811 or party or applicant for such plan shall directly or indirectly receive or accept or agree to receive or accept any rebate of premium or of any part thereof, or any favor or advantage, or share in any benefit to accrue under any plan issued pursuant to section 4080g of this title or 33 V.S.A.  1811, or any valuable consideration or inducement, other than such as is specified in the plan. (c) Nothing in this section shall be construed as prohibiting any insurer from allowing or returning to its participating policyholders dividends, savings, or unused premium deposits; or as prohibiting any insurer from returning or otherwise abating, in full or in part, the premiums of its policyholders out of surplus accumulated from nonparticipating insurance, or as prohibiting the taking of a bona fide obligation, with interest not exceeding six percent per annum, in payment of any premium. (d)(1) No insurer shall pay any commission, fee, or other compensation, directly or indirectly, to a licensed or unlicensed agent, broker, or other individual in connection with the sale of a health insurance plan issued pursuant to section 4080g of this title or 33 V.S.A.  1811, nor shall an insurer include in an insurance rate for a health insurance plan issued pursuant to section 4080g of this title or 33 V.S.A.  1811 any sums related to services provided by an agent, broker, or other individual. A health insurer may provide to its employees wages, salary, and other employment-related compensation in connection with the sale of health insurance plans, but may not structure any such compensation in a manner that promotes the sale of particular health insurance plans over other plans offered by that insurer. (2) Nothing in this subsection shall be construed to prohibit the Vermont Health Benefit Exchange established in 33 V.S.A. chapter 18, subchapter 1 from structuring compensation for agents or brokers in the form of an additional commission, fee, or other compensation outside insurance rates or from compensating agents, brokers, or other individuals through the procedures and payment mechanisms established pursuant to 33 V.S.A.  1805(17). (Amended 2011, No. 171 (Adj. Sess.),  2e, eff. Jan. 1, 2014.) 
 4085a. Rebates prohibited for group insurance policies
(a) As used in this section, group insurance means any policy described in section 4079 of this title, except that it shall not include any small group policy issued pursuant to section 4080a or 4080g of this title or to 33 V.S.A.  1811. (b) No insurer doing business in this State and no insurance agent or broker shall offer, promise, allow, give, set off, or pay, directly or indirectly, any rebate of or part of the premium payable on a group insurance policy, or on any group insurance policy or agents commission thereon or earnings, profits, dividends, or other benefits founded, arising, accruing or to accrue thereon or therefrom, or any special advantage in date of policy or age of issue, or any paid employment or contract for services of any kind or any other valuable consideration or inducement to or for insurance on any risk in this State, now or hereafter to be written, or for or upon any renewal of any such insurance, which is not specified in the policy contract of insurance, or offer, promise, give, option, sell, purchase any stocks, bonds, securities, or property or any dividends or profits accruing or to accrue thereon, or other thing of value whatsoever as inducement to insurance or in connection therewith, or any renewal thereof, which is not specified in the policy. (c) No insured person under a group insurance policy or party or applicant for group insurance shall directly or indirectly receive or accept or agree to receive or accept any rebate of premium or of any part thereof or all or any part of any agents or brokers commission thereon, or any favor or advantage, or share in any benefit to accrue under any policy of insurance, or any valuable consideration or inducement, other than such as is specified in the policy. (d) Nothing in this section shall be construed as prohibiting the payment of commission or other compensation to any duly licensed agent or broker; or as prohibiting any insurer from allowing or returning to its participating policyholders dividends, savings, or unused premium deposits; or as prohibiting any insurer from returning or otherwise abating, in full or in part, the premiums of its policyholders out of surplus accumulated from nonparticipating insurance, or as prohibiting the taking of a bona fide obligation, with interest not exceeding six percent per annum, in payment of any premium. (e) An insurer that pays a commission, fee, or other compensation, directly or indirectly, to a licensed or unlicensed agent, broker, or other individual other than a bona fide employee of the insurer in connection with the sale of a group insurance policy shall clearly disclose to the purchaser of such group policy the amount of any such commission, fee, or compensation paid or to be paid. (Added 2011, No. 171 (Adj. Sess.),  2f.) 
 4086. Exemption from attachment and trustee process
So much of any benefits under all policies of health insurance as does not exceed $200.00 for each month during any period of disability covered thereby shall not be liable to attachment, trustee process, or other process, or to be seized, taken, appropriated, or applied by any legal or equitable process or by operation of law, either before or after payment of such benefits, to pay any debt or liabilities of the person insured under such policy. However, this exemption shall not apply where an action is brought to recover for necessaries contracted for during such period and the writ or bill of complaint contains a statement to that effect. When a policy provides for a lump sum payment because of a dismemberment or other loss insured, such payment shall be exempt from execution of the insureds creditors. 
 4087. Penalties for violations
Any person, partnership, or corporation wilfully violating any provision of this chapter or order of the Commissioner made in accordance with this chapter shall pay an administrative penalty to the people of the State a sum not to exceed $750.00 for each such violation. The Commissioner may also suspend or revoke the license of an insurer or agent for any such wilful violation. (Amended 1995, No. 167 (Adj. Sess.),  9.) 
 4088. Appeal
Any person, partnership, or corporation aggrieved by any action of the Commissioner may obtain a review by appeal to the Superior Court within and for the County of Washington. Such appeal shall be on the basis of the record of the proceedings before the Commissioner and shall not be limited to questions of law. If the appeal is from an order of the Commissioner, such order shall not take effect during the pendency of the appeal unless the court shall determine otherwise. The court may review all the facts and in disposing of any issue before it may modify, affirm, or reverse any order of the Commissioner in whole or in part. Either party may appeal from the decision of the Superior Court to the Supreme Court in the manner provided by law. 
 4088a. Chiropractic services
(a)(1) A health insurance plan shall provide coverage for clinically necessary health care services provided by a chiropractic physician licensed in this State for treatment within the scope of practice described in 26 V.S.A. chapter 10, but limiting adjunctive therapies to physiotherapy modalities and rehabilitative exercises. A health insurance plan does not have to provide coverage for the treatment of any visceral condition arising from problems or dysfunctions of the abdominal or thoracic organs. (2) A health insurer may require that the chiropractic services be provided by a licensed chiropractic physician under contract with the insurer or upon referral from a health care provider under contract with the insurer. (3) Health care services provided by chiropractic physicians may be subject to reasonable deductibles, co-payment and coinsurance amounts, fee or benefit limits, practice parameters, and utilization review consistent with any applicable regulations published by the Department of Financial Regulation; provided that any such amounts, limits, and review shall not function to direct treatment in a manner unfairly discriminative against chiropractic care and collectively shall be no more restrictive than those applicable under the same policy to care or services provided by other health care providers but allowing for the management of the benefit consistent with variations in practice patterns and treatment modalities among different types of health care providers. (4) For silver- and bronze-level qualified health benefit plans and any reflective health benefit plans offered at the silver or bronze level pursuant to 33 V.S.A. chapter 18, subchapter 1, health care services provided by a chiropractic physician may be subject to a co-payment requirement, provided that any required co-payment amount shall be between 125 and 150 percent of the amount of the co-payment applicable to care and services provided by a primary care provider under the plan. (5) Nothing contained in this section shall be construed as impeding or preventing either the provision or coverage of health care services by licensed chiropractic physicians, within the lawful scope of chiropractic practice, in hospital facilities on a staff or employee basis. (b) As used in this section, health insurance plan  means any individual or group health insurance policy, any hospital or medical service corporation or health maintenance organization subscriber contract, or any other health benefit plan offered, issued, or renewed for any person in this State by a health insurer, as defined by 18 V.S.A.  9402. The term shall not include benefit plans providing coverage for specific disease or other limited benefit coverage. (Added 1999, No. 16,  1; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2018, No. 7 (Sp. Sess.),  2, eff. Jan. 1, 2020; 2019, No. 19,  1, eff. Jan. 1, 2020.) 
 4088b. Clinical trials for cancer patients
(a) The Commissioner shall, after notice and hearing, adopt rules requiring that all health benefit plans issued in this State provide coverage for routine costs for patients who participate in cancer clinical trials. (1) Any rules adopted under this section shall be limited to the coverage of routine costs for patients who participate in a cancer clinical trial. (2) Any rules adopted under this section shall be restricted to approved cancer clinical trials conducted under the auspices of the following cancer care providers (cancer care providers): The University of Vermont Medical Center, the Norris Cotton Cancer Center at Dartmouth-Hitchcock Medical Center, and approved clinical trials administered by a hospital and its affiliated, qualified cancer care providers. (3) For participation in clinical trials located outside Vermont, coverage under this section shall be required only if the patient provides notice to the health benefit plan prior to participation in the clinical trial, and: (A) no clinical trial is available at the Vermont or New Hampshire cancer care providers described in subdivision (2) of this subsection (a); (B) the patient already has completed a clinical trial under subdivision (A) of this subdivision (3) and the patients cancer care provider determines that a subsequent clinical trial related to the original diagnosis is available outside the health benefit plans network and determines participation in that clinical trial would be in the best interest of the patient, even if a comparable clinical trial is available at that time under subdivision (2) of this subsection (a); or (C) the health benefit plan already has approved a referral of the patient to an out-of-network cancer care provider and an out-of-network clinical trial becomes available and the patients cancer care provider determines participation in that clinical trial would be in the best interest of the patient, even if a comparable clinical trial is available under subdivision (2) of this subsection (a). (4) If a patient participates in a clinical trial administered by a cancer care provider that is not in the health benefit plans provider network, the health plan may require that routine follow-up care be provided within the health benefit plans network, unless the cancer care provider determines this would not be in the best interest of the patient. (b) As used in this section, health benefit plan means any health insurance policy or health benefit plan offered by a health insurer as defined in 18 V.S.A.  9402. (c) The Vermont Agency of Human Services through its Vermont Medicaid program shall participate in the provisions of this section in the same manner as insurers as defined in 18 V.S.A.  9402. (d) Notwithstanding 3 V.S.A. chapter 25, the Commissioner shall amend rules adopted under this section for the sole purpose of eliminating any sunset provision in the rule by filing a new adopted rule with the Secretary of State and the Legislative Committee on Administrative Rules. The new adopted rule shall be effective when filed. (Added 2001, No. 10,  1, eff. April 26, 2001; amended 2005, No. 3,  1, eff. Feb. 24, 2005; 2015, No. 97 (Adj. Sess.),  14.) 
 4088c. Chemotherapy treatment
(a) A health insurance plan shall provide coverage for medically necessary growth cell stimulating factor injections taken as part of a prescribed chemotherapy regimen. (b) As used in this section, health insurance plan means an individual or group health insurance policy, hospital or medical service corporation service contract, or health maintenance organization health benefit plan offered, issued, or renewed in this State. (Added 2003, No. 124 (Adj. Sess.),  3.) 
 4088d. Coverage for covered services provided by naturopathic physicians
(a) A health insurance plan shall provide coverage for medically necessary health care services covered by the plan when provided by a naturopathic physician licensed in this State for treatment within the scope of practice described in 26 V.S.A. chapter 81 and shall recognize naturopathic physicians who practice primary care to be primary care physicians. Health care services provided by naturopathic physicians may be subject to reasonable deductibles, co-payment and coinsurance amounts, and fee or benefit limits consistent with those applicable to other primary care physicians under the plan, as well as practice parameters, cost-effectiveness and clinical efficacy standards, and utilization review consistent with any applicable rules published by the Department of Financial Regulation. Any amounts, limits, standards, and review shall not function to direct treatment in a manner unfairly discriminative against naturopathic care, and collectively shall be not more restrictive than those applicable under the same policy to care or services provided by other primary care physicians, but may allow for the management of the benefit consistent with variations in practice patterns and treatment modalities among different types of health care providers. A health insurance plan may require that the naturopathic physicians services be provided by a licensed naturopathic physician under contract with the insurer or shall be covered in a manner consistent with out-of-network provider reimbursement practices for primary care physicians; however, this shall not relieve a health insurance plan from compliance with the applicable network adequacy requirements adopted by the Commissioner by rule. Nothing contained in this section shall be construed as impeding or preventing either the provision or the coverage of health care services by licensed naturopathic physicians, within the lawful scope of naturopathic practice, in hospital facilities on a staff or employee basis. (b) As used in this section, health insurance plan means Medicaid and any other public health care assistance program, any individual or group health insurance policy, any hospital or medical service corporation or health maintenance organization subscriber contract, or any other health benefit plan offered, issued, or renewed for any person in this State by a health insurer, as defined by 18 V.S.A.  9402. The term shall not include benefit plans providing coverage for a specific disease or other limited benefit coverage. (Added 2007, No. 59,  1, eff. Oct. 1, 2007; amended 2007, No. 88 (Adj. Sess.),  1, eff. March 6, 2008; 2011, No. 78 (Adj. Sess.),  2, 30, eff. April 2, 2012; 2011, No. 96 (Adj. Sess.),  1, eff. Oct. 1, 2012; 2015, No. 97 (Adj. Sess.),  15; 2017, No. 113 (Adj. Sess.),  43.) 
 4088e. Notice of preferred drug list changes
On a periodic basis, no less than once per calendar year, a health insurer as defined in 18 V.S.A.  9471(2)(A), (C), and (D) shall notify beneficiaries of changes in pharmaceutical coverage and provide access to the preferred drug list maintained by the insurer. (Added 2007, No. 80,  11.) 
 4088f. Prosthetic parity
(a) As used in this section:(1) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402, as well as Medicaid and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. The term shall not include policies or plans providing coverage for a specific disease or other limited benefit coverage. (2) Prosthetic device means an artificial limb device to replace, in whole or in part, an arm or a leg. (b) A health insurance plan shall provide coverage for prosthetic devices in all health plans at least equivalent to that provided by the federal Medicare program. Coverage may be limited to the prosthetic device that is the most appropriate model that is medically necessary to meet the patients medical needs. Any dispute between the insured and the carrier concerning coverage and the application of this section shall be subject to independent external review under section 4089f of this title. (c) A health insurance plan may require prior authorization for prosthetic devices in the same manner and to the same extent as prior authorization is required for any other covered benefit. (d) A health insurance plan shall provide coverage under this section for the medically necessary repair or replacement of a prosthetic device. (e) A health insurance plan shall not impose any annual or lifetime dollar maximum on coverage for prosthetics that is less than the annual or lifetime dollar maximum that applies generally to all terms and services covered under the plan. (f) The coverage required may not be subject to a deductible, co-payment, or coinsurance provision that is less favorable to a covered individual than the deductible, co-payment, or coinsurance provisions that apply generally to other non-primary care items and services under the health plan. (Added 2007, No. 103 (Adj. Sess.),  1, eff. Oct. 1, 2008; amended 2015, No. 97 (Adj. Sess.),  16.) 
 4088g. Coverage for covered services provided by athletic trainers
(a) To the extent a health insurance plan provides coverage for a particular type of health service or for any particular medical condition that is within the scope of practice of athletic trainers, a licensed athletic trainer who acts within the scope of practice authorized by law shall not be denied reimbursement by the health insurer for those covered services if the health insurer would reimburse another health care provider for those services. A health insurer may require that the athletic trainer services be provided by a licensed athletic trainer under contract with the insurer. Services provided by athletic trainers may be subject to reasonable deductibles, co-payment and co-insurance amounts, fee or benefit limits, practice parameters, and utilization review consistent with applicable rules adopted by the Department of Financial Regulation; provided that the amounts, limits, and review shall not function to direct treatment in a manner unfairly discriminative against athletic trainer care, and collectively shall be no more restrictive than those applicable under the same policy for care or services provided by other health care providers but allowing for the management of the benefit consistent with variations in practice patterns and treatment modalities among different types of health care providers. Nothing in this section shall be construed as impeding or preventing either the provision or coverage of health care services by licensed athletic trainers within the lawful scope of athletic trainer practice. (b) As used in this section, health insurance plan means an individual or group health insurance policy, a hospital or medical service corporation or health maintenance organization subscriber contract, or another health benefit plan offered, issued, or renewed for a person in this State by a health insurer, as defined in 18 V.S.A.  9402(8). The term shall not include benefit plans providing coverage for specific disease or other limited benefit coverage. (Added 2007, No. 141 (Adj. Sess.),  1, eff. July 1, 2008; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4088h. Health insurance and the Blueprint for Health
(a)(1) A health insurance plan shall be offered, issued, and administered consistent with the Blueprint for Health established in 18 V.S.A. chapter 13, as determined by the Commissioner. (2) As used in this section, health insurance plan means any individual or group health insurance policy, any hospital or medical service corporation or health maintenance organization subscriber contract, or any other health benefit plan offered, issued, or renewed for any person in this State by a health insurer, as defined in 18 V.S.A.  9402. The term shall include the health benefit plan offered by the State of Vermont to its employees and any health benefit plan offered by any agency or instrumentality of the State to its employees. The term shall not include benefit plans providing coverage for specific disease or other limited benefit coverage unless so directed by the Commissioner. (b) Health insurers as defined in 18 V.S.A.  701 shall participate in the Blueprint for Health as specified in 18 V.S.A.  706. In consultation with the Director of the Blueprint for Health and the Director of Health Care Reform, the Commissioner may establish procedures to exempt or limit the participation of health insurers offering a stand-alone dental plan or specific disease or other limited-benefit coverage. A health insurer shall be exempt from participation if the insurer offers only benefit plans which are paid directly to the individual insured or the insureds assigned beneficiaries and for which the amount of the benefit is not based upon potential medical costs or actual costs incurred. (Added 2007, No. 204 (Adj. Sess.),  2; amended 2009, No. 128 (Adj. Sess.),  15.) 
 4088i. Coverage for diagnosis and treatment of early childhood developmental disorders
(a)(1) A health insurance plan shall provide coverage for the evidence-based diagnosis and treatment of early childhood developmental disorders, including applied behavior analysis supervised by a nationally board-certified behavior analyst, for children, beginning at birth and continuing until the child reaches age 21. (2) Coverage provided pursuant to this section by Medicaid or any other public health care assistance program shall comply with all federal requirements imposed by the Centers for Medicare and Medicaid Services. (3) Any benefits required by this section that exceed the essential health benefits specified under Section 1302(b) of the Patient Protection and Affordable Care Act, Public Law 111-148, as amended, shall not be required in a health insurance plan offered in the individual, small group, and large group markets on and after January 1, 2014. (b) The amount, frequency, and duration of treatment described in this section shall be based on medical necessity and may be subject to a prior authorization requirement under the health insurance plan. (c) A health insurance plan shall not impose greater coinsurance, co-payment, deductible, or other cost-sharing requirements for coverage of the diagnosis or treatment of early childhood developmental disorders than apply to the diagnosis and treatment of any other physical or mental condition under the plan. (d)(1) A health insurance plan shall provide coverage for applied behavior analysis when the services are provided or supervised by a licensed provider who is working within the scope of his or her license or who is a nationally board-certified behavior analyst. (2) A health insurance plan shall provide coverage for services under this section delivered in the natural environment when the services are furnished by a provider working within the scope of his or her license or under the direct supervision of a licensed provider or, for applied behavior analysis, by or under the supervision of a nationally board-certified behavior analyst. (e) Except for inpatient services, if an individual is receiving treatment for an early developmental delay, the health insurance plan may require treatment plan reviews based on the needs of the individual beneficiary, consistent with reviews for other diagnostic areas and with rules established by the Department of Financial Regulation. A health insurance plan may review the treatment plan for children under the age of eight no more frequently than once every six months. (f) As used in this section:(1) Applied behavior analysis means the design, implementation, and evaluation of environmental modifications using behavioral stimuli and consequences to produce socially significant improvement in human behavior. The term includes the use of direct observation, measurement, and functional analysis of the relationship between environment and behavior. (2) Autism spectrum disorders means one or more pervasive developmental disorders as defined in the most recent edition of the Diagnostic and Statistical Manual of Mental Disorders, including autistic disorder, pervasive developmental disorder not otherwise specified, and Aspergers disorder. (3) Behavioral health treatment means evidence-based counseling and treatment programs, including applied behavior analysis, that are: (A) necessary to develop skills and abilities for the maximum reduction of physical or mental disability and for restoration of an individual to his or her best functional level, or to ensure that an individual under the age of 21 achieves proper growth and development; (B) provided or supervised by a nationally board-certified behavior analyst or by a licensed provider, so long as the services performed are within the providers scope of practice and certifications. (4) Diagnosis of early childhood developmental disorders means medically necessary assessments, evaluations, or tests to determine whether an individual has an early childhood developmental delay, including an autism spectrum disorder. (5) Early childhood developmental disorder means a childhood mental or physical impairment or combination of mental and physical impairments that results in functional limitations in major life activities, accompanied by a diagnosis defined by the Diagnostic and Statistical Manual of Mental Disorders (DSM) or the International Classification of Disease (ICD). The term includes autism spectrum disorders, but does not include a learning disability. (6) Evidence-based means the same as in 18 V.S.A.  4621.(7) Health insurance plan means Medicaid and any other public health care assistance program, any individual or group health insurance policy, any hospital or medical service corporation or health maintenance organization subscriber contract, or any other health benefit plan offered, issued, or renewed for any person in this State by a health insurer, as defined in 18 V.S.A.  9402. The term does not include benefit plans providing coverage for specific diseases or other limited benefit coverage. (8) Medically necessary describes health care services that are appropriate in terms of type, amount, frequency, level, setting, and duration to the individuals diagnosis or condition, are informed by generally accepted medical or scientific evidence, and are consistent with generally accepted practice parameters. Such services shall be informed by the unique needs of each individual and each presenting situation, and shall include a determination that a service is needed to achieve proper growth and development or to prevent the onset or worsening of a health condition. (9) Natural environment means a home or child care setting.(10) Pharmacy care means medications prescribed by a licensed physician and any health-related services deemed medically necessary to determine the need for or effectiveness of a medication. (11) Psychiatric care means direct or consultative services provided by a licensed physician certified in psychiatry by the American Board of Medical Specialties. (12) Psychological care means direct or consultative services provided by a psychologist licensed pursuant to 26 V.S.A. chapter 55. (13) Therapeutic care means services provided by licensed or certified speech language pathologists, occupational therapists, or physical therapists. (14) Treatment for early developmental disorders means evidence-based care and related equipment prescribed or ordered for an individual by a licensed health care provider or a licensed psychologist who determines the care to be medically necessary, including: (A) behavioral health treatment;(B) pharmacy care;(C) psychiatric care;(D) psychological care; and(E) therapeutic care.(g) Nothing in this section shall be construed to affect any obligation to provide services to an individual under an individualized family service plan, individualized education program, or individualized service plan. A health insurance plan shall not reimburse services provided under 16 V.S.A.  2959a. (h) It is the intent of the General Assembly that the Department of Financial Regulation facilitate and encourage health insurance plans to bundle co-payments accrued by beneficiaries receiving services under this section to the extent possible. (Added 2009, No. 127 (Adj. Sess.),  2, eff. July 1, 2011; amended 2011, No. 158 (Adj. Sess.),  1; 2013, No. 79,  8, eff. Jan. 1, 2014; 2013, No. 96 (Adj. Sess.),  18.) 
 4088j. Choice of providers for vision care and medical eye care services
(a) To the extent a health insurance plan provides coverage for vision care or medical eye care services, it shall cover those services whether provided by a licensed optometrist or by a licensed ophthalmologist, provided the health care professional is acting within his or her authorized scope of practice and participates in the plans network. (b) A health insurance plan shall impose no greater co-payment, coinsurance, or other cost-sharing amount for services when provided by an optometrist than for the same service when provided by an ophthalmologist. (c) A health insurance plan shall provide to a licensed health care professional acting within his or her scope of practice the same level of reimbursement or other compensation for providing vision care and medical eye care services that are within the lawful scope of practice of the professions of medicine, optometry, and osteopathy, regardless of whether the health care professional is an optometrist or an ophthalmologist. (d)(1) A health insurer shall permit a licensed optometrist to participate in plans or contracts providing for vision care or medical eye care to the same extent as it does an ophthalmologist. (2) A health insurer shall not require a licensed optometrist or ophthalmologist to provide discounted materials benefits or to participate as a provider in another medical or vision care plan or contract as a condition or requirement for the optometrists or ophthalmologists participation as a provider in any medical or vision care plan or contract. (e)(1) An agreement between a health insurer or an entity that writes vision insurance and an optometrist or ophthalmologist for the provision of vision services to plan members or subscribers in connection with coverage under a stand-alone vision care plan or other health insurance plan shall not require that an optometrist or ophthalmologist provide services or materials at a fee limited or set by the plan or insurer unless the services or materials are reimbursed as covered services under the contract. (2) An optometrist or ophthalmologist shall not charge more for services and materials that are noncovered services under a vision care plan or other health insurance plan than his or her usual and customary rate for those services and materials. (3) Reimbursement paid by a vision care plan or other health insurance plan for covered services and materials shall be reasonable and shall not provide nominal reimbursement in order to claim that services and materials are covered services. (4)(A) A vision care plan or other health insurance plan shall not restrict or otherwise limit, directly or indirectly, an optometrists, ophthalmologists, or independent opticians choice of or relationship with sources and suppliers of products, services, or materials or use of optical laboratories if the optometrist, ophthalmologist, or optician determines that the source, supplier, or laboratory he or she has selected offers the products, services, or materials in a manner that is more beneficial to the consumer, including with respect to cost, quality, timing, or selection, than the source, supplier, or laboratory selected by the vision care plan or other health insurance plan. The plan shall not impose any penalty or fee on an optometrist, ophthalmologist, or independent optician for using any supplier, optical laboratory, product, service, or material. (B) The optometrist, ophthalmologist, or optician shall notify the consumer of any additional costs the consumer may incur as the result of procuring the products, services, or materials from the source, supplier, or laboratory selected by the optometrist, ophthalmologist, or optician instead of from the source, supplier, or laboratory selected by the vision care plan or other health insurance plan. (C) Nothing in this subdivision (4) shall be construed to prevent a vision care plan or other health insurance plan from informing its policyholders of the benefits available under the plan or from conducting an audit of an optometrists, ophthalmologists, or opticians use of alternative sources, suppliers, or laboratories. (D) The provisions of this subdivision (4) shall not apply to Medicaid.(f) The Department of Financial Regulation shall enforce the provisions of this section as they relate to health insurance plans and vision care plans other than Medicaid. (g) As used in this section:(1) Covered services means services and materials for which reimbursement from a vision care plan or other health insurance plan is provided by a members or subscribers plan contract, or for which a reimbursement would be available but for application of the deductible, co-payment, or coinsurance requirements under the members or subscribers health insurance plan. (2) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer or a subcontractor of a health insurer, as well as Medicaid and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. The term includes vision care plans but does not include policies or plans providing coverage for a specified disease or other limited benefit coverage. (3) Health insurer shall have the same meaning as in 18 V.S.A.  9402.(4) Materials includes lenses, devices containing lenses, prisms, lens treatments and coatings, contact lenses, and prosthetic devices to correct, relieve, or treat defects or abnormal conditions of the human eye or its adnexa. (5) Ophthalmologist means a physician licensed pursuant to 26 V.S.A. chapter 23 or an osteopathic physician licensed pursuant to 26 V.S.A. chapter 33 who has had special training in the field of ophthalmology. (6) Optometrist means a person licensed pursuant to 26 V.S.A. chapter 30.(7) Optician means a person licensed pursuant to 26 V.S.A. chapter 47.(8) Vision care plan means an integrated or stand-alone plan, policy, or contract providing vision benefits to enrollees with respect to covered services or covered materials, or both. (Added 2013, No. 182 (Adj. Sess.),  1, eff. Jan. 1, 2015; amended 2015, No. 164 (Adj. Sess.),  1.) 
 4088k. Physical therapy co-payments for certain plans
For silver- and bronze-level qualified health benefit plans and any reflective health benefit plans offered at the silver or bronze level pursuant to 33 V.S.A. chapter 18, subchapter 1, health care services provided by a licensed physical therapist may be subject to a co-payment requirement, provided that any required co-payment amount shall be between 125 and 150 percent of the amount of the co-payment applicable to care and services provided by a primary care provider under the plan. (Added 2018, No. 7 (Sp. Sess.),  3, eff. Jan. 1, 2020; amended 2019, No. 19,  2, eff. Jan. 1, 2020.) 
 4088l. Coverage for hearing aids [Effective January 1, 2024]
(a) As used in this section:(1) Health insurance plan means a group health insurance policy or health benefit plan offered by a health insurance company, nonprofit hospital or medical service corporation, or health maintenance organization, but does not include: (A) a qualified health benefit plan or reflective health benefit plan offered in accordance with 33 V.S.A. chapter 18, subchapter 1; (B) a health benefit plan offered by an intermunicipal insurance association to one or more entities providing educational services pursuant to 24 V.S.A. chapter 121, subchapter 6; or (C) a policy or plan providing coverage for a specified disease or other limited benefit coverage. (2) Hearing aid means any small, wearable electronic instrument or device designed and intended for the ear for the purpose of aiding or compensating for impaired human hearing and any related parts, attachments, or accessories, including earmolds and associated remote microphones that pair with hearing aids to improve word comprehension in difficult listening situations in live or telecommunication settings. The term does not include large-audience assisted listening devices, such as those designed for auditoriums, or stand-alone assisted listening devices that can function without a hearing aid. (3) Hearing aid professional services means the practice of fitting, selecting, dispensing, selling, or servicing hearing aids, or a combination, including: (A) evaluation for a hearing aid;(B) fitting of a hearing aid;(C) programming of a hearing aid;(D) hearing aid repairs;(E) follow-up adjustments, servicing, and maintenance of a hearing aid;(F) ear mold impressions; and(G) auditory rehabilitation and training.(4) Hearing care professional means an audiologist or hearing aid dispenser licensed under 26 V.S.A. chapter 67, a physician licensed under 26 V.S.A. chapter 23 or 33, a physician assistant licensed under 26 V.S.A. chapter 31, or an advanced practice registered nurse licensed under 26 V.S.A. chapter 28, working within that professionals scope of practice. (b)(1) A health insurance plan shall cover the cost of a hearing aid for each ear and the associated hearing aid professional services when the hearing aid or aids are prescribed, fitted, and dispensed by a hearing care professional. The coverage shall include hearing aid batteries when prescribed by a hearing care professional. (2) A health insurance plan may limit coverage to not more than one hearing aid per ear every three years, except that a plan shall cover the cost of one or more new hearing aids for a covered individual prior to the expiration of the three-year period based on a hearing care professionals determination that a new hearing aid for one or both ears is medically necessary. (c)(1) Subject to the limitations set forth in subdivision (b)(2) of this section, the coverage provided by a health plan for hearing aids and associated services shall be limited only by medical necessity. (2) A covered individual may select a hearing aid that exceeds the limits set forth in subdivision (1) of this subsection and pay the additional cost. (d) The coverage required by this section shall not be subject to a deductible, co-payment, or coinsurance provision that is less favorable to a covered individual than the deductible, co-payment, or coinsurance provisions that apply generally to other nonprimary care items and services under the health insurance plan. (e) A covered individual who has exhausted all applicable internal review procedures provided by the health insurance plan shall have the right to an independent external review as set forth in section 4089f of this title. (Added 2021, No. 108 (Adj. Sess.),  4, eff. January 1, 2024.) 
 4089. Services for victims of sexual assault
(a) A health insurer shall not impose any co-payment or coinsurance or, to the extent permitted under federal law, deductible or other cost-sharing requirement for the sexual assault examination of a victim of alleged sexual assault for health care services associated with specific procedure codes identified in a memorandum of understanding between the health insurer and the Vermont Center for Crime Victim Services. (b) As used in this section:(1) Health insurer shall have the same meaning as in 18 V.S.A.  9402.(2) Sexual assault examination means either or both of the following:(A) a physical examination of the patient, documentation of biological and physical findings, and collection of evidence; and (B) treatment of the patients injuries; providing care for sexually transmitted infections; assessing pregnancy risk; discussing treatment options including reproductive health services, screening for the human immunodeficiency virus, and prophylactic treatment when appropriate; and providing instructions and referrals for follow-up care. (Added 2015, No. 34,  1, eff. Oct. 1, 2015.) 
 4089a. Mental health care services review
(a) The purposes of this section are to:(1) promote the delivery of quality mental health care in a cost-effective manner;(2) foster the practice of mental health services review as a professional collaborative process, the primary objective of which is to enhance the effectiveness of clinical treatment; (3) protect clients/patients, employers, and mental health care providers by ensuring that review agents are qualified to perform service review activities and to make informed decisions on the appropriateness of mental health care; and (4) ensure the confidentiality of clients/patients mental health records in the performance of service review activities in accordance with applicable State and federal laws. (b) Definitions. As used in this section:(1) License means a review agents license granted by the Commissioner.(2) Mental health care provider or mental health care professional means any person, corporation, facility, or institution certified or licensed by this State to provide mental health care services, including a physician, a nurse with recognized psychiatric specialties, hospital or other health care facility, psychologist, clinical social worker, mental health counselor, alcohol or drug abuse counselor, or an employee or agent of such provider acting in the course and scope of employment or an agency related to mental health care services. (3) Mental health care services mean acts of diagnosis, treatment, evaluation, or advice or any other acts permissible under the health care laws of Vermont whether performed in an outpatient or institutional setting, and include alcohol and drug abuse treatment. (4) Review agent means a person or entity performing service review activities within one year of the date of a fully compliant application for licensure who is either affiliated with, under contract with, or acting on behalf of a business entity in this State and who provides or administers mental health care benefits to members of health benefit plans subject to the Departments jurisdiction, including a health insurer, nonprofit health service plan, health insurance service organization, health maintenance organization, or preferred provider organization, including organizations that rely upon primary care physicians to coordinate delivery of services. (5) Service review means any system for reviewing the appropriate and efficient allocation of mental health care services given or proposed to be given to a patient or group of patients for the purpose of recommending or determining whether such services should be reimbursed, covered, or provided by an insurer, plan, or other entity or person and includes activities of utilization review and managed care, but does not include professional peer review which does not affect reimbursement for or provision of services. (c) Any person who approves or denies payment, or who recommends approval or denial of payment for mental health care services, or whose review results in approval or denial of payment for mental health services on a case-by-case basis, may not review such services in this State unless the Commissioner has granted the person a review agents license. On or before January 1, 1995, the Commissioner shall adopt rules to implement the provisions of this section, including the procedures and standards for licensure. The rules shall differentiate between health maintenance organizations licensed to do business within this State and other forms of utilization review. The rules shall establish: (1) A requirement that within 10 business days after request the review agent make available at no cost to its clients/patients and providers affected by its service review activities, the specific review criteria and standards, credentials of the reviewing professionals, and procedures and methods to be used in evaluating proposed or delivered mental health care services. (2) A time period within which any determination regarding the provision or reimbursement of mental health services shall be made. (3) A requirement that any determination regarding mental health care services rendered or to be rendered to a client/patient which may result in a denial of third-party reimbursement or a denial of pre-certification for that service shall include the evaluation, findings, and concurrence of a mental health professional whose training and expertise is at least comparable to that of the treating clinician. (4) The type, qualifications, and number of personnel required to perform service review activities. (5) A requirement that a determination by a review agent that care rendered or to be rendered is inappropriate shall not be made until the review agent has communicated with the patients attending mental health professional concerning that medical care. The review shall be prospective or concurrent with the treatment. (6) A requirement that any determination that care rendered or to be rendered is inappropriate shall include the written evaluation and findings of the review agent. (7) A procedure for clients or patients, or both, mental health professionals, or hospitals to seek prompt reconsideration before an independent review organization pursuant to section 4089f of this title of an adverse decision by a review agent. The external reviewer engaged by the independent review organization shall have training and expertise at least comparable to that of the treating clinician. (8) Policies and procedures to ensure that all applicable State and federal laws to protect the confidentiality of individual mental health records are followed. (9) Policies and procedures which ensure appropriate notification and concurrence of providers and clients/patients before client/patient interviews are conducted by the review agent. (10) Prohibition of an agreement between the review agent and a business entity or third-party payor in which payment to the review agent includes an incentive or contingent fee arrangement based on the reduction of mental health care services, reduction of length of stay, reduction of treatment, or treatment setting selected. Nothing in this subdivision shall prohibit capitation arrangements for reimbursement for mental health services. Notwithstanding the foregoing, a clinical decision made by the attending mental health professional regarding continued treatment shall not be construed as a denial of services subject to the provisions of this section. (d) Reviewing agents shall be subject to the provisions of chapter 129 of this title governing unfair insurance trade practices. (e) Interim provisions: Review agents who are operating in Vermont prior to the adoption of rules pursuant to this section may continue to conduct review activities until the Commissioner adopts rules and acts upon the application submitted by the review agent. Review agents operating pursuant to this subsection shall file a completed initial application within the time set forth by rule in order to continue operating until a license is granted. (f) The Commissioner shall have the authority to examine, take administrative action against and penalize review agents as provided in chapters 3, 101, and 129 of this title. A person who violates any provision of this section or who submits any false information in an application required by this section may be fined not more than $5,000.00 for each violation. (g) [Repealed.](h) A review agent shall pay a license fee for the year of registration and a renewal fee for each year thereafter of $200.00. In addition, a review agent shall pay any additional expenses incurred by the Commissioner to examine and investigate an application or an amendment to an application. (i) The confidentiality of any health care information acquired by or provided to an independent review organization pursuant to section 4089f of this title shall be maintained in compliance with any applicable State or federal laws. Records of, and internal materials prepared for, specific reviews under this section shall be exempt from public inspection and copying under the Public Records Act. (Added 1993, No. 185 (Adj. Sess.),  1, eff. June 11, 1994; amended 1997, No. 25,  1, eff. May 28, 1997; 2001, No. 76 (Adj. Sess.),  2, eff. March 15, 2002; 2011, No. 21,  14; 2013, No. 79,  2, eff. June 7, 2013; 2015, No. 23,  4.) 
 4089b. Health insurance coverage, mental health, and substance use disorder
(a) It is the goal of the General Assembly that treatment for mental conditions be recognized as an integral component of health care, that health insurance plans cover all necessary and appropriate medical services without imposing practices that create barriers to receiving appropriate care, and that integration of health care be recognized as the standard for care in this State. (b) As used in this section:(1) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402, except a benefit plan providing coverage for a specific disease or other limited benefit coverage. Health insurance plan includes any health benefit plan offered or administered by the State, or any subdivision or instrumentality of the State. (2) Mental condition means any condition or disorder involving psychiatric disabilities or alcohol or substance use that falls under any of the diagnostic categories listed in the mental disorders section of the International Classification of Diseases, as periodically revised. (3) Rate, term, or condition means any lifetime or annual payment limits, deductibles, copayments, coinsurance, and any other cost-sharing requirements, out-of-pocket limits, visit limits, and any other financial component of health insurance coverage that affects the insured. (c) A health insurance plan shall provide coverage for treatment of a mental condition and shall: (1) not establish any rate, term, or condition that places a greater burden on an insured for access to treatment for a mental condition than for access to treatment for other health conditions, including no greater co-payment for primary mental health care or services than the co-payment applicable to care or services provided by a primary care provider under an insureds policy and no greater co-payment for specialty mental health care or services than the co-payment applicable to care or services provided by a specialist provider under an insureds policy; (2) not exclude from its network or list of authorized providers any licensed mental health or substance abuse provider located within the geographic coverage area of the health benefit plan if the provider is willing to meet the terms and conditions for participation established by the health insurer; (3) make any deductible or out-of-pocket limits required under a health insurance plan comprehensive for coverage of both mental and physical health conditions; and (4) if the plan provides prescription drug coverage, ensure that at least one medication from each drug class approved by the U.S. Food and Drug Administration for the treatment of substance use disorder is available on the lowest cost-sharing tier of the plans prescription drug formulary. (d)(1)(A) A health insurance plan that does not otherwise provide for management of care under the plan, or that does not provide for the same degree of management of care for all health conditions, may provide coverage for treatment of mental conditions through a managed care organization, provided that the managed care organization is in compliance with the rules adopted by the Commissioner that ensure that the system for delivery of treatment for mental conditions does not diminish or negate the purpose of this section. In reviewing rates and forms pursuant to section 4062 of this title, the Commissioner or the Green Mountain Care Board established in 18 V.S.A. chapter 220, as appropriate, shall consider the compliance of the policy with the provisions of this section. (B) The rules adopted by the Commissioner shall ensure that:(i) timely and appropriate access to care is available;(ii) the quantity, location, and specialty distribution of health care providers is adequate;(iii) administrative or clinical protocols do not serve to reduce access to medically necessary treatment for any insured; (iv) utilization review and other administrative and clinical protocols do not deter timely and appropriate care, including emergency hospital admissions; (v) in the case of a managed care organization that contracts with a health insurer to administer the insurers mental health benefits, the portion of a health insurers premium rate attributable to the coverage of mental health benefits is reviewed under section 4062, 4513, 4584, or 5104 of this title to determine whether it is excessive, inadequate, unfairly discriminatory, unjust, unfair, inequitable, misleading, or contrary to the laws of this State; (vi) the health insurance plan is consistent with the Blueprint for Health with respect to mental conditions, as determined by the Commissioner under 18 V.S.A.  9414(b)(2); (vii) a quality improvement project is completed annually as a joint project between the health insurance plan and its mental health managed care organization to implement policies and incentives to increase collaboration among providers that will facilitate clinical integration of services for medical and mental conditions, including: (I) evidence of how data collected from the quality improvement project are being used to inform the practices, policies, and future direction of care management programs for mental conditions; and (II) demonstration of how the quality improvement project is supporting the incorporation of best practices and evidence-based guidelines into the utilization review of mental conditions; (viii) an up-to-date list of active mental health care providers in the plans network who are available to the general membership is available on the health insurers and managed care organizations websites and provided to consumers upon request; and (ix) the health insurers and managed care organizations make accessible to consumers the toll-free telephone number for the Vermont Health Care Administrations consumer protection help line. (C) Prior to the adoption of rules pursuant to this subdivision, the Commissioner shall consult with the Commissioner of Mental Health and the task force established pursuant to subsection (h) of this section concerning: (i) developing incentives and other measures addressing the availability of providers of care and treatment for mental conditions, especially in medically underserved areas; (ii) incorporating nationally recognized best practices and evidence-based guidelines into the utilization review of mental conditions; and (iii) establishing benefit design, infrastructure support, and payment methodology standards for evaluating the health insurance plans consistency with the Blueprint for Health with respect to the care and treatment of mental conditions. (2) A managed care organization providing or administering coverage for treatment of mental conditions on behalf of a health insurance plan shall comply with this section, sections 4089a and 4724 of this title, and 18 V.S.A.  9414, with rules adopted pursuant to those provisions of law, and with all other obligations, under Title 18 and under this title, of the health insurance plan and the health insurer on behalf of which the review agent is providing or administering coverage. A violation of any provision of this section shall constitute an unfair act or practice in the business of insurance in violation of section 4723 of this title. (3) A health insurer that contracts with a managed care organization to provide or administer coverage for treatment of mental conditions is fully responsible for the acts and omissions of the managed care organization, including any violations of this section or a rule adopted pursuant to this section. (4) In addition to any other remedy or sanction provided for by law, if the Commissioner, after notice and an opportunity to be heard, finds that a health insurance plan or managed care organization has violated this section or any rule adopted pursuant to this section, the Commissioner may: (A) assess a penalty on the health insurer or managed care organization under section 4726 of this title; (B) order the health insurer or managed care organization to cease and desist in further violations; (C) order the health insurer or managed care organization to remediate the violation, including issuing an order to the health insurer to terminate its contract with the managed care organization; and (D) revoke or suspend the license of a health insurer or managed care organization, or permit continued licensure subject to such conditions as the Commissioner deems necessary to carry out the purposes of this section. (5) As used in this subsection, the term managed care organization includes any of the following entities that provide or administer the coverage of mental health benefits on behalf of a health insurance plan: (A) a review agent as defined in section 4089a of this title;(B) a health insurer or an affiliate of a health insurer as defined in 18 V.S.A.  9402;(C) a managed care organization or an affiliate of a managed care organization as defined in 18 V.S.A.  9402; and (D) a person or entity that should be licensed as a managed care organization.(e) [Repealed.](f) To be eligible for coverage under this section, the service shall be rendered:(1) For treatment of a mental condition:(A) by a licensed or certified mental health professional; or(B) in a mental health facility qualified pursuant to rules adopted by the Secretary of Human Services or in an institution, approved by the Secretary of Human Services, that provides a program for the treatment of a mental condition pursuant to a written plan. A nonprofit hospital or medical service corporation may require a mental health facility or licensed or certified mental health professional to enter into a contract as a condition of providing benefits. (2) For treatment of alcohol or substance abuse:(A) by a substance abuse counselor or other person approved by the Secretary of Human Services based on rules adopted by the Secretary that establish standards and criteria for determining eligibility under this subdivision; or (B) in an institution, approved by the Secretary of Human Services, that provides a program for the treatment of alcohol or substance dependency pursuant to a written plan. (g), (h) [Repealed.] (Added 1997, No. 25,  2, 4, 6; amended 1999, No. 129 (Adj. Sess.),  1; 2001, No. 32,  1; 2001, No. 76 (Adj. Sess.),  1, eff. March 15, 2002; 2003, No. 29,  1; 2005, No. 129 (Adj. Sess.),  1; 2007, No. 142 (Adj. Sess.),  1, eff. May 14, 2008; 2009, No. 33,  17; 2009, No. 128 (Adj. Sess.),  30; 2009, No. 137 (Adj. Sess.),  26a; 2009, No. 156 (Adj. Sess.),  I.13; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2011, No. 78 (Adj. Sess.),  31, eff. April 2, 2012; 2011, No. 171 (Adj. Sess.),  11d, eff. Jan. 1, 2014; 2011, No. 171 (Adj. Sess.),  41(a); 2013, No. 79,  5e, eff. Jan. 1, 2014; 2013, No. 96 (Adj. Sess.),  19; 2015, No. 54,  32; 2019, No. 43,  1, eff. Jan. 1, 2020.)
 4089c. Diabetes treatment
(a)(1) A health insurer shall provide coverage for the equipment, supplies, and outpatient self-management training and education, including medical nutrition therapy, for the treatment of insulin dependent diabetes, insulin using diabetes, gestational diabetes, and noninsulin using diabetes if prescribed by a health care professional legally authorized to prescribe such items under law. A health insurer may require that such prescriptions be made, and care be given, by a health care professional under contract with the insurer. (2) Diabetes outpatient self-management training and education required to be covered by this section shall be provided by a certified, registered, or licensed health care professional with specialized training in the education and management of diabetes. (3) Benefits required to be covered by this section shall be subject to the same dollar limits, deductibles, and coinsurance factors within the provisions of the health insurance policy. (b) For the purposes of this section, insurer means any health insurance company, nonprofit hospital and medical service corporation, and health maintenance organization. The term does not apply to coverage for specified disease or other limited benefit coverage. (Added 1997, No. 14,  1.) 
 4089d. Coverage; dependent children
(a) As used in this section, health insurance plan has the same meaning as group health plan and shall be subject to the same excepted benefits, in each case, as set forth in 45 C.F.R.  146.145, as in effect as of December 31, 2017. (b) A health insurance plan that provides dependent coverage of children shall continue to make that coverage available for an adult child until the child attains 26 years of age, provided that this subsection shall not apply to a plan providing coverage for a specified disease or other limited benefit coverage, and further provided that nothing in this subsection shall require a plan to make coverage available for the child of a child receiving dependent coverage. (c)(1) A health insurance plan that provides for terminating the coverage of a dependent child upon attainment of the limiting age for dependent children specified in the policy shall not limit or restrict coverage with respect to an unmarried child who: (A) is incapable of self-sustaining employment by reason of a mental or physical disability that has been found to be a disability that qualifies or would qualify the child for benefits using the definitions, standards, and methodology in 20 C.F.R. Part 404, Subpart P; (C) is chiefly dependent upon the employee, member, subscriber, or policyholder for support and maintenance. (2) Coverage under subdivision (1) of this subsection shall not be denied any person based upon the existence of such a condition; however a health insurance plan may require reasonable periodic proof of a continuing condition no more frequently than once every year. (B) became so incapable prior to attainment of the limiting age; and(d) A health insurance plan that covers dependent children who are full-time college students beyond 18 years of age shall include coverage for a dependents medically necessary leave of absence from school for a period not to exceed 24 months or the date on which coverage would otherwise end pursuant to the terms and conditions of the policy or coverage, whichever comes first, except that coverage may continue under subsection (b) of this section as appropriate. To establish entitlement to coverage under this subsection, documentation and certification by the students treating physician of the medical necessity of a leave of absence shall be submitted to the insurer or, for self-insured plans, the health plan administrator. The health insurance plan may require reasonable periodic proof from the students treating physician that the leave of absence continues to be medically necessary. (Added 1975, No. 237 (Adj. Sess.),  1, eff. April 7, 1976; amended 1983, No. 165 (Adj. Sess.),  2; 2005, No. 199 (Adj. Sess.),  1; 2019, No. 63,  5, eff. Jan. 1, 2020; 2019, No. 103 (Adj. Sess.),  27.) 
 4089e. Treatment of inherited metabolic diseases
(a) For the purposes of this section:(1) Inherited metabolic disease means a disease caused by an inherited abnormality of body chemistry for which the State screens newborn infants. (2) Insurer means any health insurance company, nonprofit hospital and medical service corporation, managed care organization, and health maintenance organization. The term does not apply to coverage for specified disease or other limited benefit coverage. (3) Low protein modified food product means a food product that is specifically formulated to have less than one gram of protein per serving and is intended to be used under the direction of a physician for the dietary treatment of a metabolic disease. (4) Medical food means an amino acid modified preparation that is intended to be used under the direction of a physician for the dietary treatment of an inherited metabolic disease. (b) An insurer shall provide coverage for medical foods prescribed for medically necessary treatment for an inherited metabolic disease. (c) Coverage for low protein modified food products prescribed for medically necessary treatment of an inherited metabolic disease shall be at least $2,500.00 during any continuous period of 12 months for any insured individual. (Added 1997, No. 128 (Adj. Sess.),  1, eff. April 27, 1998.) 
 4089f. Independent external review of health care service decisions
(a) As used in this section:(1) Health benefit plan means a policy, contract, certificate, or agreement entered into, offered, or issued by a health insurer, as defined in 18 V.S.A.  9402, to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services. (2) Insured means the beneficiary of a health benefit plan, including the subscriber and all others covered under the plan, and shall also mean a member of a health benefit plan not otherwise subject to the Departments jurisdiction that has voluntarily agreed to use the external review process provided under this section. (b) An insured who has exhausted all applicable internal review procedures provided by the health benefit plan shall have the right to an independent external review of a decision under a health benefit plan to deny, reduce, or terminate health care coverage or to deny payment for a health care service. The independent review shall be available when requested in writing by the affected insured, provided the decision to be reviewed requires the plan to expend at least $100.00 for the service and the decision by the plan is based on one of the following reasons: (1) The health care service is a covered benefit that the health insurer has determined to be not medically necessary. (2) A limitation is placed on the selection of a health care provider that is claimed by the insured to be inconsistent with limits imposed by the health benefit plan and any applicable laws and rules. (3) The health care treatment has been determined to be experimental, investigational, or an off-label drug. A health benefit plan that denies use of a prescription drug for the treatment of cancer as not medically necessary or as an experimental or investigational use shall treat any internal appeal of such denial as an emergency or urgent appeal, and shall decide such appeal within the time frames applicable to emergency and urgent internal appeals under rules adopted by the Commissioner. (4) The health care service involves a medically based decision that a condition is preexisting.(5) The decision involves an adverse determination related to surprise medical billing, as established under Section 2799A-1 or 2799A-2 of the Public Health Service Act, including with respect to whether an item or service that is the subject of the adverse determination is an item or service to which Section 2799A-1 or 2799A-2 of the Public Health Service Act, or both, applies. (c) The right to review under this section shall not be construed to change the terms of coverage under a health benefit plan. (d) The Department shall adopt rules necessary to carry out the purposes of this section. The rules shall ensure that the independent external reviews have the following characteristics: (1) The independent external reviews shall be conducted:(A) by independent review organizations pursuant to a contract with the Department, and the reviewers shall include health care providers credentialed with respect to the health care service under review and have no conflict of interest relating to the performance of their duties under this section; and (B) in accordance with standards of decision-making based on objective clinical evidence and shall resolve all issues in a timely manner and provide expedited resolution when the decision relates to emergency or urgent health care services. (2) An insured shall:(A) Be provided with adequate notice of his or her review rights under this section.(B) Have the right to use outside assistance during the review process and to submit evidence relating to the health care service. (C) Pay an application fee of $25.00 for each request for an independent external review of an appealable decision not to exceed a total of $75.00 annually. The application fee may be waived or reduced based on a determination by the Commissioner that the financial circumstances of the insured warrant a waiver or reduction. The application fee shall be paid by the insurer, not the insured, if the independent review organization reverses an insurers decision to deny payment for a health care service. (D) Be protected from retaliation for exercising his or her right to an independent external review under this section. (3) Other costs of the independent review shall be paid by the health benefit plan.(4) The independent review organization shall issue to both parties a written review decision that is evidence-based. The decision shall be binding on the health benefit plan. (5) The confidentiality of any health care information acquired or provided to the independent review organization shall be maintained in compliance with any applicable State or federal laws. (6) The records of, and internal materials prepared for, specific reviews by any independent review organization under this section shall be exempt from public disclosure under 1 V.S.A.  316. (e) [Repealed.](f) Decisions relating to the following health care services shall not be reviewed under this section but shall be reviewed by the review process provided by law: (1) health care services provided by the Vermont Medicaid program or Medicaid benefits provided through a contracted health plan; and (2) health care services provided to inmates by the Department of Corrections. (Added 1997, No. 159 (Adj. Sess.),  1, eff. April 29, 1998; amended 2005, No. 139 (Adj. Sess.),  2; 2011, No. 21,  14a-16; 2021, No. 137 (Adj. Sess.),  4, eff. July 1, 2022.)
 4089g. Craniofacial disorders
(a) A health insurance plan shall provide coverage for diagnosis and medically necessary treatment, including surgical and nonsurgical procedures, for a musculoskeletal disorder that affects any bone or joint in the face, neck, or head and is the result of accident, trauma, congenital defect, developmental defect, or pathology. Subject to subsection (b) of this section, this coverage shall be the same as that provided under the health insurance plan for any other musculoskeletal disorder in the body and may be provided when prescribed or administered by a physician or a dentist. This section shall not be construed to require coverage for dental services for the diagnosis or treatment of dental disorders or dental pathology primarily affecting the gums, teeth, or alveolar ridge. (b) A health insurance plan may require a referral from a health care provider under contract with the plan. (c) As used in this section, health insurance plan means any health insurance policy or health benefit plan offered by a health insurer as defined in 18 V.S.A.  9402. Health insurance plan includes any health benefit plan offered or administered by the State, or any subdivision or instrumentality of the State. (Added 1997, No. 95 (Adj. Sess.),  1.) 
 4089h. Cancellation or nonrenewal of health insurance coverage
(a) Except as otherwise provided for comprehensive major medical insurance coverage in section 4077 of this chapter, a health insurer shall notify a policyholder of any premium payment due on a policy at least 21 days before the due date. If an insurer does not receive payment by the due date, an insurer shall send a termination notice to the policyholder notifying the policyholder that the insurer will terminate the policy effective on the due date if payment is not received within 14 days from the date of mailing of the termination notice. If an insurer does not receive payment within 14 days from the date of mailing of the termination notice, an insurer may cancel coverage effective on the due date. (b) As used in this section, health insurer means a health insurance company, a hospital or medical service corporation, or a health maintenance organization that issues or renews any individual policy, service contract, or benefit plan in this State. (Added 1997, No. 112 (Adj. Sess.),  1; amended 2021, No. 25,  20, eff. May 12, 2021.) 
 4089i. Prescription drug coverage
(a) A health insurance or other health benefit plan offered by a health insurer shall provide coverage for prescription drugs purchased in Canada, and used in Canada or reimported legally or purchased through the I-SaveRx program on the same benefit terms and conditions as prescription drugs purchased in this country. For drugs purchased by mail or through the Internet, the plan may require accreditation by the Internet and Mailorder Pharmacy Accreditation Commission (IMPAC/tm) or similar organization. (b) A health insurance or other health benefit plan offered by a health insurer or pharmacy benefit manager shall not include an annual dollar limit on prescription drug benefits. (c) A health insurance or other health benefit plan offered by a health insurer or pharmacy benefit manager shall limit a beneficiarys out-of-pocket expenditures for prescription drugs, including specialty drugs, to no more for self-only and family coverage per year than the minimum dollar amounts in effect under Section 223(c)(2)(A)(i) of the Internal Revenue Code of 1986 for self-only and family coverage, respectively. (d) For prescription drug benefits offered in conjunction with a high-deductible health plan (HDHP), the plan may not provide prescription drug benefits until the expenditures applicable to the deductible under the HDHP have met the amount of the minimum annual deductibles in effect for self-only and family coverage under Section 223(c)(2)(A)(i) of the Internal Revenue Code of 1986 for self-only and family coverage, respectively, except that a plan may offer first-dollar prescription drug benefits to the extent permitted under federal law. Once the foregoing expenditure amount has been met under the HDHP, coverage for prescription drug benefits shall begin, and the limit on out-of-pocket expenditures for prescription drug benefits shall be as specified in subsection (c) of this section. (e)(1) A health insurance or other health benefit plan offered by a health insurer or by a pharmacy benefit manager on behalf of a health insurer that provides coverage for prescription drugs and uses step-therapy protocols shall not require failure on the same medication on more than one occasion for continuously enrolled members or subscribers. (2) Nothing in this subsection shall be construed to prohibit the use of tiered co-payments for members or subscribers not subject to a step-therapy protocol. (f)(1) A health insurance or other health benefit plan offered by a health insurer or by a pharmacy benefit manager on behalf of a health insurer that provides coverage for prescription drugs shall not require, as a condition of coverage, use of drugs not indicated by the federal Food and Drug Administration for the condition diagnosed and being treated under supervision of a health care professional. (2) Nothing in this subsection shall be construed to prevent a health care professional from prescribing a medication for off-label use. (g) A health insurance or other health benefit plan offered by a health insurer or by a pharmacy benefit manager on behalf of a health insurer that provides coverage for prescription drugs shall apply the same cost-sharing requirements to interchangeable biological products as apply to generic drugs under the plan. (h)(1) A health insurance or other health benefit plan offered by a health insurer or pharmacy benefit manager shall limit a beneficiarys total out-of-pocket responsibility for prescription insulin medications to not more than $100.00 per 30-day supply, regardless of the amount, type, or number of insulin medications prescribed for the beneficiary. (2) The $100.00 monthly limit on out-of-pocket spending for prescription insulin medications set forth in subdivision (1) of this subsection shall apply regardless of whether the beneficiary has satisfied any applicable deductible requirement under the health insurance or health benefit plan. (i) As used in this section:(1) Health care professional means an individual licensed to practice medicine under 26 V.S.A. chapter 23 or 33, an individual licensed as a physician assistant under 26 V.S.A. chapter 31, or an individual licensed as an advanced practice registered nurse under 26 V.S.A. chapter 28. (2) Health insurer shall have the same meaning as in 18 V.S.A.  9402.(3) Out-of-pocket expenditure means a co-payment, coinsurance, deductible, or other cost-sharing mechanism. (4) Pharmacy benefit manager shall have the same meaning as in section 4089j of this title. (5) Step therapy means protocols that establish the specific sequence in which prescription drugs for a specific medical condition are to be prescribed. (6) Interchangeable biological products shall have the same meaning as in 18 V.S.A.  4601.(7) Prescription insulin medication means a prescription medication that contains insulin and is used to treat diabetes. (j) The Department of Financial Regulation shall enforce this section and may adopt rules as necessary to carry out the purposes of this section. (Added 2003, No. 122 (Adj. Sess.),  128l; amended 2005, No. 2,  5, eff. Feb. 17, 2005; 2011, No. 171 (Adj. Sess.),  32; 2013, No. 79,  3; 2017, No. 193 (Adj. Sess.),  6; 2019, No. 154 (Adj. Sess.),  E.307.1, eff. Jan. 1, 2022.) 
 4089j. Retail pharmacies; filling of prescriptions
(a) As used in this section:(1) Health insurer shall have the same meaning as in 18 V.S.A.  9402 and shall also include Medicaid and any other public health care assistance program.(2) Pharmacy benefit manager means an entity that performs pharmacy benefit management. Pharmacy benefit management means an arrangement for the procurement of prescription drugs at negotiated dispensing rates, the administration or management of prescription drug benefits provided by a health insurance plan for the benefit of beneficiaries, or any of the following services provided with regard to the administration of pharmacy benefits: (A) mail service pharmacy;(B) claims processing, retail network management, and payment of claims to pharmacies for prescription drugs dispensed to beneficiaries; (C) clinical formulary development and management services;(D) rebate contracting and administration;(E) certain patient compliance, therapeutic intervention, and generic substitution programs; and (F) disease management programs.(3) Health care provider means a person, partnership, or corporation, other than a facility or institution, that is licensed, certified, or otherwise authorized by law to provide professional health care services in this State to an individual during that individuals medical care, treatment, or confinement. [Subdivision (a)(4) effective January 1, 2023.](4) Pharmacy benefit manager affiliate means a pharmacy or pharmacist that, directly or indirectly, through one or more intermediaries, is owned or controlled by, or is under common ownership or control with, a pharmacy benefit manager. [Subdivision (a)(5) effective January 1, 2023.](5) Drug or prescription drug has the same meaning as prescription drug in 26 V.S.A.  2022 and includes:(A) biological products, as defined in 18 V.S.A.  4601;(B) medications used to treat complex, chronic conditions, including medications that require administration, infusion, or injection by a health care professional; (C) medications for which the manufacturer or the U.S. Food and Drug Administration requires exclusive, restricted, or limited distribution; and (D) medications with specialized handling, storage, or inventory reporting requirements.[Subsection (b) effective until January 1, 2023; see also subsection (b) effective January 1, 2023 set out below.] (b) A health insurer and pharmacy benefit manager doing business in Vermont shall permit a retail pharmacist licensed under 26 V.S.A. chapter 36 to fill prescriptions in the same manner and at the same level of reimbursement as they are filled by mail order pharmacies with respect to the quantity of drugs or days supply of drugs dispensed under each prescription. [Subsection (b) effective January 1, 2023; see also subsection (b) effective until January 1, 2023 set out above.] (b) A health insurer or pharmacy benefit manager doing business in Vermont shall permit a retail pharmacist licensed under 26 V.S.A. chapter 36 to fill prescriptions for all prescription drugs in the same manner and at the same level of reimbursement as they are filled by any other pharmacist or pharmacy, including a mail-order pharmacy or a pharmacy benefit manager affiliate, with respect to the quantity of drugs or days supply of drugs dispensed under each prescription. (c) Notwithstanding any provision of a health insurance plan to the contrary, if a health insurance plan provides for payment or reimbursement that is within the lawful scope of practice of a pharmacist, the insurer may provide payment or reimbursement for the service when the service is provided by a pharmacist. [Subsection (d) effective January 1, 2023.](d)(1) A health insurer or pharmacy benefit manager shall permit a participating network pharmacy to perform all pharmacy services within the lawful scope of the profession of pharmacy as set forth in 26 V.S.A. chapter 36. (2) A health insurer or pharmacy benefit manager shall not do any of the following:(A) Require a covered individual, as a condition of payment or reimbursement, to purchase pharmacist services, including prescription drugs, exclusively through a mail-order pharmacy or a pharmacy benefit manager affiliate. (B) Offer or implement plan designs that require a covered individual to use a mail-order pharmacy or a pharmacy benefit manager affiliate. (C) Order a covered individual, orally or in writing, including through online messaging, to use a mail-order pharmacy or a pharmacy benefit manager affiliate. (D) Establish network requirements that are more restrictive than or inconsistent with State or federal law, rules adopted by the Board of Pharmacy, or guidance provided by the Board of Pharmacy or by drug manufacturers that operate to limit or prohibit a pharmacy or pharmacist from dispensing or prescribing drugs. (E) Offer or implement plan designs that increase plan or patient costs if the covered individual chooses not to use a mail-order pharmacy or a pharmacy benefit manager affiliate. The prohibition in this subdivision (E) includes requiring a covered individual to pay the full cost for a prescription drug when the covered individual chooses not to use a mail-order pharmacy or a pharmacy benefit manager affiliate. (3) A health insurer or pharmacy benefit manager shall not, by contract, written policy, or written procedure, require that a pharmacy designated by the health insurer or pharmacy benefit manager dispense a medication directly to a patient with the expectation or intention that the patient will transport the medication to a health care setting for administration by a health care professional. (4) A health insurer or pharmacy benefit manager shall not, by contract, written policy, or written procedure, require that a pharmacy designated by the health insurer or pharmacy benefit manager dispense a medication directly to a health care setting for a health care professional to administer to a patient. (5) The provisions of this subsection shall not apply to Medicaid. (Added 2003, No. 122 (Adj. Sess.),  128e; amended 2013, No. 79,  9, eff. Jan. 1, 2014; 2015, No. 173 (Adj. Sess.),  7, eff. June 8, 2016; 2021, No. 131 (Adj. Sess.),  4, eff. January 1, 2023.)
 4090a. Continuation of group
(a) All group health insurance policies, including dental policies, issued by an insurance company or a nonprofit hospital or medical service corporation; self-insured group plans; and prepaid health insurance plans, delivered or issued for delivery in this State, which insure employees or members for dental insurance or hospital and medical insurance on an expense incurred, service basis, or prepaid basis, other than policies covering specific diseases or accidental injuries only, shall provide that any person whose insurance under the group policy would terminate because of the occurrence of a qualifying event as defined in subsection (b) of this section shall be entitled to continue his or her health insurance under that group policy. (b) For purposes of this subchapter, qualifying event means:(1) loss of employment, including a reduction in hours that results in ineligibility for employer-sponsored coverage; (2) divorce, dissolution, or legal separation of the covered employee from the employees spouse or civil union partner; (3) a dependent child ceasing to qualify as a dependent child under the generally applicable requirements of the policy; or (4) death of the covered employee or member.(c) The provisions of this section shall not apply if:(1) The deceased person or employee was not insured under the group policy on the date of the qualifying event. (2) The person is covered by Medicare.(3) The person is covered by any other group insured or uninsured arrangement which provides dental coverage or hospital and medical coverage for individuals in a group and under which the person was not covered immediately prior to such qualifying event, and no preexisting condition exclusion applies; provided, however, that the person shall remain eligible for continuation coverages which are not available under the insured or uninsured arrangement. (4) The person has a loss of employment due to misconduct as defined in 21 V.S.A.  1344.(d) The continuation required by this section only applies to dental, hospital, and medical benefits. (e) Notice of the continuation privilege shall be included in each certificate of coverage and shall be provided by the employer to the employee within 30 days following the occurrence of any qualifying event. (Added 1983, No. 165 (Adj. Sess.),  1; amended 1985, No. 184 (Adj. Sess.),  1; 2001, No. 121 (Adj. Sess.),  3, eff. June 5, 2002; 2009, No. 61,  14, eff. June 2, 2009.) 
 4090b. Continuation; notice; terms
(a) A person electing continuation shall notify the insurer, or the policyholder, or the contractor, or agent for the group if the policyholder did not contract for the policy directly with the insurer, of such election in writing within 60 days after receiving notice following the occurrence of a qualifying event pursuant to subsection 4090a(e) of this title. Notice of election to continue under the group policy shall be accompanied by the initial contribution, which shall include payment for the period from the qualifying event through the end of the month in which the election is made. (b) Contributions shall be due on a monthly basis in advance to the insurer or the insurers agent, and shall not be more than 102 percent of the group rate for the insurance being continued under the group policy on the due date of each payment. (Added 1983, No. 165 (Adj. Sess.),  1; amended 1985, No. 184 (Adj. Sess.),  2; 2001, No. 121 (Adj. Sess.),  4, eff. June 5, 2002; 2009, No. 61,  15, eff. June 2, 2009.) 
 4090c. Termination of coverage
Continuation of insurance under the group policy shall terminate upon the occurrence of any of the following: (1) The date 18 months after the date that insurance under the policy would have terminated due to a qualifying event, as defined in subsection 4090a(b) of this title. (2) The person fails to make timely payment of the required contribution.(3) The person is covered by Medicare.(4) The person is covered by any other group insured or uninsured arrangement that provides dental coverage or hospital and medical coverage for individuals in a group, under which the person was not covered immediately prior to the occurrence of a qualifying event, as defined in subsection 4090a(b) of this title, and no preexisting condition exclusion applies; provided, however, that the person shall remain eligible for continuation coverages which are not available under the insured or uninsured arrangement. (5) The date on which the group policy is terminated or, in the case of an employee, the date the decedents or terminated employees employer terminates participation under the group policy. If such coverage is replaced by similar coverage under another group policy: (A) the person shall have the right to become covered under that replacement policy, for the balance of the period that he or she would have remained covered under the prior group policy; (B) the minimum level of benefits to be provided by the replacement policy shall be the applicable level of benefits of the prior group policy reduced by any benefits payable under that prior group policy; and (C) the prior group policy shall continue to provide benefits to the extent of its accrued liabilities and extensions of benefits as if the replacement has not occurred. (Added 1983, No. 165 (Adj. Sess.),  1; amended 1985, No. 184 (Adj. Sess.),  3; 2001, No. 121 (Adj. Sess.),  5, eff. June 5, 2002; 2009, No. 61,  16, eff. June 2, 2009.) 
 4090d. Right of conversion
All group health insurance policies, issued by an insurance company, a nonprofit hospital or medical service corporation, a self-insured group plan, and prepaid health insurance plans delivered or issued for delivery in this State which insure employees or members for hospital and medical insurance on an expense incurred, service or prepaid basis, other than for specific diseases or for accidental injuries only, shall provide that any person whose insurance under the group policy would terminate because of the death or loss of employment of the employee or member shall be entitled to have a converted policy issued to him or her by the insurer under whose group policy he or she was insured, without evidence of insurability. (Added 1983, No. 165 (Adj. Sess.),  1; amended 1985, No. 184 (Adj. Sess.),  4.) 
 4090e. Conversion; notice; terms
(a) Written application and the first premium payment for the converted policy shall be made to the insurer not later than 30 days prior to the date termination of the continuation of the group policy under section 4090a of this title would have occurred due to the death or termination of the employee or member. Its effective date shall be the day following the termination of the continued insurance under the group policy under subdivision 4090c(1) of this title. (b) The premium for the converted policy shall be determined in accordance with the insurers table of premium rates applicable to the age and class of risk of each person to be covered under that policy and to the type and amount of insurance provided. (c) The converted policy shall cover any person who was covered by the continued group policy. At the option of the insurer, a separate converted policy may be issued to cover any dependent. Qualified beneficiaries could be charged premiums up to 102 percent of the group rate. (d) The converted policy shall not exclude as a preexisting condition any condition covered by the group policy. (e) The converted policy may provide:(1) for a reduction of its hospital and medical benefits by the amount of any such benefits payable under the group policy; (2) that during the first policy year, the benefits payable under the converted policy, together with the benefits payable under the group policy, shall not exceed those that would have been payable had the persons insurance under the group policy remained in force and effect. (f) The insurer may elect to provide group insurance coverage in lieu of the issuance of a converted individual policy. (Added 1983, No. 165 (Adj. Sess.),  1; amended 1985, No. 184 (Adj. Sess.),  5.) 
 4090f. Exemptions; termination
(a) The insurer shall not be required to issue a converted policy if:(1) termination under the group policy occurred because the person:(A) was not entitled to continuation of group coverage under section 4090a of this title; or (B) failed to elect continuation as provided in section 4090b of this title;(2) the person is or could be covered by Medicare;(3) the person is covered for similar benefits by another individual policy; or(4) the person is or could be covered for similar benefits under any arrangement of coverage for individuals in a group, whether insured or uninsured or similar benefits are provided for or available to such person, by reason of any state or federal law and together with the converted policys benefits, would result in overinsurance according to the insurers standards for overinsurance. (b) The converted policy may provide that as of any premium due date the insurer may refuse to renew or to cancel the policy if the person: (1) would be overinsured or the person fails to provide the insurer with information upon which it can make a determination as to overinsurance; (2) would be eligible for coverage under Medicare or under any other state or federal law providing for benefits similar to those provided by the converted policy; or (3) is in default of any required contribution.(c) Notice of the conversion privilege shall be included in each certificate of coverage. (Added 1983, No. 165 (Adj. Sess.),  1.)
 4090g. Options required
(a) If the group policy from which conversion is made provides basic hospital and medical insurance, the person shall be entitled to obtain a converted policy providing, at his or her option, coverage similar to the coverage provided by the group policy or lesser coverage at lesser premiums. (b) If the group policy from which conversion is made provides major medical expense insurance, the person shall be entitled to obtain a converted policy providing at his or her option coverage similar to the catastrophic or major medical coverage provided by the group policy or lesser coverage at lesser premiums. (c) If any insurer customarily offers individual policies on a service basis, that insurer may, in lieu of converted policies on an expense incurred basis, make available converted policies on a service basis which, in the opinion of the Commissioner of Financial Regulation, satisfy the intent of this subchapter. (d) The Commissioner of Financial Regulation may adopt rules describing the lesser coverages that may be offered under this section. (Added 1983, No. 165 (Adj. Sess.),  1; amended 1985, No. 184 (Adj. Sess.),  6; 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a).) 
 4091a. Definitions
As used in this subchapter:(1) Carrier means an insurance company, a nonprofit medical or hospital service corporation, or a health maintenance organization which issues or provides a group health insurance policy or subscriber contract. (2) Group health insurance policy or subscriber contract means a policy or contract which meets the following conditions: (A) coverage is provided through insurance policies or subscriber contracts to classes of employees or members of an organization or group; (B) the coverage is not available to the general public and can be obtained and maintained only because of the covered persons employment or membership in an organization or group; (C) there are arrangements for bulk payment of premiums or subscription charges to the insurer, nonprofit service corporation, or health maintenance organization; and (D) there is sponsorship of the plan by the employer, organization, or group. (Added 1989, No. 113,  2.)
 4091b. Policies and contracts covered
A group health insurance policy or subscriber contract shall not be issued or provided by a carrier unless the policy or contract complies with the provisions of this subchapter and the rules adopted pursuant to this subchapter. (Added 1989, No. 113,  2.) 
 4091c. Termination for nonpayment of premium or subscription charges
(a) If a group health insurance policy or subscriber contract provides for automatic termination of the policy or contract after a premium or subscription charge has remained unpaid through the grace period allowed for such payment, the carrier shall be liable for valid claims for covered losses incurred prior to the end of the grace period. (b) If the actions of the carrier after the end of the grace period indicate that it considers the policy or contract to be continuing in force beyond the end of the grace period, including actions such as continuing to recognize claims subsequently incurred, or in some other manner, the carrier shall be liable for valid claims for losses incurred prior to the effective date of written notice of termination to the policyholder or other entity responsible for making payments or submitting subscription charges to the carrier. (c) The carrier shall notify a policyholder or other responsible entity of any premium payment due on a policy at least 21 days before the due date. The effective date of termination of a policy or contract shall not be prior to midnight at the end of the 14th day following mailing of notice of termination. (Added 1989, No. 113,  2; amended 1997, No. 112 (Adj. Sess.),  2.) 
 4091d. Notice of termination
(a) A notice of termination of a carriers group health insurance policy or subscriber contract shall: (1) request the group policyholder or other entity involved to notify employees or members covered under the policy or subscriber contract of the date of termination of the policy or contract and to advise the employees or members that, unless otherwise provided in the policy or contract, the carrier shall not be liable for claims for losses incurred after such date; (2) advise, in any instance in which the plan involves employee contributions, that if the policyholder or other entity continues to collect contributions for the coverage beyond the date of termination, the policyholder or other entity may be held solely liable for the benefits with respect to which the contributions have been collected. (b) The carrier giving notice of termination shall prepare and furnish to the policyholder or other entity at the time of notice a supply of a notice form to be distributed to covered employees or members. The form shall state the fact of termination and the effective date of termination. The form shall contain a statement directing employees or members to refer to their certificates or contracts in order to determine their rights. (c) The provisions of this section shall not be construed to relieve any nonprofit medical or hospital service corporation of its obligation to notify subscribers directly of a termination under this subchapter. (Added 1989, No. 113,  2.) 
 4091e. Extension of benefits
(a) Every group health insurance policy or subscriber contract issued on or after July 1, 1989, or under which the level of benefits is altered, modified, or amended on or after July 1, 1989, shall provide a reasonable extension of benefits in the event of total disability of the employee or member on the date of termination of the group policy or contract in accordance with the provisions of this section. (b) A policy or contract providing benefits for loss of time from work or specific indemnity during hospital confinement shall provide that termination of the policy or contract during a loss of time or confinement shall have no effect on benefits payable for the loss of time or confinement. (c) A policy or contract providing hospital or medical expense coverage benefits shall provide an extension of benefits of at least 12 months under major medical and comprehensive medical type coverages, and at least 90 days under other types of hospital or medical expense coverages. (d) The provisions of a policy or contract relating to extension of benefits or accrued liability shall be described in the policy or contract as well as in group insurance certificates. The benefits payable during a period of extension or accrued liability may be subject to the policys or contracts regular benefit limits. (e) The provisions of this section do not require an extension of dental benefits. (Added 1989, No. 113,  21.)
 4091f. Replacement coverage
(a) General. When the group health insurance policy or subscriber contract of a carrier replaces a policy or contract providing similar benefits of another carrier, the liability of both carriers shall be as provided in this section and rules adopted pursuant to this section. (b) Liability of prior carrier. A prior carrier remains liable after termination of its policy or contract only to the extent of its accrued liabilities and extensions of benefits. (c) Liability of succeeding carrier. (1) A succeeding carrier shall offer a group health insurance policy or subscriber contract to replace a prior carriers policy or contract in accordance with the provisions of this subsection. (2) A succeeding carrier shall offer a policy or contract to cover all persons who:(A) are covered or are a member of a class eligible for coverage under the prior carriers policy or contract on the date of termination of the prior carriers policy or contract; or (B) are a member of a class eligible for coverage under the succeeding carriers policy or contract on the date of termination of the prior carriers policy or contract. (3) The succeeding carrier is not liable under this subsection for benefits required to be paid by the prior carrier. (4) When replacing a prior carriers plan that is not subject to section 4091e of this title, the succeeding carrier shall, in addition to the coverage required to be offered under subdivision (2) of this subsection, offer a policy or contract that provides a level of benefit equal to the lesser of: (A) the extension of benefits that would have been required if the prior carriers policy or contract was subject to section 4091e of this title; or (B) the extension of benefits required for the succeeding carriers policy or contract, except that any such benefits may be reduced by benefits actually payable under the prior carriers plan. (5) The preexisting condition limitation of a succeeding carriers policy or contract shall provide a level of benefits equal to the lesser of: (A) the benefits of the succeeding carriers policy or contract determined without application of the preexisting conditions limitation; or (B) the benefits of the prior carriers policy or contract.(6) The succeeding carrier, in applying a deductible or waiting-period provision in its policy or contract, shall give credit for the satisfaction of the same or similar provisions under the prior carriers policy or contract. (7) At the succeeding carriers request the prior carrier shall furnish all information needed to determine the benefits available under the prior carriers policy or contract. (d) Rules. The Commissioner shall adopt rules necessary to carry out the purposes of this section. (Added 1989, No. 113,  2; amended 2019, No. 14,  10, eff. April 30, 2019.)
 4092. Newborn infants; coverage
(a) An individual or group health insurance policy providing coverage on an expense incurred basis and an individual or group service or indemnity contract issued by a nonprofit corporation which provides coverage for a family member of the insured or subscriber shall, as to those family members coverage, also provide that health insurance benefits applicable for children are payable with respect to a newly born child of the insured or subscriber from the moment of birth. Coverage for a newly born child shall include coverage of injury, sickness, necessary care and treatment of medically diagnosed congenital defect or birth abnormality, or any combination of these. (b) Coverage for a newly born child shall be provided without notice or additional premium for no less than 60 days after the date of birth. If payment of a specific premium or subscription fee is required in order to have the coverage continue beyond such 60-day period, the policy may require that notification of birth of newly born child and payment of the required premium or fees be furnished to the insurer or nonprofit service or indemnity corporation within a period of not less than 60 days after the date of birth. (c) The requirements of this section shall apply to all insurance policies and subscriber contracts delivered or issued for delivery in this State more than 120 days after April 15, 1975. (Added 1975, No. 53,  1, eff. April 15, 1975; amended, 1989, No. 113,  1; 2013, No. 79,  4, eff. Jan. 1, 2014.) 
 4095. Definitions
As used in this subchapter:(1) Home health agency means a nonprofit home health agency which has been certified under Title 18 of the Social Security Act (42 U.S.C.A.  1395 et seq.). (2) Home health care means care and treatment provided by a home health agency and designed and supervised by a physician, without which care and treatment a person would require institutionalization in a hospital or skilled nursing facility as those are defined by Medicare regulations. The care and treatment shall consist of one or more of the following: (A) Part-time or intermittent skilled nursing care.(B) Physical therapy.(C) Part-time or intermittent home health aide services which consist primarily of caring for the patient. (D) Medical supplies, drugs and equipment, and laboratory services to the extent that laboratory services would have been covered if the patient had been institutionalized. The medical necessity of equipment may be reviewed by reference to the Medicare guidelines for durable medical equipment. (Added 1975, No. 205 (Adj. Sess.),  1.) 
 4096. Home health care; insurance
(a) An individual or group health insurance expense policy and an individual or group service contract issued by a nonprofit hospital corporation which provides hospital or medical coverage shall provide as an option coverage for home health care. An insurer may require evidence of insurability as a prerequisite to coverage. The coverage shall consist of at least 40 visits by a home health agency in any calendar year, or in any continuous period of 12 months, for each person covered under the policy or contract. Each visit by a member of a home health care agency, other than a home health aide, shall be considered one home health care visit, and four hours of home health aide service shall be considered one home health care visit. Coverage shall be provided for maternity and childbirth, but such coverage may be provided subject to a waiting period of nine months. (b) This subchapter does not require that home health care coverage be provided to persons eligible for Medicare, nor does it require that the coverage be included in indemnity policies or contracts. (c) Home health care coverage may be subject to a co-insurance provision of not less than 80 percent of reasonable charges and a deductible provision of $50.00 annually; however, if less restrictive benefits are provided by the basic hospital or medical coverage, as the case may be, these lesser restrictions shall apply to the home health care coverage. (d) A benefit provided pursuant to this subchapter may be subject to utilization review by the nonprofit hospital service corporation. A nonprofit hospital service corporation may require a home health agency to enter into a contract as a condition of providing benefits. (Added 1975, No. 205 (Adj. Sess.),  1.) 
 4099c. Reproductive health equity in health insurance coverage
(a) As used in this section, health insurance plan means any individual or group health insurance policy, any hospital or medical service corporation or health maintenance organization subscriber contract, or any other health benefit plan offered, issued, or renewed for any person in this State by a health insurer, as defined by 18 V.S.A.  9402. The term shall not include benefit plans providing coverage for a specific disease or other limited benefit coverage. (b) A health insurance plan shall provide coverage for outpatient contraceptive services including sterilizations, and shall provide coverage for the purchase of all prescription contraceptives and prescription contraceptive devices approved by the federal Food and Drug Administration, except that a health insurance plan that does not provide coverage of prescription drugs is not required to provide coverage of prescription contraceptives and prescription contraceptive devices. A health insurance plan providing coverage required under this section shall not establish any rate, term, or condition that places a greater financial burden on an insured or beneficiary for access to contraceptive services, prescription contraceptives, and prescription contraceptive devices than for access to treatment, prescriptions, or devices for any other health condition. (c) A health insurance plan shall provide coverage without any deductible, coinsurance, co-payment, or other cost-sharing requirement for at least one drug, device, or other product within each method of contraception for women identified by the U.S. Food and Drug Administration (FDA) and prescribed by an insureds health care provider. (1) The coverage provided pursuant to this subsection shall include patient education and counseling by the patients health care provider regarding the appropriate use of the contraceptive method prescribed. (2)(A) If there is a therapeutic equivalent of a drug, device, or other product for an FDA-approved contraceptive method, a health insurance plan may provide coverage for more than one drug, device, or other product and may impose cost-sharing requirements as long as at least one drug, device, or other product for that method is available without cost sharing. (B) If an insureds health care provider recommends a particular service or FDA-approved drug, device, or other product for the insured based on a determination of medical necessity, the health insurance plan shall defer to the providers determination and judgment and shall provide coverage without cost sharing for the drug, device, or product prescribed by the provider for the insured. (d) A health insurance plan shall provide coverage for voluntary sterilization procedures for men and women without any deductible, coinsurance, co-payment, or other cost-sharing requirement, except to the extent that such coverage would disqualify a high-deductible health plan from eligibility for a health savings account pursuant to 26 U.S.C.  223. (e) A health insurance plan shall provide coverage without any deductible, coinsurance, co-payment, or other cost-sharing requirement for clinical services associated with providing the drugs, devices, products, and procedures covered under this section and related follow-up services, including management of side effects, counseling for continued adherence, and device insertion and removal. (f)(1) A health insurance plan shall provide coverage for a supply of prescribed contraceptives intended to last over a 12-month duration, which may be furnished or dispensed all at once or over the course of the 12 months at the discretion of the health care provider. The health insurance plan shall reimburse a health care provider or dispensing entity per unit for furnishing or dispensing a supply of contraceptives intended to last for 12 months. (2) This subsection shall apply to Medicaid and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. (g) Benefits provided to an insured under this section shall be the same for the insureds covered spouse and other covered dependents. (h) The coverage requirements of this section shall apply to self-administered hormonal contraceptives prescribed for an insured by a pharmacist in accordance with 26 V.S.A.  2023. (Added 1999, No. 26,  1; amended 2015, No. 120 (Adj. Sess.),  1, eff. Oct. 1, 2016; 2019, No. 157 (Adj. Sess.),  2, eff. July 1, 2021.) 
 4099d. Midwifery coverage; home births
(a) A health insurance plan or health benefit plan providing maternity benefits shall also provide coverage for services rendered by a midwife licensed pursuant to 26 V.S.A. chapter 85 or an advanced practice registered nurse licensed pursuant to 26 V.S.A. chapter 28 who is certified as a nurse midwife for services within the licensed midwifes or certified nurse midwifes scope of practice and provided in a hospital or other health care facility or at home. (b) Coverage for services provided by a licensed midwife or certified nurse midwife shall not be subject to any greater co-payment, deductible, or coinsurance than is applicable to any other similar benefits provided by the plan. (c) A health insurance plan may require that the maternity services be provided by a licensed midwife or certified nurse midwife under contract with the plan. (d) As used in this section, health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402, as well as Medicaid and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. The term shall not include policies or plans providing coverage for specific disease or other limited benefit coverage. (Added 2011, No. 35,  1, eff. Oct. 1, 2011; amended 2013, No. 79,  11, eff. Jan. 1, 2014.) 
 4100a. Mammograms; coverage required
(a) Insurers shall provide coverage for screening by mammography for the presence of breast cancer. In addition, insurers shall provide coverage for screening by ultrasound for a patient for whom the results of a screening mammogram were inconclusive or who has dense breast tissue, or both. Benefits provided shall cover the full cost of the mammography service or ultrasound, as applicable, and shall not be subject to any co-payment, deductible, coinsurance, or other cost-sharing requirement or additional charge. (b) [Repealed.](c) This section shall apply only to screening procedures conducted by test facilities accredited by the American College of Radiologists. (d) As used in this subchapter:(1) Insurer means any insurance company that provides health insurance as defined in subdivision 3301(a)(2) of this title, nonprofit hospital and medical service corporations, and health maintenance organizations. The term does not apply to coverage for specified diseases or other limited benefit coverage. (2) Mammography means the x-ray examination of the breast using equipment dedicated specifically for mammography, including the x-ray tube, filter, compression device, and digital detector. The term includes breast tomosynthesis. (3) Screening includes the mammography or ultrasound test procedure and a qualified physicians interpretation of the results of the procedure, including additional views and interpretation as needed. (Added 1991, No. 40,  1, eff. Sept. 1, 1991; amended 2007, No. 160 (Adj. Sess.),  1, eff. Oct. 1, 2008; 2013, No. 25,  1, 4; 2017, No. 141 (Adj. Sess.),  1, eff. Jan. 1, 2019.) 
 4100b. Coverage of children
(a) As used in this subchapter:(1) Health plan shall include a group health plan as defined under Section 607(1) of the Employee Retirement Income Security Act of 1974 and a nongroup plan as defined in section 4080b of this title. (2) Insurer shall include any entity providing health insurance or a health plan, a health maintenance organization as defined in subdivision 5101(2) of this title, or a hospital or medical service corporation as defined in chapters 123 and 125 of this title. (3) Dependent coverage means family coverage, or coverage for one or more persons as long as the coverage for one or more persons is greater than or equal to the coverage available under family coverage. (b) An insurer shall not deny enrollment of a child under the health plan of the childs parent ordered to provide medical support on the grounds that: (1) the child was born out of wedlock;(2) the child is not claimed as a dependent on the parents federal tax return; or(3) the child does not reside with the parent or in the insurers service area.(c) Where a child has health coverage through an insurer of a parent, the insurer shall:(1) provide such information to either parent as may be necessary for the child to obtain benefits through that coverage; (2) permit either parent, a provider with parental authorization, the State Medicaid agency as assignee, or any State agency administering health benefits or a health benefit plan for which Medicaid is a source of funding to submit claims for covered services, and to appeal the denial of any benefit, without the approval of the other parent; and (3) make payments on claims submitted in accordance with subdivision (2) of this subsection directly to the parent who paid the provider, the provider as assignee, the State Medicaid agency, or any State agency administering health benefits or a health benefit plan for which Medicaid is a source of funding. (d) Where a parent is required by a court or administrative order to provide health coverage for a child, and the parent is eligible for dependent health coverage, the insurer shall be required: (1) To enroll, under the dependent coverage, a child who is otherwise eligible for the coverage without regard to any enrollment season restrictions or any seasonal restrictions on switching from one plan to another, upon application of either parent, the employer, the State agency administering the Medicaid program, any State agency administering health benefits or a health benefit plan for which Medicaid is a source of funding, or the child support enforcement program. (2) Not to disenroll or eliminate coverage of the child unless the insurer is provided satisfactory written evidence that: (A) the court or administrative order is no longer in effect;(B) the child is or will be enrolled in comparable health coverage through another insurer which will take effect not later than the effective date of disenrollment; or (C) the employer has eliminated dependent health coverage for all of its employees if allowed by law. (3) To provide enrollment under subdivision (1) of this subsection with coverage effective three days after the mailing of notice of the court or administrative order to the insurer or upon actual receipt of notice by the insurer, whichever is sooner. The insurer shall have 10 days from notice to process the enrollment and shall be entitled to premiums from the effective date of enrollment. (e) An insurer may not impose requirements on a State agency, which has been assigned the rights of an individual eligible for medical assistance under Medicaid and covered for health benefits from the insurer, that are different from requirements applicable to an agent or assignee of any other individual so covered. (f) Any insurer that fails to enroll a child after notice under 15 V.S.A.  663(d) or 33 V.S.A.  4110(a)(4), shall be directly liable for any medical expenses of the child that would have been covered under the plan had the insurer enrolled the child upon receiving notice. (g) Notice by first class mail, postage prepaid, or by any other method showing actual receipt, shall be presumptive evidence of its receipt by the insurer to whom it is addressed. Any period of time which is determined under this subchapter by the giving of notice shall commence to run from the date of mailing, if the notice is mailed, or the date of actual receipt if another method of transmitting the notice is used. (h) An insurer may cancel any health plan which is the subject of a medical support order for nonpayment of premium only if the insurer mails or delivers notice of cancellation to both parents and all other persons or agencies identified in the medical support order. Any insurer cancelling a health plan for nonpayment of premium shall reinstate the health plan effective from the date of cancellation if the nonpayment of premium is cured within 45 days of the cancellation. (Added 1993, No. 231 (Adj. Sess.),  2; amended 1995, No. 43,  1, 2, eff. April 17, 1995; 2005, No. 191 (Adj. Sess.),  18; 2013, No. 79,  12, eff. Jan. 1, 2014.) 
 4100c. Adopted child coverage
(a) As used in this section:(1) Child means, in connection with any adoption, or placement for adoption of the child, an individual who has not attained age 18 as of the date of the adoption or placement for adoption. (2) Placement for adoption means the assumption and retention by a person of a legal obligation for total or partial support of a child in anticipation of the adoption of the child. The childs placement with a person terminates upon the termination of such legal obligations. (b) In any case in which a health plan provides coverage for dependent children of participants or beneficiaries, the plan shall provide benefits to dependent children placed with participants or beneficiaries for adoption under the same terms and conditions as apply to the natural, dependent children of the participants and beneficiaries, irrespective of whether the adoption has become final. (c) A health plan may not restrict coverage under the plan of any dependent child adopted by a participant or beneficiary, or placed with a participant or beneficiary for adoption, solely on the basis of a preexisting condition of the child at the time that the child would otherwise become eligible for coverage under the plan, if the adoption or placement for adoption occurs while the participant or beneficiary is eligible for coverage under the plan. (Added 1993, No. 231 (Adj. Sess.),  2.) 
 4100d. Child vaccine benefits
No insurer shall reduce its coverage for pediatric vaccines below the coverage provided as of May 1, 1993. (Added 1993, No. 231 (Adj. Sess.),  2.) 
 4100e. Required coverage for off-label use
(a) A health insurance plan that provides coverage for prescription drugs shall provide coverage for off-label use in cancer treatment in accordance with the following: (1) A health insurance plan contract may not exclude coverage for any drug used for the treatment of cancer on grounds that the drug has not been approved by the federal Food and Drug Administration, provided the use of the drug is a medically accepted indication for the treatment of cancer. (2) Coverage of a drug required by this section also includes medically necessary services associated with the administration of the drug. (3) This section shall not be construed to require coverage for a drug when the federal Food and Drug Administration has determined its use to be contraindicated for treatment of the current indication. (4) A drug use that is covered under subdivision (1) of this subsection may not be denied coverage based on a medical necessity requirement except for a reason unrelated to the legal status of the drug use. (5) A health insurance plan contract that provides coverage of a drug as required by this section may contain provisions for maximum benefits and coinsurance and reasonable limitations, deductibles, and exclusions to the same extent these provisions are applicable to coverage of all prescription drugs and are not inconsistent with the requirements of this section. (b) As used in this section, the following terms have the following meanings:(1) Health insurance plan means a health benefit plan offered, administered, or issued by a health insurer doing business in Vermont. (2) Health insurer is defined by 18 V.S.A.  9402. As used in this subchapter, the term includes the State of Vermont and any agent or instrumentality of the State that offers, administers, or provides financial support to State government, including Medicaid or any other public health care assistance program. (3) Medically accepted indication includes any use of a drug that has been approved by the federal Food and Drug Administration and includes another use of the drug if that use is prescribed by the insureds treating oncologist and supported by medical or scientific evidence. As used in this subchapter, medical or scientific evidence means one or more of the following sources: (A) peer-reviewed scientific studies published in or accepted for publication by medical journals that meet nationally recognized requirements for scientific manuscripts and that submit most of their published articles for review by experts who are not part of the editorial staff; (B) peer-reviewed literature, biomedical compendia, and other medical literature that meet the criteria of the National Institutes of Healths National Library of Medicine for indexing in Index Medicus, Excerpta Medicus (EMBASE), Medline, and MEDLARS database Health Services Technology Assessment Research (HSTAR); (C) medical journals recognized by the federal Secretary of Health and Human Services, under Section 1861(t)(2) of the federal Social Security Act; (D) the following standard reference compendia: the American Hospital Formulary Service-Drug Information, the American Medical Association Drug Evaluation, and the United States Pharmacopoeia-Drug Information; (E) findings, studies, or research conducted by or under the auspices of federal government agencies and nationally recognized federal research institutes, including the Agency for Health Care Policy and Research, National Institutes of Health, National Cancer Institute, National Academy of Sciences, Centers for Medicare and Medicaid Services, and any national board recognized by the National Institutes of Health for the purpose of evaluating the medical value of health services; (F) peer-reviewed abstracts accepted for presentation at major medical association meetings.(4) Off-label use means the prescription and use of drugs for medically accepted indications other than those stated in the labeling approved by the federal Food and Drug Administration. (c) A determination by a health insurer that an off-label use of a prescription drug under this section is not a medically accepted indication supported by medical or scientific evidence is eligible for review under section 4089f of this title. (Added 2005, No. 139 (Adj. Sess.),  1; amended 2013, No. 79,  13, eff. Jan. 1, 2014.) 
 4100f. Prostate screenings; coverage required
(a) Health insurers shall provide coverage for prostate cancer screenings consistent with the recommendations by the Centers for Disease Control and Prevention or upon recommendation of a health care provider. Benefits provided shall be at least as favorable as coverage for other cancer screening procedures and subject to the same dollar limits, deductibles, and coinsurance factors within the provisions of the policy. (b) For purposes of this section, health insurer is defined by 18 V.S.A.  9402. The term does not apply to coverage for specified disease or other limited benefit coverage. (Added 2007, No. 59,  3, eff. Oct. 1, 2007.) 
 4100g. Colorectal cancer screening, coverage required
(a) For purposes of this section:(1) Colonoscopy means a procedure that enables a physician to examine visually the inside of a patients entire colon and includes the concurrent removal of polyps or biopsy, or both. (2) Insurer means insurance companies that provide health insurance as defined in subdivision 3301(a)(2) of this title, nonprofit hospital and medical services corporations, and health maintenance organizations. The term does not apply to coverage for specified disease or other limited benefit coverage. (b) Insurers shall provide coverage for colorectal cancer screening, including:(1) Providing an insured 50 years of age or older with the option of:(A) annual fecal occult blood testing plus one flexible sigmoidoscopy every five years; or (B) one colonoscopy every 10 years.(2) For an insured who is at high risk for colorectal cancer, colorectal cancer screening examinations and laboratory tests as recommended by the treating physician. (c) For the purposes of subdivision (b)(2) of this section, an individual is at high risk for colorectal cancer if the individual has: (1) a family medical history of colorectal cancer or a genetic syndrome predisposing the individual to colorectal cancer; (2) a prior occurrence of colorectal cancer or precursor polyps;(3) a prior occurrence of a chronic digestive disease condition such as inflammatory bowel disease, Crohns disease, or ulcerative colitis; or (4) other predisposing factors as determined by the individuals treating physician.(d) Colorectal cancer screening services performed under contract with the insurer shall not be subject to any co-payment, deductible, coinsurance, or other cost-sharing requirement. In addition, an insured shall not be subject to any additional charge for any service associated with a procedure or test for colorectal cancer screening, which may include one or more of the following: (1) removal of tissue or other matter;(2) laboratory services;(3) physician services;(4) facility use; and(5) anesthesia.(e) [Repealed.] (Added 2009, No. 34,  2, eff. October 1, 2009; amended 2013, No. 25,  2, eff. May 13, 2013; 2013, No. 25,  5, eff. Oct. 1, 2013.)
 4100h. Orally administered anticancer medication; coverage required
(a) A health insurer that provides coverage for cancer chemotherapy treatment shall provide coverage for prescribed, orally administered anticancer medications used to kill or slow the growth of cancerous cells that is no less favorable on a financial basis than intravenously administered or injected anticancer medications covered under the insureds plan. (b) As used in this section, health insurer means any insurance company that provides health insurance as defined in subdivision 3301(a)(2) of this title, nonprofit hospital and medical service corporations, and health maintenance organizations. The term does not apply to coverage for specified disease or other limited benefit coverage. (Added 2009, No. 34,  2, eff. October 1, 2009; 2009, No. 61,  47, eff. April 1, 2010.) 
 4100i. Anesthesia coverage for certain dental procedures
(a) A health insurance plan shall provide coverage for the hospital or ambulatory surgical center charges and administration of general anesthesia administered by a licensed anesthesiologist or certified registered nurse anesthetist for dental procedures performed on a covered person who is: (1) a child seven years of age or younger who is determined by a dentist licensed pursuant to 26 V.S.A. chapter 13 to be unable to receive needed dental treatment in an outpatient setting, where the provider treating the patient certifies that due to the patients age and the patients condition or problem, hospitalization or general anesthesia in a hospital or ambulatory surgical center is required in order to perform significantly complex dental procedures safely and effectively; (2) a child 12 years of age or younger with documented phobias or a documented mental condition or psychiatric disability, as determined by a physician licensed pursuant to 26 V.S.A. chapter 23 or by a licensed mental health professional, whose dental needs are sufficiently complex and urgent that delaying or deferring treatment can be expected to result in infection, loss of teeth, or other increased oral or dental morbidity; for whom a successful result cannot be expected from dental care provided under local anesthesia; and for whom a superior result can be expected from dental care provided under general anesthesia; or (3) a person who has exceptional medical circumstances or a developmental disability, as determined by a physician licensed pursuant to 26 V.S.A. chapter 23, which place the person at serious risk. (b) A health insurance plan may require prior authorization for general anesthesia and associated hospital or ambulatory surgical center charges for dental care in the same manner that prior authorization is required for these benefits in connection with other covered medical care. (c) A health insurance plan may restrict coverage for general anesthesia and associated hospital or ambulatory surgical center charges to dental care that is provided by: (1) a fully accredited specialist in pediatric dentistry;(2) a fully accredited specialist in oral and maxillofacial surgery; and(3) a dentist to whom hospital privileges have been granted.(d) The provisions of this section shall not be construed to require a health insurance plan to provide coverage for the dental procedure or other dental care for which general anesthesia is provided. (e) The provisions of this section shall not be construed to prevent or require reimbursement by a health insurance plan for the provision of general anesthesia and associated facility charges to a dentist holding a general anesthesia endorsement issued by the Vermont Board of Dental Examiners if the dentist has provided services pursuant to this section on an outpatient basis in his or her own office and the dentist is in compliance with the endorsements terms and conditions. (f) As used in this section:(1) Ambulatory surgical center shall have the same meaning as in 18 V.S.A.  9432.(2) Anesthesiologist means a person who is licensed to practice medicine or osteopathy under 26 V.S.A. chapter 23 or 33 and who either: (A) has completed a residency in anesthesiology approved by the American Board of Anesthesiology or the American Osteopathic Board of Anesthesiology or their predecessors or successors; or (B) is credentialed by a hospital to practice anesthesiology and engages in the practice of anesthesiology at that hospital full-time. (3) Certified registered nurse anesthetist means an advanced practice registered nurse licensed by the Vermont Board of Nursing to practice as a certified registered nurse anesthetist. (4) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402, but does not include policies or plans providing coverage for a specified disease or other limited benefit coverage. (5) Licensed mental health professional means a licensed physician, psychologist, social worker, mental health counselor, or nurse with professional training, experience, and demonstrated competence in the treatment of a mental condition or psychiatric disability. (Added 2009, No. 128 (Adj. Sess.),  34, eff. Oct. 1, 2010; amended 2013, No. 96 (Adj. Sess.),  20.) 
 4100j. Coverage for tobacco cessation programs
(a) A health insurance plan shall provide coverage of at least one three-month supply per year of tobacco cessation medication, including over-the-counter medication, if prescribed by a licensed health care practitioner for an individual insured under the plan. A health insurance plan may require the individual to pay the plans applicable prescription drug co-payment for the tobacco cessation medication. (b) As used in this subchapter:(1) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402, as well as Medicaid and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. The term does not include policies or plans providing coverage for specified disease or other limited benefit coverage. (2) Tobacco cessation medication means all therapies approved by the federal Food and Drug Administration for use in tobacco cessation. (Added 2009, No. 128 (Adj. Sess.),  35, eff. Oct. 1, 2010; amended 2013, No. 79,  14, eff. Jan. 1, 2014.) 
 4100k. Coverage of health care services delivered through telemedicine and by store-and-forward means
(a)(1) All health insurance plans in this State shall provide coverage for health care services and dental services delivered through telemedicine by a health care provider at a distant site to a patient at an originating site to the same extent that the plan would cover the services if they were provided through in-person consultation. Subdivision (a)(2) repealed effective January 1, 2026.(2)(A) A health insurance plan shall provide the same reimbursement rate for services billed using equivalent procedure codes and modifiers, subject to the terms of the health insurance plan and provider contract, regardless of whether the service was provided through an in-person visit with the health care provider or through telemedicine. (B) The provisions of subdivision (A) of this subdivision (2) shall not apply:(i) to services provided pursuant to the health insurance plans contract with a third-party telemedicine vendor to provide health care or dental services; or (ii) in the event that a health insurer and health care provider enter into a value-based contract for health care services that include care delivered through telemedicine or by store-and-forward means. (b) A health insurance plan may charge a deductible, co-payment, or coinsurance for a health care service or dental service provided through telemedicine as long as it does not exceed the deductible, co-payment, or coinsurance applicable to an in-person consultation. (c) A health insurance plan may limit coverage to health care providers in the plans network. A health insurance plan shall not impose limitations on the number of telemedicine consultations a covered person may receive that exceed limitations otherwise placed on in-person covered services. (d) Nothing in this section shall be construed to prohibit a health insurance plan from providing coverage for only those services that are medically necessary and are clinically appropriate for delivery through telemedicine, subject to the terms and conditions of the covered persons policy. (e)(1) A health insurance plan shall reimburse for health care services and dental services delivered by store-and-forward means. (2) A health insurance plan shall not impose more than one cost-sharing requirement on a patient for receipt of health care services or dental services delivered by store-and-forward means. If the services would require cost sharing under the terms of the patients health insurance plan, the plan may impose the cost sharing requirement on the services of the originating site health care provider or of the distant site health care provider, but not both. (f) A health insurer shall not construe a patients receipt of services delivered through telemedicine or by store-and-forward means as limiting in any way the patients ability to receive additional covered in-person services from the same or a different health care provider for diagnosis or treatment of the same condition. (g) Nothing in this section shall be construed to require a health insurance plan to reimburse the distant site health care provider if the distant site health care provider has insufficient information to render an opinion. (h) In order to facilitate the use of telemedicine in treating substance use disorder, when the originating site is a health care facility, health insurers and the Department of Vermont Health Access shall ensure that the health care provider at the distant site and the health care facility at the originating site are both reimbursed for the services rendered, unless the health care providers at both the distant and originating sites are employed by the same entity. (i) As used in this subchapter:(1) Distant site means the location of the health care provider delivering services through telemedicine at the time the services are provided. (2) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402; a stand-alone dental plan or policy or other dental insurance plan offered by a dental insurer; and Medicaid and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. The term does not include policies or plans providing coverage for a specified disease or other limited benefit coverage. (3) Health care facility shall have the same meaning as in 18 V.S.A.  9402.(4) Health care provider means a person, partnership, or corporation, other than a facility or institution, that is licensed, certified, or otherwise authorized by law to provide professional health care services, including dental services, in this State to an individual during that individuals medical care, treatment, or confinement. (5) Originating site means the location of the patient, whether or not accompanied by a health care provider, at the time services are provided by a health care provider through telemedicine, including a health care providers office, a hospital, or a health care facility, or the patients home or another nonmedical environment such as a school-based health center, a university-based health center, or the patients workplace. (6) Store and forward means an asynchronous transmission of medical information, such as one or more video clips, audio clips, still images, x-rays, magnetic resonance imaging scans, electrocardiograms, electroencephalograms, or laboratory results, sent over a secure connection that complies with the requirements of the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191 to be reviewed at a later date by a health care provider at a distant site who is trained in the relevant specialty. In store and forward, the health care provider at the distant site reviews the medical information without the patient present in real time and communicates a care plan or treatment recommendation back to the patient or referring provider, or both. (7) Telemedicine means the delivery of health care services, including dental services, such as diagnosis, consultation, or treatment through the use of live interactive audio and video over a secure connection that complies with the requirements of the Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191. (Added 2011, No. 107 (Adj. Sess.),  1, eff. Oct. 1, 2012; amended 2013, No. 79,  15, eff. Jan. 1, 2014; 2015, No. 173 (Adj. Sess.),  4; 2017, No. 64,  1, eff. Oct. 1, 2017; 2019, No. 91 (Adj. Sess.),  24, eff. March 30, 2020; 2019, No. 91 (Adj. Sess.),  27, eff. Jan. 1, 2026; 2021, No. 6,  9, eff. March 29, 2021.) 
 4100l. Coverage of health care services delivered by audio-only telephone
(a) As used in this section:(1) Health care provider means a person, partnership, or corporation, other than a facility or institution, that is licensed, certified, or otherwise authorized by law to provide professional health care services in this State to an individual during that individuals medical care, treatment, or confinement. (2) Health insurance plan means any health insurance policy or health benefit plan offered by a health insurer, as defined in 18 V.S.A.  9402; Medicaid, to the extent permitted by the Centers for Medicare and Medicaid Services; and any other public health care assistance program offered or administered by the State or by any subdivision or instrumentality of the State. The term does not include policies or plans providing coverage for a specified disease or other limited benefit coverage. (b)(1) A health insurance plan shall provide coverage for all medically necessary, clinically appropriate health care services delivered remotely by audio-only telephone to the same extent that the plan would cover the services if they were provided through in-person consultation. Services covered under this subdivision shall include services that are covered when provided in the home by home health agencies. (2) A health insurance plan may charge an otherwise permissible deductible, co-payment, or coinsurance for a health care service delivered by audio-only telephone, provided that it does not exceed the deductible, co-payment, or coinsurance applicable to an in-person consultation. (3) A health insurance plan shall not require a health care provider to have an existing relationship with a patient in order to be reimbursed for health care services delivered by audio-only telephone. (Added 2021, No. 6,  4, eff. March 29, 2021.) 
 4101. Purpose
The purpose of this chapter is to promote the public welfare by regulating credit life insurance and credit accident and health insurance. Nothing in this chapter is intended to prohibit or discourage reasonable competition. The provisions of this chapter shall be liberally construed. (Added 1959, No. 221,  1.) 
 4102. Scope
All life insurance and all accident and health insurance sold in connection with loans or other credit transactions shall be subject to the provisions of this chapter, except such insurance sold in connection with a real estate first mortgage loan, or where the issuance of that insurance is an isolated transaction on the part of the insurer not related to an agreement or a plan for insuring debtors of the creditor. (Added 1959, No. 221,  2(A); amended 1967, No. 58,  1.) 
 4103. Definitions
As used in this chapter:(1) Credit life insurance means insurance on the life of a debtor pursuant to or in connection with a specific loan or other credit transaction. (2) Credit accident and health insurance means insurance on a debtor to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is disabled as defined in the policy. (3) Creditor means the lender of money or vendor or lessor of goods, services, property, right, or privileges, for which payment is arranged through a credit transaction or any successor to the right, title, or interest of any such 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. (4) 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. Indebtedness means the total amount payable by a debtor to a creditor in connection with a loan or other transaction. (5) Commissioner means the Commissioner of Financial Regulation. (Added 1959, No. 221,  2(B); amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.)
 4104. Forms and plans
Credit life insurance and credit accident and health insurance shall be issued only in the following forms: (1) individual policies of life insurance issued to debtors on the term plan;(2) individual policies of accident and health insurance issued to debtors on a term plan or disability benefit provisions in individual policies of credit life insurance; (3) group policies of life insurance issued to creditors providing insurance upon the lives of debtors on the term plan; (4) group policies of accident and health insurance issued to creditors on a term plan insuring debtors or disability benefit provisions in group credit life insurance policies to provide such coverage. (Added 1959, No. 221,  3.) 
 4105. Amount of insurance
(a) Credit life insurance. The amount of credit life insurance shall not exceed the initial indebtedness. Where an indebtedness repayable in substantially equal installments is secured by an individual policy of credit life insurance the amount of insurance shall at no time exceed the scheduled amount of indebtedness and, where secured by a group policy of credit life insurance shall at no time exceed the amount of unpaid indebtedness. Notwithstanding the provisions of this subsection, agricultural loans not exceeding one year may be written up to the amount of the loan commitment on a nondecreasing or level term plan. (b) Credit accident and health insurance. The amount of periodic indemnity payable by credit accident and health insurance in the event of disability, as defined in the policy, shall not exceed the aggregate of the periodic scheduled unpaid installments of indebtedness and shall not exceed the original indebtedness divided by the number of periodic installments. (Added 1959, No. 221,  4.) 
 4106. Term
The term of any credit life insurance or credit accident and health insurance shall, subject to acceptance by the insurer, commence on the date when the debtor becomes obligated to the creditor, except that, where a group policy provides coverage with respect to existing obligations, the insurance on a debtor with respect to such indebtedness shall commence on the effective date of the policy. The term of such insurance shall not extend more than 15 days beyond the scheduled maturity date of the indebtedness except when extended without additional cost to the debtor. If the indebtedness is discharged due to renewal or refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the renewed or refinanced indebtedness. In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in section 4109 of this title. (Added 1959, No. 221,  5.) 
 4107. Provisions of policies and certificates; disclosure to debtors
(a) All credit life insurance and credit accident and health insurance sold shall be evidenced by an individual policy, or in the case of group insurance by a certificate of insurance, which individual policy or group certificate of insurance shall be delivered to the debtor. (b) Each individual policy or group certificate of credit life insurance or credit accident and health insurance shall, in addition to other requirements of law, set forth the name and home office address of the insurer, the name or names of the debtor, the premium or amount of payment, if any, by the debtor separately for credit life insurance and credit accident and health insurance, a description of the coverage including the amount and term thereof, and any exceptions, limitations, or restrictions, and shall state that the benefits shall be paid to the creditor to reduce or extinguish the unpaid indebtedness and, wherever the amount of insurance may exceed the unpaid indebtedness, that any such excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to his estate. (c) Said individual policy or group certificate of insurance shall be delivered to the insured debtor at the time the indebtedness is incurred except as hereinafter provided. (d) If said individual policy or group certificate of insurance is not delivered to the debtor at the time the indebtedness is incurred, a copy of the application for such policy or a notice of proposed insurance, signed by the debtor and setting forth the name and home office address of the insurer, the name or names of the debtor, the premium or amount of payment by the debtor, if any, separately for credit life insurance and credit accident and health insurance, the amount, term, and a brief description of the coverage provided, shall be delivered to the debtor at the time such indebtedness is incurred. The copy of the application for, or notice of, proposed insurance shall refer exclusively to insurance coverage and shall be separate and apart from the loan, sale, or other credit statement of account, instrument, or agreement, unless the information required by this subsection is prominently set forth therein. Upon acceptance of the insurance by the insurer and within 30 days of the date upon which the indebtedness is incurred, the insurer shall cause the individual policy or group certificate of insurance to be delivered to the debtor. Said application or notice of proposed insurance shall state that upon acceptance by the insurer, the insurance shall become effective as of the date the indebtedness is incurred. (Added 1959, No. 221,  6.) 
 4108. Filing, approval, and withdrawal of forms
(a) All forms of policies or contracts, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements, and riders shall be filed with the Commissioner for approval prior to issuance or use by the insurer. Each such filing shall be accompanied by a payment to the Commissioner of a nonrefundable fee of $50.00 per filing submission. (b) The Commissioner shall, within 30 days after the filing of any such policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements, and riders, disapprove any such form if the benefits provided therein are not reasonable in relation to the premium charge, or if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive, or encourage misrepresentation of the coverage, or are contrary to any provision of the insurance law or of any rule or regulation promulgated thereunder. (c) If the Commissioner notifies the insurer that the form is disapproved, it is unlawful thereafter for such insurer to issue or use such form. In such notice, the Commissioner shall specify the reason for his or her disapproval and state that a hearing will be granted within 20 days after request in writing by the insurer. No such policy, certificate of insurance, notice of proposed insurance, nor any application, endorsement, or rider, shall be issued or used until the expiration of 30 days after it has been so filed, unless the Commissioner shall give his or her prior written approval thereto. (d) The Commissioner may, at any time after a hearing held not less than 20 days after written notice to the insurer, withdraw his or her approval of any such form on any ground set forth in subsection (b) above. The written notice of such hearing shall state the reason for the proposed withdrawal. (e) It is not lawful for the insurer to issue such forms or use them after the effective date of such withdrawal. (f) Any order or final determination of the Commissioner under the provisions of this section shall be subject to judicial review. (Added 1959, No. 221,  7; amended 1985, No. 236 (Adj. Sess.),  7; 1991, No. 166 (Adj. Sess.),  3.) 
 4109. Premiums and refunds
(a) Each insurer issuing credit life insurance or credit accident and health insurance shall file with the Commissioner its schedules of premium rates for use in connection with such insurance. Any insurer may revise such schedules from time to time, and shall file such revised schedules with the Commissioner. No insurer shall issue any credit life insurance policy or credit accident and health insurance policy for which the premium rate exceeds that determined by the schedules of such insurer as then on file with the Commissioner. The Commissioner may require the filing of the schedule of premium rates for use in connection with and as a part of the specific policy filings as provided by section 4108 of this title. Each such filing shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 per schedule of premium rates. (b) Each individual policy, group certificate, or notice of proposed insurance shall provide that in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the person entitled thereto; provided, however, that the Commissioner shall prescribe a minimum refund and no refund which would be less than such minimum need be made. The formula to be used in computing such refund shall be filed with and approved by the Commissioner. (c) If a creditor requires a debtor to make any payment for credit life insurance or credit accident and health insurance and an individual policy or group certificate of insurance is not issued, the creditor shall immediately give written notice to such debtor and shall promptly make an appropriate credit to the amount. (d) The amount charged by the creditor to the debtor for any credit life or credit health and accident insurance shall not exceed the premiums charged by the insurer, as computed at the time the charge to the debtor is determined. (e) Nothing in this chapter shall be construed to authorize any payments for insurance prohibited under any statute or rule governing credit transactions. However, in the case of a debtor under chapter 73 of this title, the collection of identifiable charges for group credit life insurance by the creditor shall not be deemed as a violation of said chapter if the transaction complies with this chapter and the payment of such identifiable charge is optional with the debtor. (Added 1959, No. 221,  8; amended 1961, No. 195,  2, eff. July 5, 1961; 1985, No. 236 (Adj. Sess.),  8; 1991, No. 166 (Adj. Sess.),  4.) 
 4110. Issuance of policies
All policies of credit life insurance and credit accident and health insurance shall be delivered or issued for delivery in this State only by an insurer authorized to do an insurance business therein, and shall be issued only through holders of licenses or authorizations issued by the Commissioner. (Added 1959, No. 221,  9.) 
 4111. Claims
(a) All claims shall be promptly reported to the insurer or its designated claim representative and the insurer shall maintain adequate claim files. All claims shall be settled as soon as possible and in accordance with the terms of the insurance contract. (b) All claims shall be paid either by draft drawn upon the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due pursuant to the policy provisions, or upon directions of such claimant to one specified. (c) No plan or arrangement shall be used whereby any person, firm or corporation other than the insurer or its designated claim representative shall be authorized to settle or adjust claims. The creditor shall not be designated as claim representative for the insurer in adjusting claims; provided that a group policyholder may, by arrangement with the group insurer, draw drafts or checks in payment of claims due to the group policyholder subject to audit and review by the insurer. (Added 1959, No. 221,  10.) 
 4112. Existing insurance; choice of insurer
When credit life insurance or credit accident and health insurance is required as additional security for any indebtedness, the debtor shall, upon request to the creditor, have the option of furnishing the required amount of insurance through existing policies of insurance owned or controlled by him or of procuring and furnishing the required coverage through any insurer authorized to transact an insurance business within this State. (Added 1959, No. 221,  11.) 
 4113. Enforcement
The Commissioner may, after notice and hearing, issue such rules and regulations as he or she deems appropriate for the supervision of this chapter. Whenever the Commissioner finds that there has been a violation of this chapter or any rules or regulations issued pursuant thereto, and after written notice thereof and hearing given to the insurer or other person authorized or licensed by the Commissioner, he or she shall set forth the details of his or her findings together with an order for compliance by a specified date. Such order shall be binding on the insurer and other person authorized or licensed by the Commissioner on the date specified unless sooner withdrawn by the Commissioner or a stay thereof has been ordered by a court of competent jurisdiction. (Added 1959, No. 221,  12.) 
 4114. Judicial review
Any party to the proceeding affected by an order of the Commissioner shall be entitled to judicial review in the Supreme Court. (Added 1959, No. 221,  13; amended 1995, No. 167 (Adj. Sess.),  11; 1997, No. 161 (Adj. Sess.),  6, eff. Jan. 1, 1998.) 
 4115. Penalties
In addition to any other penalty provided by law, any person who violates an order of the Commissioner after it has become final, and while such order is in effect, shall forfeit and pay to the State of Vermont an administrative penalty not to exceed $1,000.00, except that if such violation is found to be willful, the amount of such penalty shall be a sum not to exceed $5,000.00. The Commissioner, in his or her discretion, may revoke or suspend the license or certificate of authority of the person guilty of such violation. Such order for suspension or revocation shall be upon notice and hearing and shall be subject to judicial review as provided in section 4114 of this title. (Added 1959, No. 221,  14; amended 1995, No. 167 (Adj. Sess.),  10.) 
 4121. Definitions
As used in this chapter:(1) Covered individual means an individual covered under a dental insurance plan or a health insurance plan. (2) Covered service means a dental service for which reimbursement is available under a covered individuals dental insurance plan or health insurance plan or for which reimbursement would be available but for the application of contractual limitations such as deductibles, co-payments, coinsurance, waiting periods, annual or lifetime maximums, frequency limitations, alternative benefit payments, or other limitations. (3) Dental insurance plan means a stand-alone dental plan or policy that provides coverage for dental services separately from a health insurance plan. (4) Dental insurer means any health or dental insurance company, including a nonprofit dental service corporation, that offers a dental insurance plan for sale. (5) Dentist means an individual licensed to practice dentistry under 26 V.S.A. chapter 12. (6) Health insurance plan means any individual or group health insurance policy, any hospital or medical service corporation or health maintenance organization subscriber contract, or any other health benefit plan offered, issued, or renewed for any person in this State by a health insurer. The term does not include benefit plans providing coverage for a specific disease or other limited benefit coverage. (7) Health insurer has the same meaning as in 18 V.S.A.  9402. (Added 2021, No. 25,  31, eff. Jan. 1, 2022.)
 4122. Fees for covered dental services
(a) No dental insurer, health insurer, or other similar entity that covers dental services and is subject to regulation by the Department of Financial Regulation, and no contract or participating provider agreement with a dentist, shall require, directly or indirectly, that a dentist who is a participating provider provide dental services to a covered individual at a fee set by, or subject to the approval of, the insurer or other regulated entity unless the dental services are covered services. (b) No person providing third-party administrator services shall make available to any customers a plan that sets dental fees for providers in its provider network for any dental services other than covered services. (c) Fees for covered services shall be set in good faith and shall not be nominal.(d) The Commissioner of Financial Regulation shall enforce the provisions of this section pursuant to the Commissioners authority under this title. (Added 2021, No. 25,  31, eff. Jan. 1, 2022.) 
 4141. Capital of foreign fidelity and surety companies
A foreign stock fidelity and surety company shall not do business in this State unless it has a paid up and unimpaired capital, exclusive of stockholders obligations, of not less than $400,000.00. (Amended 1965, No. 59,  1, eff. May 12, 1965.) 
 4143. Law governing foreign fidelity, surety, and annuity companies
The companies specified in section 4141 of this title are governed by and subject to the laws of this State relating to foreign insurance companies and their admission to do business in this State, as applicable. (Amended 2021, No. 105 (Adj. Sess.),  157, eff. July 1, 2022.) 
 4144a. Powers of fidelity companies; other entities; authority to meet bail and bond requirements
(a) Any entity licensed or authorized to transact fidelity insurance or corporate suretyship business in this State may make bonds or contracts of insurance to guarantee the fidelity of persons holding positions of trust in a private or public capacity. (b) Such an entity may act as surety upon the official bond, provide recognizance, or guarantee the undertaking of any person or entity to any governmental entity, court, or any other person or entity, if accepted and approved by the court, magistrate, or obligee or person authorized to approve such bond or contract. However, approval of persons or entities to execute a bond or post bail as required as a condition of release shall be pursuant to 13 V.S.A.  7554a. (c) When such bond is furnished by a public officer or person and accepted for that purpose, the bond shall be deemed full compliance with any requirement for security or surety required to be given by way of bond, recognizance, or other form, such public officer or other person becoming personally bound in the form prescribed by law. (d) The entity may act as surety upon a bond or undertaking to any person or entity conditioned upon the performance of any duty or trust, or for the doing or not doing of anything in such bond or undertaking specified; it shall indemnify against loss any persons who are responsible as sureties. (Added 1993, No. 233 (Adj. Sess.),  81, eff. June 21, 1994.) 
 4145. Fidelity companies may act as sole surety
Where by law two or more sureties are required upon an obligation that a fidelity insurance company is authorized to insure, the fidelity insurance company may act as sole surety upon the obligation and may be accepted as such by the court or other person authorized to approve the sufficiency of the bond or undertaking. Any State law requiring sureties on bonds to be residents of this State shall not be construed to forbid the acceptance of a qualified foreign company as joint and sole surety upon any such bond. (Amended 2021, No. 105 (Adj. Sess.),  158, eff. July 1, 2022.) 
 4146. Limit of liability
A foreign fidelity and surety company shall not incur in behalf or on account of any one person, partnership, association, or corporation a liability for an amount larger than one-tenth of its total admitted assets, after deducting from such liability amounts reinsured in other companies authorized to do business in this State, unless it shall be secured from loss thereon beyond that amount by suitable and sufficient collateral agreements of indemnity, by deposits with it in pledge, or conveyance to it in trust for its protection, of property equal in value to the excess of its liability over such limit, or, in case such liability is incurred in behalf or on account of a fiduciary holding property in a trust capacity, by such deposit or other disposition of a suitable and sufficient portion of the estate so held, that no further sale, mortgage, pledge, or other disposition can be made thereof without such companys approval except by the decree of a court having proper jurisdiction. 
 4147. Fiduciaries may secure surety from loss
A person, partnership, association or corporation holding property for the benefit of another, except when acting under wills allowed or trusts created before November 27, 1894, may make such covenants with the sureties upon his or her official bond as will enable such fiduciary to secure such sureties from loss in any manner provided by section 4145 of this title. However, if such fiduciary was appointed by the decree of any court within this State, the approval of such court shall first be obtained to such covenant. 
 4148. Copy of agreement to be filed and recorded
A copy of such covenant, duly acknowledged in the manner required for the acknowledgment of deeds of real estate, may be filed and recorded as follows: in the office of the clerk or register of the court in which such fiduciary obtained his or her appointment; or if not appointed by decree of the court, in the manner provided by law for the record of deeds of real estate, if such covenant concerns real estate, or mortgages of personal property, if such covenant concerns personal property. Such record shall be notice to and binding on all persons. 
 4149. Allowance of premium against estate
Money paid to a company duly organized and authorized to act in this State in guaranteeing the fidelity of persons and in acting as surety on bonds, or to a person for acting as surety on an official bond given to the Judge of Probate, may be allowed, in his or her discretion, as a charge against the estate in which such bond is required. 
 4151. Short title
This subchapter shall be known and may be cited as the Vermont Life and Health Insurance Guaranty Association Act. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972.) 
 4152. Purpose
The purpose of this subchapter is to protect policyowners, insureds, beneficiaries, annuitants, payees, and assignees of life insurance policies, health insurance policies, annuity contracts, and supplemental contracts, subject to certain limitations, against failure in the performance of contractual obligations due to the impairment or insolvency of the insurer issuing such policies or contracts. To provide this protection: (1) an association of insurers is created to enable the guaranty of payment of benefits and of continuation of coverages; (2) members of the association are subject to assessment to provide funds to carry out the purpose of this subchapter; and (3) the Association is authorized to assist the Commissioner, in the prescribed manner, in the detection and prevention of insurer impairment or insolvency. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 2009, No. 137 (Adj. Sess.),  7e, eff. May 29, 2010.) 
 4153. Scope
(a) This subchapter shall provide coverage for the policies and contracts specified in subsection (b) of this section: (1) To persons who, regardless of where they reside (except for nonresident certificate holders under group policies or contracts and except for payees and beneficiaries of structured settlement annuities as specified in subdivision (3) of this subsection), are the beneficiaries, assignees, or payees of the persons covered under subdivision (2) of this subsection. (2) To persons who are owners of or certificate holders under such policies or contracts or, in the case of unallocated annuity contracts, to the persons who are the contract holders; and who (A) are residents of this State, or(B) are not residents of this State, but only if all of the following conditions are met:(i) the insurers which issued such policies or contracts are domiciled in this State;(ii) such insurers never held a license or certificate of authority in the states in which such persons reside; (iii) such states have associations similar to the Association created by this subchapter; and (iv) such persons are not eligible for coverage by such associations.(3) To persons who are payees under structured settlement annuities, or beneficiaries of such deceased payees, but only if the payees: (A) are residents of this State, regardless of where the contract owners reside; or(B) are not residents of this State, but only if both of the following conditions are met: (i)(I) the contract owners of such structured settlement annuities are residents of this State; or (II) the contract owners of such structured settlement annuities are not residents of this State, but only if: (aa) the insurers which issued such structured settlement annuities are domiciled in this State; and (bb) the states in which such contract owners reside have associations similar to the Association created by this subchapter; and (ii) Neither the payees, beneficiaries, nor the contract owners are eligible for coverage by the associations of the states in which such payees or contract owners reside. (b)(1) This subchapter shall provide coverage to the persons specified in subsection (a) of this section for direct, nongroup life, health, annuity, and supplemental policies or contracts, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers, except as limited by this subchapter. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, guaranteed interest contracts, guaranteed accumulation contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement agreements, lottery contracts, and any immediate or deferred annuity contracts. (2) This subchapter shall not provide coverage for:(A) any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract holder; (B) any policy or contract of reinsurance, unless assumption certificates have been issued;(C) any portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (i) averaged over the period of four years prior to the date on which the Association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moodys Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the Association became obligated; and (ii) on and after the date on which the Association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moodys Corporate Bond Yield Average as most recently available; (D) any plan or program of an employer, association, or similar entity to provide life, health, or annuity benefits to its employees or members to the extent that such plan or program is self-funded or uninsured, including benefits payable by an employer, association, or similar entity under: (i) a Multiple Employer Welfare Arrangement as defined in Section 514 of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, as may be amended; (ii) a minimum premium group insurance plan;(iii) a stop-loss group insurance plan; or(iv) an administrative services only contract;(E) any portion of a policy or contract to the extent that it provides dividends or experience rating credits, or provides that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract; (F) any policy or contract issued in this State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this State; (G) any unallocated annuity contract issued to an employee benefit plan protected under the federal Pension Benefit Guaranty Corporation; (H) any portion of any unallocated annuity contract which is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan, or government lottery; (I) any portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which has not been credited to the policy or contract, or as to which the policy or contract owners rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier. If a policys or contracts interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; and (J) any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Medicare Part C, 42 U.S.C.  1395w-21 to 1395w-29, or Medicare Part D, 42 U.S.C.  1395w-101 to 1395w-154, or any regulations issued pursuant to those sections. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1993, No. 55,  1, eff. June 3, 1993; 2009, No. 137 (Adj. Sess.),  7a, 7b, eff. May 29, 2010; 2021, No. 105 (Adj. Sess.),  159, eff. July 1, 2022.) 
 4154. Construction
This subchapter shall be liberally construed to effect the purpose under section 4152 of this title which shall constitute an aid and guide to interpretation. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972.) 
 4155. Definitions
As used in this subchapter:(1) Account means either of the four accounts created under section 4156 of this title.(2) Affiliate means affiliate as defined in section 3681 of this title.(3) Association means the Vermont Life and Health Insurance Guaranty Association created under section 4156 of this title. (4) Commissioner means the Commissioner of Financial Regulation of this State.(5) Contractual obligation means any obligation under covered policies.(6) Covered policy means any policy, contract, or certificate within the scope of this subchapter under section 4153 of this title. (7) Impaired insurer means a member insurer which, after the effective date of this subchapter, is not an insolvent insurer and who is placed under an order of rehabilitation or conservation by a court of competent jurisdiction. (8) Insolvent insurer means a member insurer which, after the effective date of this subchapter, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. (9) Member insurer means any person authorized to transact in this State any kind of insurance to which this subchapter applies under section 4153 of this title. (10) Premiums means amounts received on covered policies or contracts less any returned premiums, considerations, and deposits, and less any dividends and experience credits. Premiums does not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection 4153(b) of this title except that assessable premium shall not be reduced on account of subdivisions 4153(b)(2)(C) of this title, relating to interest limitations, and 4158(8) of this title, relating to limitations with respect to any one individual, any one participant, and any one contract holder, provided that premiums shall not include any premiums in excess of $5,000,000.00 on any unallocated annuity contract not issued under a governmental retirement plan established under 26 U.S.C.  401, 403(b), or 457. (11) Person means any individual, corporation, partnership, association, or voluntary organization. (12) Resident means any person who resides in this State on the date of entry of a court order that determines a member insurer to be an impaired insurer or of a court order that determines a member insurer to be an insolvent insurer, and to whom contractual obligations are owed. A person may be a resident of only one state, which in the case of a person other than a natural person shall be its principal place of business. (13) Moodys Corporate Bond Yield Average means the Monthly Average Corporates as published by Moodys Investors Service, Inc., or any successor thereto. (14) Supplemental contract means any agreement entered into for the distribution of policy or contract proceeds. (15) Unallocated annuity contract means any annuity contract or group annuity certificate which is not issued to and owned by an individual except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate and shall include guaranteed investment contracts, guaranteed interest contracts, guaranteed accumulation contracts, deposit administration contracts, and unallocated funding agreements. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1989, No. 225 (Adj. Sess.),  25; 1993, No. 55,  2-4, eff. June 3, 1993; 1995, No. 180 (Adj. Sess.),  38; 2009, No. 137 (Adj. Sess.),  7c, 7e, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  160, eff. July 1, 2022.) 
 4156. Creation of the Association
(a) There is created a nonprofit legal entity to be known as the Vermont Life and Health Insurance Guaranty Association. All member insurers shall be and remain members of the Association as a condition of their authority to transact insurance in this State. The Association shall perform its functions under the plan of operation established and approved under section 4160 of this title and shall exercise its powers through a Board of Directors established under section 4157 of this title. For purposes of administration and assessment, the Association shall maintain four accounts: (1) The health insurance account;(2) The life insurance account;(3) The annuity account; and(4) The unallocated annuity account which shall include unallocated annuity contracts not excluded from coverage by subsection 4153(b) of this title. (b) The Association shall come under the immediate supervision of the Commissioner and shall be subject to the applicable provisions of the insurance laws of this State. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1993, No. 55,  5, eff. June 3, 1993.) 
 4157. Board of Directors
(a) The Board of Directors of the Association shall consist of not less than five nor more than nine persons serving terms as established in the plan of operation. The members of the Board shall be selected by member insurers subject to the approval of the Commissioner. Vacancies on the Board shall be filled for the remaining period of the term in the same manner as initial appointments. At least one of the directors shall be a person who is an officer, director, or employee of an insurance company incorporated under the laws of this State; provided, however, this provision shall not apply in the event there is no member insurer incorporated under the laws of this State. (b) In approving selections or in appointing members to the Board, the Commissioner shall consider, among other things, whether all member insurers are fairly represented. (c) Members of the Board may be reimbursed from the assets of the Association for expenses incurred by them as members of the Board of Directors but members of the Board shall not otherwise be compensated by the Association for their services. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 2001, No. 17,  1.) 
 4158. Powers and duties of the Association
In addition to the powers and duties enumerated in other sections of this subchapter:(1) If a member insurer is an impaired insurer, the Association, in its discretion and subject to any conditions imposed by the Association that do not impair the contractual obligations of the impaired insurer and that are approved by the Commissioner, may: (A) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies or contracts of the impaired insurer; and (B) provide such monies, pledges, loans, notes, guarantees, or other means as are proper to effectuate subdivision (A) of this subdivision (1) and ensure payment of the contractual obligations of the impaired insurer pending action under subdivision (A) of this subdivision (1). (2) If a member insurer is an insolvent insurer, the Association, in its discretion, shall either: (A)(i)(I) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insolvent insurer; or (II) ensure payment of the contractual obligations of the insolvent insurer; and(ii) Provide monies, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the Associations duties; or (B) Provide benefits and coverages in accordance with the following provisions:(i) With respect to life and health insurance policies and annuities, ensure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability, that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred: (I) With respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or 45 days, but in no event less than 30 days, after the date on which the Association becomes obligated with respect to the policies and contracts. (II) With respect to nongroup policies, contracts, and annuities, not later than the earlier of the next renewal date, if any, under the policies or contracts or one year, but in no event less than 30 days, from the date on which the Association becomes obligated with respect to the policies or contracts. (ii) Make diligent efforts to provide all known insureds or annuitants, for nongroup policies and contracts, or group policy owners with respect to group policies and contracts, 30 days notice of the termination, pursuant to subdivision (i) of this subdivision (B), of the benefits provided. (iii) With respect to nongroup life and health insurance policies and annuities covered by the Association, make available to each known insured or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subdivision (iv) of this subdivision (B), if the insureds or annuitants had a right under law or the terminated policy or annuity to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or annuity or had a right only to make changes in premium by class. (iv)(I) In providing the substitute coverage required under subdivision (iii) of this subdivision (B), the Association may offer either to reissue the terminated coverage or to issue an alternative policy. (II) Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy. (III) The Association may reinsure any alternative or reissued policy.(v)(I) Alternative policies adopted by the Association shall be subject to the approval of the domiciliary insurance commissioner and the receivership court. The Association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency. (II) Alternative policies shall contain at least the minimum statutory provisions required in this State and provide benefits that shall not be unreasonable in relation to the premium charged. The Association shall set the premium in accordance with a table of rates that it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten. (III) Any alternative policy issued by the Association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the Association. (vi) If the Association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the Association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the domiciliary insurance commissioner and the receivership court; (vii) The Associations obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date the coverage or policy is replaced by another similar policy by the policy owner, the insured, or the Association; (viii) When proceeding under subdivision (B) with respect to a policy or contract carrying guaranteed minimum interest rates, the Association shall ensure the payment or crediting of a rate of interest consistent with subdivision 4153(b)(2)(C) of this title. (3)(A) In carrying out its duties under subdivisions (1)(B) and (2) of this section, the Association may request that there be imposed policy liens, contract liens, moratoriums on payments, or other similar means, and such liens, moratoriums, or similar means may be imposed if the Commissioner: (i) Finds that the amounts that can be assessed under this subchapter are less than the amounts needed to ensure full and prompt performance of the impaired or insolvent insurers contractual obligations, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of policy or contract liens, moratoriums, or similar means to be in the public interest; and (ii) Approves the specific policy liens, contract liens, moratoriums, or similar means to be used. (B) Before being obligated under subdivisions (1)(B) and (2) of this section the Association may request that there be imposed temporary moratoriums or liens on payments of cash values and policy loans and such temporary moratoriums and liens may be imposed if they are approved by the Commissioner. (4) The Association shall have no liability under this section for any covered policy of a foreign or alien insurer whose domiciliary jurisdiction or state of entry provides by statute or regulation, for residents of this State protection substantially similar to that provided by this subchapter for residents of other states. (5) The Association may render assistance and advice to the Commissioner, upon the Commissioners request, concerning rehabilitation, payment of claims, continuations of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer. (6) The Association shall have standing to appear before any court in this State with jurisdiction over an impaired or insolvent insurer concerning which the Association is or may become obligated under this subchapter. Such standing shall extend to all matters germane to the powers and duties of the Association. (7)(A) Any person receiving benefits under this subchapter shall be deemed to have assigned the persons rights under the covered policy to the Association to the extent of the benefits received because of this subchapter whether the benefits are payments of contractual obligations or continuation of coverage. The Association may require an assignment to it of such rights by any payee, policy or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any rights or benefits conferred by this subchapter upon such person. The Association shall be subrogated to these rights against the assets of any impaired or insolvent insurer. (B) The subrogation rights of the Association under this subdivision shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this subchapter. (8) The benefits for which the Association may become liable shall in no event exceed the lesser of: (A) the contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or (B)(i) with respect to any one life, regardless of the number of policies or contracts:(I) $300,000.00 in life insurance death benefits, but not more than $100,000.00 in net cash surrender and net cash withdrawal values for life insurance; (II) in health insurance benefits:(aa) $100,000.00 for coverages not defined as disability insurance or basic hospital, medical, and surgical insurance, or major medical insurance, or long-term care insurance, including any net cash surrender and net cash withdrawal values; (bb) $300,000.00 for disability insurance and $300,000.00 for long-term care insurance;(cc) $500,000.00 for basic hospital, medical, and surgical insurance, or major medical insurance; or (III) $250,000.00 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or (ii) with respect to each individual participating in a governmental retirement plan established under Section 401, 403(b), or 457 of the U.S. Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $250,000.00 in present value annuity benefits, including net cash surrender and net cash withdrawal values; or (iii) with respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased) for which coverage is provided under subdivision 4153(a)(3) of this title, $250,000.00 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; or (iv) with respect to any one contract holder covered by any unallocated annuity contract not included in subdivision (B)(ii) of this subdivision (8), $5,000,000.00 in benefits, irrespective of the number of such contracts held by that contract holder; and (v) provided, however, that in no event shall the Association be liable to expend more than $300,000.00 in the aggregate with respect to any one individual under subdivisions (B)(i)(I), (B)(i)(II)(aa) and (bb), (B)(i)(III), (B)(ii), and (B)(iii) of this subdivision (8); and provided further, however, that in no event shall the Association be liable to expend more than $500,000.00 in the aggregate with respect to any one individual under subdivision (B)(i)(II)(cc) of this subdivision (8). (9) The Association may:(A) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this subchapter. (B) Sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under section 4159 of this title. (C) Borrow money to effect the purposes of this subchapter. Any notes or other evidence of indebtedness of the Association not in default shall be legal investments for domestic insurers and may be carried as admitted assets. (D) Employ or retain such persons as are necessary to handle the financial transactions of the Association, and to perform such other functions as become necessary or proper under this subchapter. (E) Negotiate and contract with any liquidator, rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association. (F) Take such legal action as may be necessary to avoid payment of improper claims.(G) Exercise, for the purposes of this subchapter and to the extent approved by the Commissioner, the powers of a domestic life or health insurer, but in no case may the Association issue insurance policies or annuity contracts other than those issued to perform the contractual obligations of the impaired or insolvent insurer. (10)(A)(i) At any time within 180 days after the date of the order of liquidation, the Association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the Association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the Association. Any such assumption shall be effective as of the date of the order of liquidation. The election shall be effected by the Association or the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) on its behalf sending written notice, return receipt requested, to the affected reinsurers. (ii) To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver, and each reinsurer of the ceding member insurer shall make available upon request to the Association or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency proceedings: copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed; and notices of any defaults under the reinsurance contacts or any known event or condition which with the passage of time could become a default under the reinsurance contracts. (iii) The following subdivisions (I) through (IV) shall apply to reinsurance contracts so assumed by the Association: (I) The Association shall be responsible for all unpaid premiums due under the reinsurance contracts for periods both before and after the date of the order of liquidation, and shall be responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relate to policies or annuities covered, in whole or in part, by the Association. The Association may charge policies or annuities covered in part by the Association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the Association and shall provide notice and an accounting of these charges to the receiver. (II) The Association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies or annuities covered, in whole or in part, by the Association, provided that, upon receipt of any such amounts, the Association shall be obliged to pay to the beneficiary under the policy or annuity on account of which the amounts were paid a portion of the amount equal to the lesser of: (aa) The amount received by the Association; and(bb) The excess of the amount received by the Association over the amount equal to the benefits paid by the Association on account of the policy or annuity less the retention of the insurer applicable to the loss or event. (III) Within 30 days following the Associations election (the election date), the Association and each reinsurer under contracts assumed by the Association shall calculate the net balance due to or from the Association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the Association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid for periods prior to the date, and the Association or reinsurer shall pay any remaining balance due the other, in each case within five days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the Association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration clause, as otherwise provided by law. If the receiver has received any amounts due the Association pursuant to subdivision (iii)(II) of this subdivision (A), the receiver shall remit the same to the Association as promptly as practicable. (IV) If the Association or receiver, on the Associations behalf, within 60 days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the Association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the reinsurance contracts relate to policies or annuities covered, in whole or in part, by the Association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the Association, against amounts due the Association. (B) During the period from the date of the order of liquidation until the election date (or, if the election date does not occur, until 180 days after the date of the order of liquidation): (i)(I) Neither the Association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the Association has the right to assume under subdivision (A) of this subdivision (10), whether for periods prior to or after the date of the order of liquidation; and (II) The reinsurer, the receiver, and the Association shall, to the extent practicable, provide each other data and records reasonably requested; (ii) Provided that once the Association has elected to assume a reinsurance contract, the parties rights and obligations shall be governed by subdivision (A) of this subdivision (10). (C) If the Association does not elect to assume a reinsurance contract by the election date pursuant to subdivision (A) of this subdivision (10), the Association shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract. (D) When policies or annuities, or covered obligations with respect to those policies or annuities, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the Association, in the case of contracts assumed under subdivision (A) of this subdivision (10), subject to the following: (i) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred; (ii) The obligations described in subdivision (A) of this subdivision (10) shall no longer apply with respect to matters arising after the effective date of the transfer; and (iii) Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days prior to the effective date of the transfer. (E) The provisions of this subdivision (10) shall supersede the provisions of any law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods prior to the date of the order of liquidation, subject to applicable setoff provisions. (F) Except as otherwise provided in this section, nothing in this subdivision (10) shall alter or modify the terms and conditions of any reinsurance contract. Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract. Nothing in this section shall give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the Associations rights as a creditor of the estate against the assets of the estate. Nothing in this section shall apply to reinsurance agreements covering property or casualty risks. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1993, No. 55,  6, eff. June 3, 1993; 2009, No. 42,  16, eff. May 27, 2009; 2009, No. 137 (Adj. Sess.),  7d, 7e, eff. May 29, 2010; 2015, No. 97 (Adj. Sess.),  17; 2021, No. 105 (Adj. Sess.),  161, eff. July 1, 2022.) 
 4159. Assessments
(a) For the purpose of providing the funds necessary to carry out the powers and duties of the Association, the Board of Directors shall assess the member insurers, separately for each account, at such times and for such amounts as the Board finds necessary. The Board shall collect the assessment after 30 days written notice to the member insurers before payment is due. (b) There shall be three classes of assessments, as follows:(1) Class A assessments shall be made for the purpose of meeting administrative costs and other general expenses not related to a particular impaired or insolvent insurer. (2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under section 4158 of this title with regard to an impaired or insolvent domestic insurer. (3) Class C assessments shall be made to the extent necessary to carry out the powers and duties of the Association under section 4158 of this title with regard to an impaired or insolvent foreign or alien insurer. (c)(1) The amount of any Class A assessment for each account shall be determined by the Board. The amount of any Class B or C assessment shall be divided among the accounts in the proportion that the premiums received by the impaired or insolvent insurer on the policies covered by each account bears to the premiums received by such insurer on all covered policies. (2) Class A and Class C assessments against member insurers for each account shall be in the proportion that the premiums received on business in this State by each assessed member insurer on policies covered by each account bears to such premiums received on business in this State by all assessed member insurers. (3) Class B assessments for each account shall be made separately for each state in which the impaired or insolvent domestic insurer was authorized to transact insurance at any time, in the proportion that the premiums received on business in such state by the impaired or insolvent insurer on policies covered by such account bears to such premiums received in all such states by the impaired or insolvent insurer. The assessments against member insurers shall be in the proportion that the premiums received on business in each such state by each assessed member insurer on policies covered by each account bears to such premiums received on business in each such state by all assessed member insurers. (4) Assessments for funds to meet the requirements of the Association with respect to an impaired or insolvent insurer shall not be made until necessary to implement the purposes of this subchapter. Classification of assessments under subdivision (2) of this subsection and computation of assessments under this subdivision shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. (d) The Association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the Board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. The total of all assessments upon a member insurer for each account shall not in any one calendar year exceed two percent of such insurers premiums in this State on the policies covered by the account. (e)(1) In the event an assessment against a member insurer is abated or deferred, in whole or in part, because of the limitations set forth in subsection (d) of this section, the amount by which such assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum assessment, together with the other assets of the Association in any account, does not provide in any one year in any account an amount sufficient to carry out the responsibilities of the Association, the necessary additional funds shall be assessed as soon thereafter as permitted by this subchapter. (2) The Board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims. (f) The Board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each member insurer to that account, the amount by which the assets of the account exceed the amount the Board finds is necessary to carry out during the coming year the obligations of the Association with regard to that account, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the Association and for future losses if refunds are impractical. In lieu of sending a refund directly to a member insurer, the Board may, in its discretion, pay all or any portion of the refund to the Commissioner of Taxes, who shall apply the payment to the insurers obligation to repay the amount of any insurance premium taxes previously offset by the insurer pursuant to subsection 4167(b) of this title. To effectuate this payment, the Commissioner of Taxes is specifically authorized to disclose to the Association and to the Commissioner of Financial Regulation the amount of insurance premium taxes offset by the insurer. (g) The Association shall issue to each insurer paying an assessment under this subchapter a certificate of contribution, in a form prescribed by the Commissioner, for the amount so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1989, No. 222 (Adj. Sess.),  2, eff. May 31, 1990; 1989, No. 225 (Adj. Sess.),  25; 1993, No. 55,  7, eff. June 3, 1993; 1995, No. 180 (Adj. Sess.),  38; 2009, No. 137 (Adj. Sess.),  7e, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4160. Plan of operation
(a)(1) The Association shall submit to the Commissioner a plan of operation and any amendments to the plan necessary or suitable to ensure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments to the plan shall become effective upon approval in writing by the Commissioner. (2) If the Association fails to submit a suitable plan of operation within 180 days following April 27, 1972 or if at any time thereafter the Association fails to submit suitable amendments to the plan, the Commissioner shall, after notice and hearing, adopt such reasonable rules as are necessary or advisable to effectuate the provisions of this subchapter. Such rules shall continue in force until modified by the Commissioner or superseded by a plan submitted by the Association and approved by the Commissioner. (b) All member insurers shall comply with the plan of operation.(c) The plan of operation shall, in addition to requirements enumerated elsewhere in this subchapter: (1) Establish procedures for handling the assets of the Association.(2) Establish the amount and method of reimbursing members of the Board of Directors under section 4157 of this title. (3) Establish regular places and times for meetings of the Board of Directors.(4) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the Board of Directors. (5) Establish the procedures whereby selections for the Board of Directors will be made and submitted to the Commissioner. (6) Establish any additional procedures for assessments under section 4159 of this title.(7) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association. (d) The plan of operation may provide that any or all powers and duties of the Association, except those under subdivision 4158(9)(C) and section 4159 of this title, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent in two or more states. Such a corporation, association, or organization shall be reimbursed for any payments made on behalf of the Association and shall be paid for its performance of any function of the association. A delegation under this subsection shall take effect only with the approval of both the Board of Directors and the Commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this subchapter. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 2015, No. 23,  83; 2021, No. 105 (Adj. Sess.),  162, eff. July 1, 2022.) 
 4161. Duties and powers of the Commissioner
In addition to the duties and powers enumerated elsewhere in this subchapter,(1) The Commissioner shall:(A) Notify the Board of Directors of the existence of an impaired or insolvent insurer not later than three days after a determination of impairment or insolvency is made or he or she receives notice of impairment or insolvency. (B) Permit the Association to examine such records in his or her office as are necessary to obtain a statement of the premiums in the appropriate states for each member insurer. (C) When an impairment or insolvency is declared and the amount of the impairment or insolvency is determined, serve a demand upon the impaired or insolvent insurer to make good the impairment or insolvency within a reasonable time. Notice to the impaired or insolvent insurer shall constitute notice to its shareholders, if any. The failure of the insurer to promptly comply with such demand shall not excuse the Association from the performance of its powers and duties under this subchapter. (D) In any liquidation or rehabilitation proceeding involving a domestic insurer, be appointed as the liquidator or rehabilitator. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the Commissioner shall be appointed conservator. (2) The Commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the Commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when due. Such forfeiture shall not exceed five percent of the unpaid assessment per month, but no forfeiture shall be less than $500.00 per month. (3) Any action of the Board of Directors or the Association may be appealed to the Commissioner by any member insurer if such appeal is taken within 30 days of the action being appealed. Any final action or order of the Commissioner shall be subject to judicial review in the Supreme Court. (4) The liquidator, rehabilitator, or conservator of any impaired or insolvent insurer may notify all interested persons of the effect of this subchapter. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1995, No. 167 (Adj. Sess.),  12; 1997, No. 161 (Adj. Sess.),  7, eff. Jan. 1, 1998; 2009, No. 137 (Adj. Sess.),  7e, eff. May 29, 2010.) 
 4162. Prevention of impairment or insolvency
To aid in the detection and prevention of insurer impairment or insolvency:(1) The Board of Directors shall, upon majority vote, notify the Commissioner of any information indicating any member insurer may be unable or potentially unable to fulfill its contractual obligations. (2) The Board of Directors may, upon majority vote, request that the Commissioner order an examination of any member insurer which the Board in good faith believes may be unable or potentially unable to fulfill its contractual obligations. The Commissioner may conduct such examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the Commissioner designates. The cost of such examination shall be paid by the Association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the Board of Directors of the Association prior to its release to the public, but this shall not excuse the Commissioner from his or her obligation to comply with subdivision (3) of this section. The Commissioner shall notify the Board of Directors when the examination is completed. The request for an examination shall be kept on file by the Commissioner but it shall not be open to public inspection prior to the release of the examination report to the public and shall be released at that time only if the examination discloses that the examined insurer is unable or potentially unable to meet its contractual obligations. (3) The Commissioner shall report to the Board of Directors when he or she has reasonable cause to believe that any member insurer examined at the request of the Board of Directors may be unable or potentially unable to fulfill its contractual obligations. (4) The Board of Directors may, upon majority vote, make reports and recommendations to the Commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer. Such reports and recommendations shall not be considered public documents. (5) The Board of Directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer impairment or insolvency. (6) The Board of Directors shall, at the conclusion of any insurer impairment or insolvency in which the Association carried out its duties under this subchapter or exercised any of its powers under this subchapter, prepare a report on the history and causes of such impairment or insolvency, based on the information available to the Association, and submit such report to the Commissioner. (Added 1971, No. 170 (Adj. Sess.),  2, April 27, 1972; amended 2009, No. 137 (Adj. Sess.),  7e, eff. May 29, 2010.) 
 4163. Appointment of special deputy
The Commissioner may appoint a person to serve, at the expense of the Association, as a special deputy to act for and under his or her supervision in the liquidation, rehabilitation, or conservation of any member insurer. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972.) 
 4164. Miscellaneous provisions
(a) Nothing in this subchapter shall be construed to reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability. (b) Records shall be kept of all negotiations and meetings in which the Association or its representatives are involved to discuss the activities of the Association in carrying out its powers and duties under section 4158 of this title. Records of such negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the Association to render a report of its activities under section 4165 of this title. (c) For the purpose of carrying out its obligations under this subchapter, the Association shall be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the Association is entitled as subrogee pursuant to subdivision 4158(7) of this title. All assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this subchapter. Assets attributable to covered policies, as used in this subsection, is that proportion of the assets which the reserves that should have been established for such policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer. (d)(1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the Court may take into consideration the contributions of the respective parties, including the Association, the shareholders and policyowners of the impaired or insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of such impaired or insolvent insurer. In such a determination, consideration shall be the welfare of the policyholders of the continuing or successor insurer. (2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until and unless the total amount of assessments levied by the Association with respect to such insurer have been fully recovered by the Association. (e) No person shall make use in any manner of the protection afforded by this subchapter as a reason for buying insurance from him or her and the license of any person violating this provision may be revoked by the Commissioner. (f)(1) If an order for liquidation or rehabilitation of an insurer domiciled in this State has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer from any affiliate that controlled it the amount of distributions, other than stock dividends paid by the insurer on its capital stock, at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of subdivisions (2)-(4) of this subsection. (2) No such distribution shall be recoverable if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations. (3) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions he or she received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two persons are liable with respect to the same distributions they shall be jointly and severally liable. (4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets to pay the contractual obligations of the impaired or insolvent insurer. (5) If any person liable under subdivision (3) of this subsection is insolvent, all its affiliates that controlled it at the time the dividend was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 1993, No. 55,  8, eff. June 3, 1993; 2009, No. 137 (Adj. Sess.),  7e, eff. May 29, 2010.) 
 4165. Examination of the Association; annual report
The Association shall be subject to examination and regulation by the Commissioner. The Board of Directors shall submit to the Commissioner, not later than May 1 of each year, a financial report for the preceding calendar year in a form approved by the Commissioner and a report of its activities during the preceding calendar year. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972.) 
 4166. Tax exemptions
The Association shall be exempt from payment of all fees and all taxes levied by this State or any of its subdivisions, except taxes levied on real property. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972.) 
 4167. Tax write-offs of certificates of contribution
(a) Unless a longer period has been allowed by the Commissioner, a member insurer shall at its option have the right to show a certificate of contribution as an asset in the form approved by the Commissioner pursuant to subsection 4159(g) of this title, at percentages of the original face amount approved by the Commissioner, for calendar years as follows: (1) 100 percent for the calendar year of issuance;(2) 80 percent for the first calendar year after the year of issuance;(3) 60 percent for the second calendar year after the year of issuance;(4) 40 percent for the third calendar year after the year of issuance;(5) 20 percent for the fourth calendar year after the year of issuance;(6) 0 percent for the fifth calendar year after the year of issuance and thereafter.(b) The insurer may offset the amount written off by it in a calendar year under subsection (a) of this section, against its premium tax liability to this State accrued with respect to business transacted in such year. (c) Any sums acquired by refund, pursuant to subsection 4159(f) of this title, from the Association that have been written off by contributing insurers and offset against premium taxes as provided in subsection (b) of this section, and are not then needed for purposes of this subchapter, shall be paid by the insurer to the Commissioner, who shall deposit them with the State Treasurer for credit to the General Fund. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 2021, No. 105 (Adj. Sess.),  163, eff. July 1, 2022.) 
 4168. Immunity
There shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer or its agents or employees, the Association or its agents or employees, members of the Board of Directors, or the Commissioner or his or her representatives for any action taken by them in the performance of their powers and duties under this chapter. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972.) 
 4169. Stay of proceedings; reopening default judgments
All proceedings in which the impaired or insolvent insurer is a party in any court in this State shall be stayed 60 days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the Association on any matters germane to its powers or duties. As to a judgment under any decision, order, verdict, or finding based on the default, the Association may apply to have such judgment set aside by the same court that made such judgment and shall be permitted to defend against such suit on the merits. (Added 1971, No. 170 (Adj. Sess.),  2, eff. April 27, 1972; amended 2009, No. 137 (Adj. Sess.),  7e, eff. May 29, 2010.) 
 4181. Purpose; creation of Association; coverage
(a) The purpose of this subchapter is to protect members of health care plans who reside in this State, and their beneficiaries, payees, and assignees against failure in the performance of contractual obligations due to the impairment or insolvency of the health maintenance organization operating such health care plans. Nonresident members of such health care plans shall be protected by this Association if: (1) they reside in states which have associations similar to the Association created by this subchapter; (2) they are not eligible for coverage by such association;(3) the organization which operated such health care plan never held a license or certificate of authority in such states; and (4) such organization was domiciled in this State.(b) In order to provide the protection intended by this subchapter:(1) an association of health maintenance organizations is created to enable the guaranty of payment of benefits and of continuation of coverages; (2) members of the Association are subject to assessment to provide funds to carry out the purpose of this subchapter; and (3) the Association is authorized to assist the Commissioner, in the prescribed manner, in the detection and prevention of health maintenance organization impairments and insolvencies. (c) This subchapter shall provide coverage to the persons specified in subsection (a) of this section for direct individual contract, group contracts and certificates issued under such contracts, or any other evidence of coverage, each of which provides coverage under a health care plan, and has been issued by any organization holding a certificate of authority under chapter 139 of this title, but not for any business of such organization not transacted under its certificate of authority as a health maintenance organization. (Added 1993, No. 30,  15, eff. May 21, 1993.) 
 4182. Construction
This subchapter shall be liberally construed to effect its purposes under section 4181 of this title, which shall constitute an aid and guide to interpretation. (Added 1993, No. 30,  15, eff. May 21, 1993.) 
 4183. Definitions
As defined in this subchapter:(1) Association means the Vermont Health Maintenance Organization Guaranty Association created under this subchapter. (2) Commissioner means the Commissioner of Financial Regulation of this State.(3) Contractual obligation means any obligation under covered health care plan certificates.(4) Covered person means any member or person who is entitled to the protection of the Association as described in section 4181 of this title. (5) Covered health care plan certificate means any health care plan certificate, contract, or other evidence of coverage within the scope of this subchapter. (6) Fund means the Fund created under section 4184 of this title.(7) Impaired organization means a member organization deemed by the Commissioner after May 21, 1993 to be unable or potentially unable to fulfill its contractual obligations, and not an insolvent organization. (8) Insolvent organization means a member organization which becomes insolvent and is placed under a final order of liquidation or rehabilitation by a court of competent jurisdiction. (9) Member organization means any person who holds a certificate of authority under chapter 139 of this title, and includes any person whose certificate of authority has been suspended, revoked, or nonrenewed. (10) Premiums means direct gross premiums or subscriptions received on covered health care plan certificates. (11) Person means any individual, corporation, partnership, association, or voluntary organization. (12) Resident means any person who resides in this State at the time the organization is determined to be impaired or insolvent and to whom contractual obligations are owed. A person may be a resident of only one state. In the case of a person other than a natural person, residence shall be its principal place of business. (Added 1993, No. 30,  15, eff. May 21, 1993; amended 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4184. Creation of the Health Maintenance Organization Guaranty Association
Upon a finding by the Commissioner that the interests of members would be best served by the establishment of a Health Maintenance Organization Guaranty Association, the Commissioner shall order all organizations holding a certificate of authority under chapter 139 of this title to establish a nonprofit legal entity to be known as the Vermont Health Maintenance Organization Guaranty Association. All member organizations shall be and must remain members of the Association as a condition of the authority to transact business in this State. The Association shall perform its functions under the plan of operation approved by the Commissioner and shall exercise its powers through a Board of Directors. For purposes of administration and assessment, the Association must maintain the Vermont Health Maintenance Organization Guaranty Association Fund. The Association shall be supervised by the Commissioner and is subject to the provisions of this subchapter and the provisions of subchapter 1 of this chapter as further set forth in section 4185 of this title. (Added 1993, No. 30,  15, eff. May 21, 1993.) 
 4185. Application of subchapter 1 to the Vermont Health Maintenance Organization Guaranty Association; maximum benefits
(a) Sections 4157, 4158, 4159, 4160, 4161, 4162, 4163, 4164, 4165, 4168, and 4169 of this title shall govern and apply to the Association established under this subchapter except as otherwise provided in this subchapter. (b) Sections 4166 and 4167 of this title shall not apply to the Association established under this subchapter. (c)(1) Benefits for which the Association may become liable shall in no event exceed the lesser of: (A) the contractual obligations for which the Health Maintenance Organization is liable or would have been liable if it were not impaired or insolvent; or (B) $300,000.00 with respect to any one natural person.(2) In no event shall the Association be required to pay any provider participating in the insolvent organization any amount for in-plan services rendered by such provider prior to the insolvency of the organization in excess of: (A) the amount provided by a contract between a physician provider and the insolvent organization for such services; or (B) the amounts provided by contract between a hospital provider and the Department of Vermont Health Access for similar services to recipients of Medicaid; or (C) in the event neither subdivision (A) nor (B) of this subdivision (2) is applicable, then the amounts paid under the Medicare area prevailing rate for the area where the services were provided, or if no such rate exists with respect to such services, then 80 percent of the usual and customary rates established by the Health Insurance Association of America or any successor organization that calculates the usual and customary rates for medical services and procedures. The payments required to be made by the Association under this subsection shall constitute full and complete payment of such provider services for the member. (Added 1993, No. 30,  15, eff. May 21, 1993; amended 1999, No. 147 (Adj. Sess.),  4; 2005, No. 174 (Adj. Sess.),  11; 2009, No. 156 (Adj. Sess.),  I.14.) 
 4201. Filing and approval of policies; review
A policy of insurance covering against loss or damage resulting from accident to, or injury suffered by an employee or other person, and for which the insured is liable, shall not be issued or delivered to a person, firm, or corporation resident of, or doing business in this State, until a copy of the form of the policy has been filed with the Commissioner; and it shall not be issued or delivered unless approved by the Commissioner. If the Commissioner determines that the form does not comply with the requirements of law, the Commissioner shall immediately give written notice to the insurer who filed the form, specifying the reasons for the Commissioners determination, and it shall then be unlawful for the insurer to issue a policy in such form. The Commissioners determination is subject to review pursuant to Rule 75 of the Vermont Rules of Civil Procedure. (Amended 2021, No. 105 (Adj. Sess.),  164, eff. July 1, 2022.) 
 4201a. Filing fees
Each filing of a policy or contract form or document, submitted pursuant to section 4201 of this title, shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 per filing submission. (Added 1985, No. 236 (Adj. Sess.),  9; amended 1991, No. 166 (Adj. Sess.),  5.) 
 4202. Form and contents of policy
A policy shall not be issued or delivered under this chapter unless:(1) every printed portion of the policy and any endorsement or attached papers are plainly printed; (2) a brief description of the policy is plainly printed on the first page; and(3) the exceptions of the policy are printed with the same prominence as the benefits to which they apply. (Amended 2021, No. 105 (Adj. Sess.),  165, eff. July 1, 2022.) 
 4203. Required conditions
Each policy issued and delivered under this chapter shall contain in substance the following conditions: (1) The company shall pay and satisfy any judgment that may be recovered against the insured upon any claim covered by this policy to the extent and within the limits of liability assumed thereby and shall protect the insured against the levy of any execution issued upon any such judicial judgment or claim against the insured. No limitation of liability in the policy shall be valid if, after a judgment has been rendered against the insured in respect to his or her legal liability for damages in a particular instance, the company continues the litigation by an appeal or otherwise, unless the insured stipulates with the company, agreeing to continue such litigation. (2) No action shall lie against the company to recover for any loss under this policy, unless brought within one year after the amount of such loss is made certain either by judgment against the insured after final determination of the litigation or by agreement between the parties with the written consent of the company. (3) The insolvency or bankruptcy of the insured shall not release the company from the payment of damages for injury sustained or loss occasioned during the life of the policy, and in case of such insolvency or bankruptcy an action may be maintained by the injured person or claimant against the company under the terms of the policy, for the amount of any judgment obtained against the insured not exceeding the limits of the policy. (4) Payment of any judicial judgment or claim by the insured for any of the companys liability under the policy shall not bar the insured from any action or right of action against the company. In case of payment of loss or expense under the policy, the company shall be subrogated to all rights of the insured against any party, as respects such loss or expense, to the amount of such payment, and the insured shall execute all papers required and shall cooperate with the company to secure to the company such rights. (5) Policies of motor vehicle insurance shall not provide for any adjustment of rates, the application of any merit rating surcharge plan, nor any similar adjustment or surcharge for any payments made to or on behalf of an insured for damages not attributable to any fault of the insured. (6) Policies of motor vehicle insurance shall not provide for any adjustment of rates, the application of any merits surcharge rating plan, nor any similar adjustment or surcharge for the first violation of 23 V.S.A.  800. (Amended 1985, No. 77,  4; 2021, No. 105 (Adj. Sess.),  166, eff. July 1, 2022.) 
 4204. Illegal provisions
A policy shall not be issued or delivered under this chapter if it contains a provision contradictory, in whole or in part, to any of the provisions of sections 42014203 and 42054209 of this title; nor shall any endorsements or attached papers vary, alter, extend, be used as a substitute for, or in any way conflict with such provisions. A policy shall not be issued or delivered under this chapter if it contains any provision purporting to make any portion of the charter, articles of association, Constitution, or bylaws of the insurer a part of the policy unless such portion of the charter, articles, Constitution, or bylaws is set forth in full in the policy. (Amended 2021, No. 105 (Adj. Sess.),  167, eff. July 1, 2022.) 
 4205. Effect of false statement in application
The falsity of a statement in the application for a policy covered by the provisions of this chapter shall not bar the right to recovery under the policy unless such false statement was made with actual intent to deceive or unless it materially affected either the acceptance of the risk or the hazard assumed by insurer. (Amended 2021, No. 105 (Adj. Sess.),  168, eff. July 1, 2022.) 
 4206. Acts not constituting waivers
The acknowledgment by an insurer of the receipt of notice given under a policy covered by the provisions of this chapter, or the furnishing of forms for filing proofs of loss, or the acceptance of such proofs, or the investigation of a claim under the policy shall not operate as a waiver of any of the rights of the insurer in defense of a claim arising under the policy. (Amended 2021, No. 105 (Adj. Sess.),  169, eff. July 1, 2022.) 
 4207. Penalty for unauthorized alterations
An alteration of a written application for insurance by erasure, insertion, or otherwise, shall not be made by a person other than the applicant without his or her written consent, and a person making such alteration without the consent of the applicant shall pay an administrative penalty of not more than $2,000.00. If such alteration is made by an officer of the insurer, or by an employee of the insurer with the insurers knowledge or consent, such act shall be deemed to have been performed by the insurer thereafter issuing the policy upon such altered application. (Amended 1995, No. 167 (Adj. Sess.),  13.) 
 4208. Construction of illegal policies
A policy issued in violation of the provisions of this chapter shall be held valid but shall be construed as provided in the provisions of this chapter. When a provision in a policy is in conflict with the provisions of this chapter, the rights, duties, and obligations of the insurer, the policyholder, and the beneficiary shall be governed by the provisions of this chapter. (Amended 2021, No. 105 (Adj. Sess.),  170, eff. July 1, 2022.) 
 4209. Penalties
A company, corporation, association, society, or other insurer or any officer or agent thereof that issues or delivers to a person in this State a policy in willful violation of the provisions of this chapter shall pay an administrative penalty of not more than $2,000.00 for each offense. The Commissioner may revoke the license of a company, corporation, association, society, or other insurer of another state or country, or of the agent thereof, that willfully violates such provisions. (Amended 1995, No. 167 (Adj. Sess.),  14; 2021, No. 105 (Adj. Sess.),  171, eff. July 1, 2022.) 
 4210. Cost of examinations
The insurer under any motor vehicle liability insurance policy shall bear the cost of all physical examinations imposed on the insured or proposed insured as a condition for issuance or renewal of the policy. (Added 1971, No. 108.) 
 4211. Volunteer drivers
(a) An insurer may not refuse to issue motor vehicle liability insurance to an applicant solely because the applicant is a volunteer driver. An insurer may not impose a surcharge or otherwise increase the rate for a motor vehicle policy solely on the basis that the named insured, a member of the insureds household, or a person who customarily operates the insureds vehicle is a volunteer driver. (b) As used in this section, volunteer driver means a person who provides services, including transporting individuals or goods, without compensation above mileage expenses to a charitable organization or nonprofit corporation established under Title 11B, pursuant to a written agreement. (c) This section does not prohibit an insurer from refusing to renew, imposing a surcharge on, or otherwise raising the rate for a motor vehicle liability insurance policy based upon factors other than the volunteer status of the insured driver. (Added 2009, No. 80 (Adj. Sess.),  1.) 
 4222. Definitions
The following definitions, unless otherwise specified or qualified, shall be applicable to this subchapter: (1) Policy means an automobile liability policy providing bodily injury liability, property damage liability, medical payments, and uninsured motorist coverage, or any combination thereof, delivered or issued for delivery in this State, insuring a single individual or husband and wife resident of the same household, as named insured, and under which the insured vehicles designated under the policy are of the following types only: (A) A motor vehicle of the private passenger or station wagon type that is not used as a public or livery conveyance for passengers, nor rented to others; or (B) Any other four-wheel motor vehicle with a load capacity of 1,500 pounds or less which is not used in the occupation, profession, or business of the insured; provided, however, that absent specific language to the contrary, this subchapter shall not apply to any policy issued under the Vermont Automobile Insurance Plan, nor shall it apply to any policy insuring more than four automobiles, or to any policy covering garage, automobile sales agency, repair shop, service station, or public parking place operation hazards, or to any policy of insurance issued principally to cover personal or premises liability of an insured even though such insurance may also provide some incidental coverage for liability arising out of the ownership, maintenance, or use of a motor vehicle on the premises of such insured or on the ways immediately adjoining such premises. (2) Renewal or to renew means the issuance and delivery by an insurer of a policy replacing at the end of the policy period a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of the policy beyond its policy period or term; provided, however, that any policy with a policy period or term of less than six months shall for the purpose of this subchapter be considered as if written for a policy period or term of six months. Provided, further, that any policy written for a term longer than one year or any policy with no fixed expiration date, shall for the purpose of this subsection be considered as if written for successive policy periods or terms of one year, and such policy may be terminated at the expiration of any annual period upon giving 30 days notice of nonrenewal prior to such anniversary date, and such nonrenewal shall not be subject to any other provisions of this subchapter. (3) Nonpayment of premium means failure of the named insured to discharge when due any of his or her obligations in connection with the payment of premiums on the policy, or any installment of such premium, whether the premium is payable directly to the insurer or its agent or indirectly under any premium finance plan or extension of credit. (Added 1971, No. 195 (Adj. Sess.),  1; amended 1977, No. 223 (Adj. Sess.),  1, 9; 2021, No. 105 (Adj. Sess.),  172, eff. July 1, 2022.) 
 4223. Cancellation of automobile insurance
(a) A notice of cancellation of a policy shall be effective only if it is based on one or more of the following reasons: (1) nonpayment of premium;(2) fraud or material misrepresentation affecting the policy or in the presentation of a claim under the policy, or violation of any of the terms or conditions of the policy; or (3) the drivers license of the named insured or of any operator either resident in the same household or who customarily operates an automobile insured under the policy has been suspended or revoked pursuant to law during the policy period, or, if the policy is a renewal, during its policy period or the 180 days immediately preceding its effective date. (b) This section shall not apply to any policy or coverage which has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy. (c) This section shall not apply to nonrenewal. (Added 1971, No. 195 (Adj. Sess.),  2; amended 2021, No. 105 (Adj. Sess.),  173, eff. July 1, 2022.)
 4224. Notice of cancellation
(a) No notice of cancellation of a policy of insurance to which section 4223 of this title applies or of a policy issued under the Vermont Automobile Insurance Plan shall be effective unless mailed or delivered by the insurer to the named insured at least 45 days prior to the effective date of cancellation; provided, however, that where cancellation is for nonpayment of premium, at least 15 days notice of cancellation shall be given. (b) In all instances, the reason or reasons for cancellation shall accompany or be included in the notice of cancellation. An insurer shall not be held liable in any claim or suit for damages arising solely from the insurers compliance with the requirement that the reason for cancellation be specified. (c) This section shall not apply to nonrenewal. (Added 1971, No. 195 (Adj. Sess.),  3, amended 1977, No. 223 (Adj. Sess.), 2, 3; 1989, No. 171 (Adj. Sess.),  6, eff. Sept. 1, 1990.)
 4225. Notice of nonrenewal
No insurer shall refuse to renew a policy of insurance unless such insurer or its agent shall mail or deliver to the named insured, at the address shown in the policy, at least 45 days advance notice of its intention not to renew. This section shall not apply if the insurer has manifested its willingness to renew, or in case of nonpayment of premium, or if the insured fails to pay any advance premium required by the insurer for renewal. Notwithstanding the failure of an insurer to comply with this section, the policy shall terminate on the effective date of any other insurance policy with respect to any automobile designated in both policies. Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal. (Added 1971, No. 195 (Adj. Sess.),  4; amended 1977, No. 223 (Adj. Sess.),  8; 1989, No. 171 (Adj. Sess.),  7, eff. Sept. 1, 1990.) 
 4225a. Renewal policies
(a) If the insurer has the necessary information to issue the renewal policy, the insurer shall confirm in writing at least 45 days prior to expiration its intention to renew the policy and the premium at which the policy is to be renewed. The insured shall have the right to renew the policy at this premium. (b) An insurer not complying with subsection (a) of this section shall grant its insured renewal coverage at the rate or premium in effect under the expiring or expired policy or at rates lawfully in effect on the expiration date, which have been approved by the Commissioner. This shall be done on a pro rata basis and shall continue for 45 days after the insurer confirms renewal coverage and premium. This subsection shall not apply if the insured accepts the renewal policy. (c) An insurer may transfer a policy to an affiliate, as defined by subdivision 3681(1) of this title, upon expiration of the policy without providing notice of nonrenewal, provided that: (1) the rating by A. M. Best or a similarly qualified rating service of the affiliate is equal to or better than the transferring insurer; (2) there is no diminution in the terms and conditions of coverage; and(3) notice of the transfer is provided to the insured at least 45 days prior to the transfer by first class mail, and in connection with such notice the insurer: (A) complies with any requirements of federal law relating to notice of adverse credit determination; (B) includes in the notice of transfer a telephone number of the insurer, or the producer, if any, and a toll free telephone number of the insurer in the case of personal lines policies, where the insured can learn additional information concerning the transfer and the reasons for the transfer; and (C) complies with the other provisions of this section relating to renewal policies. (Added 2007, No. 135 (Adj. Sess.),  2.)
 4226. Notice requirements
When notice required under section 4224 or 4225 of this title is provided by mail, such notice shall be by certified mail, except that in the case of cancellation for nonpayment of premium notice shall be by certified mail or certificate of mailing. (Added 1971, No. 195 (Adj. Sess.),  5; amended 1975, No. 53,  3, eff. April 15, 1975; 1977, No. 223 (Adj. Sess.),  10.) 
 4227. Notice of eligibility
When automobile bodily injury and property damage liability coverage is cancelled, other than for nonpayment of premium, or in the event of failure to renew automobile bodily injury and property damage liability coverage to which section 4225 of this title applies, the insurer shall notify the named insured of his or her possible eligibility for automobile liability insurance through the Vermont Automobile Insurance Plan. Such notice shall accompany or be included in the notice of cancellation or the notice of intent not to renew. (Added 1971, No. 195 (Adj. Sess.),  6.) 
 4228. Required renewals; continuation of agents contracts and brokers accounts
(a) In the event of an insurers cancellation of an agents contract or a brokers account placement authority with such insurer, each policyholder of such an agent or broker shall be entitled to renew his or her policy, upon timely payment of premium, for one additional annual policy period commencing at the next annual anniversary date of the policy; except that an insurer shall have the right to cancel such policy pursuant to section 4223 of this title. (b) The terminated agent or broker shall be entitled to receive commissions on account of all business continued or written pursuant to this section at the insurers prevailing commission rate for such line of insurance. However, this subsection shall not apply to an agent who agrees to represent exclusively one insurer or a group of insurers under common management or an agent or broker whose license has been revoked by the Commissioner or whose contract or account has been terminated for insolvency, abandonment, gross and willful misconduct, or failure to pay over to the insurer monies due to the insurer after receipt of a written demand therefor. (c) If, after hearing, the Commissioner finds that the financial condition of the insurer is insecure to the extent that continuation of agents contracts and brokers accounts represent a potential hazard to the policyholders in this State, or that any other condition of the insurer represents such a hazard, the Commissioner may issue an order relieving the insurer from its obligation to provide the renewal policies otherwise required by subsection (a) of this section. (Added 1985, No. 230 (Adj. Sess.),  2.) 
 4229. Penalties
A person who violates a provision of this subchapter may be subject to an administrative penalty of $2,000.00 for each violation. (Added 1995, No. 167 (Adj. Sess.),  14a.) 
 4241. Vermont Automobile Insurance Plan
All insurers licensed to transact business in this State, for the issuance of automobile insurance against bodily injury, property damage, medical payments, or other loss, including what are commonly known as liability, collision, comprehensive, or uninsured motorist coverages, and every advisory or service organization operating in this State under chapter 128 of this title shall cooperate in the formation, implementation, rating, and operation of a plan for the equitable apportionment among insurers of applicants for insurance who are unable to procure that insurance through ordinary methods. (Added 1969, No. 63,  2.) 
 4242. General provisions of Plan
The Plan shall provide:(1) reasonable rules for the distribution of risks on an equitable basis under either a pooled or assigned plan; (2) rates applicable to, and based upon, that class of risks as described in section 4241 of this title to which the Plan applies; (3) limits of liability and coverages as described in section 4241 of this title which shall be not less favorable to the insured than is provided in 23 V.S.A. chapter 11, where that chapter is applicable to the insured; (4) a method whereby applicants, insureds, and insurers are entitled to a hearing before the Commissioner of Financial Regulation, for the settlement of grievances. (Added 1969, No. 63,  3; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4243. Submission and approval of Plan
(a) A plan conforming to the standards of section 4242 of this title shall be submitted to the Commissioner within 90 days of July 1, 1969. Each insurer and advisory or service organization described in section 4241 of this title shall file with the Commissioner within 90 days of July 1, 1969 a consent to operate in conformity with the Plan and an agreement to be bound by the operation of the Plan. (b) The Plan shall be deemed approved unless disapproved by the Commissioner within 30 days of its submission. Notice of disapproval shall be given to each insurer and advisory or service organization, together with the reasons for disapproval. (c) Changes in the Plan shall be submitted to the Commissioner at least 30 days before their effective date. Changes shall be deemed approved unless disapproved as provided in subsection (b) of this section within 30 days of their submission. (d) After approval, the original Plan, or changes in the original Plan, may be disapproved for failure to conform to any of the standards of section 4242 of this title. If the Commissioner disapproves the Plan, the Commissioner shall give 10 days written notice to each insurer, and advisory or service organization affected, of a hearing at which evidence in support of the proposed change shall be submitted. If the Commissioner determines after hearing that the evidence does not justify the proposed Plan or change, the Commissioner shall order the Plan or change ineffective after a certain date, which shall be not less than 60 nor more than 120 days after the date of the order. The order shall not affect policies issued prior to the date on which the Plan or change becomes ineffective. (Added 1969, No. 63,  4; amended 2021, No. 105 (Adj. Sess.),  174, eff. July 1, 2022.) 
 4244. Commissioner to formulate Plan
(a) If no Plan conforming to the standards of section 4242 of this title is submitted to the Commissioner within 90 days of July 1, 1969 or within the time provided for in any order of disapproval, the Commissioner shall prepare and promulgate a Plan conforming to the requirements of section 4242 of this title. (b) The Plan shall be prepared and promulgated after notice to each insurer and advisory or service organization, who shall be given an opportunity to be heard. (Added 1969, No. 63,  5.) 
 4245. Insurers to participate in plan
After approval of, or preparation and promulgation of the Plan, every insurer licensed to transact business in this State, shall participate in the Plan according to its provisions as described in section 4241 of this title. (1969, No. 63,  6.) 
 4246. Insurer or rating organization; conduct of
If the Commissioner finds that the conduct of any insurer or advisory or service organization is not in conformity with the Plan, he or she may, after hearing, order the cessation of the conduct complained of. Further conduct in violation of the order is subject to the provisions of subchapter 12 of chapter 101 of this title. (1969, No. 63,  7; amended 1979, No. 28,  1.) 
 4247. Definitions
As used in this subchapter:(1) Commissioner means the Commissioner of Financial Regulation.(2) Consumer means a natural person who buys other than for purposes of resale any tangible personal property that is distributed in commerce and that is normally used for personal, family, or household purposes, and not for commercial purposes. (3) Service contract holder means a person who is the purchaser or holder of a service contract. (4) Manufacturer means a person that manufactures, produces, or markets goods and sells the goods under its own name or label; or manufactures or produces goods and the goods are sold under the trade name or label of another person. (5) Maintenance agreement means a contract of limited duration that provides for scheduled maintenance only. (6) Mechanical breakdown insurance means any policy, contract, or agreement issued by an authorized insurer that provides for the repair, replacement, or maintenance of property or indemnification for repair, replacement, or maintenance, for the operational or structural failure of the property due to a defect in materials or workmanship or due to normal wear and tear. (7) Provider means a person who issues, makes, or provides a service contract, and who is contractually obligated to provide service under a service contract and is not the manufacturer. (8) Service contract means any contract or agreement to perform or indemnify for a specific duration the repair, replacement, or maintenance of property for operational or structural failure due to a defect in materials, workmanship, or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including towing, rental, and emergency road service. (9) Service contract reimbursement policy means a policy of insurance providing full reimbursement coverage for all obligations and liabilities under the terms of a service contract issued by the provider. (10) Warranty means a warranty made solely by the manufacturer, importer, or seller of property or services, without charge, that is not negotiated or separated from the sale of the product and is incidental to the sale of the product, and that guarantees indemnity for defective parts, mechanical or electrical breakdown, labor, or other remedial measures, such as repair or replacement of the property or repetition of services. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4248. Registration required
(a) All providers of service contracts issued, sold, or covering property located in this State shall file a registration with the Commissioner on a form prescribed by the Commissioner. Such registrations shall be renewed every three years. Providers shall submit a $600.00 fee at the time of registration and at the time of each renewal. (b) The following are exempt from the scope of this subchapter, inclusive of this subchapter:(1) warranties;(2) maintenance agreements; and(3) service contracts sold or offered for sale in commercial transactions.(c) The types of agreements defined as service contracts in this subchapter or excluded from coverage by subsection (b) of this section are not insurance under Vermont law. (d) A foreign or alien provider shall not transact business in this State until it has either registered with the Secretary of State to do business in Vermont, or if it is not registered to do business in Vermont, filed with the Commissioner the name and address of a person in this State upon whom service of process may be served. Failure to file such information with the Commissioner within 60 days of entering into a Vermont service contract, shall constitute an appointment by such provider of the Secretary of State as its agent for service of process. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998.) 
 4249. Proof of financial stability
(a) In order to ensure the performance of a providers obligations to its contract holders, each provider shall continue to possess and provide the Commissioner the following documents as proof of financial stability: (1)(A) a surety bond, securities of the type eligible for deposit by an authorized insurer in this State, cash, or letter of credit in a form acceptable to the Commissioner, which shall have at all times a value of not less than five percent of the gross annual consideration from all service contracts issued and in force, but in no case to be less than $25,000.00. Such bond, securities, cash, or letter of credit shall be maintained unimpaired as long as the provider continues to do business in this State. When the provider ceases to do business in this State and has furnished the Commissioner proof that it has discharged all its obligations to its service contract holders in this State, the Commissioner shall release said bond, cash, or letter of credit; and (B) a funded reserve account for its liability under its service contracts issued and outstanding in this State. Such reserve shall at all times be not less than 40 percent of all consideration received, less claims paid, on in force contracts. Such reserve accounts shall be subject to examination and review by the Commissioner upon a request; or (2) evidence that all of its service contracts are insured through the purchase of a service contract reimbursement policy issued by an insurer that files annually with the National Association of Insurance Commissioners a financial statement prepared in accordance with the accounting practices and procedures required or permitted by their domiciliary regulatory authority and a corresponding audit report that reflects: (A) capital and surplus of $5,000,000.00 or more;(B) written premiums not exceeding three times capital and surplus over the most recent five years; and (C) profitable operations over the most recent five years; or(3) a copy of the providers financial statement or, if the providers financial statement is consolidated with those of a parent company or affiliate, the providers parent company or affiliates financial statement, for the most recent calendar year which shows a net worth of the provider or its parent company or affiliate of at least $50 million. The financial statement shall contain information relating to the general financial condition, ownership, and management of the provider and its controlling parent organization, the identity of the controlling entity, if applicable, and any reinsurance agreements covering all or substantially all of the ceded service contracts. A Form 10-K filed with the Securities and Exchange Commission within the last calendar year may be filed to meet the financial stability filing requirement. (b) If the providers parent or affiliate companys financial statement is filed with the Commissioner pursuant to subdivision (a)(3) of this section as evidence of a net worth of at least $50 million, the parent or affiliate company shall agree, on a form prescribed by the Commissioner, to guarantee the providers obligations relating to service contracts sold by the provider in this State. (c) The Commissioner may, upon review of the business activities of a provider, determine that the amounts set forth in this section are inadequate for protection of the public, and may require additional assurances of financial stability. (d) In the event that the Department recovers funds from service contract providers, the Commissioner in his or her discretion may distribute such funds in a manner that he or she determines is equitable and cost-effective, giving due consideration to the amount of funds recovered, the estimated amounts due to consumers, and the costs of administering any distribution. Distributions may be allocated based on claims made, premiums, or the number of consumers affected. If the Commissioner determines that it would be prohibitively expensive or impossible to make restitution to consumers, the recovered funds will be remitted to the General Fund. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998; amended 2005, No. 122 (Adj. Sess.),  2.) 
 4250. Examinations
For the purpose of determining the providers financial stability and protecting consumer interests, the Commissioner may conduct an examination of a provider concerning service contracts sold in this State to enable the Commissioner to determine compliance or noncompliance with this subchapter. The expenses of examinations shall be paid to the State by the company or companies examined, and the Commissioner of Finance and Management shall issue warrants for the proper charges incurred in all examinations. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998; amended 2021, No. 105 (Adj. Sess.),  175, eff. July 1, 2022.) 
 4251. Consumer disclosure requirements
(a) Each service contract subject to this subchapter shall be written in clear, understandable language and easily read type and disclose the following: (1) The identity of the provider and the service contract seller;(2) The total purchase price of the contract, stated separately from the price of the goods purchased; (3) The existence of any deductible amount;(4) The procedures to file a claim, including the procedures for obtaining prior approval for repair work, the toll-free telephone number if prior approval is necessary for claim service and if the service contracts provide services essential to public health, safety, or welfare, the service contract provider shall either provide for 24-hour telephone assistance or state the procedure for obtaining reimbursement for emergency repairs performed outside normal business hours; (5) The terms for transferability of the contract;(6) The prerequisites for early cancellation;(7) The terms, restrictions or conditions governing termination of the service contract by the service contract holder; (8) The obligations and duties of the service contract holder;(9) The authorization of the original service contract holder to return the contract within 20 days of receipt of the contract if no claim has been made under the contract and obtain a refund of the full purchase price of the contract. (b) All service contract reimbursement insurance policies insuring service contracts issued, sold, or offered for sale in this State shall conspicuously state, that upon the failure of the provider to perform under the contract, the insurer which issued the policy shall pay on behalf of the provider any sums the provider is legally obligated to pay and shall provide the service which the provider is legally obligated to perform according to the providers contractual obligations under the service contracts issued or sold by the provider. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998.) 
 4252. Obligations of providers and insurers
(a) A provider is considered to be the agent of an insurer that issued a service contract reimbursement insurance policy and therefore is required to act as a fiduciary in regard to premiums, return of premiums, or other sums of money received. However, nothing in this subchapter shall be construed to make such provider subject to the insurance agent licensure requirements set forth in this title. (b) Providers shall keep accurate accounts, books, and records concerning transactions regulated under this subchapter for at least three years after the specified period of coverage has expired. Records required by this subchapter may be maintained solely in an electronic, optical, or other storage medium, provided they are capable of being accurately reproduced upon request. These accounts, books, and records shall include: (1) copies of each type of service contract in use;(2) the name and address of each service contract holder to the extent that the name and address have been furnished by the service contract holder; (3) a list of the locations where service contracts are sold; and(4) claims files which shall contain at least the dates, amounts, and description of all receipts, claims, and expenditures related to the service contracts. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998; amended 2021, No. 105 (Adj. Sess.),  176, eff. July 1, 2022.) 
 4253. Prohibited acts
(a) A provider shall not use in its name, contracts or literature:(1) the words insurance, casualty, surety, mutual; or(2) a name deceptively similar to the name or description of any insurance or surety corporation or any other provider licensed to do business in this State. (b) No provider or its agent shall advertise, print, display, publish, distribute, or broadcast, or cause to permit the foregoing to occur, in any manner whatsoever, any statement or representation with regard to the rates, terms, or conditions of a service contract which is false, misleading, or deceptive. (c) No service contract sold or offered for sale to a consumer in this State shall fail to contain the authorization of the original service contract holder to return the contract within 20 days of receipt of the contract if no claim has been made under the contract and obtain a refund of the full purchase price of the contract. Each provider shall provide or mail a copy of the service contract to the customer within 14 days of the date of sale, unless the provider makes a copy of the service contract terms and conditions available to the consumer at the point of sale, in which event the provider must provide or mail the service contract to the customer within a reasonable period of time. (d) Nothing in this subchapter shall be construed to impair or in any way affect any rule of law applicable to or governing service contracts not otherwise subject to this subchapter. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998; amended 2021, No. 105 (Adj. Sess.),  177, eff. July 1, 2022.) 
 4254. Prohibited terms
No service contract issued, sold, or covering property located in this State shall provide: (1) that the consumer is not a party to the contract;(2) that the provider has no liability to the consumer;(3) that the consumer does not have the right to bring an action to enforce the terms of the contract or otherwise challenge the denial of a claim which the consumer believes is wrongful, subject to the provisions of any alternative dispute resolution procedure authorized by contract and by law; or (4) that any civil action brought in connection with the service contract must be brought in the courts of a jurisdiction other than Vermont. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998.) 
 4255. Penalties; enforcement
(a) The Commissioner, after proper notice and opportunity for hearing in accordance with this States Administrative Procedure Act, may take action to enforce the provisions of this subchapter and may: (1) revoke or suspend the registration of the service contract provider;(2) order the provider to cease and desist from further service contract operations;(3) impose a penalty of not more than $1,000.00 for each violation or $10,000.00 for each violation the Commissioner finds to be willful; and (4) order the provider to make restitution to contract holders.(b) Failure to comply with section 4251 or 4253 of this title shall constitute an unfair or deceptive act in commerce enforceable under 9 V.S.A.  2461(b). (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998.) 
 4256. Exemption for certain delivery service maintenance and repair contracts
The provisions of this subchapter shall not apply to service contracts with a duration of one year or less where the provider also has an existing agreement to supply liquid fuel used in the course of normal operation of the property subject to the service contract. (Added 1997, No. 109 (Adj. Sess.),  2, eff. Sept. 1, 1998.) 
 4257. Definitions
As used in this chapter:(1) Portable electronics means electronic devices that are portable in nature, their accessories, and services related to the use of such devices. (2) Portable electronics insurance means insurance which may be offered on a month-to-month or other periodic basis as a group or master commercial inland marine policy that provides coverage for the repair or replacement of portable electronics against any one or more of the following causes of loss: loss, theft, inoperability due to mechanical failure, malfunction, damage, or other similar causes of loss. The term does not include a service contract governed by subchapter 4 of chapter 113 of this title, a policy of insurance covering a sellers or a manufacturers obligations under a warranty, or a homeowners, renters, private passenger automobile, commercial multi-peril, or similar policy. (3) Portable electronics vendor means a person in the business of selling or leasing portable electronics directly or indirectly. (Added 2011, No. 136 (Adj. Sess.),  9, eff. May 18, 2012.) 
 4258. Premium billings
The charges for portable electronics insurance coverage may be billed and collected by a portable electronics vendor. Any charge to a customer for coverage that is not included in the cost associated with the purchase or lease of portable electronics shall be separately itemized on the customers bill. If the portable electronics insurance coverage is included with the purchase or lease of portable electronics, a portable electronics vendor shall clearly and conspicuously disclose to the customer that the portable electronics insurance coverage is included with the portable electronics. A portable electronics vendor billing and collecting such charges shall not be required to maintain such funds in a segregated account, provided that the vendor is authorized by the insurer to hold such funds in an alternative manner and remits such amounts to the insurer or the producer appointed by the insurer to supervise the administration of a portable electronics insurance program within 60 days of receipt. All funds received by a portable electronics vendor from an enrolled customer for the sale of portable electronics insurance shall be considered funds held in trust by the vendor in a fiduciary capacity for the benefit of the insurer. Portable electronics vendors may receive compensation for billing and collection services. (Added 2011, No. 136 (Adj. Sess.),  9, eff. May 18, 2012.) 
 4259. Termination and modification requirements
Notwithstanding any other provision of law, the terms for the termination or modification of a policy of portable electronics insurance shall be as set forth in the policy. (Added 2011, No. 136 (Adj. Sess.),  9, eff. May 18, 2012.) 
 4260. Notice requirements
(a) Whenever notice or correspondence with respect to a policy of portable electronics insurance is required pursuant to the policy or is otherwise required by law, it shall be in writing. Notwithstanding any other provision of law, notices and correspondence may be sent either by mail or by electronic means as set forth in this section. If the notice or correspondence is mailed, it shall be sent to the portable electronics vendor at the vendors mailing address specified for such purpose and to its affected customers last known mailing address on file with the insurer. The insurer or vendor of portable electronics shall maintain proof of mailing in a form authorized or accepted by the U.S. Postal Service or other commercial mail delivery service. If the notice or correspondence is sent by electronic means, it shall be sent to the portable electronics vendor at the vendors electronic mail address specified for such purpose and to its affected customers last known electronic mail address as provided by each customer to the insurer or vendor of portable electronics. A customers provision of an electronic mail address to the insurer or vendor of portable electronics is deemed consent to receive notices and correspondence by electronic means at such address if notice of that consent is provided to the customer within 30 calendar days. The insurer or vendor of portable electronics shall maintain proof that the notice or correspondence was sent. (b) Notice or correspondence required pursuant to a policy of portable electronics insurance or otherwise required by law may be sent on behalf of the insurer or vendor by an insurance producer appointed by the insurer to supervise the administration of a portable electronics insurance program. (Added 2011, No. 136 (Adj. Sess.),  9, eff. May 18, 2012; amended 2017, No. 80,  17.) 
 4261. Rulemaking; licensing; claims; sales
The Commissioner shall adopt rules establishing a business entity limited lines producer license for the sale of portable electronics insurance as well as requirements for the sale of portable electronics insurance by a vendor and its employees and authorized representatives and standards for the adjusting of claims under a policy of portable electronics insurance by a supervising entity. (Added 2011, No. 136 (Adj. Sess.),  9, eff. May 18, 2012.) 
 4361. Mutual associations authorized
Employers who are subject to the requirements of 21 V.S.A. chapter 9 may, with the approval of the Commissioner, associate themselves in accordance with the law for the formation of corporations without capital stock for the purpose of establishing and maintaining mutual associations to insure their liabilities under 21 V.S.A. chapter 9. (Amended 1981, No. 165 (Adj. Sess.),  1; 2021, No. 105 (Adj. Sess.),  178, eff. July 1, 2022.) 
 4362. Commissioners approval required
The Commissioner may require the incorporators of an association formed pursuant to section 4361 of this subchapter to include in its proposed certificate of incorporation any lawful provisions for the regulation of the affairs of the association and the definition of its powers and the powers of its officers, directors, and incorporators as the Commissioner may deem necessary to ensure that it is well designed and wisely adapted to its proposed purposes. When the Commissioner has approved the certificate and it has been filed with the Secretary of State, the incorporators shall promptly submit copies of it to the Office of the Commissioner and of the Commissioner of Labor. (Amended 2005, No. 103 (Adj. Sess.),  3, eff. April 5, 2006; 2021, No. 105 (Adj. Sess.),  179, eff. July 1, 2022.) 
 4363. Membership
Membership in such association shall be limited to such employers as are liable for compensation to their employees under the workers compensation law and such association shall have power by appropriate bylaws to provide for the admission, suspension, withdrawal, or expulsion of members. (Amended 1981, No. 165 (Adj. Sess.),  1.) 
 4364. Control of association
Except as otherwise provided pursuant to this subchapter, an association shall be subject to the same rules and control as other corporations or associations taking similar risks in this State, and the Commissioner shall have jurisdiction and power over the association as provided by the insurance laws of this State. (Amended 2021, No. 105 (Adj. Sess.),  180, eff. July 1, 2022.) 
 4365. Policies
A policy shall not be issued by such association until membership in such number and with such numbers of employees as the Commissioner may decide will give a fair diffusion of risks shall have obligated themselves to take policies immediately upon their authorization, nor shall a policy be issued except such as the Commissioner shall have approved as conforming in all respects to the requirements of the law relating to such associations. If, at any time by the retirement of members, reduction of numbers of employees or other cause the membership of any association shall appear to the Commissioner no longer to afford a fair diffusion of risks, he or she may suspend or forbid the further issue of policies until the former conditions of the association have been restored. 
 4366. Officers and voting rights
The affairs of such an association shall be managed by such officers and directors as may be chosen in a manner prescribed by the bylaws of the association, provided each member shall be entitled to cast at least one ballot in all elections and votes and that a member who has had for six months an average of more than 100 and not more than 250 employees to whom he or she is bound to pay compensation under the workers compensation law shall be entitled to two ballots, and that each additional 150 employees shall entitle such member to an additional ballot, but no member shall be entitled to cast more than ten ballots. (Amended 1981, No. 165 (Adj. Sess.),  1.) 
 4367. Power to prescribe and enforce safety rules
An association formed pursuant to the provisions of this subchapter shall have power to prescribe and enforce reasonable rules for safety on the premises of its members, subject, however, to the approval of the Commissioner of Labor. The associations inspectors shall have free access to all members premises during regular working hours to ensure the safety of those premises. (Amended 2021, No. 105 (Adj. Sess.),  181, eff. July 1, 2022.) 
 4368. Premium rates
An association formed pursuant to this subchapter shall have power to determine the premium rates for each occupation or risk insured by it and to prescribe rates of cash premiums sufficient to cover losses incurred and current cost. The premium rate on each policy shall prevail for a full year but annually may be changed by the directors. As used in this section, current cost means an amount sufficient to cover the losses and expenses incurred and a premium reserve equal to 50 percent of all premiums and assessments levied or paid. (Amended 2021, No. 105 (Adj. Sess.),  182, eff. July 1, 2022.) 
 4369. Reserve requirements
Members of an association formed pursuant to the provisions of this subchapter shall be required to pay yearly in advance cash premiums and in addition thereto an amount in negotiable notes or cash sufficient to maintain a reserve equal to that required of other companies doing the same class of business. Notes shall be payable in whole or in part on the vote of the directors of the association as such payments may be required to meet estimated losses or expenses in excess of the current cost and to meet claims covering losses not payable within the same fiscal year within which the claim originated. The directors may fix rates of interest on either notes or balances. (Amended 2021, No. 105 (Adj. Sess.),  183, eff. July 1, 2022.) 
 4370. Assessments
If an association has not sufficient funds for the payment of losses incurred, reserves and expenses, it shall make an assessment for the amount needed to pay such losses, reserves and expenses upon the members in proportion to their several payrolls and rates. 
 4371. Investments
The funds of such association shall be invested by the directors in the same class of securities in which the funds of insurance companies may be lawfully invested. 
 4372. Approval of premiums, liabilities, assessments, and dividends
Such association, subject to the approval of the Commissioner, may determine the premiums, contingent liabilities, assessments, penalties and dividends of its members and enforce or administer the same. 
 4373. Bylaws and regulations
The association may also make and amend bylaws or regulations consistent with its certificate of incorporation, for the prompt, economical, and safe conduct of its affairs. All bylaws and regulations of an association, except safety rules made under the provisions of section 4367 of this subchapter, shall be filed with the Commissioner and shall be subject to the Commissioners approval. (Amended 2021, No. 105 (Adj. Sess.),  184, eff. July 1, 2022.) 
 4374. Appeals to Supreme Court
An association may appeal to the Supreme Court from a decision or order of the Commissioner affecting such association. 
 4460. Statutory purposes
The statutory purpose of the exemption for fraternal societies in section 4500 of this title is to support benevolent societies that provide benefits to members and to the community. (Added 2013, No. 200 (Adj. Sess.),  18.) 
 4461. Fraternal benefit societies defined
(a) Any incorporated society, order, or supreme lodge, without capital stock, including one exempted under the provisions of subdivision 4502(a)(2) of this title, whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which makes provision for the payment of benefits in accordance with this chapter, is hereby declared to be a fraternal benefit society. (b) As used in this chapter:(1) Society means a fraternal benefit society.(2) Commissioner means the Commissioner of Financial Regulation. (Added 1959, No. 197,  1, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.),  185, eff. July 1, 2022.)
 4462. Lodge system defined
A society having a supreme legislative or governing body and subordinate lodges or branches by whatever name known, into which members are elected, initiated or admitted in accordance with its constitutions, laws, ritual, and rules, which subordinate lodges or branches shall be required by the laws of the society to hold regular meetings, shall be deemed to be operating on the lodge system. (Added 1959, No. 197,  2, eff. Nov. 22, 1959.) 
 4463. Representative form of government defined
A society shall be deemed to have a representative form of government when:(1) it provides in its constitution or laws for a supreme legislative or governing body, composed of representatives elected either by the members or by delegates elected directly or indirectly by the members, together with such other members of the body as may be prescribed by the societys constitution and laws; (2) the representatives elected constitute a majority in number and have not less than two-thirds of the votes nor less than the votes required to amend its constitution and laws; (3) the meetings of the supreme legislative or governing body and the election of officers, representatives or delegates are held as often as once in four calendar years; (4) each insured member is eligible for election to act or serve as a delegate to the meeting; (5) the society has a board of directors charged with the responsibility for managing its affairs in the interim between meetings of its supreme legislative or governing body, subject to control by the body and having powers and duties delegated to it in the constitution or laws of the society; (6) the board of directors is elected by the supreme legislative or governing body, except in case of filling a vacancy in the interim between meetings of the body; (7) the officers are elected either by the supreme legislative or governing body or by the board of directors; and (8) the members, officers, representatives, or delegates may not vote by proxy. (Added 1959, No. 197,  3, eff. Nov. 22, 1959.)
 4464. Organization
The organization of a society shall be governed as follows:(1) Seven or more citizens of the United States, a majority of whom are citizens of this State, who desire to form a fraternal benefit society, may make, sign, and acknowledge before some officer, competent to take acknowledgments of deeds, articles of incorporation, in which shall be stated: (A) The proposed corporate name of the society, which shall not so closely resemble the name of any society or insurance company as to be misleading or confusing; (B) The purposes for which it is being formed and the mode in which its corporate powers are to be exercised. The purposes shall not include more liberal powers than are granted by this chapter, provided that any lawful, social, intellectual, educational, charitable, benevolent, moral, fraternal, or religious advantages may be set forth among the purposes of the society; and (C) The names and residences of the incorporators and the names, residences, and official titles of all the officers, trustees, directors, or other persons who are to have and exercise the general control of the management of the affairs and funds of the society for the first year or until the ensuing election at which all the officers shall be elected by the supreme legislative or governing body, which election shall be held not later than one year from the date of the issuance of the permanent certificate. (2) The articles of incorporation, duly certified copies of the constitution, laws, and rules, copies of all proposed forms of certificates, applications therefor, and circulars to be issued by the society and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within one year shall be filed with the Commissioner, who may require such further information as the Commissioner deems necessary. The bond with sureties approved by the Commissioner shall be in such amount, not less than $5,000.00 nor more than $25,000.00 as required by the Commissioner. All documents filed shall be in the English language. If the purposes of the society conform to the requirements of this chapter and all provisions of the law have been complied with, the Commissioner shall so certify, retain, and file the articles of incorporation and furnish the incorporators a preliminary certificate authorizing the society to solicit members as provided in this section. (3) A preliminary certificate granted under the provisions of this section shall be valid for one year or for a further period, not exceeding one year, as may be authorized by the Commissioner upon cause shown, unless the 500 applicants required have been secured and the organization has been completed as provided in this section. The articles of incorporation and all other proceedings thereunder shall become null and void one year from the date of the preliminary certificate, or at the expiration of the extended period, unless the society has completed its organization and received a certificate of authority to do business as provided in this section. (4) Upon receipt of a preliminary certificate from the Commissioner, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than one regular monthly premium in accordance with its table of rates as provided by its constitution and laws, and shall issue to each such applicant a receipt for the amount so collected. No society may incur any liability other than for the return of the advance premium, nor issue any certificate, nor pay, allow, or offer or promise to pay or allow, any death or disability benefit to any person until: (A) actual bona fide applications for death benefits have been secured aggregating at least $500,000.00 on not less than 500 lives; (B) all such applicants for death benefits shall have furnished evidence of insurability satisfactory to the society; (C) certificates of examinations or acceptable declarations of insurability have been duly filed and approved by the chief medical examiner of the society; (D) ten subordinate lodges or branches have been established into which the 500 applicants have been admitted; (E) there has been submitted to the Commissioner under oath of the president or secretary, or corresponding officer of the society, a list of the applicants, giving their names, addresses, date each was admitted, name and number of the subordinate branch of which each applicant is a member, amount of benefits to be granted and premiums therefor; and (F) it has been shown to the Commissioner, by sworn statement of the treasurer, or corresponding officer of the society, that at least 500 applicants have each paid in cash at least one regular monthly premium as provided in this section, which premiums in the aggregate shall amount to at least $2,500.00, all of which have been credited to the fund or funds from which benefits are to be paid and no part of which may be used for expenses. The advance premiums shall be held in trust during the period of organization, and if the society has not qualified for a certificate of authority within one year, as provided in this section, the premiums shall be returned to the applicants. (5) The Commissioner of Financial Regulation may make such examination and require such further information as he or she deems advisable. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, he or she shall issue to the society a certificate to that effect and that the society is authorized to transact business pursuant to the provisions of this chapter. The certificate shall be prima facie evidence of the existence of the society at the date of the certificate. The Commissioner of Financial Regulation shall cause a record of the certificate to be made. A certified copy of the record may be given in evidence with like effect as the original certificate. (6) Every society shall have the power to adopt a constitution and laws for the government of the society, the admission of its members, the management of its affairs and the fixing and readjusting of the rates of its members from time to time. It shall have the power to change, alter, add to, or amend the constitution and laws and shall have such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society. (Added 1959, No. 197,  4, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  186, eff. July 1, 2022.) 
 4465. Corporate powers retained
Any incorporated society authorized to transact business in this State on November 22, 1959 may thereafter exercise all the rights, powers, and privileges prescribed in this chapter and in its charter or articles of incorporation as far as consistent with this chapter. A domestic society shall not be required to reincorporate. (Added 1959, No. 197,  5, eff. Nov. 22, 1959.) 
 4466. Existing voluntary associations; may incorporate
(a) After one year from November 22, 1959, no unincorporated or voluntary association shall be permitted to transact business in this State as a fraternal benefit society. (b) Any domestic voluntary association now authorized to transact business in this State may incorporate and shall receive from the Commissioner of Financial Regulation a permanent certificate of incorporation as a fraternal benefit society when: (1) it has completed its conversion to an incorporated society not later than one year from November 22, 1959; (2) it has filed its articles of incorporation and has satisfied the other requirements described in section 4464 of this title; and (3) the Commissioner of Financial Regulation has made such examination and procured whatever additional information he or she believes advisable. (c) Every voluntary association so incorporated shall incur the obligations and enjoy the benefits thereof the same as though originally incorporated, and the corporation shall be deemed a continuation of the original voluntary association. The officers thereof shall serve through their respective terms as provided in its original articles of association, but their successors shall be elected and serve as provided in its articles of incorporation. Incorporation of a voluntary association shall not affect existing suits, claims, or contracts. (Added 1959, No. 197,  6, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4467. Location of office; place of meeting
The principal office of any domestic society shall be located in this State. The meetings of its supreme legislative or governing body may be held in any state, district, province, or territory wherein the society has at least five subordinate branches and all business transacted at the meetings shall be as valid in all respects as if the meetings were held in this State. (Added 1959, No. 197,  7, eff. Nov. 22, 1959.) 
 4468. Consolidations and mergers
(a) A domestic society may consolidate or merge with any other society by complying with the provisions of this section. (b) It shall file with the Commissioner of Financial Regulation:(1) a certified copy of the written contract containing in full the terms and conditions of the consolidation or merger; (2) a sworn statement by the president and secretary or corresponding officers of each society showing the financial condition thereof on a date fixed by the Commissioner of Financial Regulation but not earlier than December 31, next preceding the date of the contract; (3) a certificate of the officers, duly verified by their respective oaths, that the consolidation or merger has been approved by a two-thirds vote of the supreme legislative or governing body of each society; and (4) evidence that at least 60 days prior to the action of the supreme legislative or governing body of each society, the text of the contract has been furnished to all members of each society either by mail or by publication in full in the official organ of each society. (c) If the Commissioner of Financial Regulation finds that the contract is in conformity with the provisions of this section, that the financial statements are correct and that the consolidation or merger is just and equitable to the members of each society, he or she shall approve the contract and issue his or her certificate to that effect. Upon that approval, the contract shall be in full force and effect unless any society which is a party to the contract is incorporated under the laws of any other state or territory. In that event the consolidation or merger shall not become effective until it is approved as provided by the laws of that state or territory and a certificate of the approval is filed with the Commissioner of Financial Regulation of this State or, if the laws of that state or territory contain no such provision, then the consolidation or merger shall not become effective until it is approved by the commissioner of financial regulation of that state or territory and a certificate of the approval is filed with the Commissioner of Financial Regulation of this State. (d) Upon the consolidation or merger becoming effective as provided in this section, all the rights, franchises, and interests of the consolidated or merged societies in and to every species of property real, personal, or mixed, and things in action thereunto belonging shall be vested in the society resulting from or remaining after the consolidation or merger without any other instrument, except that conveyances of real property may be evidenced by proper deeds, and the title to any real estate or interest therein, vested under the laws of this State in any of the societies consolidated or merged, shall not revert or be in any way impaired by reason of the consolidation or merger but shall vest absolutely in the society resulting from or remaining after the consolidation or merger. (e) The affidavit of any officer of the society or of anyone authorized by it to mail any notice or document, stating that the notice or document has been duly addressed and mailed, shall be prima facie evidence that the notice or document has been furnished the addressees. (Added 1959, No. 197,  8, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  187, eff. July 1, 2022.) 
 4469. Conversion of fraternal benefit society into mutual life insurance company
Any domestic fraternal benefit society may be converted and licensed as a mutual life insurance company by compliance with all the requirements of sections 3366, 3423-3425, 3701-3711 of this title, if such plan of conversion is approved by the Commissioner of Financial Regulation. The plan shall be prepared in writing setting forth in full the terms and conditions thereof. The board of directors shall submit the plan to the supreme legislative or governing body of the society at any regular or special meeting thereof, by giving a full, true, and complete copy of the plan with the notice of the meeting. The notice shall be given as provided in the laws of the society for the convocation of a regular or special meeting of the body, as the case may be. The affirmative vote of two-thirds of all members of the body shall be necessary for the approval of the agreement. No conversion may take effect until approved by the Commissioner of Financial Regulation who may give the approval if he or she finds that the proposed change is in conformity with law and not prejudicial to the certificate holders of the society. (Added 1959, No. 197,  9, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4470. Qualifications for membership
(a) A society may admit to benefit membership any person not less than 15 years of age, at his or her nearest birthday, who has furnished evidence of insurability acceptable to the society. A member who applies for additional benefits more than six months after becoming a benefit member shall furnish additional evidence of insurability acceptable to the society. (b) A person admitted before becoming 18 years of age is bound by the terms of the application and certificate and by all the laws and rules of the society and is entitled to all the rights and privileges of membership to the same extent as though the age of majority had been reached at the time of application. A society may also admit general or social members who shall have no voice or vote in the management of its insurance affairs. (Added 1959, No. 197,  10, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.),  188, eff. July 1, 2022.) 
 4471. Articles of incorporation, constitution, and laws; amendments
(a) A domestic society may amend its articles of incorporation, constitution, or laws in accordance with the provisions thereof by action of its supreme legislative or governing body at any regular or special meeting of the society or, if its articles of incorporation, constitution, or laws so provide, by referendum. The referendum may be held in accordance with the provisions of its articles of incorporation, constitution, or laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members, or by the vote of local lodges or branches. No amendment submitted for adoption by referendum may be adopted unless, within six months from the date of its submission, a majority of all of the voting members of the society have signified their consent to the amendment by one of the methods specified in this section. (b) No amendment to the articles of incorporation, constitution, or laws of any domestic society may take effect unless approved by the Commissioner who shall approve the amendment if the Commissioner finds that it has been duly adopted and is not inconsistent with any requirement of the laws of this State or with the character, objects, and purposes of the society. Unless the Commissioner disapproves an amendment within 60 days after its filing, the amendment shall be considered approved. The approval or disapproval of the Commissioner shall be in writing and mailed to the secretary or corresponding officer of the society at its principal office. If the Commissioner disapproves the amendment, the Commissioner shall state the reasons for the disapproval in the written notice. (c) Within 90 days from the approval thereof by the Commissioner of Financial Regulation, all amendments, or a synopsis thereof, shall be furnished to all members of the society either by mail or by publication in full in the official organ of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendments or synopsis thereof, stating facts which show that they have been duly addressed and mailed, shall be prima facie evidence that the amendments or synopsis thereof, have been furnished the addressee. (d) Every foreign or alien society authorized to do business in this State shall file with the Commissioner of Financial Regulation a duly certified copy of all amendments of, or additions to, its articles of incorporation, constitution, or laws within 90 days after the enactment of same. (e) Printed copies of the constitution or laws as amended, certified by the secretary or corresponding officer of the society, shall be prima facie evidence of the legal adoption thereof. (Added 1959, No. 197,  11, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  189, eff. July 1, 2022.) 
 4472. Institutions
(a) It shall be lawful for a society to create, maintain, and operate charitable, benevolent, or educational institutions for the benefit of its members and their families and dependents and for the benefit of children insured by the society. For that purpose, it may own, hold, or lease personal property or real property located within or outside this State, with necessary buildings thereon. The property shall be reported in every annual statement but shall not be allowed as an admitted asset of the society. (b) Maintenance, treatment, and proper attendance in any such institution may be furnished free or a reasonable charge may be made therefor, but no such institution shall be operated for profit. The society shall maintain a separate accounting of any income and disbursements under this section and report them in its annual statement. No society shall own or operate funeral homes or undertaking establishments. (Added 1959, No. 197,  12, eff. Nov. 22, 1959.) 
 4473. No personal liability
The officers and members of the supreme, grand, or any subordinate body of a society shall not be personally liable for payment of any benefits provided by a society. (Added 1959, No. 197,  13, eff. Nov. 22, 1959.) 
 4474. Benefits
(a) A society authorized to do business in this State may provide for the payment of:(1) death benefits in any form;(2) endowment benefits;(3) annuity benefits;(4) temporary or permanent disability benefits as a result of disease or accident;(5) hospital, medical, or nursing benefits due to sickness or bodily infirmity or accident;(6) monument or tombstone benefits to the memory of deceased members not exceeding in any case the sum of $300.00; and (b) Such benefits may be provided on the lives of members or upon application of a member, on the lives of the members family, including the member, the members spouse and minor children, in the same or separate certificates. (Added 1959, No. 197,  14, eff. Nov. 22, 1959.) 
 4475. Benefits on lives of children
(a) A society may provide for benefits on the lives of children under the minimum age for adult membership but not greater than 18 years of age at the time of application for such benefits, upon the application of an adult person who has an insurable interest, as its laws or rules may provide, which benefits shall be in accordance with the provisions of subsection 4474(a) of this title. A society may, at its option, organize and operate branches for such children. Membership and initiation in local lodges shall not be required of such children, nor shall they have a voice in the management of the society. (b) A society shall have power to provide for the designation and changing of designation of beneficiaries in the certificates providing for the benefits and to provide in all other respects for the regulation, government, and control of the certificates and all rights, obligations, and liabilities of and connected with the certificates. (Added 1959, No. 197,  15, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.),  190, eff. July 1, 2022.) 
 4476. Nonforfeiture benefits, cash surrender values, certificate loans, and other options
(a) A society may grant paid-up nonforfeiture benefits, cash surrender values, certificate loans, and such other options as its laws may permit. As to certificates issued on and after November 22, 1959, a society shall grant at least one paid-up nonforfeiture benefit, except in the case of pure endowment, annuity or reversionary annuity, contracts, reducing term insurance contracts or contracts of term insurance of uniform amount of 15 years or less expiring before age 66. (b) In the case of certificates other than those for which reserves are computed in accordance with subsection (d) of this section, the value of every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan or other option granted shall not be less than the excess, if any, of (1) over (2) as follows: (1) the reserve under the certificate determined on the basis specified in the certificate; and (2) the sum of any indebtedness to the society on the certificate, including interest due and accrued, and a surrender charge equal to two and one-half percent of the face amount of the certificate, which, in the case of insurance on the lives of children, shall be the ultimate face amount of the certificate, if death benefits provided under the certificate are graded. (c) However, in the case of certificates issued on a substandard basis or in the case of certificates, the reserves for which are computed upon the American Men Ultimate Table of Mortality, the term of any extended insurance benefit granted including accompanying pure endowment, if any, may be computed upon the rates of mortality not greater than 130 percent of those shown by the mortality table specified in the certificate for the computation of the reserve. (d) In the case of certificates for which reserves are computed on the Commissioners 1941 Standard Ordinary Mortality Table, the 1941 Standard Industrial Table, or such later tables as are authorized for use by domestic life insurers, every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan, or other option granted shall not be less than the corresponding amount ascertained in accordance with the provisions of the laws of this State applicable to life insurance companies issuing policies containing like insurance benefits based upon such tables. (Added 1959, No. 197,  16, eff. Nov. 22, 1959; amended 1985, No. 111 (Adj. Sess.), 2, 3, eff. April 8, 1986; amended 2021, No. 105 (Adj. Sess.),  191, eff. July 1, 2022.) 
 4477. Beneficiaries
(a) The member shall have the right at all times to change the beneficiary or beneficiaries in accordance with the constitution, laws, or rules of the society. Every society by its constitution, laws, or rules may limit the scope of beneficiaries and shall provide that no beneficiary shall have or obtain any vested interest in the proceeds of any certificate until the certificate has become due and payable in conformity with the provisions of the insurance contract. (b) A society may provide for the payment of funeral benefits to the extent of such portion of any payment under a certificate as might reasonably appear to be due to any person equitably entitled to such benefits by reason of having incurred expense occasioned by the burial of the member, provided the portion paid shall not exceed the sum of $500.00. (c) If, at the death of any member, there is no lawful beneficiary to whom the insurance benefits are payable, the amount of the benefits, except to the extent that funeral benefits may be paid as provided in this section, shall be payable to the personal representative of the deceased member. (Added 1959, No. 197,  17, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.),  192, eff. July 1, 2022.) 
 4478. Benefits not attachable
No money or other benefit, charity, relief, or aid to be paid, provided, or rendered by any society, shall be liable to attachment, trustee or other process, or to be seized, taken, appropriated, or applied by any legal or equitable process or operation of law to pay any debt or liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment by the society. (Added 1959, No. 197,  18, eff. Nov. 22, 1959.) 
 4479. The contract
(a) Every society authorized to do business in this State shall issue to each benefit member a certificate specifying the amount of benefits provided under the certificate. The certificate, together with any attached riders or endorsements, the charter or articles of incorporation, the constitution and laws of the society, the application for membership, and declaration of insurability, if any, signed by the applicant, and all amendments to each thereof, shall constitute the agreement, as of the date of issuance, between the society and the member, and the certificate shall so state. A copy of the application for membership and of the declaration of insurability, if any, shall be endorsed upon or attached to the certificate. (b) All statements purporting to be made by the member shall be representations and not warranties. Any waiver of this provision shall be void. (c) Any changes, additions, or amendments to the charter or articles of incorporation, constitution, or laws duly made or enacted subsequent to the issuance of the certificate, shall bind the member and the beneficiaries and shall control the agreement in all respects the same as though the changes, additions, or amendments had been made before and were in force at the time of the application for membership, except that no change, addition, or amendment shall destroy or diminish benefits which the society contracted to give the member as of the date of issuance. (d) Copies of any of the documents mentioned in this section, certified by the secretary or corresponding officer of the society, shall be received in evidence of the terms and conditions thereof. (e) A society shall provide in its constitution or laws that if its reserves as to all or any class of certificates become impaired its board of directors or corresponding body may require that there shall be paid by the member to the society the amount of the members equitable proportion of the deficiency as ascertained by its board, and that if the payment be not made it shall stand as an indebtedness against the certificate and draw interest not to exceed five percent a year compounded annually. (Added 1959, No. 197,  19, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.),  193, eff. July 1, 2022.) 
 4480. Provisions, standard and prohibited
(a) After one year from November 22, 1959, no life benefit certificate shall be delivered or issued for delivery in this State unless a copy of the form shall have been filed with the Commissioner of Financial Regulation. Each filing of a policy, contract, endorsement, rider, or certificate shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 per filing submission. (b) The certificate shall contain in substance the following standard provisions, or in lieu thereof, provisions that are more favorable to the member: (1) title on the face and filing page of the certificate clearly and correctly describing its form; (2) a provision stating the amount of rates, premiums, or other required contributions, by whatever name known, which are payable by the insured under the certificate; (3) a provision that the member is entitled to a grace period of not less than a full month (or 30 days at the option of the society) in which the payment of any premium after the first, may be made. During the grace period, the certificate shall continue in full force, but if the certificate becomes a claim during the grace period before the overdue payment is made, the amount of the overdue payment or payments may be deducted in any settlement under the certificate; (4) a provision that the member shall be entitled to have the certificate reinstated at any time within three years from the due date of the premium in default, unless the certificate has been completely terminated through the application of a nonforfeiture benefit, cash surrender value, or certificate loan, upon the production of evidence of insurability satisfactory to the society and the payment of all overdue premiums and any other indebtedness to the society upon the certificate, together with interest on the premiums and the indebtedness, if any, at a rate not exceeding six percent a year compounded annually; (5) except in the case of pure endowment, annuity, or reversionary annuity contracts, reducing term insurance contracts, or contracts of term insurance of uniform amount of 15 years or less expiring before age 66, a provision that, in the event of default in payment of any premium after three full years premiums have been paid or after premiums for a lesser period have been paid if the contract so provides, the society will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on the plan stipulated in the certificate, effective as of the due date, of the value as specified in this chapter. The certificate may provide, if the societys laws so specify or if the member shall so elect prior to the expiration of the grace period of any overdue premium, that default shall not occur so long as premiums can be paid under the provisions of an arrangement for automatic premium loan as may be set forth in the certificate; (6) a provision that one paid-up nonforfeiture benefit as specified in the certificate shall become effective automatically unless the member elects another available paid-up nonforfeiture benefit, not later than 60 days after the due date of the premium in default; (7) a statement of the mortality table and rate of interest used in determining all paid-up nonforfeiture benefits and cash surrender options available under the certificate, and a brief general statement of the method used in calculating the benefits; (8) a table showing in figures the value of every paid-up nonforfeiture benefit and cash surrender option available under the certificate for each certificate anniversary either during the first 20 certificate years or during the term of the certificate whichever is shorter; (9) a provision that the certificate shall be incontestable after it has been in force during the lifetime of the member for a period of two years from its date of issue except for nonpayment of premiums, violation of the provisions of the certificate relating to military, aviation, or naval service, and violation of the provisions relating to suspension or expulsion as substantially set forth in the certificate. At the option of the society, supplemental provisions relating to benefits in the event of temporary or permanent disability or hospitalization and provisions that grant additional insurance specifically against death by accident or accidental means may also be accepted. The certificate shall be incontestable on the ground of suicide after it has been in force during the lifetime of the member for a period of two years from date of issue. The certificate may provide as to statements made to procure reinstatement that the society has the right to contest a reinstated certificate within a period of two years from date of reinstatement with the same exceptions as provided in this section; (10) a provision that in case the age or sex of the member or of any other person is considered in determining the premium and it is found at any time before final settlement under the certificate that the age or sex has been misstated, and the discrepancy and premium involved have not been adjusted, the amount payable shall be such as the premium would have purchased at the correct age and sex; but if the correct age was not in an insurable age under the societys charter or laws, only the premiums paid to the society, less any payments previously made to the member, shall be returned or, at the option of the society, the amount payable under the certificate shall be such as the premium would have purchased at the correct age according to the societys promulgated rates and any extension thereof based on actuarial principles; (11) a provision or provisions that recite fully, or that set forth the substance of, all sections of the charter, constitution, laws, rules, or regulations of the society, in force at the time of issuance of the certificate, the violation of which will result in the termination of, or in the reduction of, the benefit or benefits payable under the certificate; (12) if the constitution or laws of the society provide for expulsion or suspension of a member, any member so expelled or suspended, except for nonpayment of a premium or within the contestable period for material misrepresentations in the members application for membership shall have the privilege of maintaining the members insurance in force by continuing payment of the required premium; and any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance or because the certificate is an annuity certificate may, to the extent inapplicable, be omitted from the certificate. (c) After one year from November 22, 1959, no life benefit certificate shall be delivered or issued for delivery in this State containing in substance any of the following provisions: (1) any provision limiting the time within which any civil action may be commenced to less than two years after the cause of action accrues; (2) any provision by which the certificate shall purport to be issued or to take effect more than six months before the original application for the certificate was made, except in case of transfer from one form of certificate to another in connection with which the member is to receive credit for any reserve accumulation under the form of certificate from which the transfer is made; or (3) any provision for forfeiture of the certificate for failure to repay any loan thereon or to pay interest on the loan while the total indebtedness, including interest, is less than the loan value of the certificate. (d) The word premiums as used in this chapter means premiums, rates, or other required contributions by whatever name known. (Added 1959, No. 197,  20, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1991, No. 166 (Adj. Sess.),  6; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  194, eff. July 1, 2022.) 
 4481. Accident and health insurance and total and permanent disability insurance certificates; filing and approval
(a) No domestic, foreign, or alien society authorized to do business in this State shall issue or deliver in this State any certificate or other evidence of any contract of accident insurance or health insurance or of any total and permanent disability insurance contract unless and until the form thereof, together with the form of application and all riders of endorsements for use in connection therewith, has been filed with the Commissioner of Financial Regulation. Each filing of a policy, contract, endorsement, rider, or certificate shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00 per filing submission. (b) The Commissioner may adopt rules prescribing the required, optional, and prohibited provisions in the contracts, and the rules shall conform, as far as practicable, to the provisions of chapter 107 of this title. Where the Commissioner deems inapplicable, either in part or in their entity, the provisions of this chapter, the Commissioner may prescribe the portions or summary of the portions of the contract to be printed on the certificate issued to the member. (Added 1959, No. 197,  21, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1991, No. 166 (Adj. Sess.),  7; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  195, eff. July 1, 2022.) 
 4482. Waiver
The constitution and laws of the society may provide that no subordinate body, nor any of its subordinate officers or members shall have the power or authority to waive any of the provisions of the laws and constitution of the society. The provision shall be binding on the society and every member and beneficiary of a member. (Added 1959, No. 197,  22, eff. Nov. 22, 1959.) 
 4483. Reinsurance
A domestic society may, by a reinsurance agreement, cede any individual risk or risks in whole or in part to an insurer (other than another fraternal benefit society) having the power to make such reinsurance and authorized to do business in this State, or if not so authorized, one which is approved by the Commissioner of Financial Regulation; but no such society may reinsure substantially all of its insurance in force without the written permission of the Commissioner of Financial Regulation. It may take credit for the reserves on such ceded risks to the extent reinsured, but no credit shall be allowed as an admitted asset or as a deduction from liability, to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming effective after November 22, 1959, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding society under the contract or contracts reinsured without diminution because of the insolvency of the ceding society. (Added 1959, No. 197,  23, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4484. Annual license
Societies which are now authorized to transact business in this State may continue such business until May 1, 1960. The authority of the societies, and all societies hereafter licensed, may thereafter be renewed annually, but shall terminate on the first day of the succeeding May. However, a license so issued shall continue in full force until the new license is issued or specifically refused. The society shall pay to the Commissioner of Financial Regulation $300.00 for a license fee for the year of registration and $300.00 as a renewal fee for each year thereafter. A duly certified copy or duplicate of the license shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this chapter. (Added 1959, No. 197,  24, eff. Nov. 22, 1959; amended 1965, No. 56, eff. May 14, 1965; 1989, No. 225 (Adj. Sess.),  25(b); 1991, No. 166 (Adj. Sess.),  8; 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4485. Foreign or alien society; admission
(a) No foreign or alien society may transact business in this State without a license issued by the Commissioner of Financial Regulation. Any such society may be licensed to transact business in this State upon filing with the Commissioner of Financial Regulation: (1) a duly certified copy of its charter or articles of incorporation;(2) a copy of its constitution and laws, certified by its secretary or corresponding officer;(3) a power of attorney to the Secretary of State as prescribed in section 4489 of this title; (4) a statement of its business under oath of its president and secretary or corresponding officers in a form prescribed by the Commissioner of Financial Regulation, duly verified by an examination made by the supervising insurance official of its home state or other state, territory, province or country, satisfactory to the Secretary of State of this State; (5) a certificate from the proper official of its home state, territory, province, or country that the society is legally incorporated and licensed to transact business therein; (6) copies of its certificate forms; and(7) such other information as he or she may deem necessary; and upon a showing that its assets are invested in accordance with the provisions of this chapter. (b) Any foreign or alien society desiring admission to this State shall have the qualifications required of domestic societies organized under this chapter. (Added 1959, No. 197,  25, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4486. Injunction; liquidation; receivership of domestic society
(a) When the Commissioner of Financial Regulation upon investigation finds that a domestic society: (1) has exceeded its powers;(2) has failed to comply with any provision of this chapter;(3) is not fulfilling its contracts in good faith;(4) has a membership of less than 400 after an existence of one year or more; or(5) is conducting business fraudulently or in a manner hazardous to its members, creditors, the public, or the business; he or she shall notify the society of his or her findings, state in writing the reasons for his or her dissatisfaction, and require the society to show cause on a date named why it should not be enjoined from carrying on any business until the violation complained of shall have been corrected, or why an action in quo warranto should not be commenced against the society. (b) If on that date the society does not present good and sufficient reasons why it should not be so enjoined or why such action should not be commenced, the Commissioner may present the relevant facts to the Attorney General who shall, if the Attorney General believes the circumstances warrant, commence an action to enjoin the society from transacting business or an action under Rule 75 of the Vermont Rules of Civil Procedure. (c)(1) The court shall thereupon notify the officers of the society of a hearing. If after a full hearing it appears that the society should be so enjoined or liquidated or a receiver appointed, the court shall enter the necessary order. (2) No society so enjoined may do business until:(A) the Commissioner of Financial Regulation finds that the violation complained of has been corrected; (B) the costs of the action have been paid by the society if the court finds that the society was in default as charged; (C) the court has dissolved its injunction; and(D) the Commissioner of Financial Regulation has reinstated the certificate of authority.(3) If the court orders the society liquidated, the society shall be enjoined from carrying on any further business, whereupon the receiver of the society shall proceed at once to take possession of the books, papers, money, and other assets of the society and, under the direction of the court, immediately proceed to close the affairs of the society and to distribute its funds to those entitled to its funds. (d) No action under this section shall be recognized in any court of this State unless brought by the Attorney General upon request of the Commissioner of Financial Regulation. Whenever a receiver is to be appointed for a domestic society, the court shall appoint the Commissioner of Financial Regulation as the receiver. (e) The provisions of this section relating to hearing by the Commissioner of Financial Regulation, action by the Attorney General at the request of the Commissioner of Financial Regulation, hearing by the court, injunction and receivership shall be applicable to a society that voluntarily determines to discontinue business. (Added 1959, No. 197,  26, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  196, eff. July 1, 2022.) 
 4487. Suspension, revocation or refusal of license of foreign or alien society
(a) When the Commissioner of Financial Regulation upon investigation finds that a foreign or alien society transacting or applying to transact business in this State: (1) has exceeded its powers;(2) has failed to comply with any of the provisions of this chapter;(3) is not fulfilling its contracts in good faith; or(4) is conducting its business fraudulently or in a manner hazardous to its members or creditors or the public; he or she shall notify the society of his or her findings, state in writing the reasons for his or her dissatisfaction and require the society to show cause on a date named why its license should not be suspended, revoked, or refused. If on that date the society does not present good and sufficient reason, why its authority to do business in this State should not be suspended, revoked, or refused, he or she may suspend or refuse the license of the society to do business in this State until satisfactory evidence is furnished to him or her that the suspension or refusal should be withdrawn or he or she may revoke the authority of the society to do business in this State. (b) Nothing contained in this section shall be taken or construed as preventing any such society from continuing in good faith all contracts made in this State during the time the society was legally authorized to transact business in this State. (Added 1959, No. 197,  27, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  197, eff. July 1, 2022.) 
 4488. Licensing of agents
Agents of societies shall be licensed in accordance with the provisions of this section.(1) Insurance agent defined. The term insurance agent as used in this section means any authorized or acknowledged agent of a society who acts as such in the solicitation, negotiation, procurement, or making of a life insurance, accident and health insurance, or annuity contract. (2) License required. Any person who in this State acts as insurance agent for a society without having authority so to do by virtue of a license issued and in force pursuant to the provisions of this section shall, except as provided in subdivision (1) of this section, be guilty of a misdemeanor. (3) Payment of commissions forbidden. No society doing business in this State may pay any commission or other compensation to any person for any services in obtaining in this State any new contract of life, accident, or health insurance, or any new annuity contract, except to a licensed insurance agent of the society and except to an agent exempted by the Commissioner of Financial Regulation. (4) Prerequisites, issuance, and renewal of insurance agents licenses. (A) The Commissioner of Financial Regulation may issue a license to any person who has paid an annual license fee of $30.00 and who has complied with the requirements of this section, authorizing the licensee to act as an insurance agent on behalf of any society named in the license which is authorized to do business in this State. (B) Before any insurance agents license shall be issued, there shall be on file at the Department of Financial Regulation the following documents: (i) A written application by the prospective licensee in such form or forms and with such supplements, and containing such information, as the Commissioner may prescribe. (ii) A certificate by the society that is to be named in the license, stating that the society has satisfied itself that the named applicant is trustworthy and competent to act as an insurance agent and that the society will appoint the applicant to act as its agent if the license applied for is issued by the Commissioner of Financial Regulation. The certificates shall be executed and acknowledged by an officer or managing agent of the society. (C) A written examination may be required of any individual seeking to be named as a licensee to represent a fraternal benefit society as its agent. (D) The Commissioner of Financial Regulation may refuse to issue or renew any insurance agents license if in his or her judgment the proposed licensee is not trustworthy and competent to act as an agent, or has given cause for revocation or suspension of the license, or has failed to comply with any prerequisite for the issuance or renewal, as the case may be, of the license. (E) Every license issued pursuant to this section, and every renewal thereof, shall expire on December 31 of the even-numbered calendar year following the calendar year in which the license or renewal license was issued. (F) If the application for a renewal license has been filed with the Commissioner of Financial Regulation on or before December 31 of the year in which the existing license is to expire, the applicant named in the existing license may continue to act as insurance agent under the existing license, unless it shall be revoked or suspended, until the issuance by the Commissioner of Financial Regulation of the renewal license or until the expiration of five days after he or she has refused to renew the license and has served written notice of the refusal on the applicant. If the applicant shall, within 30 days after the notice is given, notify the Commissioner of Financial Regulation in writing of his or her request for a hearing on such refusal, the Commissioner of Financial Regulation shall, within a reasonable time after receipt of such notice, grant the hearing, and he or she may, in his or her discretion, reinstate the license. (G) A renewal license of an insurance agent may be issued upon the application of the society named in the existing license. The application shall be in the form or forms prescribed by the Commissioner and shall contain such information as the Commissioner may require. The application shall contain a certificate executed by the president, or by a vice president, a secretary, an assistant secretary, or corresponding officer by whatever name known, or by an employee expressly designated and authorized to execute the certificate of a domestic or foreign society or by the U.S. manager of an alien society, stating that the addresses in the application given of the agents of the society for whom renewal licenses are requested in the application have been verified in each instance immediately preceding the preparation of the application. Notwithstanding the filing of the application, the Commissioner may, after reasonable notice to the society, require that any or all agents of the society to be named as licensees in renewal licenses shall execute and file separate applications for the renewal of the licenses, as specified in this section, and the Commissioner may also require that each such application shall be accompanied by the certificate specified in subdivision (B)(ii) of this subdivision (4). (5) Notice of termination of appointment of insurance agent. Every society doing business in this State shall, upon the termination of the appointment of any insurance agent licensed to represent it in this State, immediately file with the Commissioner a statement, in such form as the Commissioner may prescribe, of the facts relative to the termination and the cause thereof. Every statement made pursuant to this section is privileged and shall be kept confidential to the same extent as provided under subsection 4813m(f) of this title. (6) Revocation or suspension of insurance agents license. (A) The Commissioner of Financial Regulation may revoke or may suspend for such period as he or she may determine, any insurance agents license if, after notice and hearing as specified in this section, he or she determines that the licensee has: (i) violated any provision of, or any obligation imposed by, this section, or has violated any law in the course of his or her dealings as agent; (ii) made a material misstatement in the application for the license;(iii) been guilty of fraudulent or dishonest practices;(iv) demonstrated his or her incompetency or untrustworthiness to act as an insurance agent; or (v) been guilty of rebating as defined by the laws of this State applicable to life insurance companies. (B) The revocation or suspension of any insurance agents license shall immediately terminate the license of the agent. An individual whose license has been revoked is not entitled to obtain any insurance agents license under the provisions of this section for a period of one year after the revocation or, if the revocation is judicially reviewed, for one year after the final determination affirming the action of the Commissioner in revoking the license. (Added 1959, No. 197,  28, eff. Nov. 22, 1959; amended 1985, No. 236 (Adj. Sess.),  1, eff. June 3, 1986; 1989, No. 225 (Adj. Sess.),  25; 1991, No. 166 (Adj. Sess.),  9; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2015, No. 29,  7; 2021, No. 105 (Adj. Sess.),  198, eff. July 1, 2022.) 
 4489. Service of process
(a) Every society authorized to do business in this State shall appoint in writing the Secretary of State and each successor in office to be its true and lawful attorney upon whom all lawful process in any action or proceeding against it shall be served, and shall agree in the writing that any lawful process against it which is served on the attorney shall be of the same legal force and validity as if served upon the society, and that the authority shall continue in force so long as any liability remains outstanding in this State. Copies of the appointment, certified by the Secretary of State, shall be deemed sufficient evidence thereof and shall be admitted in evidence with the same force and effect as the original thereof might be admitted. (b) Service may be made upon the Secretary of State or, if absent, upon the person in charge of the Secretarys office. It shall be made in duplicate and shall constitute sufficient service upon the society. When legal process against a society is served upon the Secretary of State, the Secretary shall immediately forward one of the duplicate copies by registered mail prepaid, directed to the secretary or corresponding officer. (c) The service authorized in this section shall be alternative to and not exclusive of any other method of service provided by law or by rule. (Added 1959, No. 197,  29, eff. Nov. 22, 1959; amended 1971, No. 185 (Adj. Sess.),  20, eff. March 29, 1972; 2003, No. 70 (Adj. Sess.),  2, eff. March 1, 2004; 2021, No. 105 (Adj. Sess.),  199, eff. July 1, 2022.) 
 4490. Injunction
No action for an injunction against any domestic, foreign, or alien society, or branch thereof, shall be recognized in any court of this State unless made by the Attorney General upon request of the Commissioner of Financial Regulation. (Added 1959, No. 197,  30, eff. Nov. 22, 1959; amended 1971, No. 185 (Adj. Sess.),  21, eff. March 29, 1972; 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4491. Review
All decisions and findings of the Commissioner of Financial Regulation made under the provisions of this chapter shall be subject to review by appeal to the Supreme Court. (Added 1959, No. 197,  31, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 1997, No. 161 (Adj. Sess.),  8, eff. Jan. 1, 1998; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4492. Funds
(a) All assets shall be held, invested, and disbursed for the use and benefit of the society and a member or beneficiary shall not have or acquire individual rights in such assets or become entitled to any apportionment or the surrender of any part of such assets, except as provided in the contract. (b) A society may create, maintain, invest, disburse, and apply any special fund or funds necessary to carry out any purpose permitted by the laws of the society. (c) Every society, the admitted assets of which are less than the sum of its accrued liabilities and reserves under all of its certificates when valued according to standards required for certificates issued after one year from November 22, 1959, shall, in every provision of the laws of the society for payments by members of the society, in whatever form made, distinctly state the purpose of them and the proportion of them that may be used for expenses, and no part of the money collected for mortuary or disability purposes or the net accretions of such money shall be used for expenses. (Added 1959, No. 197,  32, eff. Nov. 22, 1959; amended 2021, No. 105 (Adj. Sess.),  200, eff. July 1, 2022.) 
 4493. Investments
A society shall invest its funds only in such investments as are authorized by the laws of this State for the investment of assets of life insurance companies and subject to the limitations thereon. Any foreign or alien society permitted or seeking to do business in this State which invests its funds in accordance with the laws of the State, district, territory, country, or province in which it is incorporated, shall be held to meet the requirements of this section for the investment of funds. (Added 1959, No. 197,  33, eff. Nov. 22, 1959.) 
 4494. Reports and valuations
Reports shall be filed and synopses of annual statements shall be published in accordance with the provisions of this section. (1) Every society transacting business in this State shall annually, on or before March 1, unless for cause shown such time has been extended by the Commissioner of Financial Regulation, file with the Commissioner of Financial Regulation a true statement of its financial condition, transactions, and affairs for the preceding calendar year and pay a fee of $20.00 for filing it. The statement shall be in general form and context as approved by the National Association of Insurance Commissioners for fraternal benefit societies and as supplemented by additional information required by the Commissioner of Financial Regulation. (2) A synopsis of its annual statement providing an explanation of the facts concerning the condition of the society thereby disclosed shall be printed and mailed to each benefit member of the society not later than June 1 of each year, or, in lieu thereof, the synopsis may be published in the societys official publication. (3) As a part of the annual statement required in this section, each society shall, on or before March 1, file with the Commissioner a valuation of its certificates in force on December 31 last preceding; provided, however, the Commissioner may, in the Commissioners discretion for cause shown, extend the time for filing the valuation for not more than two calendar months. Such report of valuation shall show, as reserve liabilities, the difference between the present mid-year value of the promised benefits provided in the certificates of the society in force and the present mid-year value of the future net premiums as the same are in practice actually collected, not including any value for the right to make extra assessments and not including any amount by which the present mid-year value of future net premiums exceeds the present mid-year value of promised benefits on individual certificates. At the option of any society, in lieu of the above, the valuation may show the net tabular value. The net tabular value as to certificates issued before one year after November 22, 1959 shall be determined in accordance with the provisions of law applicable before November 22, 1959, and as to certificates issued on or after one year from November 22, 1959 shall be not less than the reserves determined according to the Commissioners Reserve Valuation method as defined in this section. If the premium charged is less than the tabular net premium according to the basis of valuation used, an additional reserve equal to the present value of the deficiency in the premiums shall be set up and maintained as a liability. The reserve liabilities shall be properly adjusted in the event that the mid-year or tabular values are not appropriate. (4)(A) Reserves according to the Commissioners Reserve Valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of the future guaranteed benefits provided for by the certificates, over the then present value of any future modified net premiums for the certificates. The modified net premiums for any such certificate shall be such percentage of the respective contract premiums for the benefits that the present value, at the date of issue of the certificate, of all such modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the certificate and the excess of subdivision (i) of this subdivision (4)(A) over subdivision (ii) of this subdivision (4)(A) as follows: (i) a net level premium equal to the present value, at the date of issue, of the benefits provided for after the first certificate year, divided by the present value at the date of issue, of an annuity of one percent per annum payable on the first and each subsequent anniversary of the certificate on which a premium falls due; provided however, that the net level annual premium shall not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of the certificate; and (ii) a net one-year term premium for the benefits provided for in the first certificate year. (B) Reserves according to the Commissioners Reserve Valuation method for (i) life insurance benefits for varying amounts of benefits or requiring the payment of varying premiums, (ii) annuity and pure endowment benefits, (iii) disability and accidental death benefits in all certificates and contracts, and (iv) all other benefits except life insurance and endowment benefits, shall be calculated by a method consistent with the principles of this subdivision. (5) The present value of deferred payments due under incurred claims or matured certificates shall be deemed a liability of the society and shall be computed upon mortality and interest standards prescribed in subdivision (6) of this section. (6)(A) Such valuation and underlying data shall be certified by a competent actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society. (B) The minimum standards of valuation for certificates issued before one year from November 22, 1959 shall be those provided by the law applicable immediately before November 22, 1959 but not lower than the standards used in the calculating of rates for the certificates. (C) The minimum standard of valuation for certificates issued after one year from November 22, 1959 shall be three and one-half percent interest and the following tables or such interest assumptions and tables as are authorized for use by domestic life insurers: (i) for certificates of life insuranceAmerican Men Ultimate Table of Mortality, with Bowermans or Davis Extension thereof or with the consent of the Commissioner of Financial Regulation, the Commissioners 1941 Standard Ordinary Mortality Table or the Commissioners 1941 Standard Industrial Table of Mortality; (ii) for annuity certificates, including life annuities provided or available under optional modes of settlement in the certificatesthe 1937 Standard Annuity Table; (iii) for disability benefits issued in connection with life benefit certificatesHunters Disability Table, which, for active lives, shall be combined with a mortality table permitted for calculating the reserves on life insurance certificates, except that the table known as Class III Disability Table (1926) modified to conform to the contractual waiting period, shall be used in computing reserves for disability benefits under a contract which presumes that total disability shall be considered to be permanent after a specified period; (iv) for accidental death benefits issued in connection with life benefit certificatesthe Inter-Company Double Indemnity Mortality Table combined with a mortality table permitted for calculating the reserves for life insurance certificates; and (v) for noncancellable accident and health benefitsthe Class III Disability Table (1926) with conference modifications or, with the consent of the Commissioner of Financial Regulation, tables based upon the societys own experience. (D) The Commissioner may, in the Commissioners discretion, accept other standards for valuation if the Commissioner finds that the reserves produced by such standards will be not less in the aggregate than reserves computed in accordance with the minimum valuation standard prescribed in this section. The Commissioner may, in the Commissioners discretion, vary the standards of mortality applicable to all certificates of insurance on substandard lives or other extra hazardous lives by any society authorized to do business in this State. Whenever the mortality experience under all certificates valued on the same mortality table is in excess of the expected mortality according to the table for a period of three consecutive years, the Commissioner may require additional reserves when deemed necessary in the Commissioners judgment on account of the certificates. (E) Any society, with the consent of the commissioner of insurance of the state of domicile of the society and under such conditions, if any, that such commissioner may impose, may establish and maintain reserves on its certificates in excess of the reserves required under such certificates, but the contractual rights of any insured member shall not be affected by such excess reserves. (7) A society neglecting to file the annual statement in the form and within the time provided by this section shall forfeit $500.00 for each day during which the neglect continues, and, upon notice by the Commissioner of Financial Regulation to that effect, its authority to do business in this State shall cease while such default continues. (8) Notwithstanding any provision of this section to the contrary, for societies whose assets exceed $250,000,000.00 as of January 1, 1991, the minimum standard of valuation for certificates issued after January 1, 1991 must be the interest assumptions and tables authorized for use by domestic life insurers. For societies whose assets are less than $250,000,000.00 on January 1, 1991, the interest assumptions and tables authorized for use by domestic life insurers must be utilized after the end of the year in which their assets first exceed $250,000,000.00. (Added 1959, No. 197,  34, eff. Nov. 22, 1959; amended 1985, No. 111 (Adj. Sess.),  4, 5, eff. April 8, 1986; 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 167 (Adj. Sess.),  15; 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2019, No. 131 (Adj. Sess.),  7; 2021, No. 105 (Adj. Sess.),  201, eff. July 1, 2022.) 
 4495. Examination of domestic societies
The Commissioner of Financial Regulation, or any person he or she may appoint, shall have the power of visitation and examination into the affairs of any domestic society and he or she shall make the examination at least once in every three years. He or she may employ assistants for the purpose of the examination, and he or she, or any person he or she may appoint, shall have free access to all books, papers, and documents that relate to the business of the society. The minutes of the proceedings of the supreme legislative or governing body and of the board of directors or corresponding body of a society shall be in the English language. In making an examination, the Commissioner of Financial Regulation may summon and qualify as witnesses under oath and examine its officers, agents, and employees or other persons in relation to the affairs, transactions, and condition of the society. A summary of the report of the Commissioner of Financial Regulation and such recommendations or statements of the Commissioner of Financial Regulation as may accompany the report, shall be read at the first meeting of the board of directors or corresponding body of the society following the receipt thereof, and if directed so to do by the Commissioner of Financial Regulation, shall also be read at the first meeting of the supreme legislative or governing body of the society following the receipt thereof. A copy of the report, recommendations, and statements of the Commissioner of Financial Regulation shall be furnished by the society to each member of the board of directors or other governing body. The expense of each examination and of each valuation, including compensation and actual expense of examiners, shall be paid by the society examined or whose certificates are valued, upon statements furnished by the Commissioner of Financial Regulation. (Added 1959, No. 197,  35, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4496. Examination of foreign and alien societies
The Commissioner of Financial Regulation, or any person whom he or she may appoint, may examine any foreign or alien society transacting or applying for admission to transact business in this State. He or she may employ assistants and he or she, or any person he or she may appoint, shall have free access to all books, papers, and documents that relate to the business of the society. He or she may in his or her discretion accept, in lieu of the examination, the examination of the insurance department of the state, territory, district, province, or country where the society is organized. The compensation and actual expenses of the examiners making any examination or general or special valuation shall be paid by the society examined or by the society whose certificate obligations have been valued, upon statements furnished by the Commissioner of Financial Regulation. (Added 1959, No. 197,  36, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4497. No adverse publications
Pending, during, or after an examination or investigation of a society, either domestic, foreign, or alien, the Commissioner of Financial Regulation shall make public no financial statement, report, or finding, nor shall he or she permit to become public any financial statement, report, or finding affecting the status, standing, or rights of any society, until a copy thereof has been served upon the society at its principal office and the society has been afforded a reasonable opportunity to answer the financial statement, report, or finding and to make such showing in connection therewith as it may desire. (Added 1959, No. 197,  37, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4498. Misrepresentation
(a) No person shall cause or permit to be made, issued, or circulated in any form:(1) any misrepresentation or false or misleading statement concerning the terms, benefits or advantages of any fraternal insurance contract now issued or to be issued in this state, or the financial condition of any society; (2) any false or misleading estimate or statement concerning the dividends or shares of surplus paid or to be paid by any society on any insurance contract; or (3) any incomplete comparison of an insurance contract of one society with an insurance contract of another society or insurer for the purpose of inducing the lapse, forfeiture, or surrender of any insurance contract. A comparison of insurance contracts is incomplete if it does not compare in detail: (A) the gross rates, and the gross rates less any dividend or other reduction allowed at the date of the comparison; and (B) any increase in cash values, and all the benefits provided by each contract for the possible duration thereof as determined by the life expectancy of the insured; or if it omits from consideration:(C) any benefit or value provided in the contract;(D) any differences as to amount or period of rates; or(E) any differences in limitations or conditions or provisions which directly or indirectly affect the benefits. (b) In any determination of the incompleteness or misleading character of any comparison or statement, it shall be presumed that the insured had no knowledge of any of the contents of the contract involved. (c) A person who violates a provision of this section or knowingly receives any compensation or commission by or in consequence of the violation, shall be punished by a fine of not less than $500.00 nor more than $2,000.00 or by imprisonment not less than 30 days nor more than one year, or both fine and imprisonment and shall in addition, be liable for an administrative penalty in the amount of three times the sum received by the violator as compensation or commission. (Added 1959, No. 197,  38, eff. Nov. 22, 1959; amended 1971, No. 199 (Adj. Sess.),  17; 1995, No. 167 (Adj. Sess.),  16.) 
 4499. Discrimination and rebates
(a) No society doing business in this State shall make or permit any unfair discrimination between insured members of the same class and equal expectation of life in the premiums charged for certificates of insurance, in the dividends or other benefits payable thereon or in any other of the terms and conditions of the contracts it makes. (b) No society, by itself, or any other party, and no agent or solicitor, personally, or by any other party, may offer, promise, allow, give, set off, or pay, directly or indirectly, any valuable consideration or inducement to, or for insurance, on any risk authorized to be taken by the society, which is not specified in the certificate. No member may receive or accept, directly or indirectly, any rebate of premium, or part thereof, or agents or solicitors commission thereon, payable on any certificate or receive or accept any favor or advantage or share in the dividends or other benefits to accrue on, or any valuable consideration or inducement not specified in the contract of insurance. (Added 1959, No. 197,  39, eff. Nov. 22, 1959.) 
 4500. Taxation
Every society organized or licensed under this chapter is hereby declared to be a charitable and benevolent institution, and all of its funds shall be exempt from all and every state, county, district, municipal, and school tax other than taxes on real estate and office equipment. (Added 1959, No. 197,  40, eff. Nov. 22, 1959.) 
 4501. Exemptions
(a) Except as provided in this section, societies are governed by this chapter and are exempt from all other provisions of the insurance laws of this State, not only in governmental relations with the State, but for every other purpose. No law enacted after the effective date of this chapter shall apply to them, unless societies are expressly designated in such law. (b) The civil marriage laws shall not be construed to affect the ability of a society to determine the admission of its members as provided in section 4464 of this title, or to determine the scope of beneficiaries in accordance with section 4477 of this title, and shall not require a society that has been established and is operating for charitable and educational purposes and that is operated, supervised, or controlled by or in connection with a religious organization to provide insurance benefits to any person if to do so would violate the societys free exercise of religion, as guaranteed by the First Amendment to the Constitution of the United States or by Chapter I, Article 3 of the Constitution of the State of Vermont. (Added 1959, No. 197,  41, eff. Nov. 22, 1959; amended 2009, No. 3,  10, eff. Sept. 1, 2009; 2021, No. 105 (Adj. Sess.),  202, eff. July 1, 2022.) 
 4502. Exemption of certain societies
(a) Nothing contained in this chapter shall be so construed as to affect or apply to:(1) grand or subordinate lodges of societies, orders, or associations now doing business in this State which provide benefits exclusively through local or subordinate lodges; (2) orders, societies, or associations which admit to membership only persons engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, insuring only their own members, their families, and descendants of members, and the ladies societies, or ladies auxiliaries to the orders, societies, or associations; (3) domestic societies which limit their membership to employees of a particular city or town, designated firm, business house, or corporation which provide for a death benefit of not more than $400.00 or disability benefits of not more than $350.00 to any person in any one year, or both; or (4) domestic societies or associations of a purely religious, charitable, or benevolent description, which provide for a death benefit of not more than $400.00 or for disability benefits of not more than $350.00 to any one person in any one year, or both. (b) A society or association described in subdivision (a)(3) or (4) of this section which provides for death or disability benefits for which benefit certificates are issued, and society or association included in subdivision (a)(4) which has more than 1,000 members, is not exempted from the provisions of this chapter but shall comply with all its requirements. (c) No society which, by the provisions of this section, is exempt from the requirements of this chapter, except any society described in subdivision (a)(2) of this section, shall give or allow, or promise to give or allow to any person any compensation for procuring new members. (d) A society that provides for benefits in case of death or disability resulting solely from accident and that does not obligate itself to pay natural death or sick benefits has all of the privileges and is subject to all the applicable provisions and rules of this chapter, except that the provisions of this chapter relating to medical examination, valuations of benefit certificates, and incontestability do not apply to the society. (e) The Commissioner of Financial Regulation may require from any society or association, by examination or otherwise, such information as will enable him or her to determine whether the society or association is exempt from the provisions of this chapter. (f) Societies, exempted under the provisions of this section, shall also be exempt from all other provisions of the insurance laws of this State. (Added 1959, No. 197,  42, eff. Nov. 22, 1959; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  203, eff. July 1, 2022.) 
 4503. Penalties
(a) Any person who willfully makes a false or fraudulent statement in or relating to an application for membership or for the purpose of obtaining money from or a benefit in a society, shall be fined not less than $500.00 nor more than $2,000.00 or imprisoned not less than 30 days nor more than 90 days, or both. (b) A person who willfully makes a false or fraudulent statement in any verified report or declaration under oath required or authorized by this chapter, or of any material fact or thing contained in a sworn statement concerning the death or disability of a member for the purpose of procuring payment of a benefit named in the certificate, shall be guilty of perjury and shall be subject to the penalties for perjury prescribed by law. (c) A person who solicits membership for, or in any manner assists in procuring membership in, any society not licensed to do business in this State shall upon conviction be fined not less than $250.00 nor more than $1,000.00. (d) A person guilty of a willful violation of, or neglect or refusal to comply with the provisions of this chapter for which a penalty is not otherwise prescribed, shall upon conviction, be subject to a fine of not more than $1,000.00. (1959, No. 197,  43, eff. Nov. 22, 1959; amended 1971, No. 199 (Adj. Sess.),  17; 1995, No. 167 (Adj. Sess.),  17; 2021, No. 105 (Adj. Sess.),  204, eff. July 1, 2022.) 
 4511. Purposes and definition
A corporation may be organized for the purpose of establishing, maintaining, and operating a nonprofit hospital service plan through which hospital care may be provided by a hospital maintained by a corporation organized for hospital purposes to members of the public who become subscribers to the plan under a contract that entitles each subscriber to certain hospital care. As used in this chapter, the term hospital service corporation includes any corporation organized under the provisions of this chapter and also any unincorporated association furnishing hospital, medical, surgical, or nursing services, or any combination of these, to subscribers or members, except as provided in section 4519 of this title. (Amended 2021, No. 105 (Adj. Sess.),  205, eff. July 1, 2022.) 
 4512. Powers
(a) Such hospital service corporation shall be a nonprofit sharing corporation without capital stock. It shall be maintained and operated solely for the benefit of the subscribers thereof and shall not be authorized to pay money in lieu of hospital service. A person, partnership, association, or corporation shall not contract to furnish hospital service unless authorized so to do pursuant to the provisions of this chapter. Corporations formed under the provisions of this chapter shall have the privileges and be subject to the provisions of Title 11B as well as the applicable provisions of this chapter. In the event of a conflict between the provisions of Title 11B and the provisions of this chapter, the latter shall control. (b) Subject to the approval of the Commissioner or the Green Mountain Care Board established in 18 V.S.A. chapter 220, as appropriate, a hospital service corporation may establish, maintain, and operate a medical service plan as defined in section 4583 of this title. The Commissioner or the Board may refuse approval if the Commissioner or the Board finds that the rates submitted are excessive, inadequate, or unfairly discriminatory, fail to protect the hospital service corporations solvency, or fail to meet the standards of affordability, promotion of quality care, and promotion of access pursuant to section 4062 of this title. The contracts of a hospital service corporation which operates a medical service plan under this subsection shall be governed by chapter 125 of this title to the extent that they provide for medical service benefits, and by this chapter to the extent that the contracts provide for hospital service benefits. (c) Subject to the approval of the Commissioner, a hospital or medical service corporation may establish, maintain, and operate, or participate in the establishment, maintenance, and operation of, health care services contracts or arrangements, including health maintenance organizations authorized pursuant to chapter 139 of this title, all of which are intended to ensure that subscriber benefits are provided at minimum cost under efficient and economical management. A health maintenance organization established, maintained or operated under the authority of this subsection shall be organized so that its business and affairs will be managed by a governing board or committee of which a majority are members who are not providers, as those terms are defined in section 5101 of this title. Notwithstanding the foregoing, subject to the approval of the Commissioner, a hospital or medical service corporation may establish, maintain, and operate or participate in the establishment, maintenance, and operation of administrative claims processing services and related services. (Amended 1975, No. 69,  1, eff. April 18, 1975; 1985, No. 44; 1997, No. 54,  2, 3, eff. June 26, 1997; 2005, No. 36,  20, eff. June 1, 2005; 2011, No. 48,  15a, eff. Jan. 1, 2012; 2013, No. 79,  5f, eff. Jan. 1, 2014.) 
 4513. Permit to engage in business; foreign corporations
(a) At least three-fourths of the board of directors of a corporation organized under this chapter shall be composed of subscribers and members of the public. The remainder may be providers. The subscriber members of the board shall comprise at least a majority of the board. A corporation organized under this chapter shall provide for the election of its board of directors at a publicly announced meeting. As used in this section, provider means any person who is a provider of hospital or medical services, or who is an employee, director, trustee, or representative of a provider of such services. (b) A hospital service corporation shall not enter into a contract with a subscriber until it has obtained from the Commissioner of Financial Regulation a permit so to do. A permit may be issued by the Commissioner upon the receipt of an application in form to be prescribed by the Commissioner. The application shall include a statement of the territory in which the corporation proposes to seek subscribers, the service to be rendered by it, and the rates to be charged for the service. The application shall also include a statement of the number of subscribers for hospital service. Before issuing the permit, the Commissioner may make such examination or investigation as the Commissioner deems necessary. The Commissioner may refuse the permit if the Commissioner finds that the rates submitted are excessive, inadequate, or unfairly discriminatory. A hospital service corporation organized under the laws of another state or country shall not be licensed to do business in this State except as provided by section 4520 of this title. (c) In connection with a rate decision, the Green Mountain Care Board may also make reasonable supplemental orders to the corporation and may attach reasonable conditions and limitations to such orders as the Board finds, on the basis of competent and substantial evidence, necessary to ensure that benefits and services are provided at minimum cost under efficient and economical management of the corporation. The Commissioner and, except as otherwise provided by 18 V.S.A.  9375 and 9376, the Green Mountain Care Board, shall not set the rate of payment or reimbursement made by the corporation to any physician, hospital, or other health care provider. (d) The Commissioner shall permit rates for a hospital service corporation designed to enable the corporation to accumulate and maintain a reserve fund that shall from time to time during the calendar year be increased in an amount equal to at least two percent of the annual premium income of the corporation until the reserve fund is equal to at least eight percent of the annual premium income of the corporation. However, if the liabilities of the corporation exceed its assets, the Commissioner shall permit the corporation to charge rates that enable the corporation to accumulate a reserve fund at the rate of at least five percent of annual premium income of the corporation until the corporations assets equal its liabilities. Nothing in this subsection shall require the Commissioner to permit a corporation to accumulate a reserve fund until the law of the state of incorporation of that corporation is substantially similar to this subsection with respect to the reserve fund. (Amended 1975, No. 69,  2, eff. April 18, 1975; 1983, No. 166 (Adj. Sess.); 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 79,  5g, eff. Jan. 1, 2014; 2021, No. 105 (Adj. Sess.),  206, eff. July 1, 2022.) 
 4514. Required contract provisions
A contract entered into by a hospital service corporation shall be in writing, one copy of which shall be furnished to the subscriber, and shall contain the following provisions: (1) A statement of the amount payable to the corporation by the subscriber and the times at which and manner in which such amount is to be paid. (2) A statement of the nature of the services to be furnished and the period during which they will be furnished; and if there are any services to be excepted, a detailed statement of the exceptions printed as specified in section 4515 of this chapter. (3) A statement of the terms and conditions, if any, upon which the contract may be canceled or otherwise terminated at the option of either party. (4) A statement that the contract includes the endorsements thereon and attached papers, if any, and contains the entire contract for services. (5) A statement that no representation by the subscriber in an application for a contract shall avoid the contract or be used in any legal proceeding under the contract, unless the application or an exact copy of the application is included in or attached to the contract, and that no agent or representative of the corporation, other than an officer designated in the contract, is authorized to change the contract or waive any of its provisions. (6) A statement that if the subscriber defaults in making any payment under the contract, the subsequent acceptance of a payment by the corporation or by any of its duly authorized agents shall reinstate the contract, but, with respect to sickness and injury, only to cover such sickness as may be first manifested more than 10 days after the date of such acceptance. (7) A statement of the period of grace that will be allowed the subscriber for making any payment due under the contract. The grace period shall be not less than 10 days. (Amended 2021, No. 105 (Adj. Sess.),  207, eff. July 1, 2022.) 
 4514a. Part-time employees
A nonprofit hospital service corporation shall not exclude part-time employees and shall offer the same insurance benefits to part-time employees as it offers to the employee groups of which the part-time employees would be members if they were full-time employees. The insurer shall offer to include the part-time employees as part of the employers employee group, at the full rate to be paid by the employer, at a rate prorated between the employer and the employee or at the employees expense. Part-time employee means any employee who works a minimum of at least 17 1/2 hours per week. (Added 1989, No. 34,  2.) 
 4515. Form of contract
In every such contract made, issued, or delivered in this State:(1) all printed portions shall be plainly printed in type of which the face is not smaller than ten point; (2) there shall be a brief description of the contract on its first page and on its filing back in type of which the face is not smaller than 14 point; (3) the exceptions of the contract shall appear with the same prominence as the benefits to which they apply; and (4) if the contract contains a provision purporting to make a portion of the articles, constitution, or bylaws of the corporation a part of the contract, such portion thereof shall be set forth in full. 
 4515a. Form and rate filing; filing fees
Every contract or certificate form, or amendment thereof, including the rates proposed to be charged by the corporation, shall be filed with the Commissioner or the Green Mountain Care Board established in 18 V.S.A. chapter 220, as appropriate, for the Commissioners or the Boards approval prior to issuance or use. Prior to approval, there shall be a public comment period pursuant to section 4062 of this title. In addition, each such filing shall be accompanied by payment to the Commissioner or the Board, as appropriate, of a nonrefundable fee of $150.00 and the plain language summary of rate increases pursuant to section 4062 of this title. (Added 1985, No. 236 (Adj. Sess.),  10; amended 1991, No. 166 (Adj. Sess.),  10; 2011, No. 48,  15b, eff. Jan. 1, 2012; 2013, No. 79,  5h, eff. Jan. 1, 2014; 2021, No. 105 (Adj. Sess.),  208, eff. July 1, 2022.) 
 4516. Annual report to Commissioner
Annually, on or before March 1, a hospital service corporation shall file with the Commissioner of Financial Regulation a statement sworn to by the president and treasurer of the corporation showing its condition on December 31. The statement shall be in such form and contain such matters as the Commissioner shall prescribe. To qualify for the tax exemption set forth in section 4518 of this title, the statement shall include a certification that the hospital service corporation operates on a nonprofit basis for the purpose of providing an adequate hospital service plan to individuals of the State, both groups and nongroups, without discrimination based on age, gender, geographic area, industry, and medical history, except as allowed by subdivisions 4080g(b)(7)(B)(ii) and 4080g(c)(8)(B)(ii) of this title and by 33 V.S.A.  1811(f)(2)(B). (Amended 1989, No. 225 (Adj. Sess.),  25; 1991, No. 52,  3, eff. June 6, 1991; 1995, No. 180 (Adj. Sess.),  38; 2005, No. 191 (Adj. Sess.),  52; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2019, No. 103 (Adj. Sess.),  23; 2021, No. 105 (Adj. Sess.),  209, eff. July 1, 2022.) 
 4517. Investments
Funds of a hospital service corporation may be invested in any prudent investment as permitted for an insurance company formed under chapter 101 of this title. The corporation shall file and obtain the Commissioners prior approval of its investment guidelines. Any amendments to the investment guidelines must be approved by the Commissioner prior to use. (Amended 1997, No. 54,  4, eff. June 26, 1997.) 
 4518. Tax exemption
A hospital service corporation shall be exempt from all forms of taxation except the health care claims tax assessed pursuant to 32 V.S.A.  10402. (Amended 2003, No. 70 (Adj. Sess.),  3, eff. March 1, 2004; 2019, No. 6,  67, eff. April 22, 2019.) 
 4519. Application of chapter
(a) Hospital service corporations or associations formed prior to April 7, 1939 may continue their existence and may fulfill their contracts and enter into new contracts as now written, including provisions in their contracts for medical, surgical, and nursing as well as hospital services, provided that such contracts written after July 1, 1939 shall be subject to the approval of the Commissioner of Financial Regulation as provided in section 4513 of this title. (b) Except as set forth in subsection (a) of this section, a hospital service plan as described in this chapter shall not be established, maintained, or operated by an unincorporated association. All hospital service corporations organized after April 7, 1939 and their contracts shall be subject to the provisions of this chapter. (Amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  210, eff. July 1, 2022.) 
 4520. Reciprocal provisions
A corporation organized under the laws of another state or country which, except as to state of organization, is a hospital service corporation as defined by section 4511 of this title, and which the Commissioner finds has fully complied with the laws of such other state or country, shall be entitled to do business within this State, subject to the provisions of this chapter, after obtaining a license as provided by section 4513 of this title. But such corporation organized under the laws of another state or country shall not be entitled to such license, or to do business in this State unless such other state or country grants substantially similar rights and privileges to hospital service corporations organized under the laws of this State. The Commissioner shall determine whether rights and privileges granted by other states or countries are substantially similar to those granted by this State, and his or her determination shall be final. 
 4521. Effect on liability under workers compensation law
The provisions of this chapter or any contract for hospital service shall in no way affect the liability of an employer under the provisions of the workers compensation law. (Amended 1981, No. 165 (Adj. Sess.),  1.) 
 4522. Exempt organizations
Fraternal benefit societies and life or accident insurance companies are not affected by this chapter. 
 4523. Change in control; material transactions; redomestication; establishment or acquisition of control of insurance company subsidiary
(a)(1) No corporation permitted to engage in business under this chapter shall merge or consolidate with; sell, transfer, or exchange more than a 10 percent interest in the corporation or its assets to; sell, transfer, or exchange more than 10 percent of its subscribers to; or otherwise transfer or commit more than a 10 percent interest in itself to, any other person, whether accomplished through one transaction or a series of transactions, without the Commissioners prior written approval. (2) No corporation permitted to engage in business under this chapter shall transfer its domicile to any other state or jurisdiction without the prior written approval of the Commissioner. (3) A corporation permitted to engage in business under this chapter shall obtain the Commissioners written approval prior to establishing or acquiring control of a for-profit or nonprofit entity that is authorized to engage in the business of insurance under chapter 101 or 139 of this title or the insurance law of any other U.S. jurisdiction. As used in subdivision, control shall have the same meaning as in subdivision 3681(3) of this title. In addition to any other investment limitations established pursuant to this title, investments in entities authorized to engage in the business of insurance under chapter 101 or 139 of this title or the insurance law of any other U.S. jurisdiction shall be limited to 25 percent of total assets of the nonprofit hospital services corporation in the aggregate; provided, however, that this limitation shall exclude investments in existence on May 1, 2004. (b) A corporation shall make application to the Commissioner for approval of any transaction set forth in subsection (a) of this section describing in detail the proposed transaction and identifying the parties involved. The Commissioner may require the filing of additional information as the Commissioner finds necessary or appropriate for the full consideration of the application. The applicant shall establish to the Commissioners satisfaction that the transaction meets the general good of the State. To the extent applicable in the circumstances, the Commissioner shall consider, but is not limited to, the following factors in the general good determination: (1) whether, after the transaction, the corporation continues to satisfy the requirements for a permit to do business under this chapter; (2) whether the effect of the transaction would be to substantially lessen competition in health insurance in this State or tend to create a monopoly in health insurance in this State; (3) whether the financial condition of any acquiring or acquired party is such as might jeopardize the financial stability of the corporation, or prejudice the interest of its subscribers; (4) whether the transaction contemplates the liquidation of the corporation or any other material change in its business or corporate structure or management, that would be unfair or unreasonable to its subscribers or not in the public interest; (5) whether the competence, experience, and integrity of those persons who would control the operation of the new entity or the acquiring or acquired party are such that it would not be in the interest of the public to permit the transaction; (6) whether the transaction will promote cost-effective, high quality health care in the State; and (7) such other factors as the Commissioner deems relevant to the transaction.(c) The Commissioner shall investigate and hold at least one public hearing on the application. The public hearing shall be held within 30 days of the filing of a complete application with the Commissioner, and at least 20 days notice thereof shall be given by the Commissioner to the person filing the application and the Office of the Attorney General. The applicant shall give seven days notice to any person as ordered by the Commissioner. The Commissioner may order such public notice as may be deemed necessary for full consideration of the transaction. The Commissioner shall make a determination within 30 days after the conclusion of such hearing. If a determination of general good is made, the Commissioner shall give the corporation a certificate to that effect. In the event of conflict between the provisions of section 3305 or 3683 of this title and the provisions of this section, the provisions of this section shall control. (d) The Commissioner may consider the review or portion of a review of the transaction by the insurance department of another state, district, or territory of the United States, if the Commissioner finds that the review or portion of review conducted by the other jurisdiction is substantially similar in nature and scope as a review or portion of review under this section. (e) Any corporation permitted to engage in business under this chapter may, upon the approval of the Commissioner under subsections (a) and (b) of this section, and in compliance with such conditions as may be imposed by the Commissioner, transfer its domicile, in accordance with the laws thereof, to any other state or jurisdiction, and upon such a transfer shall cease to be a domestic corporation and its corporate or other legal existence in this State shall cease upon the filing of proof of such redomestication with the Secretary of State and upon payment to the Secretary of State of a filing fee in the amount of $100.00. Such corporation shall be permitted to do business in this State under this chapter as a foreign corporation, upon compliance with the qualification requirements for foreign corporations under section 4520 of this title. The Commissioner may require any corporation redomesticating under this section to form an adequately capitalized affiliate or subsidiary corporation under this chapter, whenever the Commissioner determines that such a requirement is in the best interests of members or subscribers and will promote the general good of the State. (f) A for-profit or not-for-profit entity established or acquired with the Commissioners approval granted under this section shall be governed by the provisions of chapter 101 or 139 of this title, as applicable, and not the provisions of this chapter, other than this section. (g) Nothing in this section shall be construed to limit any common law authority of the Attorney General with respect to a nonprofit health care conversion; nor shall this section be construed to limit the application of Title 11B to any transaction reviewable under this section. (h) Any application filed with the Commissioner under this section shall be accompanied by a fee of $10.00. (Added 1997, No. 54,  5, eff. June 26, 1997; amended 2003, No. 163 (Adj. Sess.),  41, eff. June 10, 2004; 2021, No. 105 (Adj. Sess.),  211, eff. July 1, 2022.) 
 4581. Incorporation of medical service corporations
(a) Three or more persons licensed by the State Board of Medical Practice to practice medicine and surgery may incorporate under the general law of this State governing corporations for the purpose of forming a medical service corporation, but subject to the provisions of section 4584 of this title. (b) Subject to the approval of the Commissioner, a medical service corporation may establish, maintain, and operate a hospital service plan as defined in section 4511 of this title. The Commissioner may refuse approval if the Commissioner finds that the rates submitted are excessive, inadequate, or unfairly discriminatory. The contracts of a medical service corporation which operates a hospital service plan under this subsection shall be governed by chapter 123 of this title to the extent that they provide for hospital service benefits, and by this chapter to the extent that the contracts provide for medical service benefits. (Amended 1975, No. 69,  3, eff. April 18, 1975; 1997, No. 54,  6, eff. June 26, 1997.) 
 4582. Incorporation of dental and other service corporations
Three or more persons duly licensed under the laws of this State to practice dentistry, osteopathy, chiropractic, podiatry, or optometry may incorporate for the purpose of establishing a dental, osteopathic, chiropractic, podiatric, or optometric service corporation, respectively, to furnish dental, osteopathic, chiropractic, podiatric, or optometric services respectively, in the manner and subject to the restrictions specified in this chapter with respect to such corporation and consistent with the provisions of this chapter with reference to a medical service corporation organized under this chapter. (Amended 2021, No. 105 (Adj. Sess.),  212, eff. July 1, 2022.) 
 4583. Purposes and definition
A medical service corporation is a nonprofit sharing corporation without capital stock, organized under the laws of this State for the purpose of establishing, maintaining, and operating a plan through which medical or medical and dental services may be provided at the expense of the corporation by duly licensed physicians and dentists to subscribers under contract, entitling each subscriber to certain medical services or medical and dental services as provided in the contract. Corporations formed under the provisions of this chapter shall have the privileges and be subject to the provisions of Title 11B as well as the applicable provisions of this chapter. In the event of a conflict between the provisions of Title 11B and the provisions of this chapter, the latter shall control. (Amended 1997, No. 54,  7, eff. June 26, 1997; 2021, No. 105 (Adj. Sess.),  213, eff. July 1, 2022.) 
 4584. Application for permit
(a) A corporation incorporated under this chapter shall immediately, after filing its articles of association, apply to the Commissioner of Financial Regulation for a permit to operate. The application shall be made to the Commissioner upon forms to be prescribed by the Commissioner. The application shall include a statement of the territory in which the corporation proposed to operate, the services to be furnished and rendered by it, and the rates to be charged for those services. The application shall be accompanied by two copies of any contract for medical services that the corporation proposes to make with its subscriber. Before issuing the permit, the Commissioner may make such examination or investigation as the Commissioner deems necessary. The Commissioner may refuse the permit if the Commissioner finds that the rates submitted are excessive, inadequate, or unfairly discriminatory. (b) A corporation organized under the provisions of this chapter shall not enter into a contract with a subscriber to furnish medical services until it has obtained from such Commissioner a permit to do so. (c) In connection with a rate decision, the Green Mountain Care Board may also make reasonable supplemental orders to the corporation and may attach reasonable conditions and limitations to such orders as the Board finds, on the basis of competent and substantial evidence, necessary to ensure that benefits and services are provided at minimum cost under efficient and economical management of the corporation. The Commissioner and, except as otherwise provided by 18 V.S.A.  9375 and 9376, the Green Mountain Care Board, shall not set the rate of payment or reimbursement made by the corporation to any physician, hospital, or other health care provider. (d) The Commissioner shall permit rates for a medical service corporation designed to enable the corporation to accumulate and maintain a reserve fund that shall from time to time during the calendar year be increased in an amount equal to at least two percent of the annual premium income of the corporation until the reserve fund is equal to at least eight percent of the annual premium income of the corporation. However, if the liabilities of the corporation exceed its assets, the Commissioner shall permit the corporation to charge rates that enable the corporation to accumulate a reserve fund at the rate of at least five percent of annual premium income of the corporation until the corporations assets equal its liabilities. Nothing in this subchapter shall require the Commissioner to permit a corporation to accumulate a reserve fund until the law of the state of incorporation of that corporation is substantially similar to this subsection with respect to the reserve fund. (Amended 1975, No. 69,  4, eff. April 18, 1975; 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 79,  5i, eff. Jan. 1, 2014; 2021, No. 105 (Adj. Sess.),  214, eff. July 1, 2022.) 
 4585. Required contract provisions
Contracts entered into by a medical service corporation shall be in writing, one copy of which shall be furnished to the subscriber. The contract shall contain the following provisions: (1) A statement of the amount payable to the corporation by the subscriber and the manner in which such amount is payable. (2) A statement of the nature of the services to be furnished and the period during which they will be furnished and if there are any services to be excepted, a detailed statement of the exceptions printed as specified in section 4586 of this chapter. (3) A statement of the terms and conditions upon which the contract may be canceled or otherwise terminated at the option of either party. (4) A statement that the contract includes the endorsements thereon and attached papers, if any, and contains the entire contract for services. (5) A statement that no representation by the subscriber in an application shall void the contract or be used in any legal proceeding under the contract unless such application or an exact copy of the application is included in or attached to the contract, and that no agent or representative of the corporation other than an officer or officers designated in the contract is authorized to change the contract or waive any of its provisions. (6) A statement that if the subscriber defaults in making any payment under the contract, the subsequent acceptance of a payment by the corporation or by any of its duly authorized agents shall reinstate the contract, but, with respect to sickness and injury, only to cover such sickness as may be first manifested more than 10 days after the date of such acceptance. (7) A statement of the period of grace that will be allowed the subscriber for making any payment due under contract. The grace period shall be not less than 10 days. (8) A statement that the subscriber shall be entitled to engage the services of a physician or surgeon of the subscribers choosing to perform services covered by the contract, provided that the physician or surgeon is licensed by the State Board of Medical Practice and agrees to be governed by the bylaws of the corporation with respect to payment of fees for the physicians or surgeons services. (Amended 2021, No. 105 (Adj. Sess.),  215, eff. July 1, 2022.) 
 4585a. Optometrists; visual services
Whenever any policy of insurance or any medical service plan or hospital service contract or hospital and medical service contract provides for reimbursement for any visual service which is within the lawful scope of practice of a duly licensed optometrist with qualifications as defined by 26 V.S.A.  1691, the insured or other person entitled to the benefits under the policy shall be entitled to reimbursement for the services, whether the services are performed by a duly licensed physician or by a duly licensed optometrist, whichever the insured selects. Notwithstanding any provision to the contrary in any statute or in any policy, plan, or contract, duly licensed optometrists shall be entitled to participate in such policies, plans, or contracts providing for visual services to the same extent as fully licensed physicians and no insurer shall make or permit any unfair discrimination against particular individuals or persons so licensed. (1971, No. 186 (Adj. Sess.), eff. March 30, 1972.) 
 4586. Form and contents of contract
In every such contract made, issued, or delivered in this State:(1) all printed portions shall be plainly printed in type of which the face is not smaller than ten point; (2) there shall be a brief description of the contract on its first page and on its filing back in type of which the face is not smaller than 14 point; (3) the exceptions of the contract shall appear with the same prominence as the benefits to which they apply; and (4) if the contract contains any provision purporting to make any portion of the articles, constitution, or bylaws of the corporation a part of the contract, such portion thereof shall be set forth in full. 
 4587. Filing and approval of contracts
A medical service corporation that has received a permit from the Commissioner of Financial Regulation under section 4584 of this title shall not thereafter issue a contract to a subscriber or charge a rate that is different from copies of the contracts and rates originally filed with and approved by the Commissioner at the time the permit was issued to the medical service corporation, until the medical service corporation has filed copies of its proposed contracts and rates and they have been approved by the Commissioner or the Green Mountain Care Board established in 18 V.S.A. chapter 220, as appropriate. Prior to approval, there shall be a public comment period pursuant to section 4062 of this title. Each such filing of a contract or the rate therefor shall be accompanied by payment to the Commissioner or the Board, as appropriate, of a nonrefundable fee of $150.00. A medical service corporation shall file a plain language summary of rate increases pursuant to section 4062 of this title. (Added 1985, No. 236 (Adj. Sess.),  11; 1989, No. 225 (Adj. Sess.),  25; 1991, No. 166 (Adj. Sess.),  11; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 48,  15c, eff. Jan. 1, 2012; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 79,  5j, eff. Jan. 1, 2014; amended 2021, No. 105 (Adj. Sess.),  216, eff. July 1, 2022.) 
 4588. Annual report to Commissioner
Annually, on or before March 1, a medical service corporation shall file with the Commissioner of Financial Regulation a statement sworn to by the president and treasurer of the corporation showing its condition on December 31, which shall be in such form and contain such matters as the Commissioner shall prescribe. To qualify for the tax exemption set forth in section 4590 of this title, the statement shall include a certification that the medical service corporation operates on a nonprofit basis for the purpose of providing an adequate medical service plan to individuals of the State, both groups and nongroups, without discrimination based on age, gender, geographic area, industry, and medical history, except as allowed by subdivisions 4080g(b)(7)(B)(ii) and 4080g(c)(8)(B)(ii) of this title and by 33 V.S.A.  1811(f)(2)(B). (Amended 1989, No. 225 (Adj. Sess.),  25; 1991, No. 52,  4, eff. June 6, 1991; 1995, No. 180 (Adj. Sess.),  38; 2005, No. 191 (Adj. Sess.),  53; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2019, No. 103 (Adj. Sess.),  24; 2021, No. 105 (Adj. Sess.),  217, eff. July 1, 2022.) 
 4589. Investments
Funds of a medical service corporation may be invested in any prudent investment as permitted for an insurance company formed under chapter 101 of this title. The corporation shall file and obtain the Commissioners prior approval of its investment guidelines. Any amendments to the investment guidelines must be approved by the Commissioner prior to use. (Amended 1997, No. 54,  8, eff. June 26, 1997.) 
 4590. Tax exemption
A medical service corporation shall be exempt from all forms of taxation except the health care claims tax assessed pursuant to 32 V.S.A.  10402. (Amended 2003, No. 70 (Adj. Sess.),  4, eff. March 1, 2004; 2019, No. 6,  68, eff. April 22, 2019.) 
 4591. Effect on liability under workers compensation law
The provisions of this chapter or any contract for medical service shall in no way affect the liability of an employer under the provisions of the workers compensation law. (Amended 1981, No. 165 (Adj. Sess.),  1.) 
 4592. Exempt organizations
Fraternal benefit societies and life or accident insurance companies are not affected by this chapter. 
 4593. Reciprocal provisions
A corporation organized under the laws of another state or country which, except as to state of organization, is a medical service corporation as defined by section 4583 of this title, and which the commissioner finds has fully complied with the laws of such other state or country, shall be entitled to do business within this State subject to the provisions of this chapter after obtaining a permit as provided by section 4584 of this title. However, such a corporation organized under the laws of another state or country shall not be entitled to such permit, or to do business in this State unless such other state or country grants substantially similar rights and privileges to medical service corporations organized under the laws of this State. The commissioner shall determine whether rights and privileges granted by other states or countries are substantially similar to those granted by this State, and his or her determination shall be final. 
 4594. Part-time employees
A nonprofit medical service corporation shall not exclude part-time employees and shall offer the same insurance benefits to part-time employees as it offers to the employee groups of which the part-time employees would be members if they were full-time employees. The insurer shall offer to include the part-time employees as part of the employers employee group, at the full rate to be paid by the employer, at a rate prorated between the employer and the employee or at the employees expense. Part-time employee means any employee who works a minimum of at least 17 1/2 hours per week. (Added 1989, No. 34,  3.) 
 4595. Change in control; material transactions; redomestication; establishment or acquisition of control of insurance company subsidiary
(a)(1) No corporation permitted to engage in business under this chapter shall merge or consolidate with, sell, transfer, or exchange more than a 10 percent interest in the corporation or its assets to, or sell, transfer, or exchange more than 10 percent of its subscribers to, or otherwise transfer or commit more than a 10 percent interest in itself to, any other person, whether accomplished through one transaction or a series of transactions, without the Commissioners prior written approval. (2) No corporation permitted to engage in business under this chapter shall transfer its domicile to any other state or jurisdiction without the prior written approval of the Commissioner. (3) A corporation permitted to engage in business under this chapter shall obtain the Commissioners written approval prior to establishing or acquiring control of a for-profit or not-for-profit entity that is authorized to engage in the business of insurance under chapter 101 or chapter 139 of this title or the insurance law of any other U.S. jurisdiction. For purposes of this subdivision, control shall have the same meaning as in subdivision 3681(3) of this title. In addition to any other investment limitations established pursuant to this title, investments in entities authorized to engage in the business of insurance under chapter 101 or 139 of this title or the insurance law of any other U.S. jurisdiction shall be limited to 25 percent of total assets of the nonprofit medical services corporation in the aggregate; provided, however, that this limitation shall exclude investments in existence on May 1, 2004. (b) A corporation shall make application to the Commissioner for approval of any transaction set forth in subsection (a) of this section describing in detail the proposed transaction and identifying the parties involved. The Commissioner may require the filing of additional information as the Commissioner finds necessary or appropriate for the full consideration of the application. The applicant shall establish to the Commissioners satisfaction that the transaction meets the general good of the State. To the extent applicable in the circumstances, the Commissioner shall consider, but is not limited to, the following factors in the general good determination: (1) whether, after the transaction, the corporation continues to satisfy the requirements for a permit to do business under this chapter; (2) whether the effect of the transaction would be to substantially lessen competition in health insurance in this State or tend to create a monopoly in health insurance in this State; (3) whether the financial condition of any acquiring or acquired party is such as might jeopardize the financial stability of the corporation, or prejudice the interest of its subscribers; (4) whether the transaction contemplates the liquidation of the corporation or any other material change in its business or corporate structure or management, that would be unfair or unreasonable to its subscribers or not in the public interest; (5) whether the competence, experience, and integrity of those persons who would control the operation of the new entity, or the acquiring or acquired party are such that it would not be in the interest of the public to permit the transaction; (6) whether the transaction will promote cost effective, high quality health care in the State; and (7) such other factors as the Commissioner deems relevant to the transaction.(c) The Commissioner shall investigate and hold at least one public hearing on the application. The public hearing shall be held within 30 days of the filing of a complete application with the Commissioner, and at least 20 days notice thereof shall be given by the Commissioner to the person filing the application and the office of the Attorney General. The applicant shall give seven days notice to any person as ordered by the Commissioner. The Commissioner may order such public notice as may be deemed necessary for full consideration of the transaction. The Commissioner shall make a determination within 30 days after the conclusion of such hearing. If a determination of general good is made, the Commissioner shall give the corporation a certificate to that effect. In the event of conflict between the provisions of section 3305 or 3683 of this title and the provisions of this section, the provisions of this section shall control. (d) The Commissioner may consider the review or portion of a review of the transaction by the insurance department of another state, district, or territory of the United States, if the Commissioner finds that the review or portion of review conducted by the other jurisdiction is substantially similar in nature and scope as a review or portion of review under this section. (e) Any corporation permitted to engage in business under this chapter may, upon the approval of the Commissioner under subsections (a) and (b) of this section, and in compliance with such conditions as may be imposed by the Commissioner, transfer its domicile, in accordance with the laws thereof, to any other state or jurisdiction, and upon such a transfer, it shall cease to be a domestic corporation and its corporate or other legal existence in this State shall cease upon the filing of proof of such redomestication with the Secretary of State and upon payment to the Secretary of State of a filing fee in the amount of $100.00. Such corporation shall be permitted to do business in this State under this chapter as a foreign corporation, upon compliance with the qualification requirements for foreign corporations under section 4593 of this title. The Commissioner may require any corporation redomesticating under this section to form an adequately capitalized affiliate or subsidiary corporation under this chapter, whenever the Commissioner determines that such a requirement is in the best interests of members or subscribers and will promote the general good of the State. (f) A for profit or not for profit entity established or acquired with the Commissioners approval granted under this section shall be governed by the provisions of chapter 101 or 139 of this title, as applicable, and not the provisions of this chapter, other than this section. (g) Nothing in this section shall be construed to limit any common law authority of the Attorney General with respect to a nonprofit health care conversion; nor shall this section be construed to limit the application of Title 11B to any transaction reviewable under this section. (h) Any application filed with the Commissioner under this section shall be accompanied by a fee of $10.00. (Added 1997, No. 54,  9, eff. June 26, 1997; amended 2003, No. 163 (Adj. Sess.),  42, eff. June 10, 2004; 2021, No. 105 (Adj. Sess.),  218, eff. July 1, 2022.) 
 4671. Definitions
As used in this subchapter:(1) Accident means any occurrence with a motor vehicle involving the applicant, insured, or any operator of a private passenger type motor vehicle currently a resident in the same household which results in physical contact between the motor vehicle owned or operated by the insured or applicant, and a person or another object. (2) Conviction means a judicial determination of guilt by a court of competent jurisdiction regardless of whether a trial was held and regardless of whether a sentence was imposed. It shall include a plea of nolo contendere, a finding of guilt as the result of a defendants voluntary nonappearance in court or a conviction after appellate remand. It shall not include a conviction reversed with finality. (3) Experience period means the three years immediately preceding the date of application or the 39 months preceding the renewal date of the policy. (4) Insured means a person owning a private passenger type automobile and includes a relative of an owner, or a minor in the custody of an owner or relative, if the relative or minor resides in the same household as does an owner. (5) Surcharge means any amount of premium charged to or paid by an applicant or insured based on experience or record which makes the amount of the premium greater than that imposed on or charged to other applicants or insureds having more favorable experience or records. (Added 1975, No. 75; amended 1993, No. 196 (Adj. Sess.),  1.) 
 4672. Accidents
A surcharge to a private passenger automobile policy may only be applied during the experience period for an accident in which the insurer makes a payment for: (1) death;(2) personal injury, where the net payment for any accident exceeds $900.00; or(3) property damage, where the net payment for any accident exceeds $1,000.00. (Added 1975, No. 75; amended 1979, No. 28,  4; 1993, No. 196 (Adj. Sess.),  2, eff. Oct. 1, 1994.)
 4673. Exceptions
(a) No rate increase may be applied for a claim payment under uninsured motorist, medical payment, comprehensive, fire, theft, or a combined additional coverage. (b) This subchapter shall not apply to an automobile that is:(1) [Repealed.](2) used in the business of driver training; or(3) insured under a commercial plan.(c) No surcharge may be applied to a policy written for a term in excess of 12 months unless that policy provides for an annual adjustment of premiums. (d) The Commissioner may by rule designate mitigating circumstances, the existence of any of which shall remove the basis for application of a surcharge. (e) If a policy is surcharged as the result of an accident and subsequently the circumstances of the accident are found to include a mitigating circumstance, the insurer shall refund to the insured the increased portion of the premium generated by the accident. (Added 1975, No. 75; amended 1979, No. 28,  7.) 
 4674. Convictions
(a) The Commissioner may by rule specify motor vehicle and criminal violations, conviction of any of which may be used as a basis for a surcharge. (b) Notwithstanding subsection (a) of this section, only those motor vehicle violations that occurred during the experience period may be used as a basis for a surcharge. (c) An adjudication under 7 V.S.A.  656 may not be used as a basis for a surcharge. (Added 1975, No. 75; amended 1993, No. 16,  1; 1999, No. 160 (Adj. Sess.),  10.)
 4675. Two or more automobiles
When more than one automobile is insured in the same policy, a surcharge as the result of an accident or conviction or both may only be applied to that automobile principally operated by the insured, applicant, or other operator currently resident in the same household who generated the surcharge. (Added 1975, No. 75.) 
 4681. Purposes
The purposes of this chapter are:(1) to prohibit price fixing agreements and other anticompetitive behavior by or among insurers; (2) to protect policyholders and the public against the adverse effects of excessive, inadequate or unfairly discriminatory rates; (3) to promote price competition among insurers so as to provide rates that are responsive to competitive market conditions; (4) to provide regulatory controls in the absence of competition;(5) to promote availability, fairness, and reliability of insurance;(6) to authorize cooperative action among insurers in ratemaking and to regulate such activity to prevent practices that tend to substantially lessen competition or create a monopoly; and (7) to cause the availability of price and other information to enable the public to purchase insurance suitable for their needs and to foster competitive insurance markets. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4682. Scope
This chapter applies to all kinds of insurance written on risks in this State by any insurer authorized to do business in this State, except: (1) life insurance;(2) annuities;(3) accident and health insurance;(4) ocean marine insurance;(5) reinsurance; and(6) aircraft liability and aircraft hull insurance. (Added 1983, No. 238 (Adj. Sess.),  1.)
 4683. Definitions
As used in this chapter:(1) Advisory or service organization means any person or organization which assists insurers as authorized by section 4690 of this title, but such an organization shall not include joint underwriting organizations, actuarial or legal consultants, a single insurer, any employees of an insurer, or insurers under common control or management or their employees or managers. (2) Classification system or classification means a plan, system, or arrangement for recognizing differences in exposure to hazard among risks. (3) Commercial risk insurance means insurance within the scope of this chapter which is not: (A) personal risk insurance; or(B) workers compensation and employers liability insurance.(4) Competitive market means a market which has not been found to be noncompetitive pursuant to section 4684 of this title. (5) Expenses means that portion of any rate attributable to acquisition, field supervision and collection expenses, general expenses, and taxes, licenses, and fees. (6) Experience rating means a rating procedure utilizing past insurance experience of the individual policyholder to forecast future losses by measuring the policyholders loss experience to produce a prospective premium credit, debit, or unity modification. (7) Joint underwriting means a voluntary arrangement established on an ad hoc basis to provide insurance coverage pursuant to which two or more insurers separately contract with the insured at a price and under policy terms agreed upon between the insurers. (8) Loss cost means the actuarially developed portion of the rate needed to cover future losses and claims. The loss cost does not include: commission expenses, other acquisition expenses, general expenses, taxes, profit, and other contingencies. (9) Loss trending means any procedure for projecting developed losses to the average date of loss for the period during which the policies are to be effective. (10) Market means the statewide interaction between buyers and sellers of a particular line of insurance or product market component. (11) Noncompetitive market means a market for which there is a ruling in effect pursuant to section 4684 of this title that a reasonable degree of competition does not exist. (12) Personal risk insurance, other than workers compensation and employers liability insurance, means homeowners, tenants, private passenger nonfleet automobile, mobile home, and other property and casualty insurance primarily for personal, family, or household needs rather than for business or professional needs. (13) Pool means a voluntary arrangement other than a residual market mechanism, established on an ongoing basis, pursuant to which two or more insurers participate in the sharing of risks on a predetermined basis. The pool may operate through an association, syndicate, or other pooling agreement. (14) Pure premium rate means that portion of the rate which represents the loss cost per unit of exposure or loss cost per unit of insurance. (15) Rate means the cost of insurance per exposure base unit, or cost per unit of insurance, prior to the application of individual risk variations based upon loss or expense considerations, and does not include minimum premiums. (16) Residual market mechanism means an arrangement, either voluntary or mandated by law or regulation of the Commissioner, involving participation by insurers in the equitable apportionment among them of insurance which may be afforded applicants who are unable to obtain insurance through ordinary methods. (17) Statistical plan means a plan, system, or arrangement used in collecting insurance or related data. (18) Supplementary rate information includes any manual, schedule, or plan of rates, classification system, rating schedule, minimum premium, policy fee, rating rule, rating plan, or any other similar information needed or used to determine the applicable premium in effect or to be in effect for an insured. (19) Supporting information means:(A) the experience and judgment of the filer and the experience or data of other insurers or organizations relied upon by the filer; (B) the interpretation of any statistical data relied upon by the filer;(C) the description of methods used in making the rates; and(D) any other similar information relied upon by the filer. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1989, No. 128 (Adj. Sess.),  1.)
 4684. Competitive market
(a) A competitive market in a type of insurance subject to this chapter is presumed to exist unless: (1) the Commissioner, after notice and hearing, determines and orders that a reasonable degree of competition does not exist in the market; (2) the average annual increase in premiums or rates in the market is 25 percent or more as determined and noticed by the Commissioner; or (3) an insurer uses a claims made liability insurance policy form or endorsement.(b) The Commissioner shall conduct hearings to determine whether a reasonable degree of competition exists whenever, in any market over any 12-month period, the average rates or premiums increase at least 15 percent, but less than 25 percent, over the average rate or premiums for the immediately preceding 12-month period for that market. The Commissioner shall not be obligated to hold hearings under this subsection if, based on the information available to him or her under subsection 4688(a) of this title and other sources, the Commissioner determines that a competitive market continues to exist. (c) Upon a determination of an increase in rates or premiums of 25 percent or more under subdivision (a)(2) of this section, the Commissioner may issue a notice that a reasonable degree of competition does not exist. Insurers may use their currently filed rates for only 120 calendar days after such notice, unless the Commissioner determines that it is in the consumers best interest to extend this time period. (d) A competitive market does not exist if an insurer uses a claims made liability insurance policy form or endorsement. Insurers writing insurance on a claims made basis are subject to the prefiling requirements of subdivision 4688(c)(1) of this title. (e) The rates or premiums in a noncompetitive market shall be subject to the prefiling requirements set forth in subdivision 4688(c)(1) of this title. (f) An order or notice that a noncompetitive market exists under subdivisions (a)(1) and (2) of this section shall expire not later than two years after the order or notice issues unless the Commissioner earlier rescinds the order or notice, or continues the order or notice upon a further determination that a reasonable degree of competition does not exist. Such further determination shall be preceded by public notice, but may be made without a hearing unless requested by an interested party. (g) In determining whether a reasonable degree of competition exists under subdivision (a)(1) of this section, the Commissioner shall consider relevant structural and functional factors in determining the competitiveness of the market, including: the number of insurers actively engaged in providing coverage; market shares; and ease of entry. (Added 1983, No. 238 (Adj. Sess.),  1; 1985, No. 265 (Adj. Sess.),  1, eff. June 4, 1986; 1987, No. 185 (Adj. Sess.),  1, eff. May 5, 1988; 1989, No. 128 (Adj. Sess.),  2; amended 2021, No. 105 (Adj. Sess.),  219, eff. July 1, 2022.) 
 4685. Rate standards
(a) General. Rates shall not be excessive, inadequate, or unfairly discriminatory.(b) Excessiveness. (1) Competitive market. A rate in a competitive market is not excessive.(2) Noncompetitive market. Rates in a noncompetitive market are excessive if they are producing or are likely to produce unreasonably high profits for the insurance provided or if expenses are unreasonably high in relation to services rendered. (c) Inadequacy. Rates are not inadequate unless insufficient to sustain projected losses and expenses in the class or classes of business to which they apply or the use of such rates has or, if continued, will have the effect of substantially lessening competition or the tendency to create a monopoly in any market. (d) Unfair discrimination. Unfair discrimination exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and expenses. A rate is not unfairly discriminatory because different premiums result for a class of policyholders with like loss exposures but different expenses, or like expenses but different loss exposures, provided that the rate equitably reflects the differences with reasonable accuracy. A rate is not unfairly discriminatory if it is averaged broadly among persons insured under a group, franchise, or blanket policy or a mass marketed plan. (Added 1983, No. 238 (Adj. Sess.),  1; amended 2017, No. 134 (Adj. Sess.),  6.) 
 4686. Rating methods or criteria
In determining whether rates comply with the excessiveness standard in a noncompetitive market under subdivision 4685(b)(2) of this title, the inadequacy standard under subsection 4685(c) of this title and the unfair discrimination standard under subsection 4685(d) of this title, the following criteria shall apply: (1) Basic factors in rates. Due consideration shall be given to past and prospective loss and expense experience within, and as reasonable and necessary outside this State; to catastrophe hazards; to residual market loss redistributions and other similar obligations, if any; to a reasonable provision for underwriting profit; to contingencies, if any; to trends within and outside this State; to loadings for leveling premium rates over time or for dividends or savings to be allowed or returned by insurers to their policyholders, members, or subscribers; and to all other relevant factors. (2) Classification. Risks may be classified in any lawful and reasonable way for the collection of statistics and establishment of rates. Rates may be modified for individual risks in accordance with rating plans or schedules which provide for recognition of probable variations in hazards, expenses, or both. (3) Expenses. The expense provisions included in the rates to be used by an insurer shall reflect the operating methods of the insurer, and, so far as is determinable and reasonable, its own actual and anticipated expense experience for the kind of insurance involved, or any subdivision thereof. (4) Profits. The rates shall contain an allowance providing for a reasonable profit. In determining the reasonableness of profit, consideration shall be given to all relevant investment income and a provision for contingencies may be included. (Added 1983, No. 238 (Adj. Sess.),  1; 1987, No. 185 (Adj. Sess.),  2, eff. May 5, 1988.) 
 4687. Workers compensation and employers liability insurance; uniform administration of classifications; reporting of rates and other information
(a) Every workers compensation and employers liability insurer shall adhere to the uniform classification system and uniform experience rating plan for such categories of insurance which are filed with the Commissioner by the advisory or service organization which has been designated by the Commissioner and remains subject to his or her approval and designation. However, any insurer may develop subclassifications of the uniform classification system upon which a rate may be made; provided, further, that such subclassifications must be filed for the approval of the Commissioner at least 30 working days prior to their use and submitted simultaneously, for information only, to the designated advisory or service organization. The Commissioner shall disapprove any such subclassifications if the insurer fails to demonstrate that the data thereby produced can be reported consistent with the uniform statistical plan and uniform classification system. (b) The Commissioner shall designate an advisory or service organization to assist him or her in gathering, compiling, and reporting relevant statistical information. Every workers compensation and employers liability insurer shall record and report its workers compensation and employers liability insurance experience to the designated advisory or service organization as set forth in the uniform statistical plan approved by the Commissioner. (c) The designated advisory or service organization shall develop and file manual rules, subject to the approval of the Commissioner, reasonably related to the recording and reporting of data pursuant to the uniform statistical plan, uniform experience rating plan, uniform schedule rating plan, and the uniform classification system. Every workers compensation and employers liability insurer shall adhere to the approved manual rules and experience rating plan in the underwriting and statistical reporting of its business. No insurer shall agree with any other insurer or with an advisory or service organization to adhere to manual rules which are not reasonably related to the recording and reporting of data pursuant to the uniform classification system, uniform experience rating plan, uniform schedule rating plan, or the uniform statistical plan. (d) Filings submitted pursuant to this section shall be filed with the Commissioner at least 30 working days before the proposed effective date of the filing. The Commissioner may give written notice, within 30 working days after the receipt of the filing, that the Commissioner needs additional time, not to exceed 30 days from the date of such notice, to consider the filing. Upon written application of the designated advisory or service organization, the Commissioner may authorize the filing to be effective before the expiration of the waiting period or any extension of the waiting period. A filing shall be deemed to meet the requirements of this section, unless disapproved by the Commissioner before the expiration of the waiting period or any extension of the waiting period. (e) The uniform experience rating plan to be filed pursuant to this section shall contain reasonable eligibility standards, provide adequate incentives for loss prevention, and provide for sufficient premium differentials so as to encourage safety. The uniform experience rating plan shall be the exclusive means of providing prospective premium adjustment based upon measurement of the loss producing characteristics of an individual insured, but insurers may file rating plans that provide for retrospective premium adjustments based upon an insureds past experience. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1989, No. 128 (Adj. Sess.),  3; 2021, No. 105 (Adj. Sess.),  220, eff. July 1, 2022.) 
 4688. Filing of rates and other rating information
(a) Filings as to competitive markets. Except with respect to filings submitted pursuant to section 4687 of this title, in a competitive market every insurer shall file with the Commissioner all rates and supplementary rate information, and supporting information which are to be used in this State, provided that such rates and information need not be filed for specifically rated inland marine risks or such other risks which are designated by regulation of the Commissioner as not requiring a filing. Such rates, supplementary rate information, and supporting information shall be provided to the Commissioner not later than 15 days after the effective date. An insurer may adopt by reference, with or without deviation or modification, provided that said deviation or modification is readily identifiable, the rates, supplementary rate information, and supporting information filed by another insurer or an advisory or service organization with which it is affiliated; provided, however, such an adoption shall not relieve an insurer from any other requirements of this chapter. (b) Prefilings for competitive markets. Except with respect to filings submitted pursuant to section 4687 of this title, in a competitive market, if the Commissioner finds, after a hearing, that an insurers rates require closer supervision because of the insurers financial condition, the insurer shall provide and file for approval of the Commissioner, at least 30 working days before the proposed effective date therefor, all such rates and such supplementary rate information and supporting information as prescribed by the Commissioner. Upon application by the filer, the Commissioner may authorize an earlier effective date. (c) Prefilings in a noncompetitive market. (1) Except with respect to filings submitted pursuant to section 4687 of this title, in a noncompetitive market every insurer or its authorized advisory or service organization except as prohibited by subdivision 4690(b)(2) of this title shall provide and file for approval of the Commissioner all rates, supplementary rate information, and supporting information for noncompetitive markets at least 30 working days before the proposed effective date therefor. The Commissioner may give written notice, within 30 working days after the receipt of the filing, that the Commissioner needs additional time, not to exceed 30 days from the date of such notice, to consider the filing. Upon written application of the insurer, the Commissioner may authorize rates to be effective before the expiration of the waiting period or any extension thereof. A filing shall be deemed to meet the requirements of this chapter and become effective, unless disapproved pursuant to section 4689 of this title by the Commissioner before the expiration of the waiting period or any extension thereof. (2) Rates for residual market risks shall be subject to the filing requirements of subdivision (c)(1) of this subsection. (d) Requirements of Commissioner. (1) Rates filed pursuant to this section shall be filed in such form and manner as may be prescribed by the Commissioner. Rates filed by an insurer for workers compensation and employers liability insurance shall be filed simultaneously, for information only, with the designated advisory or service organization. (2) For a noncompetitive market, whenever a filing is not accompanied by such information as the Commissioner requires under this section, the Commissioner shall so inform the insurer as soon as possible and the filing shall not be deemed made until such information is furnished. (e) Filings open to inspection. All rates, supplementary rate information, and any supporting information for risks filed under this chapter shall, as soon as filed or after approval for those matters subject to prefiling, be open to public inspection at any reasonable time. Copies may be obtained by any person on request and upon payment of a reasonable charge in the manner and amount prescribed by the Commissioner. (f) Consent to rate. Notwithstanding any other provisions of this title to the contrary, upon written application of the named insured, stating the reasons therefor and filed for approval of the Commissioner, a rate in excess of, or coverage more restrictive than, that provided by an otherwise applicable filing may be used on any specific risk. Such rate or coverage shall not be effective unless approved by the Commissioner and in accordance with the effective date therefor established by the Commissioner. (g) Rating manuals and related information. Notwithstanding any other provision of this chapter to the contrary, every insurer shall file with the Commissioner all manuals of rates and rating rules that it uses in this State, and shall identify the day, month, and year on which such rates and rules were first used by the insurer. This requirement may be satisfied by reference to the manuals of rates or rating rules filed by the advisory or service organization with which the insurer is affiliated and to the extent utilized. Upon specific request of the Commissioner, an insurer shall provide the Commissioner with a copy of the underwriting rules or guides that it uses in this State. (h) Form or mode of information required to be furnished to the Commissioner. The Commissioner may prescribe, by rule or regulation, the form or mode in which the information required to be furnished to the Commissioner pursuant to this section must be filed. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1989, No. 128 (Adj. Sess.),  4; 2021, No. 105 (Adj. Sess.),  221, eff. July 1, 2022.) 
 4688a. Filing fees
Each filing submitted to the Commissioner pursuant to section 4687 or 4688 of this title shall be accompanied by payment to the Commissioner of a nonrefundable fee of $50.00. A minimum fee of $150.00 shall accompany each such filing if submitted by an advisory or service organization. (Added 1985, No. 236 (Adj. Sess.),  12; amended 1991, No. 166 (Adj. Sess.),  12.) 
 4689. Approval or disapproval of rates
(a) Timing of approval or disapproval. (1) A rate may be disapproved at any time subsequent to the effective date.(2) A rate subject to prefiling may also be disapproved before the effective date.(3) A rate for a residual market in which insurers are permitted or mandated by law or by order of the Commissioner to participate shall not become effective until approved by the Commissioner, as provided in section 4688 of this title. (b) Bases of disapproval. (1) The Commissioner shall disapprove a rate for use in a competitive market if the Commissioner finds that the rate is inadequate, or unfairly discriminatory. (2) The Commissioner shall disapprove a rate for use in a noncompetitive or residual market if the Commissioner finds that the rate is excessive, inadequate, or unfairly discriminatory. (c) Disapproval procedure; order; interim rates. (1) Disapproval procedure. (A) If the Commissioner determines, in accordance with section 4684 of this title, that a reasonable degree of competition does not exist in a market, the Commissioner shall commence a hearing to determine whether or not existing rates are excessive within 30 days of an order finding a market noncompetitive. However, the Commissioner may waive this requirement to hold a hearing if the Commissioner finds such rate filings do not violate the rate standards of this chapter. The Commissioner shall decide whether rates are excessive within 15 days after the conclusion of the hearing. Insurers shall have the burden of proving rates are not excessive in a noncompetitive market. (B) If the Commissioner believes that rates in a competitive market violate the inadequacy standard in section 4685 of this title or any other requirement of this chapter, the Commissioner shall require insurers in that market to file additional supporting information for rates. If after reviewing such additional supporting rate information the Commissioner continues to believe that the rates violate these requirements, the Commissioner shall call a hearing before entering any order. (C) The Commissioner may disapprove, without a hearing, prefiled rates. However, the insurer or other filer whose rates have been disapproved shall be given a hearing upon written request made within 30 days after the receipt of the disapproval. The Commissioner shall notice in every order of disapproval that a hearing will be granted within 30 days after receipt of a request from an affected insurer. (2) Order. If the Commissioner disapproves a rate, the Commissioner shall issue an order specifying in what respect it fails to meet the requirements of this chapter. For rates in effect at the time of disapproval, the Commissioner shall state when the further use of such rate in contracts of insurance made thereafter shall be prohibited. (3) Interim rates. In the event existing rates of an insurer are found excessive the Commissioner shall specify an interim rate at the time he or she issues an order disapproving rates. The interim rate may be modified by the Commissioner upon his or her own motion or upon motion of an insurer. The interim rate or any modification thereof shall take effect prospectively in contracts of insurance written or renewed 15 days after the Commissioners decision setting interim rates. (4) Distribution of overcharges. When the rates are finally determined, the Commissioner shall order any overcharge in the interim rates to be distributed appropriately, except that refunds to policyholders that are determined to be de minimis by the Commissioner shall be remitted to the State of Vermont General Fund. (Added 1983, No. 238 (Adj. Sess.),  1; 1987, No. 185 (Adj. Sess.),  3, eff. May 5, 1988.) 
 4690. Licensing, operation, services, and activities of advisory or service organizations
(a) License required. No person or organization may provide any service listed in subsection (b) of this section relating to any insurance subject to this chapter, and no insurer shall utilize any service of such organization for such purposes, unless the organization has obtained a license under subsection (d) of this section as an advisory or service organization. (b) Authorized activities. Any licensed advisory or service organization may perform one or more of the following activities on behalf of its affiliates: (1) Collect, compile, and furnish loss data and related statistics concerning any type of insurance subject to this chapter; (2) Collect, compile, and furnish expense data concerning commercial risk insurance, workers compensation insurance, and employers liability insurance and, as approved by the Commissioner, personal risk insurance; (3) For commercial risk insurance, workers compensation insurance, employers liability insurance, dwelling fire insurance, personal liability insurance, and inland marine insurance, prepare, recommend, distribute, or file rates and pure premium rates, supplementary rate, and supporting information, or pure premium rate data with or without adjustment for loss development and loss trending, in accordance with its statistical plans where applicable. Such pure premium rate data and adjustments should be in sufficient detail so as to permit insurers to modify the pure premium rates based on their own rating methods or interpretations of underlying data; (4) For private passenger nonfleet automobile and homeowners insurance, recommend pure premium rates and supply supplementary rate and supporting information or pure premium rate data with or without adjustment for loss development and loss trending in sufficient detail to permit insurers to modify the pure premium rates based upon their own rating methods or interpretation of underlying data. The organization may not file any material or data for or on behalf of insurers for private passenger nonfleet automobile and homeowners insurance with the Commissioner, unless the Commissioner approves the form of such material or data; (5) Prepare and distribute manuals of rates and pure premium rates and rating rules and rating schedules that provide for the development of rates or provide for the development or calculation of rates with the addition of insurer information which is not ascertainable within the distributed manuals; (6) Advise about rate and pure premium rate questions; and provide supporting information for the development and use of rates and pure premium rates; (7) Prepare, recommend, and file policy forms and endorsements and consult with its affiliates relative to their use and application; (8) Prepare, recommend, or file coverages, classifications, and statistical plans;(9) Distribute any and all information that is filed with the Commissioner and open to public inspection; (10) Conduct research and collect statistics in order to discover, identify, and classify information relating to causes or prevention of losses; (11) Make inspections, surveys, and audits;(12) Conduct research and on-the-site inspections in order to prepare classifications of public fire defenses; (13) Provide actuarial, statistical, and administrative services to insurers and other insurer-supported organizations; (14) Collect, compile, and distribute past and current prices of individual insurers insurance contracts, if such information is made available to the general public; (15) Conduct research and collect information to determine the impact of benefit level changes on rates and pure premium rates, and conduct research and report on other projects; (16) Prepare and distribute rules and rating values for experience rating plans. Calculate and disseminate individual risk premium modifications; (17) Assist an individual insurer to develop rates, supplementary rate information, or supporting information when so authorized by the individual insurer; and (18) Furnish any other services related to those enumerated in this subsection, as specified in the organizations license issued by the Commissioner. (c) Availability of services. No advisory or service organization shall refuse to supply any service for which it is licensed in this State to any insurer authorized to do business in this State and offering to pay the fair and usual compensation for the service; nor shall such an organization require the purchase of any specific service or services as a condition to obtaining the service sought, provided that the furnishing of the requested service does not otherwise place an unreasonable burden on the organization, except as prescribed by the Commissioner for workers compensation and employers liability insurance. (d) Licensing. (1) Application. An advisory or service organization applying for a license shall include with its application: (A) a nonrefundable license fee of $1,000.00 payable to the Commissioner, except that the fee shall be $100.00 for such an organization whose principal business office is located in this State; (B) a copy of its constitution, articles of association or incorporation, bylaws, and any other rules or regulations governing the conduct of its business; (C) a list of its affiliated insurers, together with disclosure of the services provided to each; which list shall be maintained and updated and supplied to the Department at least annually; (D) the names and addresses of one or more residents of this State, or the designation of the Secretary of State as a person, upon whom notices, process affecting it, or orders of the Commissioner may be served; (E) written documentation of its technical qualifications or abilities; and(F) any other relevant information and documents that the Commissioner may require.(2) Change in material circumstances. Every organization which has applied for a license pursuant to this subsection shall promptly file with the Commissioner, not less than ten days after the effective date, every change in the material facts or in the documents on which its application and license was based. (3) Granting of license. If the Commissioner finds that the applicant and the natural persons through which it acts are competent, trustworthy, and technically qualified or able to provide the services proposed, and that all other requirements of law are met, the Commissioner shall issue a license specifying the authorized activities of the applicant. The Commissioner shall not issue a license to any organization whose activities would tend to create a monopoly or to substantially lessen competition in any market segment. (4) Duration. Licenses issued pursuant to this section shall remain in effect until the licensee withdraws from the State or until the license is suspended or revoked by the Commissioner. The Commissioner may at any time, after a hearing, revoke or suspend the license of an advisory or service organization which does not comply with the requirements and standards of this title. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1989, No. 128 (Adj. Sess.),  5.) 
 4691. Filing of records and reports; exchange of information
(a) Except as provided in section 4687 of this title, the Commissioner shall review and approve, as appropriate, reasonable rules and plans for recording and reporting of loss and expense experience in appropriate form and detail and shall by rule require insurers to file loss and expense data and investment income statistics in such form and detail as the Commissioner deems appropriate. Notwithstanding any other provision of this chapter to the contrary, the Commissioner may designate one or more advisory or service organizations or contractors to assist in the gathering of such experience and making and distributing compilations thereof. (b) The Commissioner and every insurer, advisory or service organization may exchange information and experience data with insurance regulatory officials, insurers, advisory or service organizations in this and other states and may consult with them with respect to ratemaking and the application of rating systems. (Added 1983, No. 238 (Adj. Sess.),  1; 1987, No. 185 (Adj. Sess.),  4, eff. May 5, 1988; amended 2021, No. 105 (Adj. Sess.),  222, eff. July 1, 2022.) 
 4692. Joint underwriting; pool and residual market activities
(a) Authorization. Notwithstanding section 4693 of this title, insurers participating in joint underwriting, pools, or residual market mechanisms for the purpose of affording insurance under a method of distributing or sharing risks, or both, may, in connection with such activity, act in cooperation with each other in the making of rates; rating systems; policy forms; underwriting rules; surveys; inspections and investigations; the furnishing of loss and expense statistics or other information; or carrying on research. Joint underwriting, pools, and residual market mechanisms shall not be deemed advisory or service organizations. (b) Regulation. (1) Except to the extent modified by this section, insurers participating in joint underwriting, pools, and residual market mechanisms are subject to the other provisions of this chapter. (2) If, after a hearing, the Commissioner finds that any activity or practice of an insurer participating in joint underwriting or a pool is unfair or unreasonable, he or she shall issue a written order specifying in what respects such activity or practice is unfair or unreasonable and require the discontinuance of such activity or practice, in addition to any penalties which may be levied. (3) Every pool shall file for approval of the Commissioner a copy of its constitution, articles of association or incorporation, its bylaws, rules, and regulations governing its activities; a list of its members; the name and address of one or more residents of this State, or the designation of the Secretary of State as a person, upon whom notices or orders of the Commissioner or process may be served; and any changes or amendments in the foregoing. (4) Any residual market mechanism, plan, or agreement to implement such a mechanism, and any amendments thereto, shall be submitted in writing to the Commissioner for consideration and approval, together with such information as the Commissioner may reasonably require. The Commissioner shall approve only such agreements as are found to contemplate the use of rates which meet the standards prescribed by this chapter and activities and practices that are not unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter. At any time after such agreements are in effect, the Commissioner may review the activities and practices of the parties to such agreements and if, after a hearing, the Commissioner finds that any such activity or practice is unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter, the Commissioner shall issue a written order specifying in what respects such activity or practice is unfair, unreasonable, or otherwise inconsistent with the provisions of this chapter and require the discontinuance of such activity or practice or revoke approval of any such agreement. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4693. Agreements to adhere
(a) Except as necessary to comply with the requirements of section 4687 of this title, no insurer may agree with any other insurer or with an advisory or service organization to adhere to or use any rate or supplementary rate information. The fact that any insurer adheres to or uses such rate or material is not sufficient in itself to support a finding that an agreement to adhere or use exists but may be used for the purpose of supplementing any other evidence as to the existence of such an agreement. (b) Two or more insurers having common ownership or operating in this State under common management or control may act in concert between or among themselves in the same manner as if they constituted a single insurer. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4694. Residual market mechanism status
All insurers authorized to write insurance which is subject to this chapter may establish and participate in a plan providing for the equitable apportionment among them of insurance which may be afforded applicants who are in good faith entitled to, but who are unable to, procure such insurance through ordinary methods. A plan shall be submitted for the Commissioners prior approval, unless already existing on July 1, 1984. The rates, supplementary rate information, and policy forms to be used in such a plan and any future modification thereof must be submitted to the Commissioner for approval in accordance with sections 4686, 4687, and 4688 of this title. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4695. Exemptions
The Commissioner may, by rule, exempt any market from any or all of the provisions of this chapter, if and to the extent that the Commissioner finds their application unnecessary or impractical to achieve the purpose of this chapter. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4696. Mandatory market participation
If the Commissioner finds that there is no voluntary market in which buyers of any line of property and casualty insurance may obtain such insurance, the Commissioner may initiate proceedings to establish a joint underwriting association for that market under chapter 137 of this title. (Added 1985, No. 265 (Adj. Sess.),  2, eff. June 4, 1986.) 
 4700. Examinations
(a) The Commissioner or his or her designee shall examine any insurer, pool, advisory or service organization, or residual market mechanism as he or she deems necessary to ascertain compliance with this chapter. (b) Every insurer, pool, advisory or service organization, and residual market mechanism shall maintain reasonable records of the type and kind reasonably adapted to its method of operation containing its experience, or the experience of its affiliated insurers including the data, statistics, or information collected or used by it in its activities. These records shall be available at all reasonable times to enable the Commissioner to determine whether the activities of any advisory or service organization, insurer, residual market mechanism, or pool comply with the provisions of this chapter. Such records shall be maintained in an office within this State or shall be made available to the Commissioner for examination or inspection at any time. (c) The necessary and reasonable cost of an examination made pursuant to this section shall be paid by the examined party upon presentation of a detailed account of such costs. (d) In lieu of any such examination the Commissioner may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of such state. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4701. Consumer information
The Commissioner shall utilize, develop, or cause to be developed a consumer information system which will include representative price ranges and other relevant information to be readily available to purchasers of insurance. The development and operation of this system may be conducted internally within the Department of Financial Regulation, in cooperation with other state insurance departments, through outside contractors, or in any other appropriate manner. To the extent deemed necessary and appropriate by the Commissioner, insurers, advisory or service organizations, and other persons or organizations involved in conducting the business of insurance in this State to which this section applies shall assist and cooperate in the development and utilization of a consumer information system. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4702. Monitoring competition
In determining whether or not a competitive market exists pursuant to section 4684 of this title, the Commissioner shall monitor the degree of competition in this State. In doing so, the Commissioner shall utilize existing relevant information, analytical systems, and other sources; cause or participate in the development of new relevant information, analytical systems, and other sources; or rely on some combination thereof. Such activities may be conducted internally within the Department of Financial Regulation, in cooperation with other state insurance departments, through outside contractors or in any other appropriate manner. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4703. Information and monitoring costs
To the extent deemed necessary and appropriate by the Commissioner, the costs of complying with sections 4689, 4691, 4701, and 4702 of this title shall be assessed against insurers subject to this chapter. These assessments shall be made on an equitable and practicable basis established after a hearing by regulation of the Commissioner. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1987, No. 185 (Adj. Sess.),  5, eff. May 5, 1988.) 
 4704. Information to be furnished insureds; aggrieved persons
(a) Every insurer shall, within a reasonable time after receipt of a written request and upon payment of a reasonable charge, if any, furnish to any insured affected by a premium or rate utilized by it, all pertinent information as to the development and application of such premium or rate. (b) Every insurer and advisory or service organization shall provide within this State a reasonable means whereby a person aggrieved by the application of any of its filings shall be allowed to be heard, on written request, for the purpose of reviewing the manner in which the filing has been applied in connection with the insurance involved. If 25 persons are aggrieved, they may appeal in writing to the Commissioner who may call a hearing, to be held not less than 10 days after written notice to the parties, and review the filing in accordance with the provisions of this chapter and all other applicable provisions of this title. (Added 1983, No. 238 (Adj. Sess.),  1; amended 2021, No. 105 (Adj. Sess.),  223, eff. July 1, 2022.) 
 4704a. Rerating after use of erroneous credit information
If it is determined through the reinvestigation process set forth in the federal Fair Credit Reporting Act, 15 U.S.C.  1681i(a)(5), that credit information relied upon by an insurer was incorrect, and if an insurer receives notice of that determination from either the consumer-reporting agency or from the insured who has provided written documentation from the consumer-reporting agency, within one year of the date after the insured is no longer a customer of the insurer, such insurer shall reunderwrite and rerate the consumer within 30 days after receiving the notice. After reunderwriting or rerating the insured, the insurer shall make any adjustments necessary consistent with its underwriting and rating guidelines. If an insurer determines that the insured has overpaid the premium, the insurer shall refund to the insured the amount of overpayment. (Added 2005, No. 211 (Adj. Sess.),  5.) 
 4705. Dividend plans
Nothing in this chapter shall be construed to prohibit or regulate the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers; provided, however, this provision shall not contravene the provisions of chapter 145 of this title. A plan for the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers shall not be deemed a rating plan or system, nor be conditioned upon renewal of a policy. The Commissioner is authorized to obtain information concerning dividends in such form or detail as he or she deems appropriate. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1987, No. 185 (Adj. Sess.),  6, eff. May 5, 1988.) 
 4706. Penalties
(a) If the Commissioner finds that any person, insurer, or advisory or service organization has violated any provision of this chapter, the Commissioner may impose an administrative penalty of not more than $2,000.00 for each violation; but if the Commissioner finds such violation to be willful, a penalty of not more than $15,000.00 for each such violation may be imposed. (b) Unintentional technical violations arising from systems or computer generated errors or failures of the same type shall be treated as a single violation for the purposes of this section. In the event of resulting overcharges which are de minimis, the insurer shall make financial restitution including payment of interest as determined by the Commissioner and no penalty shall be imposed under this chapter; provided that the insurer demonstrates to the satisfaction of the Commissioner that the violation was unintentional. (c) For purposes of this section, any insurer using a premium or rate for which the insurer has failed to submit a filing pursuant to section 4687 or 4688 of this title shall have committed a separate violation for each day such failure existed. (d) The Commissioner may suspend or revoke the license of any advisory or service organization or insurer, failing or refusing to comply with an order of the Commissioner within the time limit prescribed by such order, or any extension thereof which the Commissioner may grant. (e) The Commissioner may determine when a suspension of license shall become effective and it shall remain in effect for the period fixed by the Commissioner, including an indefinite period, unless such suspension is modified or rescinded or until the order upon which such suspension is based is modified, rescinded, or reversed. (f) No penalty shall be imposed and no license shall be suspended or revoked except upon a written order of the Commissioner, stating the findings made after a hearing. (g) The penalties applicable under this section are in addition to any other penalties applicable under this title. (Added 1983, No. 238 (Adj. Sess.),  1; amended 1995, No. 167 (Adj. Sess.),  18.) 
 4707. Judicial review
Any party in interest aggrieved by the decision or final order of the Commissioner may appeal to a court of competent jurisdiction. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4708. Severability
If any provision of this chapter or the application of such provision to any person or circumstance shall be held invalid by a court of competent jurisdiction, the remainder of the chapter and the application of its provisions to a person or circumstance other than that or those as to which it is held invalid, shall not be affected thereby. (Added 1983, No. 238 (Adj. Sess.),  1.) 
 4711. Cancellation of commercial risk insurance
(a) A notice of cancellation of a policy of commercial risk insurance as defined in this chapter but excluding farm risks, issued under this chapter shall be effective only if it is based on: (1) nonpayment of premium;(2) fraud or material misrepresentation affecting the policy or in the presentation of a claim under the policy, or violation of any of the terms or conditions of the policy; or (3) substantial increase in hazard provided that cancellation for this reason shall be effective only after prior approval of the Commissioner. (b) This section shall not apply to any policy or coverage which has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy. (c) This section shall not apply to nonrenewal. (Added 1985, No. 265 (Adj. Sess.),  3; amended 2021, No. 105 (Adj. Sess.),  224, eff. July 1, 2022.)
 4712. Notice of cancellation
(a) No notice of cancellation of a policy to which section 4711 of this title applies shall be effective unless mailed or delivered by the insurer to the named insured at least 45 days prior to the effective date of cancellation, provided, that where cancellation is for nonpayment of premium, at least 15 days notice of cancellation shall be given. (b) In all instances, the reason or reasons for cancellation shall accompany or be included in the notice of cancellation. An insurer shall not be held liable in any claim or suit for damages arising solely from the insurers compliance with the requirement that the reason for cancellation be specified. (c) The Commissioner shall have the authority to waive any provision of subsection (a) or (b) of this section upon the written request of an insurer specifying the reasons therefor. (d) This section shall not apply to nonrenewal. (Added 1985, No. 265 (Adj. Sess.),  3.)
 4713. Notice of nonrenewal
No insurer shall refuse to renew a policy of insurance to which section 4711 of this title applies at its expiration or anniversary if written for a term of more than one year, unless such insurer or its agent shall mail or deliver to the named insured, at the address shown in the policy, at least 45 days advance notice of its intention not to renew. This section shall not apply if the insurer has manifested its willingness to renew, or in case of nonpayment of premium, or if the insured fails to pay any advance premium required by the insurer for renewal. However, notwithstanding the failure of an insurer to comply with this section, the policy shall terminate on the effective date of any other policy with respect to property designated in both policies. Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal. (Added 1985, No. 265 (Adj. Sess.),  3.) 
 4714. Notice requirements
When notice required under section 4712 or section 4713 of this title is provided by mail, such notice shall be by certified mail, except that in the case of cancellation for nonpayment of premium, notice shall be by certified mail or certificate of mailing. (Added 1985, No. 265 (Adj. Sess.),  3; amended 1989, No. 171 (Adj. Sess.),  8, eff. Sept. 1, 1990.) 
 4715. Renewal policies
(a) If the insurer has the necessary information to issue the renewal policy of insurance to which section 4711 of this title applies, the insurer shall confirm in writing at least 45 days prior to expiration its intention to renew the policy and the premium at which the policy is to be renewed. The insured shall have the right to renew the policy at this premium. (b) An insurer not complying with subsection (a) of this section shall grant its insured renewal coverage at the rate or premium in effect under the expiring or expired policy or at rates lawfully in effect on the expiration date. This shall be done on a pro rata basis and shall continue for 45 days after the insurer confirms renewal coverage and premium. This subsection shall not apply if the insured accepts the renewal policy. (c) An insurer may transfer a policy to an affiliate, as defined by subdivision 3681(1) of this title, upon expiration of the policy without providing notice of nonrenewal, provided that: (1) the rating by A. M. Best or a similarly qualified rating service of the affiliate is equal to or better than the transferring insurer; (2) there is no diminution in the terms and conditions of coverage; and(3) notice of the transfer is provided to the insured at least 45 days prior to the transfer by first class mail, and in connection with such notice the insurer: (A) complies with any requirements of federal law relating to notice of adverse credit determination; (B) includes in the notice of transfer a telephone number of the insurer, or the producer, if any, and a toll free telephone number of the insurer in the case of personal lines policies, where the insured can learn additional information concerning the transfer and the reasons for the transfer; (C) complies with the other provisions of this section relating to renewal policies. (Added 1985, No. 265 (Adj. Sess.),  3; amended 2007, No. 135 (Adj. Sess.),  3.)
 4716. Penalties
A person who violates a provision of this subchapter may be subject to an administrative penalty of $2,000.00 for each violation. (Added 1995, No. 167 (Adj. Sess.),  18a.) 
 4721. Purpose
The purpose of sections 4721-4733 of this title is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Public Law 15, 79th Congress), by defining, or providing for the determination of practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined. (Amended 1973, No. 216 (Adj. Sess.),  1, eff. May 1, 1974.) 
 4722. Definitions
As used in this chapter:(1) Person means any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, appraisers, and adjusters. Person also means medical, dental, optometric, and hospital service plans as defined in this title. For the purposes of this title, medical, dental, optometric, and hospital service plans shall be deemed to be engaged in the business of insurance. (2) Commissioner means the Commissioner of Financial Regulation.(3) Insurance policy or insurance contract means any contract of insurance, indemnity, medical, dental, optometric, or hospital service, suretyship, or annuity issued, proposed for issuance, or intended for issuance by any person. (Amended 1973, No. 216 (Adj. Sess.),  2, eff. May 1, 1974; 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4723. Unfair methods of competition or unfair or deceptive acts or practices prohibited
No person shall engage in any trade practice which is determined under this chapter to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. (Amended 1973, No. 216 (Adj. Sess.),  3, eff. May 1, 1974.) 
 4724. Unfair methods of competition or unfair or deceptive acts or practices defined
The following are hereby defined as unfair methods of competition or unfair or deceptive acts or practices in the business of insurance: (1) Misrepresentations and false advertising of insurance policies. Making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which: (A) misrepresents or fails to adequately disclose the benefits, advantages, conditions, exclusions, limitations, or terms of any insurance policy; or (B) misrepresents the dividends or share of the surplus to be received on any insurance policy; or (C) makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy; or (D) is misleading or is a misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any life insurer operates; or (E) uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof; or (F) is a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy; or (G) is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy; or (H) misrepresents any insurance policy as being shares of stock.(2) False information and advertising generally. Making, publishing, disseminating, circulating, or placing before the public or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine, or other publication, in the form of a notice, circular, pamphlet, letter, or poster or over any radio station or television station, or in any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of his or her business, which is untrue, deceptive, or misleading. (3) Defamation. Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of any person and which is calculated to injure such person. (4)(A) Boycott, coercion, and intimidation. Entering into any agreement to commit, or by any concerted action committing any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of trade, or monopoly in, the business of insurance. (B) Committing any act of boycott, coercion, or intimidation in the marketing or sale of any insurance contracts. (5) False financial statements and entries. (A) Knowingly filing with any supervisory or other public official, or knowingly making, publishing, disseminating, circulating, or delivering to any person, or placing before the public, or knowingly causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement of fact as to the financial condition of a person. (B) Knowingly making any false entry of a material fact in a book, report, or statement of any person or knowingly omitting to make a true entry of any material fact pertaining to the business of such person in any book, report, or statement of such person. (C) Knowingly concealing, withholding or destroying, mutilating, altering, or by any means falsifying any documentary material in the possession, custody, or control of any person after that person: (i) has received a complaint to which that documentary material is directly relevant; or (ii) knows that the documentary material is relevant to an investigation or an examination of that person being made by the Commissioner. (6) Stock operations and advisory board contracts. Permitting agents, officers, or employees to issue or deliver agency or company stock or other capital stock, or benefit certificates or share in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insure. (7) Unfair discrimination; arbitrary underwriting action. (A) Making or permitting any unfair discrimination between insureds of the same class and equal risk in the rates charged for any contract of insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contracts. (B) Making or permitting unfair discrimination against an applicant or an insured, on the basis of the sex, sexual orientation, gender identity, or marital status of the applicant or insured, with regard to: (i) underwriting standards and practices or eligibility requirements; or(ii) rates; however, nothing in this subdivision shall prevent any person who contracts to insure another from setting rates for such insurance in accordance with reasonable classifications based on relevant actuarial data or actual cost experience in accordance with section 4686 of this title. (C)(i) Inquiring or investigating, directly or indirectly as to an applicants, an insureds or a beneficiarys sexual orientation, or gender identity in an application for insurance coverage, or in an investigation conducted by an insurer, reinsurer, or insurance support organization in connection with an application for such coverage, or using information about gender, marital status, medical history, occupation, residential living arrangements, beneficiaries, zip codes, or other territorial designations to determine sexual orientation or gender identity; (ii) Using sexual orientation, gender identity, or beneficiary designation in the underwriting process or in the determination of insurability; (iii) Making adverse underwriting decisions because medical records or a report from an insurance support organization reveal that an applicant or insured has demonstrated HIV-related concerns by seeking counseling from health care professionals; (iv) Making adverse underwriting decisions on the basis of the existence of nonspecific blood code information received from the medical information bureau or a national data bank, but this prohibition shall not bar investigation in response to such a nonspecific blood code; (v) The provisions of this subdivision (C) shall not be construed to prohibit an insurer from requesting an applicant or insured to take an HIV-related test on the basis of the health history or current condition of health of the applicant or insured in accordance with the provisions of subdivision (20) of this section. (D) Making or permitting any unfair discrimination against any individual by conditioning insurance rates, the provision or renewal of insurance coverage, or other conditions of insurance based on medical information, including the results of genetic testing, where there is not a relationship between the medical information and the cost of the insurance risk that the insurer would assume by insuring the proposed insured. In demonstrating the relationship, the insurer can rely on actual or reasonably anticipated experience. As used in this subdivision, genetic testing shall be defined as the term is defined in 18 V.S.A.  9331(7). (E) Making or permitting unfair discrimination between married couples and parties to a civil union as defined under 15 V.S.A.  1201, with regard to the offering of insurance benefits to a couple, a spouse, a party to a civil union, or their family. The Commissioner shall adopt rules necessary to carry out the purposes of this subdivision. The rules shall ensure that insurance contracts and policies offered to married couples, spouses, and families are also made available to parties to a civil union and their families. The Commissioner may adopt by order standards and a process to bring the forms currently on file and approved by the Department into compliance with Vermont law. The standards and process may differ from the provisions contained in chapter 101, subchapter 6, and sections 4062, 4201, 4515a, 4587, 4685, 4687, 4688, 4985, 5104, and 8005 of this title where, in the Commissioners opinion, the provisions regarding filing and approval of forms are not desirable or necessary to effectuate the purposes of this section. (8) Rebates. (A) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of insurance or agreement as to such contract other than as plainly expressed in the insurance contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, any rebate or premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance contract or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever of value not specified in the contract. (B) Making available through any rating plan or form, property, casualty, or surety insurance to any firm, corporation, or association of individuals, any preferred rate or premium based upon any fictitious grouping of such firm, corporation, or individuals. The grouping of risks by way of membership, nonmembership, license, franchise, employment, contract, agreement, or any other method or means, when the grouping of risks have no preferred characteristic over similar risks written on an individual basis, for the purpose of insuring such grouped risks at a preferred rate or premium or on a preferred form is a fictitious grouping. This subdivision shall not apply to life or health and disability insurance or annuity contracts. (C) Nothing in subdivision (7) or (8)(A) of this section shall be construed as including within the definition of discrimination or rebates any of the following practices: (i) in the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, provided that such bonuses or abatement of premiums shall be fair, and equitable to policyholders and for the best interest of the company and its policyholders; (ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expenses; (iii) readjustment of the rate of premium for a group insurance policy based on the loss or expense under the group insurance policy at the end of the first or any subsequent policy year of insurance under the group policy, which may be made retroactive only for such policy year; (iv) the offer or provision by insurers, by or through employees, affiliates, or third-party representatives of value-added products or services at no or reduced cost, even when such products or services are not specified in the insurance policy, provided the product or service meets each of the following criteria: (I) The product or service relates to the insurance coverage.(II) The product or service is primarily designed to satisfy one or more of the following:(aa) provide loss mitigation or loss control;(bb) reduce claim costs or claim settlement costs;(cc) provide education about liability risks or risk of loss to persons or property;(dd) monitor or assess risk, identify sources of risk, or develop strategies for eliminating or reducing risk; (ee) enhance health;(ff) enhance financial wellness through items such as education or financial planning services;(gg) provide post-loss service;(hh) incent behavioral changes to improve health or reduce the risk of death or disability or an insured or potential insured; or (ii) assist in the administration of the employee or retiree benefit insurance coverage.(III) The cost to the insurer offering the product or service to any given customer is determined by the Commissioner to be reasonable in comparison to that customers premiums or insurance coverage for the policy class. (IV) The insurer, providing the product or service directly or through a producer, ensures that the customer is provided with contact information to assist the customer with questions regarding the product or service. (V) The availability of the product or service is based on documented objective criteria and offered in a manner that is not unfairly discriminatory. (VI) Within 10 days after offering or providing a product or service pursuant to subdivision (8)(C)(iv) of this section, the insurer submits to the Commissioner a description of the offer or provision, accompanied by an explanation of how each criterion in this subdivision (8)(C)(iv) of this section is met. (D) An insurer, producer, or representative of either may not offer or provide insurance as an inducement to the purchase of another policy or otherwise use the words free or no cost or words of similar import in an advertisement. (9) Unfair claim settlement practices. Committing or performing with such frequency as to indicate a business practice any of the following: (A) misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue; (B) failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; (C) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (D) refusing to pay claims without conducting a reasonable investigation based upon all available information; (E) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; (F) not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear; (G) attempting to settle a claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made a part of the application; (H) attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured; (I) making claim payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are made; (J) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; (K) delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; (L) failing to promptly settle claims where liability has become reasonably clear under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; (M) failing to promptly provide a reasonable explanation on the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement. (10) Failure to maintain complaint handling procedures. Failure of any person to maintain a complete record of all of the complaints which it has received since the date of its last examination under section 3563 or 3564 of this title. This record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, the time it took to process each complaint, and such other information as the Commissioner may require. As used in this subdivision, complaint shall mean any written communication primarily expressing a grievance. (11) Misrepresentation in insurance applications. Making false or fraudulent statements or representations on or relative to an application for an insurance policy, for the purpose of obtaining a fee, commission, money, or other benefit from any insurers, agent, broker, or individual. (12) Failure of agent, broker, or insurer to act as fiduciary. Failure of any insurance agent, broker, or insurer to act as a fiduciary in regard to premiums, return premiums or other sums of money received by him or her in his or her capacity as insurance agent, insurance broker, or insurer by failure to pay or transmit in a timely manner those sums of money to the persons to whom it is owed. (13) Misrepresentation of services or products. Any person offering his or her, or its services or insurance policies to the public in such a way as to mislead or to fail to adequately disclose to the public the true nature of the policies or the services offered. (14) Nondisclosure of fees or charges. Failure of any agent or broker to obtain a prior written agreement with a client, policyholder, or other member of the public concerning fees or charges made by that agent or broker directly to the client, policyholder, or member of the public for that agent or broker procuring, servicing, or providing advice on insurance contracts. Commissions, expense allowances, bonuses, fees, or any other compensation received directly by agents or brokers from any legal entity engaged in the insurance business is exempt from this subdivision. (15) Financed premiums. Misrepresenting or failing to completely disclose the terms, conditions, or benefits of financing premiums for insurance policies where the financing of the premiums constitute part of the solicitation or sale of the policy. (16) Unsuitable policies. Soliciting, selling, or issuing an insurance policy when the person soliciting, selling, or issuing the policy has reason to know or should have reason to know that it is unsuitable for the person purchasing it. (17) Failure to instruct or supervise representatives. Failure of an employer or principal engaged in the business of insurance to instruct or supervise any full-time agent, or full-time adjuster, or full or part-time employee after that employer or principal has knowledge of a deceptive or unfair act or practice prohibited by this chapter which was committed by that agent, adjuster, or employee. (18) Doing business with a person known to be committing deceptive or unfair acts or using prohibited practices. Accepting business from or contracting with or continuing contractual relations with a person whom the other person knows or has or should have reason to know is repeatedly committing deceptive or unfair acts or practices prohibited by this title. (19) Failure to comply with filed rates, rules, regulations, or forms. Failure to comply with any rates, rules, regulations, or forms filed with the Commissioner.(20) HIV-related tests. Failing to comply with the provisions of this subdivision regarding HIV-related tests. HIV-related test means a test approved by the U.S. Food and Drug Administration, included in the current Centers for Disease Control and Prevention recommended laboratory HIV testing algorithm for serum or plasma specimens, used to determine the existence of HIV antibodies or antigens in the blood. (A) No person shall request or require that a person reveal having taken HIV-related tests in the past. (B)(i) No person shall request or require that an individual submit to an HIV-related test unless he or she has first obtained the individuals written informed consent to the test. Before written, informed consent may be granted, the individual shall be informed, by means of a printed information statement that shall have been read aloud to the individual by any agent of the insurer at the time of application or later and then given to the individual for review and retention, of the following: (I) an explanation of the test or tests to be given, including: the tests relationship to AIDS, the insurers purpose in seeking the test, potential uses and disclosures of the results, limitations on the accuracy of and the meaning of the tests results, the importance of seeking counseling about the individuals test results after those results are received, and the availability of information from and the telephone numbers of the Vermont Department of Health and the Centers for Disease Control and Prevention; and (II) an explanation that the individual is free to consult, at personal expense, with a personal physician or counselor or the Vermont Department of Health, which shall remain confidential, or to obtain an anonymous test at the individuals choice and personal expense, before deciding whether to consent to testing and that such delay will not affect the status of any application or policy; and (III) a summary of the individuals rights under this subdivision (20), including subdivisions (F)-(K); and (IV) an explanation that the person requesting or requiring the test, not the individual or the individuals health care provider, will be billed for the test, that the individual has a choice to receive the test results directly or to designate in writing prior to the administration of the test any other person through whom to receive the results, and any HIV positive test result from a test performed pursuant to this subdivision (20) shall be reported to the Vermont Department of Health pursuant to 18 V.S.A.  1001. (C) The forms for informed consent, information disclosure, and test results disclosure used for HIV-related testing shall be filed with and approved by the Commissioner pursuant to section 3541 of this title. (D) HIV-related tests required by insurers or insurance support organizations must be processed in a laboratory certified under the Clinical Laboratory Improvement Act, 42 U.S.C.  263a, or that meets the requirements of the federal Health Care Financing Administration under the Clinical Laboratory Improvement Amendments. (E) The test protocol shall be considered positive only if testing results meet the most current Centers for Disease Control and Prevention recommended laboratory HIV testing algorithm or more reliable confirmatory test or test protocol that has been approved by the U.S. Food and Drug Administration. (F) If the HIV-1/2 antibody differentiation test result is indeterminate, the insurer may delay action on the application, but no change in preexisting coverage, benefits, or rates under any separate policy or policies held by the individual shall be based upon such indeterminacy. If the HIV-1 NAT test result is negative, a new application for coverage shall not be denied by the insurer. If the HIV-1 NAT test is invalid, the full testing algorithm shall be repeated. No application for coverage shall be denied based on an indeterminate or invalid result. Any underwriting decision granting a substandard classification or exclusion based on the individuals prior HIV-related test results shall be reversed, and the company performing any previous HIV-related testing that had forwarded to a medical information bureau reports based upon the individuals prior HIV-related test results shall request the medical information bureau to remove any abnormal codes listed due to such prior test results. (G)(i) Upon the written request of an individual for a retest, an insurer shall retest, at the insurers expense, any individual who was denied insurance, or offered insurance on any other than a standard basis, because of the positive results of an HIV-related test: (I) once within the three-year period following the date of the most recent test; and(II) in any event, upon updates to the Centers for Disease Control and Prevention recommended laboratory HIV testing algorithm for serum or plasma specimens. (ii) If such retest is negative, a new application for coverage shall not be denied by the insurer based upon the results of the initial test. Any underwriting decision granting a substandard classification or exclusion based on the individuals prior HIV-related test results shall be reversed, and the company performing a retest which had forwarded to a medical information bureau reports based upon the individuals prior HIV-related test results shall request the medical information bureau to remove any abnormal codes listed due to such prior test results. (H) An insurer, on the basis of the individuals written informed consent as specified in subdivision (B) of this subdivision, if necessary to make underwriting decisions regarding the particular individuals application, may disclose the results of an individuals HIV-related test results to its reinsurers, or to those contractually retained medical personnel, laboratories, insurance support organizations, and insurance affiliates (but not agents or brokers) that are involved in underwriting decisions regarding the individuals particular application. Other than the disclosures permitted by this subdivision, the entities listed herein, including the insurer, shall not further disclose to anyone individually identified HIV-related test result information without a separately obtained written authorization from the individual; provided, however, that if an individuals test result is positive or indeterminate, then an insurer may report a code to the medical information bureau provided that a nonspecific test result code is used which does not indicate that the individual was subjected to HIV-related testing. (I) An insurer, reinsurer, contractually retained medical personnel, laboratories, medical information bureau, or other national data bank, insurance affiliate, or insurance support organizations that are obligated not to disclose any individually-identifiable records of HIV-related tests pursuant to this subdivision (20) shall have no duty to disclose this information to any person except in compliance with a court order or as provided in subdivision (B) or (H) nor shall it have any liability to any person for refusing or failing to disclose such information. (J) Any individual who sustains damage as a result of the unauthorized negligent or knowing disclosure of that individuals individually-identifiable HIV-related test result information in violation of subdivision (H) of this subdivision (20) may bring an action for appropriate relief in Superior Court against any person making such a disclosure. The Court may award costs and reasonable attorneys fees to the individual who prevails in an action brought under this subdivision. (K) In addition to any other remedy or sanction provided by law, after notice and opportunity for hearing the Commissioner may assess an administrative penalty in an amount not to exceed $2,000.00 for each violation against any person who violates any provision of this subdivision (20) or subdivision (7)(C) of this section. (21) Automobile glass services. In the case of claims for damage to automobile glass under a policy of insurance covering, in whole or in part, motor vehicles: (A) Failing to inform an insured, at the time a claim is made, of the right of the insured to choose freely any company or location for providing automobile glass services. (B) Intimidating, coercing, threatening, or misinforming an insured for the purpose of inducing the insured to use a particular company or location to provide automobile glass services. (22) Genetic testing. (A) Conditioning insurance rates, the provision or renewal of insurance coverage or benefits or other conditions of insurance for any individual on: (i) any requirement or agreement of the individual to undergo genetic testing; or(ii) the results of genetic testing of a member of the individuals family unless the results are contained in the individuals medical record. (B) As used in this subdivision, genetic testing shall be defined as the term is defined in 18 V.S.A.  9331(7). (ii) In addition, before drawing blood, the person doing so shall give the individual to be tested an informed consent form containing the information required by the provisions of this subdivision (B), and shall then obtain the individuals written informed consent. (Amended 1967, No. 186, eff. April 17, 1967; 1973, No. 216 (Adj. Sess.),  4, eff. May 1, 1974; 1975, No. 180 (Adj. Sess.); 1979, No. 28,  5; 1987, No. 194 (Adj. Sess.),  1, 2; 1991, No. 135 (Adj. Sess.),  7; 1991, No. 194 (Adj. Sess.); 1997, No. 160 (Adj. Sess.),  5a, eff. Jan. 1, 1999; 1999, No. 91 (Adj. Sess.),  17, eff. Jan. 1, 2001; 2001, No. 23,  1; 2007, No. 41,  9; 2007, No. 73,  3, eff. April 1, 2008; 2019, No. 57,  15; 2019, No. 103 (Adj. Sess.),  22; 2021, No. 139 (Adj. Sess.),  8, eff. May 27, 2022.) 
 4725. Favored agent or insurer; coercion of debtors
(a) No person may:(1) require, as a condition precedent to the lending of money or extension of credit, or any renewal thereof, that the person to whom such money or credit is extended or whose obligation the creditor is to acquire or finance, negotiate any policy or contract of insurance through a particular insurer or group of insurers or agent or broker or group of agents or brokers; (2) unreasonably disapprove the insurance policy provided by a borrower for the protection of property securing the credit or lien; for the purpose of this subdivision this disapproval shall be deemed unreasonable if it is not based solely on reasonable standards uniformly applied, relating to the extent of coverage required and the financial soundness and service of an insurer; these standards shall not discriminate against a particular type of insurer, nor shall these standards call for the disapproval of an insurance policy because the policy contains coverage in addition to that required; (3) require directly or indirectly that any borrower, mortgagor, purchaser, insurer, broker, or agent pay a separate charge to substitute the insurance policy of one insurer for that of another. This subdivision does not include the interest which may be charged on premium loans or premium advancements in accordance with the security instrument; (4) use or disclose information resulting from a requirement that a borrower, mortgagor or purchaser furnish insurance of any kind on real property being conveyed or used as collateral security to a loan, when this information is to the advantage of the mortgagee, vendor, or lender, or is to the detriment of the borrower, mortgagor, purchaser, insurer, or the agent of broker complying with this request. (b) The Commissioner may investigate any person to whom this section applies to determine whether such person has violated this section. (Amended 1973, No. 216 (Adj. Sess.),  5, eff. May 1, 1974.) 
 4726. Power of Commissioner; enforcement
(a) The Commissioner shall have the power to examine and investigate any person engaged in the business of insurance in this State in order to determine whether that person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice. (b) Any person violating any of the provisions of this chapter may be subject to an administrative penalty of not more than $1,000.00 for each violation. The Commissioner may impose an administrative penalty of not more than $10,000.00 each for those violations the Commissioner finds were willful. The Commissioner may suspend or revoke the license of any insurer or organization for any violation of this chapter or the failure to comply with an order of the Commissioner issued under this chapter. (c) The powers vested in the Commissioner by this chapter shall be in addition to any other powers to enforce any penalties, fines, or forfeitures authorized by law with respect to the methods, acts, and practices hereby declared to be unfair or deceptive. (Amended 1973, No. 216 (Adj. Sess.),  6, eff. May 1, 1974; 1979, No. 28  6; 1995, No. 167 (Adj. Sess.),  19, eff. May 15, 1996; 2021, No. 105 (Adj. Sess.),  225, eff. July 1, 2022.) 
 4727. Personal insurance; use of credit information
(a) Purpose. The purpose of this section is to regulate the use of credit information for personal insurance so that consumers are afforded certain protections with respect to the use of such information. (b) Scope. This section applies to personal insurance and not to commercial insurance. As used in this section, personal insurance means private passenger automobile, homeowners, motorcycle, mobile home owners, and noncommercial dwelling fire insurance policies. Such policies must be underwritten for personal, family, or household use. No other types of insurance shall be included as personal insurance for the purpose of this section. (c) Definitions. As used in this section:(1) Adverse action means a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of personal insurance. (2) Affiliate means any company that controls, is controlled by, or is under common control with another company. (3) Applicant means an individual who has applied to be covered by a personal insurance policy with an insurer. (4) Consumer means an insured whose credit information is used or whose insurance score is calculated in the underwriting or rating of a personal insurance policy or an applicant for such a policy. (5) Consumer reporting agency means any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties. (6) Credit information means any credit related information derived from a credit report, found on a credit report itself, or provided on an application for personal insurance. Information that is not credit related shall not be considered credit information, regardless of whether it is contained in a credit report or in an application or is used to calculate an insurance score. (7) Credit report means any written, oral, or other communication of information by a consumer reporting agency bearing on a consumers credit worthiness, credit standing, or credit capacity that is used or expected to be used or collected in whole or in part for the purpose of serving as a factor to determine personal insurance premiums, eligibility for coverage, or tier placement. (8) Insurance score means a number or rating that is derived from an algorithm, computer application, model, or other process that is based in whole or in part on credit information for the purposes of predicting the future insurance loss exposure of an individual applicant or insured. (d) Use of credit information. An insurer authorized to do business in this State that uses credit information to underwrite or rate risks shall not: (1) Use an insurance score that is calculated using income, gender, address, zip code, ethnic group, religion, marital status, or nationality of the consumer as a factor. (2) Deny, cancel, or nonrenew a policy of personal insurance solely on the basis of credit information without consideration of any other applicable underwriting factor independent of credit information and not expressly prohibited by subdivision (1) of this subsection. (3) Base an insureds renewal rates for personal insurance solely upon credit information without consideration of any other applicable factor independent of credit information. (4) Take an adverse action against a consumer solely because he or she does not have a credit card account without consideration of any other applicable factor independent of credit information. (5) Consider an absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance unless the insurer does one of the following: (A) treats the consumer as otherwise approved by the Commissioner if the insurer presents information that such an absence or inability relates to the risk for the insurer; (B) treats the consumer as if the applicant or insured had neutral credit information, as defined by the insurer; or (C) excludes the use of credit information as a factor and uses only other underwriting criteria. (6) Take an adverse action against a consumer based on credit information unless an insurer obtains and uses a credit report issued or an insurance score calculated within 90 days from the date the policy is first written or renewal is issued. (7) Use credit information unless not later than every 36 months following the last time that the insurer obtained current credit information for the insured, the insurer recalculates the insurance score or obtains an updated credit report. Regardless of the requirements of this subsection: (A) At annual renewal, upon the request of a consumer or the consumers agent, the insurer shall reunderwrite and rerate the policy based upon a current credit report or insurance score. An insurer need not recalculate the insurance score or obtain the updated credit report of a consumer more frequently than once in a 12-month period. (B) The insurer shall have the discretion to obtain current credit information upon any renewal before the 36 months if consistent with its underwriting guidelines. (C) No insurer need obtain current credit information for an insured, despite the requirements of subdivision (A) of this subdivision (7), if one of the following applies: (i) The insurer is treating the consumer as otherwise approved by the Commissioner.(ii) The insured is in the most favorably priced tier of the insurer within a group of affiliated insurers. However, the insurer shall have the discretion to order such report if consistent with its underwriting guidelines. (iii) Credit was not used for underwriting or rating such insured when the policy was initially written. However, the insurer shall have the discretion to use credit for underwriting or rating such insured upon renewal if consistent with its underwriting guidelines. (iv) The insurer reevaluates the insured beginning not later than 36 months after inception and thereafter based upon other underwriting or rating factors, excluding credit information. (8) Use the following as a negative factor in any insurance scoring methodology or in reviewing credit information for the purpose of underwriting or rating a policy of personal insurance: (A) credit inquiries not initiated by the consumer or inquiries requested by the consumer for his or her own credit information; (B) inquiries relating to insurance coverage, if so identified on a consumers credit report; (C) collection accounts with a medical industry code, if so identified on the consumers credit report; (D) multiple lender inquiries if coded by the consumer reporting agency on the consumers credit report as being from the home mortgage industry and made within 30 days of one another unless only one inquiry is considered; and (E) multiple lender inquiries if coded by the consumer reporting agency on the consumers credit report as being from the automobile lending industry and made within 30 days of one another unless only one inquiry is considered. (e)(1) Extraordinary life circumstances. Notwithstanding any other law or rule to the contrary, an insurer that uses credit information shall, on written request from an applicant for insurance coverage or an insured, provide reasonable exceptions to the insurers rates, rating classifications, company or tier placement, or underwriting rules or guidelines for a consumer who has experienced and whose credit information has been directly influenced by any of the following events: (A) a catastrophic event, as declared by the federal or State government;(B) a serious illness or injury or a serious illness or injury to an immediate family member; (C) the death of a spouse, child, or parent;(D) divorce or involuntary interruption of legally owed alimony or support payments;(E) identity theft;(F) the temporary loss of employment for a period of three months or more if it results from involuntary termination; (G) military deployment overseas; or(H) other events as determined by the insurer.(2) If an applicant or insured submits a request for an exception as set forth in subdivision (1) of this subsection, an insurer may, in its sole discretion, but is not mandated to: (A) require the consumer to provide reasonable written and independently verifiable documentation of the event; (B) require the consumer to demonstrate that the event had direct and meaningful impact on the consumers credit information; (C) require such request be made not more than 60 days from the date of the application for insurance or the policy renewal; (D) grant an exception despite the consumer not providing the initial request for an exception in writing; or (E) grant an exception where the consumer asks for consideration of repeated events or the insurer has considered this event previously. (3) An insurer is not out of compliance with any law or rule relating to underwriting, rating, or rate filing as a result of granting an exception under this section. Nothing in this section shall be construed to provide a consumer or other insured with a cause of action that does not exist in the absence of this section. (4) The insurer shall provide notice to consumers that reasonable exceptions are available and information about how the consumer may inquire further. (5) Within 30 days following the insurers receipt of sufficient documentation of an event described in subdivision (1) of this subsection, the insurer shall inform the consumer of the outcome of the request for a reasonable exception. Such communication shall be in writing or provided to an applicant in the same medium as the request. (f) Dispute resolution and error correction. If it is determined through the dispute resolution process set forth in the federal Fair Credit Reporting Act, 15 U.S.C.  1681i(a)(5), that the credit information of a current insured was incorrect or incomplete and if the insurer receives notice of such determination from either the consumer reporting agency or from the insured, the insurer shall reunderwrite and rerate the consumer within 30 days following receiving the notice. After reunderwriting or rerating the insured, the insurer shall make any adjustments necessary, consistent with its underwriting and rating guidelines. If an insurer determines that the insured has overpaid the premium, the insurer shall refund to the insured the amount of overpayment calculated back to the shorter of either the last 12 months of coverage or the actual policy period. (g)(1) Initial notification. If an insurer writing personal insurance uses credit information in underwriting or rating a consumer, the insurer or its agent shall disclose, either on the insurance application or at the time the insurance application is taken, that it may obtain credit information in connection with such application. Such disclosure shall be either written or provided to an applicant in the same medium as the application for insurance. The insurer need not provide the disclosure statement required under this section to any insured on a renewal policy if such consumer has previously been provided a disclosure statement. (2) Use of the following example disclosure statement constitutes compliance with this section: In connection with this application for insurance, we may review your credit report or obtain or use a credit-based insurance score based on the information contained in that credit report. We may use a third party in connection with the development of your insurance score. (h) Adverse action notification. If an insurer takes an adverse action based upon credit information, the insurer must meet the notice requirements of this subsection. Such insurer shall: (1) Provide notification to the consumer that an adverse action has been taken, in accordance with the requirements of the federal Fair Credit Reporting Act, 15 U.S.C.  1681m(a). (2) Provide notification to the consumer explaining the reason for the adverse action. The reasons must be provided in sufficiently clear and specific language so that a person can identify the basis for the insurers decision to take an adverse action. Such notification shall include a description of up to four factors that were the primary influences of the adverse action. The use of generalized terms such as poor credit history, poor credit rating, or poor insurance score does not meet the explanation requirements of this subsection. Standardized credit explanations provided by consumer reporting agencies or other third-party vendors are deemed to comply with this section. (i) Plain language. In any written communication or notification to a consumer pursuant to this section, an insurer shall use clear and plain language that is understandable to the average consumer. (j) Filing. Insurers that use insurance scores to underwrite and rate risks must file their scoring models, or other scoring processes, with the Department of Financial Regulation. A third party may file scoring models on behalf of insurers. A filing that includes insurance scoring may include loss experience justifying the use of credit information. Any filing relating to credit information is considered a trade secret and is not subject to disclosure under Vermonts Public Records Act. (k) Indemnification. An insurer shall indemnify, defend, and hold agents harmless from and against all liability, fees, and costs arising out of or relating to the actions, errors, or omissions of a producer who obtains or uses credit information or insurance scores, or both, for an insurer, provided the producer follows the instructions of or procedures established by the insurer and complies with any applicable law or rule. Nothing in this section shall be construed to provide a consumer or other insured with a cause of action that does not exist in the absence of this section. (l) Sale of policy term information by consumer reporting agency. A consumer reporting agency shall not provide or sell data or lists that include any information that in whole or in part was submitted in conjunction with an insurance inquiry about a consumers credit information or a request for a credit report or insurance score. Such information includes the expiration dates of an insurance policy or any other information that may identify time periods during which a consumers insurance may expire and the terms and conditions of the consumers insurance coverage. The restrictions provided in this subsection do not apply to data or lists the consumer reporting agency supplies to the insurance producer from whom information was received, the insurer on whose behalf such producer acted, or such insurers affiliates or holding companies. Nothing in this section shall be construed to restrict any insurer from being able to obtain a claims history report or a motor vehicle report. (Added 2017, No. 179 (Adj. Sess.),  6, eff. May 28, 2018.) 
 4728. Insurance Data Security
(a) Title. This section shall be known and may be cited as the Vermont Insurance Data Security Law. (b) Construction. (1) Notwithstanding any other provision of law, this section establishes the exclusive State standards applicable to licensees for data security and for the investigation of a cybersecurity event. (2) This section shall not be construed to change any aspect of the Security Breach Notice Act, 9 V.S.A.  2435. (3) This section may not be construed to create or imply a private cause of action for violation of its provisions, nor may it be construed to curtail a private cause of action that would otherwise exist in the absence of this section. (4) A licensee in compliance with N.Y. Comp. Codes R. & Regs. Title 23, section 500, Cybersecurity Requirements for Financial Services Companies, effective March 1, 2017, shall be considered to meet the requirements of this section, provided that the licensee submits a written statement to the Commissioner certifying such compliance. (c) Definitions. As used in this section:(1) Authorized person means a person known to and screened by the licensee and determined to be necessary and appropriate to have access to the nonpublic information held by the licensee and its information systems. (2) Consumer means an individual, including an applicant, policyholder, insured, beneficiary, claimant, or certificate holder, who is a resident of this State and whose nonpublic information is in a licensees possession, custody, or control. (3) Cybersecurity event means an event resulting in unauthorized access to or disruption or misuse of an information system or nonpublic information stored on such information system. The term cybersecurity event does not include: (A) the unauthorized acquisition of encrypted nonpublic information if the encryption, protective process, or key is not also acquired, released, or used without authorization; or (B) an event with regard to which the licensee has determined that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed. (4) Encrypted means the transformation of data into a form that results in a low probability of assigning meaning without the use of a protective process or key. (5) Information security program means the administrative, technical, and physical safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information. (6) Information system means a discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic information, as well as any specialized system such as an industrial/process controls system, telephone switching and private branch exchange system, or environmental control system. (7) Licensee means a person licensed, authorized to operate, or registered or required to be licensed, authorized, or registered pursuant to the insurance laws of this State, but shall not include: (A) a captive insurance company;(B) a purchasing group or risk retention group chartered; or(C) a licensee domiciled in a jurisdiction other than this State or a person that is acting as an assuming insurer for a licensee domiciled in this State. (8) Multi-factor authentication means authentication through verification of at least two of the following types of authentication factors: (A) a knowledge factor, such as a password;(B) a possession factor, such as a token or text message on a mobile phone; or(C) an inherence factor, such as a biometric characteristic.(9) Nonpublic information means information that is not publicly available information and is: (A) business-related information of a licensee, the tampering with which or unauthorized disclosure, access, or use of which would cause a material adverse impact to the business, operations, or security of the licensee; (B) information concerning a consumer that, because of name, number, personal mark, or other identifier, can be used to identify such consumer, in combination with any one or more of the following data elements: (i) Social Security number;(ii) drivers license number or nondriver identification card number;(iii) individual taxpayer identification number;(iv) passport number;(v) military identification card number;(vi) financial account number or credit or debit card number;(vii) security code, access code, or password that would permit access to a consumers financial account; or (viii) biometric record;(C) information or data, except age or gender, in any form or medium created by or derived from a health care provider or a consumer, that relates to: (i) the past, present, or future physical, mental, or behavioral health or condition of any consumer or a member of the consumers family; (ii) the provision of health care to any consumer; or(iii) payment for the provision of health care to any consumer.(10)(A) Publicly available information means information that a licensee has a reasonable basis to believe is lawfully made available to the general public from federal, state, or local government records; widely distributed media; or disclosures to the general public that are required to be made by federal, state, or local law. (B) As used in this subdivision, a licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine: (i) that the information is of the type that is available to the general public; and(ii) whether a consumer can direct that the information not be made available to the general public and, if so, that the consumer has not done so. (11) Risk assessment means the risk assessment that each licensee is required to conduct under subdivision (d)(3) of this section. (12) Third-party service provider means a person, not otherwise defined as a licensee, that contracts with a licensee to maintain, process, or store nonpublic information or is otherwise permitted access to nonpublic information through its provision of services to the licensee. (d) Information security program. (1) Commensurate with the size and complexity of the licensee, the nature and scope of the licensees activities, including its use of third-party service providers, and the sensitivity of the nonpublic information used by the licensee or in the licensees possession, custody, or control, each licensee shall develop, implement, and maintain a comprehensive written information security program that is based on the licensees risk assessment and contains administrative, technical, and physical safeguards for the protection of nonpublic information and the licensees information system. (2) A licensees information security program shall be designed to:(A) protect the security and confidentiality of nonpublic information and the security of the information system; (B) protect against any threats or hazards to the security or integrity of nonpublic information and the information system; (C) protect against unauthorized access to or use of nonpublic information and minimize the likelihood of harm to any consumer; and (D) define and periodically reevaluate a schedule for retention of nonpublic information and a mechanism for its destruction when no longer needed. (3) The licensee shall:(A) designate one or more employees, an affiliate, or an outside vendor designated to act on behalf of the licensee to be responsible for the information security program; (B) identify reasonably foreseeable internal or external threats that could result in unauthorized access, transmission, disclosure, misuse, alteration, or destruction of nonpublic information, including the security of information systems and nonpublic information that are accessible to or held by third-party service providers; (C) assess the likelihood and potential damage of these threats, taking into consideration the sensitivity of the nonpublic information; (D) assess the sufficiency of policies, procedures, information systems, and other safeguards in place to manage these threats, including consideration of threats in each relevant area of the licensees operations, including: (i) employee training and management;(ii) information systems, including network and software design, as well as information classification, governance, processing, storage, transmission, and disposal; and (iii) detecting, preventing, and responding to attacks, intrusions, or other systems failures; and (E) implement information safeguards to manage the threats identified in its ongoing assessment and, not less than annually, assess the effectiveness of the safeguards key controls, systems, and procedures. (4) Based on its risk assessment, the licensee shall:(A) Design its information security program to mitigate the identified risks, commensurate with the size and complexity of the licensee, the nature and scope of the licensees activities, including its use of third-party service providers, and the sensitivity of the nonpublic information used by the licensee or in the licensees possession, custody, or control. (B) Determine which security measures listed below are appropriate and implement such security measures: (i) place access controls on information systems, including controls to authenticate and permit access only to authorized persons to protect against the unauthorized acquisition of nonpublic information; (ii) identify and manage the data, personnel, devices, systems, and facilities that enable the organization to achieve business purposes in accordance with their relative importance to business objectives and the organizations risk strategy; (iii) restrict physical access to nonpublic information to authorized persons only;(iv) protect by encryption or other appropriate means all nonpublic information while being transmitted over an external network and all nonpublic information stored on a laptop computer or other portable computing or storage device or media; (v) adopt secure development practices for in-house developed applications utilized by the licensee and procedures for evaluating, assessing, or testing the security of externally developed applications utilized by the licensee; (vi) modify the information system in accordance with the licensees information security program; (vii) utilize effective controls, which may include multi-factor authentication procedures, for any individual accessing nonpublic information; (viii) regularly test and monitor systems and procedures to detect actual and attempted attacks on or intrusions into information systems; (ix) include audit trails within the information security program designed to detect and respond to cybersecurity events and reconstruct material financial transactions sufficient to support normal operations and obligations of the licensee; (x) implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, such as fire and water damage or other catastrophes or technological failures; and (xi) develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format. (C) Include cybersecurity risks in the licensees enterprise risk management process.(D) Stay informed regarding emerging threats and vulnerabilities and utilize reasonable security measures when sharing information relative to the character of the sharing and the type of information shared. (E) Provide its personnel with cybersecurity awareness training that is updated as necessary to reflect risks identified by the licensee in the risk assessment. (5)(A) If the licensee has a board of directors, the board or an appropriate committee of the board shall, at a minimum: (i) require the licensees executive management or its delegates to develop, implement, and maintain the licensees information security program; (ii) require the licensees executive management or its delegates to report in writing at least annually the following information: (I) the overall status of the information security program and the licensees compliance with this section; and (II) material matters related to the information security program, addressing issues such as risk assessment; risk management and control decisions; third-party service provider arrangements; results of testing, cybersecurity events, or violations and managements responses thereto; and recommendations for changes in the information security program. (B) If executive management delegates any of its responsibilities under subsection (d) of this section, it shall oversee the development, implementation, and maintenance of the licensees information security program prepared by the delegate or delegates and shall receive a report from the delegate or delegates complying with the requirements of the report to the board of directors. (6)(A) A licensee shall exercise due diligence in selecting its third-party service provider.(B) A licensee shall require a third-party service provider to implement appropriate administrative, technical, and physical measures to protect and secure the information systems and nonpublic information that are accessible to or held by the third-party service provider. (7) A licensee shall monitor, evaluate, and adjust, as appropriate, the information security program consistent with any relevant changes in technology, the sensitivity of its nonpublic information, internal or external threats to information, and the licensees own changing business arrangements, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems. (8)(A) As part of its information security program, a licensee shall establish a written incident response plan designed to promptly respond to and recover from any cybersecurity event that compromises the confidentiality, integrity, or availability of nonpublic information in its possession; the licensees information systems; or the continuing functionality of any aspect of the licensees business or operations. (B) The incident response plan shall address the following areas:(i) the internal process for responding to a cybersecurity event;(ii) the goals of the incident response plan;(iii) the definition of clear roles, responsibilities, and levels of decision-making authority;(iv) external and internal communications and information sharing;(v) identification of requirements for the remediation of any identified weaknesses in information systems and associated controls; (vi) documentation and reporting regarding cybersecurity events and related incident response activities; and (vii) the evaluation and revision as necessary of the incident response plan following a cybersecurity event. (9) Annually, each insurer domiciled in this State shall submit to the Commissioner a written statement on or before April 15, certifying that the insurer is compliant with the requirements established in this subsection. Each insurer shall maintain for examination by the Commissioner all records, schedules, and data supporting this certificate for a period of five years. To the extent an insurer has identified areas, systems, or processes that require material improvement, updating, or redesign, the insurer shall document the identification and the remedial efforts planned and underway to address such areas, systems, or processes. Such documentation shall be available for inspection by the Commissioner. (e) Investigation of a cybersecurity event. (1) If the licensee learns that a cybersecurity event has or may have occurred, the licensee or an outside vendor or service provider, or both, designated to act on behalf of the licensee shall conduct a prompt investigation. (2) During the investigation, the licensee or an outside vendor or service provider, or both, designated to act on behalf of the licensee shall, at a minimum, make the best effort to: (A) determine whether a cybersecurity event has occurred;(B) assess the nature and scope of the cybersecurity event;(C) identify any nonpublic information that may have been involved in the cybersecurity event; and (D) perform or oversee reasonable measures to restore the security of the information systems compromised in the cybersecurity event in order to prevent further unauthorized acquisition, release, or use of nonpublic information in the licensees possession, custody, or control. (3) The licensee shall maintain records concerning all cybersecurity events for a period of at least five years from the date of the cybersecurity event and shall produce those records upon demand of the Commissioner. (f) Power of Commissioner. (1) The Commissioner shall have power to examine and investigate into the affairs of any licensee to determine whether the licensee has been or is engaged in any conduct in violation of this section. This power is in addition to the powers the Commissioner has under section 4726 of this title and 9 V.S.A.  2435(h)(2). Any such investigation or examination shall be conducted pursuant to section 4726 of this title. (2) Whenever the Commissioner has reason to believe that a licensee has been or is engaged in conduct in this State that violates this section, the Commissioner may take action that is necessary or appropriate to enforce the provisions of this section. (g) Confidentiality. (1) Any documents, materials or other information in the control or possession of the Commissioner that are furnished by a licensee or an employee or agent thereof acting on behalf of the licensee pursuant to subdivision (d)(8) of this section, or that are obtained by the Commissioner in an investigation or examination pursuant to subsection (f) of this section, shall be confidential by law and privileged, shall not be subject to 1 V.S.A.  315320, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the 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 Commissioners duties. (2) Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subdivision (1) of this subsection. (3) To assist in the performance of the Commissioners duties under this section, the Commissioner may: (A) share documents, materials, or other information, including confidential and privileged documents, materials, or information subject to subdivision (1) of this subsection, with other state, federal, and international regulatory agencies, the National Association of Insurance Commissioners, its affiliates or subsidiaries, and state, federal, and international law enforcement authorities, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information shared; (B) receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the National Association of Insurance Commissioners, 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; (C) share documents, materials, or other information subject to subdivision (1) of this subsection with a third-party consultant or vendor, provided that the consultant agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information shared; and (D) enter into agreements governing the sharing and use of information consistent with this subsection. (4) No waiver of any applicable privilege or claim of confidentiality in any document, material, or information shall occur as a result of its disclosure to the Commissioner under this section or as a result of sharing as authorized in subdivision (3) of this subsection. (5) Nothing in this section shall prohibit the Commissioner from releasing final adjudicated actions that are open to public inspection pursuant to 1 V.S.A.  315320 to a database or other clearinghouse service maintained by the National Association of Insurance Commissioners or its affiliates or subsidiaries. (h) Exceptions. (1) The following exceptions apply to this section:(A) A licensee with fewer than 20 employees, including any independent contractors, is exempt from subsection (d) of this section. (B) A licensee that is in possession of protected health information subject to the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Pub. L. No. 104191, 110 Stat. 1936, that has established and maintains an information security program pursuant to such statutes and the rules, regulations, procedures, or guidelines established under HIPAA, is considered to meet the requirements of subsection (d) of this section, provided that the licensee is compliant with, and annually submits a written statement to, the Commissioner certifying its compliance with such program. As used in this section, the definition of protected health information is as set forth in HIPAA and the regulations promulgated under HIPAA and shall be considered to be a subset of nonpublic information. (C) An employee, agent, representative, or designee of a licensee, who is also a licensee, is exempt from subsection (d) of this section and need not develop its own information security program to the extent that the employee, agent, representative, or designee is covered by the information security program of the other licensee. (D) A licensee that is affiliated with a financial institution, as defined in subdivision 11101(32) of this title, or a credit union, as defined in subdivision 30101(5) of this title, that has established and maintains an information security program in compliance with the interagency guidelines establishing standards for safeguarding customer information as set forth in section 501(b) of the Gramm-Leach-Bliley Act, 15 U.S.C.  6801 et seq., is considered to meet the requirements of subsection (d) of this section, provided that the licensee produces, upon request, documentation satisfactory to the Commissioner that independently validates the affiliated financial institutions or credit unions adoption of an information security program that satisfies the interagency guidelines. (2) In the event that a licensee ceases to qualify for an exception, such licensee shall have 180 days to comply with this section. (i) Penalties. In the case of a violation of this section, a licensee may be penalized in accordance with section 3661 or 4726 of this title, as appropriate. (j) Effective date. This section shall take effect on January 1, 2023. A licensee shall have one year from the effective date of this section to implement subsection (d) of this section, other than subdivision (d)(6) of this section. A licensee shall have two years from the effective date of this section to implement subdivision (d)(6) of this section. (Added 2021, No. 139 (Adj. Sess.),  20, eff. May 27, 2022.) 
 4750. Insurer anti-fraud plans
(a) Every insurer with direct written premiums shall prepare, implement, and maintain an insurance anti-fraud plan. Each insurers anti-fraud plan shall outline specific procedures, appropriate to the type of insurance the insurer writes in this State, to: (1) Prevent, detect, and investigate all forms of insurance fraud, including fraud involving the insurers employees or agents; fraud resulting from misrepresentations in the application, renewal, or rating of insurance policies; claims fraud; and security of the insurers data processing systems. (2) Educate appropriate employees on fraud detection and the insurers anti-fraud plan.(3) Provide for the hiring of or contracting for fraud investigators.(4) Report insurance fraud to appropriate law enforcement and regulatory authorities in the investigation and prosecution of insurance fraud. (5) Where appropriate, pursue restitution for financial loss caused by insurance fraud.(6) Ensure that applicable State and federal privacy laws are complied with and that the confidential personal and financial information of consumers and insureds is protected. (7) Comply with such other procedures as the Commissioner may require by rule.(b) The Commissioner may require an insurer to file annually its anti-fraud plan with the Department and an annual summary of the insurers anti-fraud activities and results, including misclassification and miscoding. A workers compensation insurer shall file an anti-fraud plan with the Department of Labor, including information about fraud investigations, referrals, or prosecutions involving Vermont workers compensation claims, misclassifications, and miscoding, if requested by the Commissioner of Labor. Information regarding fraud investigations and referrals shall not be public unless the Commissioner of Labor or the Attorney General commences administrative or criminal proceedings. As used in this subsection: (1) Misclassification means improperly classifying employees as independent contractors for the purposes of workers compensation insurance or unemployment insurance, as the context dictates. (2) Miscoding means the improper categorization of employees under the National Council on Compensation Insurance (NCCI) worker classification codes, which account for varying levels of risk attributable to different job types for the purposes of determining workers compensation insurance premiums. (c) This section confers no private rights of action. This section does not affect private rights of action conferred under other laws or court decisions. (d) Enforcement. Notwithstanding any other provision of this title, the following are the exclusive monetary penalties for violation of this section. Insurers that fail to prepare, implement, maintain, or submit to the Department of Financial Regulation an insurance anti-fraud plan are subject to a penalty of $500.00 per day, not to exceed $10,000.00. (Added 2005, No. 179 (Adj. Sess.),  2, eff. Jan. 1, 2007; amended 2007, No. 208 (Adj. Sess.),  3; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4791. Definitions
As used in this chapter:(1) Surplus lines insurance broker means an individual who solicits, negotiates, or procures a policy of insurance in an insurance company not licensed to transact business in this State which cannot be procured from insurers licensed to do business in this State. All transactions under the license shall be subject to the provisions of this title. Nothing contained in this chapter shall prevent a surplus lines insurance broker from assigning or transferring all or part of his or her commissions or compensation to any producer duly licensed under the provisions of this chapter. (2) Consultant means an individual, resident, or nonresident who, for a fee, holds himself or herself out to the public as engaged in the business of offering any advice, counsel, opinion, or service with respect to the benefits, advantages, or disadvantages promised under any policy of insurance that could be issued in this State. (3) Adjuster means any person who investigates claims or negotiates settlement of claims arising under policies of insurance in behalf of insurers under such policies, or who advertises or solicits business from insurers as an adjuster. Lawyers settling claims of clients shall not be considered an adjuster. A license as an adjuster shall not be required of an official or employee of a domestic fire or casualty insurance company or of a duly licensed resident insurance producer of a domestic or duly licensed foreign insurer who is authorized by such insurer to appraise losses under policies issued by such insurer. (4) Public adjuster means any person who investigates claims or negotiates settlement of claims arising under policies of insurance in behalf of the insured under such policies or who advertises or solicits business as such adjuster. Lawyers settling claims of clients shall not be deemed to be insurance public adjusters. (5) Appraiser means any person who, for compensation, appraises the loss or damage under policies of automobile insurance on the behalf of the insurers under such policies. A license as an appraiser will not be required of an official or employee of a domestic fire or casualty insurance company or of a duly licensed resident insurance producer of a domestic or duly admitted foreign insurer who is authorized by such insurer to appraise losses under policies issued by such insurer. A license will not be required of an automobile repair shop or repair facility which makes an appraisal at the request of the insured or insurer. (6) Insurance producer means a person required to be licensed under the laws of this State to sell, solicit, or negotiate insurance. (7) Limited lines producer means a person authorized by the Commissioner to sell, solicit, or negotiate limited lines insurance as defined in subchapter 1A of this chapter. (8) Business entity means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity. (9) Business entity limited lines producer means a business entity, as defined in subdivision (8) of this section, that is also a limited lines producer, as defined in subdivision (7) of this section. (Amended 1969, No. 175 (Adj. Sess.),  4, eff. March 5, 1970; 1973, No. 217 (Adj. Sess.),  1; 1981, No. 210 (Adj. Sess.),  1; 1993, No. 30,  16, eff. May 21, 1993; 2001, No. 97 (Adj. Sess.),  3; 2015, No. 149 (Adj. Sess.),  30; 2019, No. 57,  20.) 
 4793. General license requirements
(a) No person, partnership, association, or corporation shall act as or hold himself or herself out to be an insurance producer, surplus lines insurance broker, managing general agent, reinsurance intermediary, limited lines producer, consultant, insurance adjuster, or insurance appraiser unless duly licensed. (b) No insurance producer, surplus lines insurance broker or limited lines producer shall make application for, procure, negotiate for or place for others, any lines of insurance as to which he or she is not then qualified and duly licensed. (c) No person shall investigate or negotiate settlement of any claim arising under 21 V.S.A. chapters 9 and 11 unless the person is licensed as a workers compensation adjuster under this subchapter. (Amended 1969, No. 175 (Adj. Sess.),  5, eff. March 5, 1970; 1973, No. 217 (Adj. Sess.),  3; 1991, No. 249 (Adj. Sess.),  19; 1993, No. 225 (Adj. Sess.),  24; 2001, No. 97 (Adj. Sess.),  4.) 
 4795. Controlled business
(a) The Commissioner shall not grant, renew, continue, or permit to continue any license except for life insurance if he or she finds that the license is being or will be used by the applicant or licensee for the purpose of writing controlled business. Controlled business means: (1) Insurance written on the interests of the licensee or those of his or her immediate family or of his or her employer; or (2) Insurance covering himself or herself or members of his or her immediate family or a corporation, association, or partnership, or the officers, directors, substantial stockholders, partners, employees of the corporation, association, or partnership, of which he or she or a member of his or her immediate family is an officer, director, substantial stockholder, partner, associate, or employee. Provided, however, that nothing in this subdivision shall apply to insurance written in connection with credit transactions. (b) The license shall be deemed to have been, or intended to be, used for the purpose of writing controlled business, if the Commissioner finds that during any 12-month period the aggregate commissions earned from the controlled business has exceeded 25 percent of the aggregate commission earned on all business written by the applicant or licensee during the same period. (Amended 1969, No. 175 (Adj. Sess.),  6, eff. March 5, 1970; 1973, No. 217 (Adj. Sess.),  5.) 
 4796. Commissions; payment; acceptance
(a) An insurance company, insurance producer, limited lines, or surplus lines broker shall not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance in this State if that person is required to be licensed under this chapter and is not so licensed. (b) A person shall not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, or negotiating insurance in this State if that person is required to be licensed under this chapter and is not so licensed. (c) Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance in this State if that person was required to be licensed under this chapter at the time of the sale, solicitation, or negotiation and was so licensed at the time. (d) An insurer, insurance producer, or limited lines producer may pay or assign commissions, service fees, brokerages, or other valuable consideration to an insurance agency or to persons who do not sell, solicit, or negotiate insurance in this State, unless the payment would violate subdivision 4724(8) of this title. (e) A person licensed under this chapter shall not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, negotiating, or otherwise orchestrating the sale, enrollment, membership, or other connection between a Vermont resident and any arrangement involving the sharing of health-related expenses that is not insurance as defined in section 3301a of this title. (Amended 1973, No. 217 (Adj. Sess.),  6; 2001, No. 97 (Adj. Sess.),  5; 2019, No. 63,  8, eff. June 17, 2019.) 
 4797. License contents
The license shall state the name, address, date of issue, the renewal, or expiration date, the line or lines of insurance covered by the license, and such other information as the Commissioner deems proper for inclusion. (Amended 1967, No. 39,  1; 1971, No. 14,  1, eff. March 11, 1971; 1973, No. 217 (Adj. Sess.),  7; 1975, No. 78,  3; 2001, No. 97 (Adj. Sess.),  6.) 
 4798. Term of license
(a) Except as provided by subsections (b) and (d) of this section, all licenses issued pursuant to this subchapter shall continue in force not longer than 24 months. (b)(1) All licenses of insurance producers and limited lines producers issued pursuant to this subchapter shall expire as of 12:01 a.m. oclock on the first day of April of the odd-numbered year next following date of issuance; and (2) all other license types issued pursuant to this subchapter shall expire as of 12:01 a.m. oclock on the first day of April of the even-numbered year following the date of issuance; unless (3) the licensee prior to the expiration of the license has filed with the Commissioner, on forms prescribed and furnished by the Commissioner, a request for renewal of such license for an ensuing 24-month period. Such request must be accompanied by payment of the renewal fee as provided in subdivision 4800(2) of this title. (c) In order to spread continuation of insurance producer and limited lines producer appointment renewals with reasonable uniformity throughout the calendar year, the Commissioner may fix a date, insurers anniversary, upon which all such renewals of persons licensed under this chapter who have been appointed by that insurer shall be subject to renewal as to that particular insurer. (d) Producer appointments shall expire as of 12:01 a.m. on the first day of June following the date of issuance. Annually, before the expiration of producer appointments, the Commissioner shall provide each insurer with an alphabetical appointment renewal list of the names for all of its producers in the State. Each insurer shall return the list and identify the producer appointments to be renewed in a manner and time specified by the Commissioner. Payment of the annual producer appointment renewal fee, as specified in section 4800 of this title, shall be made in a manner and time specified by the Commissioner. (Added 1969, No. 175 (Adj Sess.),  8, eff. March 5, 1970; amended 1973, No. 217 (Adj. Sess.),  8; 1985, No. 236 (Adj. Sess.),  2, eff. June 3, 1986; 1999, No. 87 (Adj. Sess.),  1; 2001, No. 97 (Adj. Sess.),  7; 2019, No. 70,  2, eff. June 1, 2021; 2019, No. 131 (Adj. Sess.),  6; 2021, No. 105 (Adj. Sess.),  226, eff. July 1, 2022.) 
 4800. License requirements
The Commissioner shall not issue, continue, or permit to continue any license of an insurance producer, surplus lines insurance broker, managing general agent, reinsurance intermediary, insurance consultant, limited lines producer, business entity limited lines producer, insurance adjuster, public adjuster, and appraiser except in compliance with the following: (1) Application shall be made to the Commissioner by the applicant on a form prescribed by the Commissioner. (2)(A) All license applications shall be accompanied by a $30.00 fee plus the applicable fees as follows: (i) Initial licensing and biennial renewal licensing fee for insurance producers and limited lines producers, $30.00. (ii) Initial licensing and biennial renewal licensing fee for a business entity limited lines producer, $150.00. (iii) Except as provided in subdivisions (I) and (II) of this subdivision, initial and annual producer appointment fees for each qualification set forth in section 4813g of subchapter 1A of this chapter for resident and nonresident producers acting as agents of foreign insurers, $60.00: (I) the Commissioner may charge one fee for a qualification in property and casualty insurance; and (II) the Commissioner may charge one fee for a qualification in life and accident and health or sickness insurance. (iv) Initial 24-month appointment and biennial renewal appointment fee for limited lines producers, $90.00. (v) Initial 24-month license and biennial renewal fee for resident and nonresident adjusters, and appraisers licenses, $120.00, and public adjusters, $200.00. (vi) The initial 24-month license fee and biennial renewal fee for surplus lines brokers, $400.00. (vii) The initial 24-month license fee and biennial renewal fee for consultants, $200.00.(viii) The initial 24-month license fee and biennial renewal fee for reinsurance intermediaries, $200.00. (ix) The initial 24-month license fee and biennial renewal fee for managing general agents, $300.00. (B) An appointment or license shall terminate upon failure to pay the prescribed fees.(3) The Commissioner shall issue an insurance producers license, an insurance consultants license, a limited lines producers license, adjusters license, public adjusters license, and appraisers license to any duly qualified resident or nonresident of the State as follows: (A) An applicant may qualify as a resident if the applicant resides in this State or maintains the applicants principal place of business in this State. Any license issued pursuant to any application claiming residency for licensing purposes, as defined in this section, in this State shall constitute an election of residency in this State and shall be void if the licensee while holding a resident license in this State, also holds or makes application for a license in, or thereafter claims to be a resident of any other state or other jurisdiction or ceased to be a resident of this State. (B)(i) An applicant may qualify for a license under this chapter as a nonresident only if the applicant holds a like license in the United States, or a province of Canada. A license issued to a nonresident of this State shall grant the same rights and privileges afforded a resident licensee, except as provided in subdivision (3)(B)(v) of this section. (ii) An application for a license by a nonresident applicant shall constitute designation by the applicant of the Commissioner and the Commissioners successors in office, to be the applicants true and lawful attorney, upon whom may be served all lawful process in any action, suit, or proceeding instituted by or on behalf of any interested person arising out of the applicants insurance business in this State. The designation shall constitute an agreement that the service of process is of the same legal force and validity as personal service of process in this State upon that person. The service of process upon any licensee in any action or proceeding in any court of competent jurisdiction of this State, may be made by serving the Commissioner with appropriate copies thereof and the payment to the Commissioner of a fee of $25.00. The Commissioner shall forward a copy of the process by registered or certified mail to the licensee at the licensees last known address of record or principal place of business, and shall keep a record of all process so served upon the licensee. (iii) Service of process upon any licensee in any action or proceeding instituted by the Commissioner under this subdivision shall be made by the Commissioner by mailing the process by registered or certified mail to the licensee at the licensees last known address of record or principal place of business. If the Commissioner revokes or suspends any nonresidents license through a formal proceeding under this chapter, the Commissioner shall promptly notify the appropriate commissioner of the licensees residence of the action and of the particulars thereof. (iv) A nonresident of this State may be licensed at the discretion of the Commissioner without taking an otherwise required written examination if the applicant has passed a comparable written examination, or has been a continuous holder prior to the time the written examination was required, of a license like the license being applied for in this State. This subdivision does not apply to insurance producers and limited lines producers exempt from examination pursuant to section 4813i of this chapter. (v) Whenever, by the laws or regulations of any other state or jurisdiction, fees are imposed upon residents of this State who are nonresident applicants or licensees of another state or jurisdiction in addition to, or in excess of, those imposed on nonresidents under this subchapter, the same fees shall be imposed upon the residents of the other state or jurisdiction. (C) An applicant for any license under this chapter must be deemed by the Commissioner to be competent, trustworthy, financially responsible, and of good personal and business reputation. (D)(i) Except as provided in section 4813i of this title or subdivision (3)(B)(iv) of this section, the Commissioner shall subject each applicant for license as an insurance producer, surplus lines insurance broker, consultant, limited lines producer, adjuster, public adjuster, or appraiser to a written examination or series of written examinations as to the applicants competence to act as a licensee, which the applicant must personally take and pass to the satisfaction of the Commissioner. An applicant must submit an application to the Commissioner within 24 months after the date of examination. (ii) The Commissioner may issue interim licenses not to be valid for more than 24 months or such lesser time as the Commissioner may deem appropriate for such lines of insurance as the Commissioner may deem appropriate. The qualifications, requirements, and fees for an interim license will be the same as for a regular license in the same line except that the written examination testing professional competence shall be of a lesser degree of difficulty than the written examination for a regular license. An interim license will not be renewable once it has expired. (iii) At the discretion of the Commissioner, an applicant for a license may be a business entity; however, this subdivision shall not affect the requirement of any natural person to be licensed as required under this chapter. (iv) Each examination or series of examinations for a license shall be approved for use by the Commissioner and shall reasonably test the applicants knowledge as to the lines of insurance, policies, and transactions to be handled under the license applied for, of the duties and responsibilities of a licensee, and of the pertinent insurance laws of this State. (v) Examination for licensing shall be at such reasonable times and places as are designated by the Commissioner. (vi) The Commissioner or the Commissioners designee shall give, conduct, and grade all examinations in a fair and impartial manner and without discrimination as between individuals examined. (vii) The applicant must pass the examination or series of examinations with a grade determined by the Commissioner to indicate satisfactory knowledge and understanding of the line or lines of insurance for which the applicant seeks qualification. A fee shall be charged for each examination or series of examinations for which the applicant sits. If examinations are administered by the Commissioners designee pursuant to subdivision (3)(D)(vi) of this section, the fee charged may be payable to the designee, notwithstanding 32 V.S.A.  502(a). Formal evidence of the licensing shall be issued by the Commissioner to the licensee within a reasonable time. (E)(i) If the Commissioner finds that the applicant has not fully met the requirements for licensing, the Commissioner shall refuse to issue the license and promptly notify the applicant and the appointing insurer, in writing, of the denial, stating the grounds therefor. (ii) If a license is refused, the Commissioner shall refund the license fee tendered with the license application. All other fees accompanying the application for license as insurance producer, surplus lines insurance broker, consultant, and limited lines producer, adjuster, public adjuster, and appraiser shall not be refundable. (F) Every licensee shall notify the Commissioner of any change in the licensees residential or business address within 30 days after the change. (4) In order to assist in the performance of the Commissioners duties under this chapter, the Commissioner may: (A) contract with nongovernmental entities, including the National Association of Insurance Commissioners (NAIC) or any affiliates or subsidiaries that the NAIC oversees, to perform any ministerial functions, including the collection of fees, and the collection of system charges related to producer licensing or to any other activities which require a license under this chapter that the Commissioner and the nongovernmental entity may deem appropriate; (B) participate, in whole or in part, with the NAIC, or any affiliates or subsidiaries the NAIC oversees, in a centralized producer license registry to effect the licensure and appointment of producers and other persons required to be licensed under this chapter; (C) adopt by rule any uniform standards and procedures as are necessary to participate in a centralized registry. Such rules may include the central collection of all fees and system charges for license or appointments that are processed through the registry, and the establishment of uniform license and appointment renewal dates; (D) require persons engaged in activities which require a license under this chapter to make any filings with the Department in a digital, electronic manner approved by the Commissioner for applications, renewal, amendments, notifications, reporting, appointments, terminations, the payment of fees and system charges, and such other activities relating to licensure under this chapter as the Commissioner may require, subject to such hardship circumstances demonstrated by the applicant or licensee which the Commissioner deems appropriate for the utilization of the central registry in a nondigital and nonelectronic manner; and (E)(i) authorize the centralized producer license registry, or other third party approved by the Commissioner, to collect fingerprints on behalf of the Commissioner in order to receive or conduct criminal history background checks; (ii) use the centralized producer license registry, or other third party approved by the Commissioner, as a channeling agent for requesting information from and distributing information to the U.S. Department of Justice or any governmental agency, in order to reduce the points of contact which the Federal Bureau of Investigation (FBI) or the Commissioner may have to maintain for purposes of this subsection; and (iii) require persons engaged in activities that require a license under this chapter to submit fingerprints, and the Commissioner may utilize the services of the centralized producer license registry, or other third party approved by the Commissioner, to process the fingerprints and to submit the fingerprints to the FBI, the Vermont State Police, or any equivalent State or federal law enforcement agency for the purpose of conducting a criminal history background check. The licensee or applicant shall pay the cost of such criminal history background check, including any charges imposed by the centralized producer licensing system, or other third party approved by the Commissioner, as applicable. (Amended 1973, No. 217 (Adj. Sess.),  10; 1979, No. 44,  1-5; 1979, No. 197 (Adj. Sess.),  14; 1981, No. 42,  2; 1981, No. 210 (Adj. Sess.),  3; 1983, No. 66,  1, 2; 1985, No. 236 (Adj. Sess.),  3, eff. June 3, 1986; 1991, No. 166 (Adj. Sess.),  13; 1991, No. 249 (Adj. Sess.),  20-22; 1997, No. 59,  68, eff. June 30, 1997; 1999, No. 87 (Adj. Sess.),  2; 2001, No. 97 (Adj. Sess.),  8; 2009, No. 137 (Adj. Sess.),  8; 2011, No. 21,  13; 2015, No. 149 (Adj. Sess.),  31; 2019, No. 70,  3; 2019, No. 70,  3a, eff. June 1, 2021; 2021, No. 105 (Adj. Sess.),  227, eff. July 1, 2022.) 
 4800a. Continuing education
(a) An applicant for an insurance producer license renewal shall demonstrate satisfactory completion of 24 hours of continuing education during the preceding two years. (b) The Commissioner shall adopt such rules as are needed to carry out the purposes of this section. Such rules shall include: (1) a process for the formation and operation of an advisory council of insurance professionals and consumers to advise the Commissioner on matters relating to continuing education; (2) a process for the approval of courses;(3) a process for the approval of course providers;(4) standards for courses; and(5) procedures for documenting satisfactory completion of courses.(c) For good cause shown, the Commissioner may extend for no longer than six months the period of time for completion of the educational requirements of this section. (d) This section shall not apply to a nonresident insurance producer who resides in a state or district that has a continuing education requirement and who has satisfied such requirement, and submits adequate documentation of continuing education completion to the Commissioner. (e) The license of an applicant who has failed to satisfy the continuing education requirements of this section, and who has not been granted an extension of time as set forth in subsection (c) of this section, shall not be renewed. (f) The Commissioner shall suspend the license of any applicant who, after receiving an extension of time as set forth in subsection (c) of this section, has not satisfactorily completed the continuing education requirement. (g) The Commissioner may contract with an outside vendor to administer continuing education requirements, including approval of courses and course providers; collection and maintenance of insurance producer record-keeping; and compliance monitoring. The costs of an outside vendor shall be borne by applicants for insurance producer license renewal and by course providers through fees imposed by the outside vendor. All fees charged by the outside vendor will be subject to the prior approval of the Commissioner and may be payable to the outside vendor, notwithstanding 32 V.S.A.  502(a). (h) [Deleted.] (Added 1999, No. 87 (Adj. Sess.),  3; amended 2001, No. 97 (Adj. Sess.),  9, 20.)
 4802. Consultants
(a) An individual shall not engage in the business of an insurance consultant until being issued a consultant license by the Commissioner; provided, however, that a consultant license shall not be required of the following: (1) Attorneys licensed to practice law in this State acting in their professional capacity;(2) A duly licensed insurance producer or surplus lines insurance broker;(3) A trust officer of a bank acting in the normal course of his or her employment; or(4) An actuary or a certified public accountant who provides information, recommendations, advice, or services in his or her professional capacity. (b) An application for a license to act as an insurance consultant shall be made to the Commissioner on forms prescribed by the Commissioner. Within a reasonable time after receipt of a properly completed application form the Commissioner shall hold a written examination for the applicant, and may conduct investigations and propound interrogatories concerning the applicants qualifications, residence, business affiliations, and any other matter which he or she deems necessary or advisable to determine compliance with this chapter or for the protection of the public. (c) In advance of rendering any service as a consultant, a written agreement on a form approved by the Commissioner, shall be prepared by the consultant, and shall be signed by both the consultant and the client. The agreement shall outline the nature of the work to be performed by the consultant and shall state his or her fee for the work. The consultant shall retain a copy of the agreement for not less than two years after completion of the services. The copy shall be available to the Commissioner. (d) No person may concurrently hold a consultants license and an insurance producers, surplus lines insurance brokers, or limited lines producers license in any line. (e) No licensed consultant may employ, be employed by, or be in partnership with nor receive any remuneration whatsoever, from any licensed insurance producer, surplus lines insurance broker, limited lines producer, or insurer arising out of his or her activities as a consultant. (f) The license shall be valid for not longer than 24 months and may be renewed biennially and extended in the same manner as an insurance producers license. (g) All requirements and standards relating to the denial, revocation, or suspension of an insurance producers license, including penalties, shall apply to the denial, revocation, and suspension of an insurance consultants license as nearly as practicable. (h) A consultant is obligated under his or her license, to serve with objectivity and complete loyalty the interests of his or her client alone; and to render his or her client such information, counsel, and service as within the knowledge, understanding, and opinion, in good faith of the licensee, best serves the clients insurance needs and interests. (i) Prior to the issuance of a license to an insurance consultant, the applicant shall file with the Commissioner, and thereafter for as long as the license remains in effect, shall keep in force a bond in the penal sum of not less than $5,000.00 with an authorized corporate surety approved by the Commissioner. The aggregate liability of the surety for any and all claims on any bond shall in no event exceed the penal sum thereof. No bond shall be terminated unless at least 60 days prior written notice thereof is given by the surety to the licensee and the Commissioner. Upon termination of the license for which the bond was in effect, the Commissioner shall notify the surety within ten working days. All surety protection under this subsection is to inure to the benefit of the aggrieved parties. (Amended 1973, No. 217 (Adj. Sess.),  12; 1975, No. 78,  2; 2001, No. 97 (Adj. Sess.),  10; 2021, No. 105 (Adj. Sess.),  228, eff. July 1, 2022.) 
 4803. Adjusters, workers compensation adjusters, public adjusters and appraisers, qualifications, and requirements
(a) For the protection of the people of this State, the Commissioner shall not issue, continue, or permit to exist any license as an adjuster, a workers compensation adjuster, public adjuster, or appraiser except in compliance with this section, or as to any individual not qualified therefor as follows: (1) must be at least 18 years of age;(2) must be competent, trustworthy, financially responsible, and of good personal business reputation; (3) must pass any written examination required for the license under this subchapter. This subsection shall not apply to multiperil crop insurance adjusters certified in accordance with subsection (f) of this section; and (4) must have at least two years experience or special training with respect to handling of loss claims, in the case of workers compensation adjusters, workers compensation claims, or in the case of appraisers, insurance loss appraising of sufficient duration and scope reasonably to make the applicant competent to fulfill the responsibilities of an adjuster, workers compensation adjuster, public adjuster, or appraiser; or, in lieu of such experience or training, is to be employed by and subject to the immediate personal supervision of a licensed adjuster, workers compensation adjuster, public adjuster or appraiser in this State who has been so established in business for not less than three years preceding the date of application for the license. This subsection shall not apply to persons holding existing licenses as adjuster, and public adjusters in this State immediately prior to July 1, 1974. This section shall apply to any person applying for a workers compensation adjusters license or an appraisers license. (5) [Repealed.](b) [Repealed.](c) Records.(1) Each adjuster, workers compensation adjuster, public adjuster, or appraiser shall keep at the address shown on the license a record of all transactions under the license. (2) The record shall include:(A) A copy of all investigations, adjustments, or appraisals undertaken or consummated.(B) A statement of any fee, commission, or other compensation received or to be received by the adjuster, workers compensation adjuster, public adjuster, or appraiser on account of such investigation, adjustment, or appraisal. (3) The adjuster, workers compensation adjuster, public adjuster, or appraiser shall make such records available for examination by the Commissioner at all times, and shall retain the records for at least three years. (d) Nonresident adjusters, workers compensation adjusters, public adjusters, or appraisers; process; special catastrophe losses. (1) Subdivision 4800(3)(B)(ii) of this title (service of process) shall also apply as to nonresidents of this State licensed as adjuster, workers compensation adjuster, public adjuster, or appraiser by this State. (2) No adjuster, public adjuster, or appraiser license is required as to any adjuster, public adjuster, or appraiser sent into this State on behalf of a duly admitted insurer for the investigation or adjustment of a particularly unusual or extraordinary loss, or of a series of losses resulting from a catastrophe common to all such losses. Nor shall such a license be required of a marine-average adjuster. (e) The Commissioner shall require workers compensation adjusters to complete educational or training programs in their field. The Commissioner may suspend or revoke a license issued under this subchapter of any person who fails to comply with the educational or training requirements established by the Commissioner. (f) The Commissioner may require a multiperil crop insurance adjuster to be certified as having passed a proficiency examination approved by the federal Risk Management Agency as a condition of obtaining an adjusters license or license renewal under this chapter, or another proficiency examination approved by the Commissioner. Upon request of the Commissioner, a multiperil crop insurance adjuster licensee shall furnish to the Commissioner proof of such certification satisfactory to the Commissioner. (Amended 1973, No. 217 (Adj. Sess.),  13; 1975, No. 78,  1, 4; 1993, No. 225 (Adj. Sess.),  25; 2001, No. 97 (Adj. Sess.),  11; 2009, No. 137 (Adj. Sess.),  10, 11.) 
 4804. License denial; nonrenewal; or termination causes
(a) The Commissioner may suspend, revoke, or refuse to continue or renew any license issued under this chapter if, after notice to the licensee and to the insurer represented, and opportunity for hearing, he or she finds as to the licensee any one or more of the following conditions: (1) Providing incorrect, misleading, incomplete, or materially untrue information in the license application; (2) Any cause for which issuance of the license could have been refused had it then existed and been known to the Commissioner at the time of issuance; (3) Violation of, or noncompliance with, any insurance laws, or for violation of any lawful rule, regulation, subpoena, or order of the Commissioner or of a commissioner of another state; (4) Obtaining or attempting to obtain any license through misrepresentation or fraud;(5) Improperly withholding, misappropriating, or converting to his or her own use any monies belonging to policyholders, insurers, beneficiaries or others received in the course of his or her insurance business; (6) Misrepresentation of the terms of any actual or proposed insurance contract;(7) Conviction of a felony or misdemeanor involving moral turpitude;(8) The licensee has committed any unfair trade practice or fraud as defined in this title. It shall be an unfair practice under this section for a licensee to: (A)(i) Sell, solicit, or negotiate the purchase of health insurance in this State through an advertisement which makes use directly or indirectly of any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance, and that contact will be made by an insurance agent or insurance company. (ii) Use an appointment that was made to discuss Medicare products or to solicit the sale of Medicare products to solicit sales of any other insurance products unless the consumer requests the solicitation, and the products to be discussed are clearly identified to the consumer in writing at least 48 hours in advance of the appointment. (iii) Solicit the sale of Medicare products door-to-door prior to receiving an invitation from a consumer. (B) As used in this subdivision, the term Medicare products includes Medicare Part A, Medicare Part B, Medicare Part C, Medicare Part D, and Medicare supplement plans; (9) In the conduct of his or her affairs, the licensee has used fraudulent, coercive, or dishonest practices, or has shown himself or herself to be incompetent, untrustworthy, or financially irresponsible; (10) His or her license has been suspended or revoked in any other state, province, district, or territory; (11) The licensee has forged anothers name to an application for insurance or to any document related to an insurance transaction; (12) The applicant has been found to have been cheating on an examination for an insurance license; (13) Knowingly accepting insurance business from a person who is not licensed;(14) Failing to comply with an administrative or court order imposing a child support obligation; or (15) Failing to pay State income tax or comply with any administrative or court order directing payment of State income tax. (b) The license of a business entity may be suspended, revoked, or refused if the Commissioner finds, after notice and opportunity for a hearing, that an individual licensees violation was known or should have been known by one or more of the partners, officers, directors, or managers acting on behalf of the business entity, and the violation was neither reported to the Commissioner nor corrective action taken. (c) In the event that the action by the Commissioner is to not renew or to deny an application for a license, he or she shall notify the applicant or licensee and advise, in writing, the applicant or licensee of the reasons for the denial or nonrenewal of the applicants or licensees license. The applicant or licensee may make written demand upon the Commissioner within a reasonable time for a hearing before the Commissioner to determine the reasonableness of the Commissioners action. The hearing shall be held within 30 days from the date of receipt of the written demand by the applicant and shall be held pursuant to 3 V.S.A. chapter 25. (d) In addition to or in lieu of any applicable denial, suspension, or revocation of a license, any person violating this subchapter may, after hearing, be subject to an administrative penalty of not less than $500.00 nor more than $2,500.00. (Amended 1973, No. 217 (Adj. Sess.),  14; 1995, No. 167 (Adj. Sess.),  20; 2001, No. 97 (Adj. Sess.),  12; 2007, No. 80,  22.) 
 4805. Hearings
All hearings held pursuant to this subchapter shall be governed by the provisions of 3 V.S.A. chapter 25. (Amended 1973, No. 217 (Adj. Sess.),  15.) 
 4806. Suspension, revocation, or termination of license
(a) The Commissioner shall promptly notify all appointing insurers, where applicable, and the licensee regarding any suspension, revocation, or termination of license by the Commissioner. (b) Upon suspension, revocation, or termination of the license of a resident of this State, the Commissioner shall notify the central office of the National Association of Insurance Commissioners and the commissioner of each state for whom the licensee has executed a certificate as provided for in accordance with subdivision 4800(3) of this title. (c)-(e) [Repealed.] (Added 1963, No. 178,  1, eff. June 27, 1963; amended 1973, No. 217 (Adj. Sess.),  16; 2001, No. 97 (Adj. Sess.),  13; 2021, No. 25,  9, eff. May 12, 2021.)
 4807. Surplus lines insurance broker
(a) Every surplus lines insurance broker who solicits an application for insurance of any kind, in any controversy between the insured or his or her beneficiary and the insurer issuing any policy upon such application, shall be regarded as representing the insured and his or her beneficiary and not the insurer; except any insurer which directly or through its agents delivers in this State to any surplus lines insurance broker a policy or contract for insurance pursuant to the application or request of the surplus lines insurance broker, acting for an insured other than himself or herself, shall be deemed to have authorized the surplus lines insurance broker to receive on its behalf payment of any premium which is due on the policy or contract for insurance at the time of its issuance or delivery. (b) [Repealed.](c) Notwithstanding any other provision of this title, a person licensed as a surplus lines insurance broker in his or her home state shall receive a nonresident surplus lines insurance broker license pursuant to section 4800 of this chapter. (d) Not later than July 1, 2012, the Commissioner shall participate in the national insurance producer database of the NAIC, or any other equivalent uniform national database, for the licensure of surplus lines brokers and the renewal of such licenses. (Added 1973, No. 217 (Adj. Sess.),  17; amended 1981, No. 210 (Adj. Sess.),  2; 2001, No. 97 (Adj. Sess.),  14; 2009, No. 137 (Adj. Sess.),  9a; 2011, No. 49,  12, eff. May 26, 2011.) 
 4808. Representative of fraternal benefit societies
Representatives of fraternal benefit societies who sell, solicit, and negotiate insurance contracts shall be deemed insurance producers and subject to the same licensing requirements as insurance producers. (Added 1973, No. 217 (Adj. Sess.),  18; amended 2001, No. 97 (Adj. Sess.),  15.) 
 4809. Countersignature
Notwithstanding any other provisions of the statutes of this State, there shall be no requirement that an insurance producer who is a resident of this State must countersign a policy of insurance written by a foreign insurance company. (Added 1973, No. 217 (Adj. Sess.),  19; amended 2001, No. 97 (Adj. Sess.),  16.) 
 4812. Rules and regulations
The Commissioner may adopt reasonable rules and regulations for the implementation and administration of the provisions of this chapter. (Added 1973, No. 217 (Adj. Sess.),  22; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2001, No. 97 (Adj. Sess.),  17; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  229, eff. July 1, 2022.) 
 4813. Purpose and scope
This subchapter governs the qualifications and procedures for the licensing of insurance producers. It simplifies and organizes some statutory language to improve efficiency, permits the use of new technology, and reduces costs associated with issuing and renewing insurance licenses. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813a. Definitions
As used in this subchapter:(1) Business entity shall have the same meaning as in subdivision 4791(8) of this title.(2) Home state means the District of Columbia and any state or territory of the United States in which an insurance producer maintains his or her principal place of residence or principal place of business and is licensed to act as an insurance producer. (3) Insurance producer shall have the same meaning as in subdivision 4791(6) of this title. (4) Insurer means any person engaged in the business of insurance in this State. It shall include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance. The term includes entities formed or regulated under chapters 101, 103, 105, 107, 109, 111, 113, 121, 123, 125, 132, 137, 138, and 139 of this title. As used in this subchapter, insurer does not include entities formed under chapter 141 or 142 of this title. (5) License means a document issued by the Commissioner authorizing a person to act as an insurance producer for the lines of authority specified in the document. The license itself does not create any authority, actual, apparent, or inherent, in the holder to represent or commit an insurer. (6) Limited lines insurance means travel accident or travel baggage insurance, or any other line of insurance that the Commissioner deems necessary to recognize for the purposes of complying with subsection 4813h(d) of this subchapter, or any other line of insurance the Commissioner, by regulation, shall deem essential for the transaction of business in this State and which does not require the professional competency demanded for an insurance producers license. (7) Limited lines producer shall have the same meaning as in subdivision 4791(7) of this title. (8) Negotiate means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers. (9) Person means an individual or a business entity.(10) Portable electronics insurance shall have the same meaning as in subdivision 4257(2) of this title. (11) Portable electronics vendor shall have the same meaning as in subdivision 4257(3) of this title. (12) Sell means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurer. (13) Solicit means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular insurer. (14) Terminate means the cancellation of the relationship between an insurance producer and the insurer or the termination of a producers authority to transact insurance. (15) Uniform Application means the current version of the NAIC Uniform Application for resident and nonresident producer licensing. (16) Uniform Business Entity Application means the current version of the NAIC Uniform Business Entity Application for resident and nonresident business entities. (Added 2001, No. 97 (Adj. Sess.),  18; amended 2005, No. 36,  8, eff. June 1, 2005; 2011, No. 136 (Adj. Sess.),  10, eff. May 18, 2012; 2015, No. 149 (Adj. Sess.),  32.) 
 4813b. License required
A person shall not sell, solicit, or negotiate insurance in this State for any class or classes of insurance unless the person is licensed for that line of authority in accordance with this subchapter. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813c. Duties
(a) A person not duly licensed as an insurance producer or limited lines producer, who sells, solicits, or negotiates insurance policies on behalf of an insurer, shall be deemed a producer acting as the agent of such insurer within the intent of this subchapter, and shall be liable for all the duties, requirements, liabilities, and penalties to which an insurance producer or limited lines producer is subject, and the insurer, by compensating the person through any of its officers, agents, or employees for soliciting policies of insurance, shall accept and acknowledge that person as its agent in such a transaction. (b) A person not licensed as an insurance producer or limited lines producer, who sells, solicits, or negotiates insurance on behalf of others or transmits for others an application for a policy of insurance to or from an insurer, or offers or assumes to act in the negotiations of insurance, shall be a producer within the intent of this subchapter, and shall be liable for all the duties, requirements, liabilities, and penalties to which licensed insurance producers or limited lines producers are subject. (c) Every insurance producer or limited lines producer acting as an agent of an insurer, who sells, solicits, or negotiates insurance of any kind shall, in any controversy between the insured or his or her beneficiary and the insurer, be regarded as representing the insurer and not the insured or his or her beneficiary for whose acts the insurer will be responsible. (d) Every insurance producer or limited lines producer, not acting as the agent of an insurer, who sells, solicits, or negotiates insurance of any kind shall, in any controversy between the insured and his or her beneficiary and the insurer issuing any policy of insurance, be regarded as representing the insured or his or her beneficiary and not the insurer, except any insurer which directly or through its agents delivers in this State to any producer a policy or contract for insurance pursuant to the application or request of the producer, acting for an insured other than himself or herself shall be deemed to have authorized the producer to receive on its behalf payment of any premium which is due on the policy, or contract for insurance at the time of its issuance or delivery. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813d. Exceptions to licensing
(a) Nothing in this subchapter shall be construed to require an insurer to obtain an insurance producer license. In this section, the term insurer does not include an insurers officers, directors, employees, subsidiaries, or affiliates. (b) A license as an insurance producer shall not be required of the following:(1) An officer, director, or employee of an insurer or of an insurance producer, provided the officer, director, or employee does not receive any commission on policies written or sold to insure risks residing, located, or to be performed in this State, and: (A) The officer, director, or employees activities are executive, administrative, managerial, clerical, or a combination of these, and are only indirectly related to the sale, solicitation, or negotiation of insurance; or (B) The officer, director, or employees function relates to underwriting, loss control, inspection, or the processing, adjusting, investigating, or settling of a claim on a contract of insurance; or (C) The officer, director, or employee is acting in the capacity of a special agent or agency supervisor assisting insurance producers where the persons activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation, or negotiation of insurance; (2) A person who secures and furnishes information for the purpose of group life insurance, group property and casualty insurance, group annuities, group, or blanket accident and health insurance; or for the purpose of enrolling individuals under plans; issuing certificates under plans, or otherwise assisting in administering plans; or performs administrative services related to mass-marketed property and casualty insurance; where no commission is paid to the person for the service; (3) An employer or association or its officers, directors, employees, or the trustees of an employee trust plan, to the extent that the employers, officers, employees, directors, or trustees are engaged in the administration or operation of a program of employee benefits for the employers or associations own employees or the employees of its subsidiaries or affiliates, which program involves the use of insurance issued by an insurer, as long as the employers, associations, officers, directors, employees, or trustees are not in any manner compensated, directly or indirectly, by the company issuing the contracts; (4) Employees of insurers or organizations employed by insurers who are engaging in the inspection, rating, or classification of risks, or in the supervision of the training of insurance producers and who are not individually engaged in the sale, solicitation, or negotiation of insurance; (5) A person whose activities in this State are limited to advertising without the intent to solicit insurance in this State through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the State, provided the person does not sell, solicit, or negotiate insurance that would insure risks residing, located, or to be performed in this State; (6) A person who is not a resident of this State who sells, solicits, or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under that contract, provided that person is otherwise licensed as an insurance producer to sell, solicit, or negotiate that insurance in the State where the insured maintains its principal place of business and the contract of insurance insures risks located in that state; or (7) A salaried full-time employee who counsels or advises his or her employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer, provided the employee does not sell or solicit insurance or receive a commission. (8) A person selling or offering portable electronics insurance who is an employee or authorized representative of a portable electronics vendor licensed as a limited lines insurance producer to sell, solicit, or negotiate portable electronics insurance in accordance with rules adopted by the Commissioner pursuant to section 4261 of this title. (Added 2001, No. 97 (Adj. Sess.),  18; amended 2011, No. 136 (Adj. Sess.),  11, eff. May 18, 2012.) 
 4813e. Application for examination
A resident individual applying for an insurance producer license shall pass a written examination as set forth in subdivision 4800(3)(E) of this title unless exempt pursuant to section 4813i of this subchapter. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813f. Application for license
(a) An individual applying for a resident insurance producer license shall make application to the Commissioner on the Uniform Application, and declare under penalty of refusal, suspension, or revocation of the license that the statements made in the application are true, correct, and complete to the best of the individuals knowledge and belief. Before approving the application, the Commissioner shall find that the individual: (1) is at least 18 years of age;(2) has not committed any act that is a ground for denial, suspension, or revocation set forth in section 4804 of this title; (3) is competent, trustworthy, financially responsible, and of good personal and business reputation; (4) has paid the fees set forth in section 4800 of this title; and(5) has successfully passed the examinations for the lines of authority for which the person has applied. (b) As soon as practicable, but no later than April 1, 2003, the Commissioner shall permit a business entity to be licensed as an insurance producer. Application shall be made using the Uniform Business Entity Application. Except as permitted by regulation, licensure of a business entity shall not relieve any natural person who sells, solicits, or negotiates insurance of the requirement to be licensed under this chapter. Before approving the application, the Commissioner shall find that: (1) The business entity has paid the fees set forth in section 4800 of this title.(2) The business entity has designated a licensed producer who is a natural person responsible for the business entitys compliance with the insurance laws, rules, and regulations of this State. (c) The Commissioner may require any documents reasonably necessary to verify the information contained in an application. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813g. License
(a) An insurance producer may receive qualification for a license and an appointment in one or more of the following lines of authority: (1) Life: insurance coverage on human lives, including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income. (2) Accident and health or sickness: insurance coverage for sickness, bodily injury, or accidental death, and may include benefits for disability income. (3) Property: insurance coverage for the direct or consequential loss or damage to property of every kind. (4) Casualty: insurance coverage against legal liability, including that for death, injury, or disability or damage to real or personal property. (5) Variable life and variable annuity products: insurance coverage provided under variable life insurance contracts and variable annuities. (6) Personal lines: property and casualty insurance coverage sold to individuals and families for primarily noncommercial purposes. (7) Any other line of insurance permitted under State laws or regulations.(b) An insurance producer license shall remain in effect unless revoked or suspended as long as the fee set forth in section 4800 of this title is paid and education requirements for resident individual producers are met by the due date. (c) A licensed insurance producer who is unable to comply with license renewal procedures due to military service or some other extenuating circumstance (for example, including a long-term medical disability) may request a waiver of those procedures. The producer may also request a waiver of any examination requirement or any other fine or sanction imposed for failure to comply with renewal procedures. (d) [Repealed.] (Added 2001, No. 97 (Adj. Sess.),  18; amended 2009, No. 137 (Adj. Sess.),  9.)
 4813h. Nonresident licensing
(a) Unless denied licensure pursuant to section 4804 of this title, a nonresident person shall receive a nonresident producer license if: (1) The person is currently licensed as a resident and in good standing in his or her home state; (2) The person has submitted the proper request for licensure and has paid the fees required by section 4800 of this title; (3) The person has submitted or transmitted to the Commissioner the application for licensure that the person submitted to his or her home state, or in lieu of the same, a completed Uniform Application; and (4) The persons home state awards nonresident producer licenses to residents of this State on the same basis. (b) The Commissioner may verify the producers licensing status through the producer database maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries. (c) A nonresident producer who moves from one state to another state or a resident producer who moves from this State to another state shall file a change of address and provide certification from the new resident state within 30 days of the change of legal residence. No fee or license application is required. (d) Notwithstanding any other provision of this chapter, the Commissioner may allow a person licensed as a limited lines producer in his or her home state to receive a nonresident limited lines producer license, pursuant to subsection (a) of this section, granting the same scope of authority as granted under the license issued by the producers home state. For the purposes of this section, limited lines insurance is any authority granted by the home state which restricts the authority of the license to less than the total authority prescribed in the associated major lines pursuant to subdivisions 4813g(a)(1) through (6) of this subchapter. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813i. Exemption from examination
(a) An individual who applies for an insurance producer license in this State who was previously licensed for the same lines of authority in another state shall not be required to complete any prelicensing education or examination. This exemption is only available if the person is currently licensed in that state or if the application is received within 90 days of the cancellation of the applicants previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the states producer database records, maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries, indicate that the producer is or was licensed in good standing for the line of authority requested. (b) A person licensed as an insurance producer in another state who moves to this State shall make application within 90 days of establishing legal residence to become a resident licensee pursuant to section 4813f of this subchapter. No prelicensing education or examination shall be required of that person to obtain any line of authority previously held in the prior state except where the Commissioner determines otherwise by regulation. (c) A person who applies for a limited lines travel insurance producer license under chapter 148 of this title shall not be required to be examined by the Commissioner. (d), (e) [Repealed.](f) At the discretion of the Commissioner, a limited lines producer may be exempt from examination. (Added 2001, No. 97 (Adj. Sess.),  18; amended 2009, No. 137 (Adj. Sess.),  12; 2021, No. 139 (Adj. Sess.),  11, eff. August 25, 2022.) 
 4813j. Assumed names
An insurance producer doing business under any name other than the producers legal name is required to notify the Commissioner prior to using the assumed name. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813k. Temporary licensing
(a) The Commissioner may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the Commissioner deems that the temporary license is necessary for the servicing of an insurance business in the following cases: (1) To the surviving spouse or court-appointed personal representative of a licensed insurance producer who dies or becomes mentally or physically disabled to allow adequate time for the sale of the insurance business owned by the producer or for the recovery or return of the producer to the business or to provide for the training and licensing of new personnel to operate the producers business; (2) To a member or employee of a business entity licensed as an insurance producer, upon the death or disability of an individual designated in the business entity application or license; (3) To the designee of a licensed insurance producer entering active service in the Armed Forces of the United States of America; or (4) In any other circumstance where the Commissioner deems that the public interest will best be served by the issuance of this license. (b) The Commissioner may, by order, limit the authority of any temporary licensee in any way deemed necessary to protect insureds and the public. The Commissioner may require the temporary licensee to have a suitable sponsor who is a licensed producer or insurer and who assumes responsibility for all acts of the temporary licensee and may impose other similar requirements designed to protect insureds and the public. The Commissioner may, by order, revoke a temporary license if the interest of insureds or the public is endangered. A temporary license may not continue after the owner or the personal representative disposes of the business. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813l. Appointments
(a) An insurance producer or limited lines producer shall not act as an agent of an insurer unless the producer becomes an appointed agent of that insurer. A producer who is not acting as an agent of an insurer is not required to become appointed. (b) An appointment shall be made by an insurer designating an insurance producer or limited lines producer as an agent of the insurer for the lines of insurance the producer will be authorized to sell, solicit, or negotiate for the insurer. (c) As set forth in section 4813g of this subchapter, an insurer shall make a separate appointment for each line of insurance for which an insurance producer or limited lines producer will be acting as an agent of the insurer. (d) To appoint a producer as its agent, the appointing insurer shall file, in a format approved by the Commissioner, a notice of appointment within 15 days from the date the agency contract is executed or the first insurance application is submitted, whichever is sooner. (e) An insurer shall pay an appointment fee, in the amount and method of payment set forth in section 4800 of this title, for each insurance producer appointed by the insurer and for each line of insurance in which a producer is qualified. (f) An insurer shall remit, in a manner prescribed by the Commissioner, a renewal appointment fee in the amount set forth in section 4800 of this title. (g) As soon as practicable, the Commissioner shall permit an insurer to appoint a producer to all or some insurers within the insurers holding company system or group by the filing of a single appointment request. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813m. Notification to Commissioner of termination
(a) Termination for cause. An insurer or authorized representative of the insurer that terminates the appointment, employment, contract, or other insurance business relationship with a producer shall notify the Commissioner within 30 days following the effective date of the termination, using a format prescribed by the Commissioner, if the reason for termination is one of the reasons set forth in section 4804 of this title or the insurer has knowledge the 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 4804 of this title. Upon the written request of the Commissioner, the insurer shall provide additional information, documents, records, or other data pertaining to the termination or activity of the producer. (b) Termination without cause. An insurer or authorized representative of the insurer that terminates the appointment, employment, or contract with a producer for any reason not set forth in section 4804 of this title shall notify the Commissioner within 30 days following the effective date of the termination, using a format prescribed by the Commissioner. Upon written request of the Commissioner, the insurer shall provide additional information, documents, records, or other data pertaining to the termination. (c) Ongoing notification requirement. The insurer or the authorized representative of the insurer shall promptly notify the Commissioner in a format acceptable to the Commissioner if, upon further review or investigation, the insurer discovers additional information that would have been reportable to the Commissioner in accordance with subsection (a) of this section had the insurer then known of its existence. (d) Copy of notification to be provided to producer:(1) Within 15 days after making the notification required by subsections (a), (b), and (c) of this section, the insurer shall mail a copy of the notification to the producer at his or her last known address. If the producer is terminated for cause for any of the reasons listed in section 4804 of this title, the insurer shall provide a copy of the notification to the producer at his or her last known address by certified mail, return receipt requested, postage prepaid or by overnight delivery using a nationally recognized carrier. (2) Within 30 days after the producer has received the original or additional notification, the producer may file written comments concerning the substance of the notification with the Commissioner. The 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 Commissioners file and accompany every copy of a report distributed or disclosed for any reason about the producer as permitted under subsection (f) of this section. (e) Immunities.(1) In the absence of actual malice, an insurer, the authorized representative of the insurer, a producer, the Commissioner, or an organization of which the Commissioner is a member and that compiles the information and makes it available to other commissioners or regulatory or law enforcement agencies shall not be subject to civil liability, and a civil cause of action of any nature shall not arise against these entities or their respective agents or employees, 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 Commissioner from an insurer or producer, or a statement by a terminating insurer or producer to an insurer or producer limited solely and exclusively to whether a termination for cause under subsection (a) of this section was reported to the Commissioner, provided 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 producer terminating the relationship. (2) In any action brought against a person that may have immunity under subdivision (1) of this subsection for making any statement required by this section or providing any information relating to any statement that may be requested by the Commissioner, the party bringing the action shall plead specifically in any allegation that subdivision (1) of this subsection does not apply because the person making the statement or providing the information did so with actual malice. (3) Subdivision (1) or (2) of this subsection shall not abrogate or modify any existing statutory or common law privileges or immunities. (f) Confidentiality.(1) Any documents, materials, or other information in the control or possession of the Department of Financial Regulation that is furnished by an insurer, producer, or an employee or agent thereof acting on behalf of the insurer or producer, or obtained by the Commissioner in an investigation pursuant to this section shall be confidential by law and privileged, shall not be subject to 1 V.S.A. chapter 5, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the 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 Commissioners duties. (2) Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subdivision (1) of this subsection. (3) In order to assist in the performance of the Commissioners duties under this chapter, the Commissioner may: (A) share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subdivision (1) of this subsection, with other state, federal, and international regulatory agencies, with the National Association of Insurance Commissioners, its affiliates or subsidiaries, and with state, federal, and international law enforcement authorities, provided the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information; (B) receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the National Association of Insurance Commissioners, 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; and (C) enter into agreements governing sharing and use of information consistent with this subsection. (4) 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 subdivision (3) of this subsection. (5) Nothing in this act shall prohibit the Commissioner fromreleasing final, adjudicated actions, including for cause terminations that are open to public inspection pursuant to 1 V.S.A. chapter 5 to a database or other clearinghouse service maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries. (g) Penalties for failing to report. An insurer, the authorized representative of the insurer, or 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 assessed an administrative penalty of $10,000.00. (Added 2001, No. 97 (Adj. Sess.),  18; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 4813n. Reciprocity
(a) The Commissioner shall waive any requirements for a nonresident license applicant with a valid license from his or her home state, except the requirements imposed by section 4813g of this chapter, if the applicants home state awards nonresident licenses to residents of this State on the same basis. (b) A nonresident producers satisfaction of his or her home states continuing education requirements for licensed insurance producers shall constitute satisfaction of this States continuing education requirements if the nonresident producers home state recognizes the satisfaction of its continuing education requirements imposed upon producers from this State on the same basis. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4813o. Reporting of actions
(a) A producer shall report to the Commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. This report shall include a copy of the order, consent to order or other relevant legal documents. (b) Within 30 days of the initial pretrial hearing date, a producer shall report to the Commissioner any criminal prosecution of the producer taken in any jurisdiction. The report shall include a copy of the initial complaint filed, the order resulting from the hearing and any other relevant legal documents. (Added 2001, No. 97 (Adj. Sess.),  18.) 
 4815. Definitions
As used in this subchapter:(1) Actuary shall have the same meaning as in section 3577 of this title.(2) Accredited state means a state in which the insurance department or regulatory agency has qualified as meeting the minimum financial regulatory standards promulgated and established from time to time by the National Association of Insurance Commissioners. (3) Control or controlled shall have the same meaning as in chapter 101, subchapter 13 of this title. (4) Controlled insurer means a licensed insurer which is controlled, directly or indirectly, by a producer. (5) Controlling producer means a producer who, directly or indirectly, controls an insurer.(6) Licensed insurer or insurer means any person, firm, association, or corporation duly licensed to transact an insurance business in this State. The following are not licensed insurers for the purposes of this subchapter: (A) all residual market pools and joint underwriting authorities or associations; and(B) all captive insurers as defined in chapter 141 of this title, except risk retention groups. (7)(A) Managing general agent means any person who:(i) manages all or part of the insurance business of an insurer and acts as an agent for such insurer, and, who, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross written premium greater than or equal to five percent of the policyholder surplus of the insurer in any one quarter or year; and (ii) engages in one or more of the following activities on the business produced:(I) adjusts or pays claims in excess of $10,000.00; or(II) negotiates reinsurance on behalf of the insurer.(B) Notwithstanding the provisions of subdivision (A) of this subdivision (7), the following persons shall not be considered as managing general agents for the purposes of this chapter: (i) an employee of the insurer;(ii) a U.S. manager of the U.S. branch of an alien insurer;(iii) an underwriting manager who, pursuant to contract, manages all, or part of the insurance operations of the insurer, is under common control with the insurer, subject to the holding company regulatory act, and whose compensation is not based on the volume of premiums written, or if based on the volume of premiums written, is also based on the insurer earning a profit on the business written by such underwriting manager; and (iv) the attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or inter-insurance exchange under powers of attorney. (8) Producer means an agent, broker, or reinsurance intermediary licensed pursuant to subchapter 1 of this chapter. (9) Reinsurance intermediary means a reinsurance intermediary-broker or a reinsurance intermediary-manager as defined in subdivisions (10) and (11) of this section. (10) Reinsurance intermediary-broker means any person, other than an officer or employee of the ceding insurer, who solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of such insurer. (11)(A) Reinsurance intermediary-manager means any person who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office, and acts as an agent for such reinsurer whether known as a reinsurance intermediary-manager, manager, or other similar term. (B) Notwithstanding the provisions of subdivision (A) of this subdivision (11), the following persons shall not be considered a reinsurance intermediary-manager, with respect to such reinsurer, for the purposes of this subchapter: (i) An employee of the reinsurer;(ii) A U.S. manager of the U.S. branch of an alien reinsurer;(iii) An underwriting manager who, pursuant to contract, manages all the reinsurance operations of the reinsurer, is under common control with the reinsurer, and whose compensation is not based on the volume of premiums written; and (iv) The manager of a group, association, pool, or organization of insurers which engage in joint underwriting or joint reinsurance and who are subject to examination by the insurance commissioner of the state in which the managers principal business office is located. (12) Reinsurer means any person, firm, association, or corporation duly licensed in this State pursuant to the applicable provisions of the insurance law as an insurer with the authority to assume reinsurance. (13) Underwrite means the authority to accept or reject risk on behalf of the insurer. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993; amended 2013, No. 103 (Adj. Sess.),  2, eff. April 14, 2014.)
 4816. Applicability of subchapter to controlling producers
(a) The provisions of this subchapter shall apply to a controlling producer if, in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer is greater than or equal to five percent of the admitted assets of the controlled insurer, as reported in the controlled insurers quarterly statement filed as of September 30 of the prior year. (b) The provisions of this subchapter shall not apply if the controlling producer:(1) places insurance only with the controlled insurer, or only with the controlled insurer and a member or members of the controlled insurers holding company system, or the controlled insurers parent, affiliate, or subsidiary and receives no compensation based upon the amount of premiums written in connection with such insurance; (2) accepts insurance placements only from nonaffiliated subproducers, and not directly from insureds; and (3) the controlled insurer, except for insurance business written through a residual market facility such as The Vermont Automobile Insurance Plan, accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer, or a producer that is a subsidiary of the controlled insurer. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.) 
 4817. Licensure
(a) No person shall act in the capacity of a managing general agent with respect to risks located in this State for an insurer licensed in this State unless such person is licensed as a managing general agent in this State and is a licensed producer in this State as defined in this subchapter. (b) No person shall act in the capacity of a managing general agent representing an insurer domiciled in this State with respect to risks located outside this State unless such person is a licensed producer in this State (such license may be a nonresident license) pursuant to this chapter. (c) The Commissioner may require a bond in an amount acceptable to him or her for the protection of the insurer or reinsurer. (d) The Commissioner may require a managing general agent or reinsurance intermediary to maintain an errors and omissions policy. (e) No person shall act as a reinsurance intermediary-broker in this State unless such reinsurance intermediary-broker is licensed as a resident or nonresident reinsurance intermediary and as an insurance broker in this State as defined in this chapter. (f) No person shall act as a reinsurance intermediary-manager:(1) for a reinsurer domiciled in this State, unless such reinsurance intermediary-manager is a producer in this State; (2) in this State, if the reinsurance intermediary-manager maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation in this State, unless such reinsurance intermediary-manager is a producer in this State; and (3) in another state for a nondomestic insurer on any Vermont business, unless such reinsurance intermediary-manager is a licensed producer in this State or another state having a law substantially similar to this law or such person is licensed in this State as a nonresident reinsurance intermediary. (g) The Commissioner shall issue a reinsurance intermediary license to any person who has complied with the requirements of this subchapter unless the applicant, anyone named on the application, or any member, principal, officer, or director of the applicant, is not trustworthy, or that any controlling person of such applicant is not trustworthy to act as a reinsurance intermediary, or that any of the foregoing persons has given cause for revocation or suspension of such license, or has failed to comply with any prerequisite for the issuance of such license. (h) If the applicant for a reinsurance intermediary license is a nonresident, such applicant, as a condition precedent to receiving or holding a license, shall designate the Secretary of State as agent for service of process in the manner, and with the same legal effect, provided for by section 3370 of this title for designation of service of process upon unauthorized insurers; and also shall furnish the Secretary of State with the name and address of a resident of this State upon whom notices or orders of the Commissioner or process affecting such nonresident reinsurance intermediary may be served. Such licensee shall promptly notify the Secretary of State in writing of every change in its designated agent for service of process, and such change shall not become effective until acknowledged by the Secretary of State. (i) Licensed attorneys at law of this State when acting in their professional capacity as such shall be exempt from this section. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.) 
 4818. Contract required
(a) No person shall transact business with a managing general agent, a reinsurance intermediary-manager, or a controlling producer as qualified by section 4816 of this title unless there is in force a written contract between the parties which sets forth the respective responsibilities of each party and where both parties share responsibility for a particular function, specifies the division of such responsibilities. The contract must be approved by the board of directors of a reinsurer represented by a reinsurance intermediary-manager or the board of directors of a controlled insurer. At least 30 days before such reinsurer assumes or cedes business through such manager, or reinsurance intermediary, a true copy of the approved contract shall be filed with the Commissioner for approval. (b) The contract required under subsection (a) of this section shall contain the following minimum provisions: (1) The contract may be terminated by the insurer or reinsurer for cause upon written notice. (2) The authority to write business, underwrite, assume, or cede business, or settle claims may be suspended by the insurer or reinsurer during the pendency of any dispute regarding the cause for termination. (3) All funds due under the contract shall be remitted not less than monthly together with an accounting; however, the due date shall be fixed so that premiums or installments thereof collected shall be remitted not later than 90 days after the effective date of any policy for which the funds are collected. (4) All funds collected for an insurer or reinsurer under the contract shall be held in a fiduciary capacity in a financial institution approved by the Commissioner; however, funds of a controlling producer not required to be licensed in this State shall be maintained in compliance with the requirements of the controlling producers domiciliary jurisdiction. (5) Separate records of all business written under the contract shall be maintained. The contracting insurer or reinsurer shall have access to and the right to copy all accounts and records related to its business in a form usable by the insurer or reinsurer. (6) The contract may not be assigned in whole or in part.(7) The required use of underwriting, rating, or reinsurance underwriting standards formulated by the insurer or reinsurer when underwriting or reinsurance underwriting authority is transferred to a party to the contract. (8) The required use of a claims handling or settlement procedure formulated by the insurer or reinsurer when claims handling or settlement authority is transferred to a party to the contract. (9) The insurer shall have the right to cancel or nonrenew any policy of insurance subject to any applicable laws and regulations. (10) The required use of written standards established by the insurer for the cession or retrocession of all risks when ceding or retroceding authority is transferred to a party to the contract. (11) The managing general agent, reinsurance intermediary-manager, or controlling producer shall not bind or cede reinsurance on behalf of the insurer, reinsurer, or controlled insurer, except for facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract contains reinsurance underwriting guidelines for reinsurance ceded and assumed. The guidelines must list the reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules. (c) Transactions between a reinsurance intermediary broker and the insurer it represents in such capacity shall only be entered into pursuant to a written authorization specifying the responsibilities of each party. The authorization shall, at a minimum, provide that: (1) The insurer may terminate the reinsurance intermediary brokers authority at any time.(2) The reinsurance intermediary broker will render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by or owing to the reinsurance intermediary broker, and remit all funds due to the insurer within 30 days of receipt. (3) All funds collected for the insurers account will be held by the reinsurance intermediary broker in a fiduciary capacity in a financial institution approved by the Commissioner. (4) The reinsurance intermediary broker will comply with subsection 4821(c) of this title.(5) The reinsurance intermediary broker will comply with the written standards established by the insurer for the cession or retrocession of all risks. (6) The reinsurance intermediary broker will disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993; amended 1993, No. 12,  8, eff. April 26, 1993; 2005, No. 122 (Adj. Sess.),  1; 2021, No. 105 (Adj. Sess.),  230, eff. July 1, 2022.) 
 4819. Duties of insurers and reinsurers
(a) Insurers utilizing managing general agents. (1) An insurer shall have on file an independent financial examination, in a form acceptable to the Commissioner, of each managing general agent with which it has done business. (2) If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. The requirements of this subdivision are in addition to any other required loss reserve certification. (3) At least semiannually an insurer shall conduct an on-site review of the underwriting and claims processing operations of the managing general agent. (4) Binding authority for all reinsurance contracts other than those permitted in this chapter or participation in insurance or reinsurance syndicates shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent. (5) Within 30 days of entering into or termination of a contract with a managing general agent, the insurer shall provide written notification of such appointment or termination to the Commissioner. Notices of appointment of a managing general agent shall include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is to be authorized to act, and any other information the Commissioner may request. (6) An insurer shall review its books and records each quarter to determine if any producer as defined by this chapter has become a managing general agent as defined in this chapter. If the insurer determines that a producer has become a managing general agent, the insurer shall promptly notify the producer and the Commissioner of such determination and the insurer and producer must fully comply with the provisions of this subchapter within 30 days. (7) An insurer shall not appoint to its board of directors an officer, director, employee, subproducer, or controlling shareholder of any of its managing general agents, unless the appointment is permitted by the applicable sections of subchapter 13 of chapter 101 of this title concerning insurance holding companies or, if applicable, the sections of this chapter concerning business transacted with broker controlled property casualty insurers. (b) Insurers utilizing the services of a reinsurance intermediary-broker. (1) An insurer shall not engage the services of any person to act as a reinsurance intermediary-broker on its behalf unless such person is licensed as required by this chapter. (2) An insurer may not employ an individual who is employed by a reinsurance intermediary-broker with which it transacts business, unless such reinsurance intermediary-broker is under common control with the insurer and subject to subchapter 13 of chapter 101 of this title. (3) The insurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-broker with which it transacts business. (c) Reinsurers utilizing the services of a reinsurance intermediary-manager. (1) A reinsurer shall not engage the services of any person to act as a reinsurance intermediary-manager on its behalf unless such person is licensed as required by this chapter. (2) The reinsurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-manager which such reinsurer has engaged prepared by an independent certified accountant in a form acceptable to the Commissioner. (3) If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. This opinion shall be in addition to any other required loss reserve certification. (4) Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer who shall not be affiliated with the reinsurance intermediary-manager. (5) Within 30 days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of such termination to the Commissioner. (6) A reinsurer shall not appoint to its board of directors, any officer, director, employee, controlling shareholder, or subproducer of its reinsurance intermediary-manager. This subsection shall not apply to relationships governed by subchapter 13 of chapter 101 of this title. (7) At least semiannually, a reinsurer shall conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.) 
 4820. Examination authority
(a) The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer. (b) A reinsurance intermediary shall be subject to examination by the Commissioner. The Commissioner shall have reasonable access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the Commissioner. (c) A reinsurance intermediary-manager may be examined as if it were the reinsurer. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.)
 4821. Maintenance of books and records
(a) General requirement. All claim files will be the joint property of the insurer or reinsurer and the contracting party. However, upon an order of liquidation of the insurer or reinsurer, such files shall become the sole property of the insurer, reinsurer, or its estate; both parties shall have reasonable access to and the right to copy the files on a timely basis. (b) Managing general agents. Managing general agents shall maintain separate records of business written. The insurer shall have access and right to copy all accounts and records related to its business in a form usable by the insurer and the Commissioner shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the Commissioner. Such records shall be retained according to section 3568 of this title. (c) Reinsurance intermediary-brokers and managers. For at least ten years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-broker or manager, the reinsurance intermediary will keep a complete record for each transaction showing: (1) the type of contract, limits, underwriting restrictions, classes, or risks and territory;(2) period of coverage, including effective and expiration dates, cancellation provisions, notice required of cancellation, and, in the case of reinsurance intermediary-managers, the disposition of outstanding reserves on covered risks; (3) reporting and settlement requirements of balances;(4) rate used to compute the reinsurance premium;(5) names and addresses of assuming reinsurers;(6) rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary; (7) related correspondence and memoranda;(8) proof of placement;(9) details regarding retrocessions handled by the reinsurance intermediary, including the identity of retrocessionaires and percentage of each contract assumed or ceded; (10) financial records, including premium and loss accounts;(11) when the reinsurance intermediary procures or places a reinsurance contract on behalf of a licensed ceding insurer: (A) Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk; or (B) If placed through a representative of the assuming reinsurer, other than an employee, written evidence that such reinsurer has delegated binding authority to the representative; and (12) the insurer will have reasonable access and the right to copy and audit all accounts and records maintained by the reinsurance intermediary related to its business in a form usable by the insurer. (d) Broker controlled property casualty companies. The controlling broker shall maintain separately identifiable records of business written for the controlled insurer. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.) 
 4822. Sanctions
If the Commissioner determines, after notice and hearing, that any person has violated any provision of this subchapter, the Commissioner may: (1) for each separate violation, impose a penalty up to $25,000.00;(2) revoke or suspend the persons license;(3) order the managing general agent, reinsurance intermediary, or controlling producer to reimburse the insurer or reinsurer, or the rehabilitator or liquidator of the insurer or reinsurer for any losses incurred which are caused by a violation of this subchapter; and (4) order the controlling producer to cease placing business with the controlled insurer. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.)
 4823. Other requirements of managing general agents and reinsurance intermediaries
(a) Managing general agents and reinsurance intermediaries shall not:(1) commit the insurer or reinsurer to participate in insurance or reinsurance syndicates;(2) appoint any producer without assuring that the producer is lawfully licensed to transact the type of insurance for which he or she is appointed; (3) pay or commit the insurer to pay a claim, net of reinsurance or retrocessions, that exceeds one percent of the insurers or reinsurers policyholders surplus as of December 31 of the last completed calendar year without prior approval of the insurer or reinsurer; (4) collect any payment from a reinsurer or retrocessionaire or commit the insurer or reinsurer to any claim settlement with a reinsurer or retrocessionaire without prior approval of the insurer or reinsurer. If prior approval is given, a report must be promptly forwarded to the insurer or reinsurer; (5) permit its subproducer to serve on the insurers board of directors;(6) jointly employ an individual who is employed with the insurer or reinsurer unless such reinsurance intermediary-manager is under common control with the reinsurer subject to subchapter 13 of chapter 101 of this title; (7) appoint a sub-managing general agent or sub-reinsurance intermediary-manager; or(8) pay interim profits until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business, or a later period set by the Commissioner for specified lines of insurance, and not until the adequacy of reserves on remaining claims has been verified pursuant to subdivision 4819(a)(2) or 4819(c)(3) of this title, if the managing general agent or reinsurance intermediary set reserves. (b) The reinsurance intermediary shall:(1) disclose in writing to the insurer any relationship with the ceding or assuming insurer and the rates, terms, and purposes of commissions, charges, and other fees which the reinsurance intermediary-manager may levy against the reinsurer; and (2) provide the reinsurer with a statement of its financial condition.(c) The acts of the reinsurance intermediary-manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting within the scope of its actual or apparent authority. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.) 
 4824. Other requirements of controlling producers
(a) All provisions of subchapter 13 of chapter 101 of this title, to the extent they are not in conflict with the provisions of this subchapter, shall continue to apply to all parties within holding company systems subject to this subchapter. (b)(1) The controlled insurer shall provide the controlling producer with its underwriting standards, rules, and procedures, manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates, and conditions. The standards, rules, procedures, rates and conditions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer. (2) The rates of the commissions, charges, and other fees shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers. For purposes of this subdivision and subdivision (1) of this subsection, examples of comparable business include the same lines of insurance, same kinds of insurance, same kinds of risks, similar policy limits, and similar quality of business. (3) If the contract provides that the controlling producer, on insurance business placed with the insurer, is to be compensated contingent upon the insurers profits on that business, then such compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event shall the commissions be paid until the adequacy of the controlled insurers reserves on remaining claims has been independently verified pursuant to subdivision (6) of this subsection. (4) A controlled insurer shall limit the controlling producers writings in relation to the controlled insurers surplus and total writings. The insurer may establish a different limit for each line or sub-line of business. The controlled insurer shall notify the controlling producer when the applicable limit is approached and shall not accept business from the controlling producer if the limit is reached. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached. (5) A controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with management, the insurers independent certified public accountants, and an independent casualty actuary or other independent loss reserve specialist acceptable to the Commissioner to review the adequacy of the insurers loss reserves. (6) In addition to any other required loss reserve certification, a controlled insurer shall annually, on April 1 of each year, file with the Commissioner an opinion of an independent casualty actuary, or such other independent loss reserve specialist acceptable to the Commissioner, reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end, including incurred but not reported, on business placed by the producer. (7) A controlled insurer shall annually report to the Commissioner the amount of commissions paid to the producer, the percentage such amount represents of the net premiums written, and comparable amounts and percentages paid to noncontrolling producers for placements of the same kinds of insurance. (8) A controlled insurer shall deliver written notice to the prospective insured disclosing the relationship between the producer and the controlled insurer; except that, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain in his or her records a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the producer and that the subproducer has or will notify the insured. (Added 1991, No. 249 (Adj. Sess.),  18, eff. Jan. 1, 1993.) 
 4826. Uniform interstate licensing
Notwithstanding the provisions of subchapters 1 and 2 of this chapter or of chapter 142A of this title, the Commissioner may enter into reciprocal, cooperative, coordinating, and information sharing agreements with any other insurance producer licensing agency of any other jurisdiction in order to promote uniformity and efficiency of producer licensing among jurisdictions. Such agreements may be used to resolve conflicts arising from inconsistent licensing requirements of the laws of this State with the laws and regulations of any other jurisdiction. The Commissioner may approve a uniform producer license application or renewal form with tax or child support certification provisions which vary in form but not legal effect from those provided in 15 V.S.A.  795 or 32 V.S.A.  3113. The provisions of this subchapter shall apply to licenses granted under the provisions of chapters 131 and 142A of this title. (Added 1999, No. 38,  2, eff. May 20, 1999.) 
 4831. Definitions
As used in this chapter, unless the context clearly requires otherwise:(1) Attorney means the attorney-in-fact of a reciprocal insurer.(2) Reciprocal insurance is that resulting from an interchange among persons, known as subscribers, of reciprocal agreements of indemnity, the interchange being effectuated through an attorney-in-fact common to all such persons. (3) Subscribers are persons who enter into reciprocal insurance agreements under this chapter. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4832. Scope of chapter; existing insurers
(a) All authorized reciprocal insurers shall be governed by those provisions of this chapter not expressly made applicable to domestic reciprocal insurers. (b) Existing authorized reciprocal insurers shall after March 31, 1971 comply with this chapter, and shall make such amendments to their subscribers agreement, power of attorney, policies, and other documents and accounts and perform such other acts as may be required for such compliance. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4833. Insuring powers of reciprocals
(a) A reciprocal insurer may, upon qualifying therefor as provided for by this title, transact any kind or kinds of insurance defined by this title, other than life or title insurances. (b) Such an insurer may purchase reinsurance upon the risk of any subscriber or subscribers, and may assume or cede reinsurance as to any kind of insurance it is authorized to transact direct. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 1997, No. 49,  1, eff. June 26, 1997.) 
 4834. Name; suits
A reciprocal insurer shall:(1) Have and use a business name. The name shall include the word reciprocal, or interinsurer, or interinsurance, or exchange, or underwriters, or underwriting, or association. (2) Sue and be sued in its own name. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 1997, No. 49,  2, eff. June 26, 1997.)
 4835. Attorney
(a) The attorney of a foreign reciprocal insurer, which is duly authorized to transact insurance in this State, shall not, by virtue of discharge of its duties as such attorney with respect to the insurers transactions in this State, be deemed to be doing business in this State within the meaning of any laws of this State applying to foreign persons, firms, or corporations. (b) The subscribers and the attorney-in-fact comprise a reciprocal insurer and a single entity as to all operations under the insurers certificate of authority. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4836. Organization of reciprocal insurer
(a) Two or more persons may organize a domestic reciprocal insurer and make application to the Commissioner for a certificate of authority to transact insurance. (b) The proposed attorney shall fulfill the requirements of and shall execute and file with the Commissioner when applying for a certificate of authority, a declaration setting forth: (1) The name of the insurer;(2) The location of the insurers principal office, which shall be the same as that of the attorney and shall be maintained within this State; (3) The kinds of insurance proposed to be transacted;(4) The names and addresses of the original subscribers;(5) The designation and appointment of the proposed attorney and a copy of the power of attorney; (6) The names and addresses of the officers and directors of the attorney, if a corporation, or its members, if a firm or a limited liability company; (7) The powers of the subscribers advisory committee; and the names and terms of office of the members thereof; (8) That all monies paid to the reciprocal shall, after deducting therefrom any sum payable to the attorney, be held in the name of the insurer and for the purposes specified in the subscribers agreement; (9) A statement that each of the original subscribers has in good faith applied for insurance of a kind proposed to be transacted, and that the insurer has received from each such subscriber the full premium or premium deposit required for the policy applied for, for a term of not less than six months at an adequate rate previously filed with and approved by the Commissioner; (10) A statement of the financial condition of the insurer, a schedule of its assets, and a statement that the surplus as required by this title is on hand; and (11) A copy of each policy, endorsement, and application form it then proposes to issue or use. (c) The declaration shall be acknowledged by the attorney in the manner required for the acknowledgment of deeds. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 1997, No. 49,  3, eff. June 26, 1997; 2003, No. 55,  1; 2021, No. 105 (Adj. Sess.),  231, eff. July 1, 2022.) 
 4837. Certificate of authority
(a) The certificate of authority of a reciprocal insurer shall be issued to its attorney in the name of the insurer. (b) The Commissioner may refuse, suspend, or revoke the certificate of authority, in addition to other grounds therefor, for failure of the attorney to comply with any applicable provisions of this title. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4838. Power of attorney
(a) The rights and powers of the attorney of a reciprocal insurer shall be as provided in the power of attorney given it by the subscribers. A valid power of attorney shall be in writing, executed by the subscriber, and duly executed by the attorney-in-fact. (b) The power of attorney must set forth:(1) the powers of the attorney;(2) the general services to be performed by the attorney;(3) the maximum amount to be deducted from advance premiums or deposits to be paid to the attorney and the general items of expense in addition to losses, to be paid by the insurer; and (4) except as to nonassessable policies, a provision for a contingent several liability of each subscriber in a specified amount. (c) The power of attorney may:(1) provide for the right of substitution of the attorney and revocation of the power of attorney and rights thereunder; (2) impose such restrictions upon the exercise of the power as are agreed upon by the subscribers; (3) provide for the exercise of any right reserved to the subscribers directly or through their advisory committee; and (4) contain other lawful provisions deemed advisable.(d) The terms of any power of attorney or agreement collateral thereto shall be reasonable and equitable, and no such power or agreement shall be used or be effective in this State until approved by the Commissioner. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 2009, No. 137 (Adj. Sess.),  16, eff. May 29, 2010; 2013, No. 29,  45, eff. May 13, 2013.) 
 4839. Modifications
Modifications of the terms of the subscribers agreement or of the power of attorney of a domestic reciprocal insurer shall be made jointly by the attorney and the subscribers advisory committee. No such modification shall be effective retroactively, nor as to any insurance contract issued prior thereto. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4840. Attorneys bond
(a) Concurrently with the filing of the declaration provided for in section 4836 of this title, the attorney of a domestic reciprocal insurer shall file with the Commissioner a bond in favor of this State for the benefit of all persons damaged as a result of breach by the attorney of the conditions of his or her bond which shall be executed by the attorney and by an authorized corporate surety, and which shall be in the form as set forth in subsection (b) of this section. The bond shall be executed subject to the Commissioners approval. (b) The bond shall be in the penal sum of $250,000.00 aggregate in form, conditioned that the attorney will faithfully account for all monies and other property of the insurer coming into his or her hands, and that he or she will not withdraw or appropriate to his or her own use from the funds of the insurer, any monies or property to which he or she is not entitled under the power of attorney. (c) The bond shall provide that it is not subject to cancellation unless 30 days notice in writing of cancellation is given both the attorney and the Commissioner. (d) The Commissioner may waive or reduce the requirements of this section for an attorney that is under common ownership or control with a reciprocal insurer. The Commissioner may reduce by 50 percent the bond amount required by this section for an attorney that is not under common ownership or control with a reciprocal insurer if the Commissioner finds sufficient evidence of financial responsibility, notwithstanding the reduction of the bond amount. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 1997, No. 49,  4, eff. June 26, 1997; 2003, No. 55,  2; 2007, No. 178 (Adj. Sess.),  9.) 
 4841. Deposit in lieu of bond
In lieu of the bond required under section 4840 of this title, the attorney may maintain on deposit in the office of the Commissioner, subject to the same conditions as the bond, a like amount in: (1) cash;(2) securities qualified as insurer investments; or(3) a letter of credit issued for the benefit of and acceptable to the Commissioner. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 1997, No. 49,  5, eff. June 26, 1997; 2003, No. 55,  3.)
 4842. Action on bond
Action on the attorneys bond or to recover against any such deposit made in lieu thereof may be brought at any time by one or more subscribers suffering loss through a violation of its conditions, or by a receiver or liquidator of the insurer. Amounts recovered on the bond shall be deposited in and become part of the insurers funds. The total aggregate liability of the surety shall be limited to the amount of the penalty of such bond. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4843. Services of process; judgment
(a) Legal process shall be served upon a domestic reciprocal insurer by serving the insurers attorney at his or her principal office. (b) Any judgment based upon legal process so served shall be binding upon each of the insurers subscribers as their respective interests may appear, but in an amount not exceeding their respective contingent liabilities, if any, the same as though personal service of process was had upon each such subscriber. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4844. Contributions to insurer
The attorney or other parties may advance to a domestic reciprocal insurer upon reasonable terms such funds as it may require from time to time in its operations. Sums so advanced shall not be treated as a liability of the insurer, and, except upon liquidation of the insurer, shall not be withdrawn or repaid except out of the insurers realized earned surplus in excess of its minimum required surplus. No such withdrawal or repayment shall be made without the prior written approval of the Commissioner. This section does not apply to bank loans, or to other loans made upon security. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4845. Financial condition; method of determining
In determining the financial condition of a reciprocal insurer the Commissioner shall apply the following rules: (1) The Commissioner shall charge as liabilities the same reserves as are required of incorporated insurers issuing nonassessable policies on a reserve basis. (2) The surplus deposits of subscribers shall be allowed as assets, except that any premium deposit delinquent for 90 days shall first be charged against such surplus deposit. (3) The surplus deposits of subscribers shall not be charged as a liability.(4) All premium deposits delinquent less than 90 days shall be allowed as assets.(5) An assessment levied upon subscribers, and not collected, shall not be allowed as an asset. (6) The contingent liability of subscribers shall not be allowed as an asset.(7) The computation of reserves shall be based upon premium deposits other than membership fees and without any deduction for expenses and the compensation of the attorney. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 2003, No. 55,  4.) 
 4846. Subscribers
Any individual or entity that is duly organized under the laws of this State or the laws of another jurisdiction may make application for, enter into agreement for, and hold policies or contracts in or with and be a subscriber of any domestic, foreign, or alien reciprocal insurer. Any corporation organized under the laws of this State, including nonprofit corporations organized under the provisions of Title 11B of the Vermont Statutes Annotated, shall, in addition to the rights, powers, and franchises specified in its articles of incorporation, have full power and authority as a subscriber to exchange insurance contracts through such reciprocal insurer. The right to exchange such contracts is declared to be incidental to the purposes for which such corporations are organized and to be as fully granted as the rights and powers expressly conferred upon such corporations. Government or governmental agencies, state or political subdivisions thereof, boards, associations, estates, trustees, or fiduciaries are authorized to exchange nonassessable reciprocal interinsurance contracts with each other and with individuals and lawful entities to the same extent that individuals and lawful entities are herein authorized to exchange reciprocal interinsurance contracts. Any officer, representative, trustee, receiver, or legal representative of any such subscriber shall be recognized as acting for or on its behalf for the purpose of such contract but shall not be personally liable upon such contract by reason of acting in such representative capacity. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 1997, No. 49,  6, eff. June 26, 1997; 2009, No. 137 (Adj. Sess.),  17, eff. May 29, 2010; 2021, No. 105 (Adj. Sess.),  232, eff. July 1, 2022.) 
 4847. Subscribers advisory committee
(a) The advisory committee of a domestic reciprocal insurer exercising the subscribers rights shall be selected under such rules as the subscriber adopts. (b) Not less than two-thirds of the committee shall be subscribers.(c) The committee shall:(1) supervise the finances of the insurer;(2) supervise the insurers operations to such extent as to ensure conformity with the subscribers agreement and power of attorney; (3) procure the audit of the accounts and records of the insurer and of the attorney at the expense of the insurer; and (4) have such additional powers and functions as may be conferred by the subscribers agreement. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 2003, No. 55,  5; 2021, No. 105 (Adj. Sess.),  233, eff. July 1, 2022.) 
 4848. Subscribers liability
(a) The liability of each subscriber, other than as to a nonassessable policy, for the obligations of the reciprocal insurer shall be an individual, several and proportionate liability, and not joint. (b) Except as to a nonassessable policy, each subscriber shall have a contingent assessment liability, in the amount provided for in the power of attorney or in the subscribers agreement, for payment of actual losses and expenses incurred while his or her policy was in force. (c) Each assessable policy issued by the insurer shall contain a statement of the contingent liability, set in type of the same prominence as the insuring clause. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 2013, No. 29,  46, eff. May 13, 2013.) 
 4849. Subscribers liability on judgment
(a) No action shall lie against any subscriber upon any obligation claimed against the insurer until a final judgment has been obtained against the insurer and remains unsatisfied for 30 days. (b) Any such judgment shall be binding upon each subscriber only in such proportion as his or her interests may appear and in amount not exceeding his or her contingent liability, if any. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4850. Assessments
(a) Assessments may from time to time be levied upon subscribers of a domestic reciprocal insurer liable therefor under the terms of their policies by the attorney upon approval in advance by the subscribers advisory committee and the Commissioner; or by the Commissioner in liquidation of the insurer. (b) Each subscribers share of a deficiency for which an assessment is made, but not exceeding in any event his or her aggregate contingent liability as computed in accordance with section 4852 of this title, shall be computed by applying to the premium earned on the subscribers policy or policies during the period to be covered by the assessment, the ratio of the total deficiency to the total premiums earned during such period upon all policies subject to the assessment. (c) In computing the earned premiums for the purposes of this section, the gross premium received by the insurer for the policy shall be used as a base, deducting therefrom solely charges not recurring upon the renewal or extension of the policy. (d) No subscriber shall have an offset against any assessment for which he or she is liable, on account of any claim for unearned premium or losses payable. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4851. Time limit for assessments
Every subscriber of a domestic reciprocal insurer having contingent liability shall be liable for, and shall pay his or her share of any assessment, as computed and limited in accordance with this chapter, if: (1) while his or her policy is in force or within one year after its termination, he is notified by either the attorney or the Commissioner of his or her intentions to levy such assessment; or (2) if an order to show cause why a receiver, conservator, rehabilitator, or liquidator of the insurer should not be appointed is issued while his or her policy is in force or within one year after its termination. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4852. Aggregate liability
No one policy or subscriber as to a policy shall be assessed or charged with an aggregate of contingent liability as to obligations incurred by a domestic reciprocal insurer in any one calendar year, in excess of the amount provided for in the power of attorney or in the subscribers agreement, computed solely upon premium earned on such policy during that year. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4853. Nonassessable policies
(a) If a reciprocal insurer has a surplus of assets over all liabilities at least equal to the minimum capital stock and surplus required to be maintained by a domestic stock insurer authorized to transact like kinds of insurance, upon application of the attorney and as approved by the subscribers advisory committee, the Commissioner shall issue his or her certificate authorizing the insurer to extinguish the contingent liability of subscribers under its policies then in force in this State, and to omit provisions imposing contingent liability in all policies delivered or issued for delivery in this State for so long as all of the surplus remains unimpaired. (b) Upon impairment of such surplus, the Commissioner shall immediately revoke the certificate. The revocation shall not render subject to contingent liability any policy then in force and for the remainder of the period for which the premium has previously been paid; but after the revocation no policy shall be issued or renewed without providing for contingent assessment liability of the subscriber. (c) The Commissioner shall not authorize a domestic reciprocal insurer so to extinguish the contingent liability of any of its subscribers or in any of its policies to be issued, unless it is qualified to and does extinguish the liability of all its subscribers and in all policies for all kinds of insurance transacted by it. Nevertheless, if required by the laws of another state in which the insurer is transacting insurance as an authorized insurer, the insurer may issue policies providing for the contingent liability of such of its subscribers as may acquire such policies in that state, and need not extinguish the contingent liability applicable to policies previously in force in that state. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 2021, No. 105 (Adj. Sess.),  234, eff. July 1, 2022.) 
 4854. Subscribers share in assets
Upon the liquidation of a domestic reciprocal insurer, its assets remaining after discharge of its indebtedness and policy obligations, the return of any contributions of the attorney or other persons to its surplus, and the return of any unused premium, savings, or credits then standing on subscribers account, shall be distributed to its subscribers who were such within the 12 months prior to the last termination of its certificate of authority, according to a reasonable formula which the Commissioner approves. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4855. Merger or conversion
(a) A domestic reciprocal insurer, upon affirmative vote of not less than two-thirds of its subscribers who vote on such merger pursuant to due notice and the approval of the Commissioner of the terms therefor, may merge with another reciprocal insurer or be converted to a stock or mutual insurer. (b) Such a stock or mutual insurer shall be subject to the same capital or surplus requirements and shall have the same rights as a like domestic insurer transacting like kinds of insurance. (c) The Commissioner shall not approve any plan for merger or conversion which is inequitable to subscribers, or which, if for conversion to a stock insurer, does not give each subscriber preferential right to acquire stock of the proposed insurer proportionate to his or her interest in the reciprocal insurer as determined in accordance with section 4854 of this chapter and a reasonable length of time within which to exercise such right. (Added 1971, No. 31,  1, eff. March 31, 1971.) 
 4856. Impaired reciprocals
(a) If the assets of a domestic reciprocal insurer are at any time insufficient to discharge its liabilities, other than any liability on account of funds contributed by the attorney or others, and to maintain the required surplus, its attorney shall immediately make up the deficiency or levy an assessment upon the subscribers for the amount needed to make up the deficiency, but subject to the limitation set forth in the power of attorney or policy. (b) If the attorney fails to make up such deficiency or to make the assessment within 30 days after the Commissioner orders him or her to do so, or if the deficiency is not fully made up within 60 days after the date the assessment was made, the insurer shall be deemed insolvent and shall be proceeded against as authorized by this title. (c) If liquidation of such an insurer is ordered, an assessment shall be levied upon the subscribers for such an amount, subject to limits as provided by this chapter, as the Commissioner determines to be necessary to discharge all liabilities of the insurer, exclusive of any funds contributed by the attorney or other persons, but including the reasonable cost of the liquidation. (Added 1971, No. 31,  1, eff. March 31, 1971; amended 2021, No. 105 (Adj. Sess.),  235, eff. July 1, 2022.) 
 4901. Definitions
As used in this chapter:(1) Insurance policy means a policy or contract covering any kind of insurance described in this title, including a contract or certificate issued by a fraternal benefit society under chapter 121 of this title or a subscriber contract issued by a medical or hospital service corporation under chapter 123 or 125 of this title. (2) Insurer means any insurance company regulated by this title, including a fraternal benefit society or a medical or hospital service corporation. (Added 1975, No. 36.) 
 4902. Disclosure and public information
(a) The Commissioner shall make such rules as he or she considers necessary or desirable for the full, fair, and uniform disclosure and conveyance of useful information to consumers of insurance. (b) The rules may include requirements that for each or any insurance policy sold or offered for sale in this State an insurer shall prepare and provide or cause to be provided to the policyholder, buyer, or prospective buyer a disclosure statement containing: (1) a clear and concise outline summarizing and clarifying important features of the policy;(2) information on cost and on return to or on behalf of policyholders;(3) such other information which the Commissioner considers appropriate to further the purposes of or reduce violations of chapter 129 of this title; and (4) a statement that the outline is a summary of the policy or contract issued or applied for and that the policy or contract should be consulted to determine governing contractual provisions. (c) The Commissioner shall by rule establish standards for the format, content, and distribution of disclosure statements and any other informational materials he or she considers necessary or desirable to promote the purposes of this section. (Added 1975, No. 36.) 
 4903. Administrative procedure; withdrawal of approval; judicial review
Rules issued under this chapter shall be adopted under 3 V.S.A. chapter 25, and shall be subject to review as provided in that chapter. When a rule is adopted under this chapter and an insurance policy is not in compliance with the rule, the Commissioner may withdraw his approval of the policy form in the manner provided in sections 3541-3543 of this title. An insurer may appeal a decision of the Commissioner to withdraw a policy form under 3 V.S.A.  815 and review shall be confined to the record below. (Added 1975, No. 36.) 
 4981. Definitions
As used in this chapter, unless the context otherwise requires:(1) Association means a joint underwriting association established pursuant to this chapter. (2) Commissioner means the Commissioner of Financial Regulation or a designee.(3) Property and casualty insurance means all insurance covered under chapter 128 of this title relating to property and casualty rate regulation. (4) Member means an insurer which is a member of an association.(5) Plan means the plan of operation of the association approved or proposed by the Commissioner pursuant to this chapter. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  236, eff. July 1, 2022.) 
 4982. Creation of Vermont joint underwriting associations
(a) The Commissioner is hereby authorized, under the terms of this chapter, to establish one or more Vermont joint underwriting associations. The purpose of any such association shall be to provide insurance on a self-supporting basis without subsidy from its members. No such association formed pursuant to this chapter shall be formed for the purpose of providing coverage for pollution exposures. (b) Each insurer authorized to write, and engaged in writing within this State, property and casualty insurance shall be a member of an association established under this chapter by the Commissioner and shall remain a member as a condition of its authority to write such insurance within this State, except that the Commissioner may exclude classes of insurers for administrative convenience or because it is not practicable to require them to participate. (c) An association shall be a temporary, nonexclusive, nonprofit unincorporated association constituting a legal entity separate and distinct from its members. All funds and reserves of an association shall be separately held and invested. (d) An association shall not commence or resume after suspension, any of its underwriting operations, until the Commissioner, after due hearing and investigation determines, and the emergency board approves such determination, that a voluntary market of insurance does not exist and that a voluntary market assistance plan has failed to restore availability of the needed insurance coverages. Upon such determination, an association shall be authorized to engage in the underwriting of any specific line of insurance determined to be unavailable in the voluntary market. If, after an association commences its operation, the Commissioner determines that insurance can be made available in the voluntary market, he or she shall suspend the operation of the association. The Commissioner may re-establish the associations operations if he or she finds after due hearing and investigation that the insurance industry has failed to provide a voluntary market for the specific line of insurance underwritten through the association. (e) An association shall, subject to the terms and conditions of this chapter, have power on behalf of its members to: (1) issue, or to cause to be issued, policies of insurance to qualified applicants, including incidental coverages and subject to limits as specified in the plan of operation. Coverages under such policies may be made available as primary or excess protection; (2) underwrite and otherwise service such policies of insurance and adjust and pay losses with respect thereto, or appoint service companies or associations to perform those functions; (3) assume or cede 100 percent reinsurance or a lesser percentage on any policy underwritten by the association. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4983. Board of directors
Each association established under this chapter shall operate subject to the supervision of a board of directors consisting of representatives of four of the members, who shall be elected by the members; an insurance agent licensed and writing insurance in this State, who shall be named by the Commissioner and two representatives of the group of buyers of the line of insurance provided, to be named by the association of such group if any exists, or by the Commissioner. A chair and such other officers as may be provided for in the plan shall be elected by the board. The directors shall serve without compensation but shall be reimbursed by the association for their actual and necessary expenses incurred in the performance of their duties. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4984. Plan of operation
(a) Within 45 days following the creation of an association pursuant to section 4982 of this title, or such additional time as may be prescribed by the Commissioner, the board of directors of the association shall submit to the Commissioner for review and approval a proposed plan of operation consistent with the provisions of this chapter. If the Commissioner approves the proposed plan, the Commissioner shall certify such approval to the board and the plan shall take effect 10 days after such certification. If the Commissioner disapproves of all or any part of the proposed plan, the Commissioner shall return the plan to the board with a statement in writing of the reasons for the disapproval and any recommendations the Commissioner may make. The board may accept the Commissioners recommendations and submit the amended plan to the Commissioner or submit a new plan within 30 days after the return of the disapproved plan to the board. Within 10 days after receipt of the second plan, the Commissioner shall propose a plan and certify it to the board. A plan proposed by the Commissioner shall take effect 10 days after certification to the board. (b) The plan of operation shall provide for economic, fair, and nondiscriminatory administration, and for the prompt and efficient provision of insurance on a self-supporting basis. The plan shall contain other provisions including preliminary assessment of all members for initial expenses necessary to commence operations, establishment of necessary facilities, management of the association, administrative expenses, reasonable commission arrangements, reasonable and objective underwriting standards, procedures for acceptance and cession of reinsurance, appointment of servicing carriers or other servicing arrangements or the direct issuance of syndicate policies, procedures for determining amounts of insurance to be provided by the association, provisions for assessment of deficits under section 4986 of this title, and an equitable apportionment among the members in the associations writings, expenses, servicing allowance, management fees, and losses. (c) Amendments to the plan may be made by the board of directors of the association, subject to the approval of the Commissioner. The Commissioner may also make amendments to the plan subject to the approval of the board. An amendment to the plan shall take effect not less than 10 days after adoption. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986; amended 2021, No. 105 (Adj. Sess.),  237, eff. July 1, 2022.) 
 4985. Policy forms and rates
(a) The Commissioner shall specify whether policy forms and the rate structure shall be on a claims-made, occurrence or other basis and coverage shall be provided by an association only on the basis specified by the Commissioner. The Commissioner may specify a claims-made basis only if the contract makes provisions for residual occurrence coverage or extended reporting coverage upon the discontinuance of the insured activity in this State of the insured or the termination of the insurance policy by the insured for so long as there is a reasonable probability of a claim for injury for which the insured may be held liable. Provision may be made for a premium charge allocable to any such residual occurrence coverage and such premium charges for such residual coverage shall be segregated and separately maintained and calculated to be self-supporting for such purpose which may include the reinsurance of all or a part of that portion of the risk. All policy forms shall be approved by the Commissioner. (b) The rates, rating plans, rating rules, and rating classifications applicable to the insurance written by the association shall be approved by the Commissioner after hearing and shall be on an actuarially sound basis calculated to be self-supporting without insured assessments, giving due consideration to the past and prospective loss and expense experience within and without this State for that line of insurance written and to be written in this State, trends in the frequency and severity of losses, the investment income of the association and such other information as the Commissioner may require. (c) Policies issued by an association may provide for deductibles and for co-insurance, premium discounts, surcharges, separate classifications which reflect income, and other features not necessarily in current use. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4986. Deficits
(a) In the event an association suffers an underwriting deficit for any year, the board of directors shall so certify to the Commissioner. Such certification shall be subject to the review and approval of the Commissioner. As provided in the plan of operation, but in a term not to exceed one year, each policyholder shall pay to the association a premium contingency assessment which bears the same ratio to the amount of such deficit as his or her premium for such year for insurance written or reinsured by the association bore to the total premiums paid to the association for such year. The association may cancel any policy of any policyholder who fails to pay the premium contingency assessment and need not pay any future claims against that policyholder. Any deficit premium contingency assessment uncollectible against any policyholder shall not be assessed against any other policyholder or policyholders. (b) In no event shall a deficit incurred by an association be charged directly or indirectly to any insured other than a policyholder insured through an association. (c) An association shall amend the amount of its certification of deficit to the Commissioner as the values of its incurred losses become finalized and the members of the association shall upon approval by the Commissioner amend their recoupment procedure accordingly. The board of directors of an association may require all members to contribute on a temporary basis to the financial requirements of the association prior to recoupment of any deficit in such proportion as shall be specified in the plan. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4987. Annual statements
Each association shall adopt a fiscal year beginning on October 1, and shall file in the office of the Commissioner on or before the 15th day of November each year, or such other month specified in the plan, a statement as prescribed by the Commissioner. The statement shall contain matters and information required by the Commissioner including information with respect to its transactions, condition, operations, and affairs during the preceding year, and shall be in a form approved by the Commissioner. The Commissioner may, at any time, require an association to furnish additional information with respect to matters considered to be material to the scope, operation, and experience of the association. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4988. Examination
The Commissioner shall make an examination into the affairs of each association annually or as often as he or she deems necessary. The Commissioner shall make an order indicating the scope of the examination and may appoint as examiners one or more competent persons not employed by any insurer or interested in any insurer except as a policyholder. The expenses of every such examination shall be borne and paid for by the association involved. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4989. Immunity
Any association, the Commissioner, or any other person or organization shall be immune from civil liability for any actions taken or statements made in good faith by any of them in any report, communication, or actions concerning risks insured or to be insured by the association or during any proceedings in connection therewith. Any reports and communications in connection therewith are not subject to public inspection. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4990. Rules; enforcement
The Commissioner may adopt reasonable rules to carry out the purposes of this chapter, and may suspend or revoke, after reasonable notice and a hearing, the certificate of authority or license to transact the business of insurance in this State of any member or other person that fails to comply with the provisions of this chapter, rules adopted hereunder, or any plan. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986; amended 2015, No. 23,  84.) 
 4991. Appeal
Any member or other person aggrieved by any action or decision of an association, or of any member as a result of its participation therein, may appeal to the board of directors. The decision of the board of directors may be appealed to the Commissioner within 30 days from the date of its decision. The Commissioner shall, after hearing held upon notice, issue an order approving or disapproving the board of directors decision. All final orders and decisions of the Commissioner are subject to judicial review as provided in 3 V.S.A.  815. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986.) 
 4992. Termination
The authority granted to the Commissioner to establish a joint underwriting association under this chapter shall continue indefinitely unless the authority is terminated by act of the General Assembly. In the event authority is so terminated, any association established prior to the termination date may continue to exist for a period of one year from the date it commences underwriting activities. All obligations incurred by the association or by policyholders during this period shall be honored and binding until discharged, and any association shall remain in effect for the purpose of discharging any obligations incurred. The plan of operation shall provide for the orderly dissolution of the association at its termination. Upon termination of the association and the discharge of all its liabilities and at any such other time as may be specified in the plan, any excess funds of the association shall be distributed to the policyholders of the association in an equitable manner as set forth in the plan of operation. (Added 1985, No. 265 (Adj. Sess.),  4, eff. June 4, 1986; amended 1987, No. 20; 1987, No. 185 (Adj. Sess.),  7, eff. May 5, 1988; 1989, No. 113,  3.) 
 5021. Non-Admitted Insurance Act; short title
This chapter may be cited as the Non-Admitted Insurance Act. (Added 1979, No. 50,  2.)
 5022. Definitions
(a) Notwithstanding subsection (b) of this section, as used in this chapter, unless the context requires otherwise, words and phrases shall have the meaning given under Title V, Subtitle B of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub.L. 111-203, as amended. (b) As used in this chapter:(1) Admitted insurer means an insurer licensed to transact business in this State. For purposes of this chapter, admitted insurer shall not include a domestic surplus lines insurer. (2) Commissioner means the Commissioner of Financial Regulation.(3) Domestic insurer means any insurer that has been chartered by, incorporated, organized, or constituted within or under the laws of this State. (4) Domestic risk means a subject of insurance that is resident, located, or to be performed in this State. (5) Domestic surplus lines insurer means a domestic insurer with which insurance coverage may be placed under this chapter. (6) To export means to place surplus lines insurance with a non-admitted insurer.(7) Home state means, with respect to an insured:(A)(i) The state in which an insured maintains its principal place of business or, in the case of an individual, the individuals principal residence; or (ii) if 100 percent of the insured risk is located outside the state referred to in subdivision (A)(i) of this subsection, the state to which the greatest percentage of the insureds taxable premium for that insurance contract is allocated. (B) If more than one insured from an affiliated group are named insureds on a single non-admitted insurance contract, the term home state means the home state, as determined pursuant to subdivision (A) of this subdivision (7), of the member of the affiliated group that has the largest percentage of premium attributed to it under such insurance contract. (8) NAIC means the National Association of Insurance Commissioners.(9) Surplus lines broker means an individual licensed under this chapter and chapter 131 of this title. (10) Surplus lines insurance means coverage not procurable from admitted insurers.(11) Surplus lines insurer means a non-admitted insurer with which insurance coverage may be placed under this chapter. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  1; 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 49,  2, eff. May 26, 2011; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2019, No. 57,  4.) 
 5023. Surplus lines insurance; authorized
Surplus lines insurance may be procured from non-admitted insurers, if:(1) The insurance meets the conditions specified in section 5024 of this title;(2) The insurance is placed through a licensed surplus lines broker;(3) The insurer meets the conditions specified in section 5026 of this title; and(4) All other requirements of this chapter are met. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  2; 2001, No. 97 (Adj. Sess.),  19.)
 5023a. Domestic surplus lines insurer; authorized
(a) Surplus lines insurance may be procured from a domestic surplus lines insurer if all of the following criteria are met: (1) The board of directors of the insurer has adopted a resolution seeking certification as a domestic surplus lines insurer and the Commissioner has approved such certification. (2) The insurer is already eligible to offer surplus lines insurance in at least one other state besides Vermont. (3) The insurer meets the requirements of section 5026 of this title.(4) All other requirements of this chapter are met.(b) The requirements of 8 V.S.A.  80 shall not apply to domestic surplus lines insurers. A domestic surplus lines insurer shall be deemed to be a non-admitted insurer for purposes of chapter 138 of this title. (Added 2019, No. 57,  5.) 
 5024. Conditions for placement of insurance
(a) Insurance coverage, except as described in section 5025 of this chapter, shall not be placed with a surplus lines insurer unless the full amount of insurance required is not reasonably procurable from admitted insurers actually transacting that kind and class of insurance in this State; and the amount of insurance exported shall be only the excess over the amount procurable from admitted insurers actually transacting and insuring that kind and class of insurance. (b) Notwithstanding any other provision of this section, the Commissioner may order eligible for export any class or classes of insurance coverage or risk for which he or she finds there to be an inadequate competitive market among admitted insurers either as to acceptance of the risk, contract terms, or premium or premium rate. (c) The due diligence search for reasonably procurable insurance coverage required under subsection (a) of this section is not required for an exempt commercial purchaser, provided: (1) the surplus lines broker procuring or placing the surplus lines insurance has disclosed to the exempt commercial purchaser that such insurance may be available from an admitted insurer and may provide greater protection with more regulatory oversight; and (2) the exempt commercial purchaser has subsequently requested in writing the surplus lines broker to procure or place such insurance from a non-admitted insurer. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  3; 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  3, eff. May 26, 2011; 2019, No. 57,  6.) 
 5025. Exceptions concerning placement of insurance with non-admitted insurers; records
The provisions of this chapter controlling the placement of insurance with non-admitted insurers shall not apply to life insurance, health insurance, annuities, or reinsurance, nor to the following insurance when so placed by any licensed producer in this State: (1) insurance on subjects whose home state is other than Vermont;(2) insurance on the property or operations of aircraft or railroads engaged in transportation in interstate and foreign commerce; or (3) insurance of vessels, crafts or hulls, cargoes, marine builders risks, marine protection and indemnity, or other risks, including strikes and war risks commonly insured under ocean or wet marine forms of policy. (Added 1979, No. 50,  2; amended 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  4, eff. May 26, 2011.) 
 5026. Solvent insurers required
(a) Where Vermont is the home state of the insured, surplus lines brokers shall not knowingly place or continue surplus lines insurance with surplus lines insurers who are insolvent or unsound financially, and in no event shall any surplus lines broker place any insurance with a non-admitted insurer unless such insurer: (1) has and maintains capital and surplus or its equivalent under the laws of its domiciliary jurisdiction which equals the greater of: (A) the minimum capital and surplus requirements under the law of this State; or(B) $15,000,000.00; and(2) if an alien insurer, is listed on the quarterly listing of alien insurers maintained by the NAIC international insurers department. (b) Notwithstanding the capital and surplus requirements of this section, a surplus lines insurer may receive approval upon an affirmative finding of acceptability by the Commissioner. The finding shall be based upon such factors as quality of management, capital, and surplus of any parent company, company underwriting profit and investment-income trends, market availability, and company record and reputation within the industry. In no event, however, shall the Commissioner make an affirmative finding of acceptability when the surplus lines insurers capital and surplus is less than $4,500,000.00. (c) The Commissioner may from time to time publish a list of all non-admitted insurers deemed by him or her to be currently eligible surplus lines insurers under the provisions of this section, and shall mail a copy of such list to each surplus lines broker. This subsection shall not be deemed to cast upon the Commissioner the duty of determining the actual financial condition or claims practices of any non-admitted insurer; and the status of eligibility, if granted by the Commissioner, shall indicate only that the insurer appears to be sound financially and to have satisfactory claims practices, and that the Commissioner has no credible evidence to the contrary. While any such list is in effect, the surplus lines broker shall restrict to the insurers so listed all surplus lines insurance business placed by him or her. However, upon the request of a surplus lines broker or an insured, the Commissioner may deem a non-admitted insurer to be an eligible surplus lines insurer for purposes of this subsection prior to publication of the name of such surplus lines insurer on the list. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  4; 1985, No. 236 (Adj. Sess.),  4, eff. June 3, 1986; 1989, No. 249 (Adj. Sess.),  1; 1993, No. 235 (Adj. Sess.),  5, eff. June 21, 1994; 2001, No. 97 (Adj. Sess.),  19; 2007, No. 49,  7; 2011, No. 49,  5, eff. May 26, 2011; 2019, No. 57,  7.) 
 5027. Evidence of the insurance; changes; penalty
(a) Where Vermont is the home state of the insured, the surplus lines broker, upon placing a domestic risk with a surplus lines insurer, shall promptly deliver to the insured the policy issued by the surplus lines insurer, or if such policy is not then available, a certificate, cover note, or other confirmation of insurance, showing the description and location of the subject of the insurance, coverage, conditions and term of the insurance, the premium and rate charged and taxes collected from the insured, and the name and address of the insured and surplus lines insurer. If the risk is assumed by more than one insurer, the document or documents shall state the name and address and proportion of the entire risk assumed by each insurer. (b) No surplus lines broker shall issue or deliver such policy or such confirmation of insurance or represent that insurance will be or has been written by any non-admitted surplus lines insurer unless he or she has written authority from the surplus lines insurer to assume the risk or has received confirmation from the surplus lines insurer in the regular course of business that such insurance has been granted. (c) If, after delivery of any such document, there is any change in the identity of the insurers, the proportion of the risk assumed by any insurer, or any other material change in coverage evidenced by an appropriate document, the surplus lines broker shall promptly deliver to the insured an appropriate substitute for, or endorsement of the original document, accurately showing the current status of the coverage and the insurers responsible thereunder. The document as modified and issued must conform to all the requirements of this chapter, and any such change resulting in a violation of this chapter is prohibited. (d) As soon as reasonably possible, and in no event later than 60 days after placement of any such insurance, the surplus lines broker shall procure from the insurer a full and properly executed policy and deliver it to the insured to replace any confirmation previously issued. The word policy, as used in this section, shall include a certificate of insurance or cover note bound under a fully executed and effective contract from a bona fide intermediary or general agent for a surplus lines insurer, provided that it contains or has attached to it all insuring agreements, clauses, conditions, endorsements, exclusions, or any other material provisions that would regularly be included in such a policy. (e) Any surplus lines broker who fails to comply with the requirements of this section shall be subject to the penalties provided in this chapter. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  5; 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  6, eff. May 26, 2011.) 
 5028. Information required on contract
Where Vermont is the home state of the insured, each surplus lines broker through whom a surplus lines insurance coverage is procured shall endorse on the outside of the policy and on any confirmation of the insurance, his or her name, address and license number, and the name and address of the producer, if any, through whom the business originated. Where such coverage is placed with an eligible surplus lines insurer there shall be stamped or written conspicuously in no smaller than 10 point boldface type of a contrasting color upon the first page of the policy and the confirmation of insurance if any, The company issuing this policy is a surplus lines insurer and the rates charged have not been approved by the Commissioner of Financial Regulation. Any default on the part of the insurer is not covered by the Vermont Insurance Guaranty Association. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  6; 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  7, eff. May 26, 2011; 2019, No. 57,  9.) 
 5029. Surplus lines insurance valid
(a) Insurance contracts procured as surplus lines insurance from surplus lines insurers in accordance with this chapter shall be valid and enforceable to the same extent as insurance contracts procured from admitted insurers. (b) The insurance trade practices provisions of sections 4723 and 4724(1)-(7) and (9)-(18) of this title, and the cancellation provisions of sections 3879-3883 (regarding fire and casualty policies) and 4711-4715 (regarding commercial risk policies) of this title shall apply to surplus lines insurers, both domestic and foreign. (c) Other provisions of this title not specifically applicable to surplus lines insurers shall not apply. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  7; 2019, No. 57,  10.) 
 5030. Liability of surplus lines insurer for losses and unearned premiums
If a surplus lines insurer has assumed a surplus lines coverage through the intervention of a licensed surplus lines broker of this State, and if the premium for that coverage has been received by that broker, then in all questions thereafter arising under the coverage as between the insurer and the insured, the insurer shall be deemed to have received that premium and the insurer shall be liable to the insured for losses covered by such insurance and for any return premiums due on that insurance to the insured whether or not the broker is indebted to the insurer for such insurance or for any other cause. (Added 1979, No. 50,  2; amended 2019, No. 57,  11.) 
 5031. Licensing of surplus lines brokers
After written application on a form supplied by the Commissioner, any licensed producer who is deemed by the Commissioner to be trustworthy and competent may be licensed as a surplus lines broker, pursuant to the provisions of chapter 131 of this title. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  8; 1981, No. 42,  3; 2001, No. 97 (Adj. Sess.),  19.) 
 5032. Surplus lines broker may accept business from other producers
(a) A licensed surplus lines broker may originate surplus lines business himself or herself, or may accept such business from any other originating producer duly licensed as to the kind or kinds of insurance involved and may compensate such producer therefor. (b) No originating producer shall knowingly misrepresent to the surplus lines broker any material fact involved in any such insurance transaction or in the eligibility of the risk for placement with a surplus lines broker. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  9; 2001, No. 97 (Adj. Sess.),  19.) 
 5033. Records of surplus lines broker
(a) Where Vermont is the home state of the insured, each surplus lines broker shall keep in his or her office a full and true record of each surplus lines insurance contract covering a domestic risk placed by or through him or her with a surplus lines insurer, including a copy of the daily report, if any, and showing such of the following items as may be applicable: (1) amount of the insurance and perils insured;(2) brief description of property insured and its locations;(3) gross premium charged;(4) any return premium paid;(5) rate of premium charged upon the several items of property;(6) effective date of the contract, and its terms;(7) name and post office address of the insured;(8) name and post office address of the insurer;(9) name and post office address of brokerage house, if applicable, and name of licensed individual producer with whom business was placed; (10) amount collected from the insured; and(11) other information as may be required by the Commissioner.(b) The record of each contract shall be kept open to examination by the Commissioner without notice until three years next following termination of the contract. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  10; 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  8, eff. May 26, 2011.) 
 5034. Quarterly reports; summary of exported business
On or before the end of each month next following each calendar quarter, each surplus lines broker shall file with the Commissioner of Taxes, on forms prescribed by him or her, a verified report of all surplus lines insurance transacted during the preceding calendar quarter. (Added 1979, No. 50,  2; amended 2001, No. 97 (Adj. Sess.),  19; 2019, No. 51,  36, eff. June 10, 2019.) 
 5035. Surplus lines tax
(a) Where Vermont is the home state of the insured, gross premiums charged, less any return premiums, for surplus lines coverages placed with surplus lines insurers are subject to a premium receipts tax of three percent, which shall be collected from the insured by the surplus lines broker at the time of delivery of policy or other confirmation of insurance, in addition to the full amount of the gross premium charged by the insurer for the insurance. The tax on any portion of the premium unearned at termination of insurance shall be returned to the policyholder by the surplus lines broker. Nothing contained in this section will preclude a surplus lines broker from charging a fee to the purchaser of the contract sufficient to recover the amount of this tax. (b) At the time of filing his or her quarterly report with the Commissioner of Taxes, each surplus lines broker shall remit the premium tax due thereon to the Commissioner of Taxes. (c) The Commissioner of Taxes shall collect the tax imposed by this section. All administrative provisions of 32 V.S.A. chapter 151, including those relating to the collection and enforcement of the income tax by the Commissioner of Taxes, shall apply to this section. (Added 1979, No. 50,  2; amended 1981, No. 42,  4; 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  9, eff. May 26, 2011; 2019, No. 51,  37, eff. June 10, 2019; 2019, No. 57,  12.) 
 5036. Direct placement of insurance
(a) Every insured and every self-insurer in this State for whom this is their home state who procures or causes to be procured or continues or renews insurance from any non-admitted insurer, covering a subject located or to be performed within this State, other than insurance procured through a surplus lines broker pursuant to this chapter, shall, before March 1 of the year after the year in which the insurance was procured, continued or renewed, file a written report with the Commissioner of Taxes on forms prescribed and furnished by the Commissioner of Taxes. The report shall show: (1) the name and address of the insured or insureds;(2) the name and address of the insurer or insurers;(3) the subject of the insurance;(4) a general description of the coverage;(5) the amount of premium currently charged for it;(6) such additional pertinent information as may be reasonably requested by the Commissioner of Taxes. (b) Any insurance, where this State is the home state of the insured, or for which premium in whole or in part is remitted directly or indirectly from within this State, shall be deemed insurance subject to subsection (a) of this section. (c) A tax at the rate of three percent of the gross amount of premium, less any return premium, shall be levied upon an insured who procures insurance subject to subsection (a) of this section. Before March 1 of the year after the year in which the insurance was procured, continued, or renewed, the insured shall remit to the Commissioner of Taxes the amount of the tax. (d) All administrative provisions of 32 V.S.A. chapter 151, including those relating to the collection and enforcement of the income tax by the Commissioner of Taxes, shall apply to this section. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  11; 2011, No. 49,  10, eff. May 26, 2011; 2019, No. 51,  38, eff. June 10, 2019; 2019, No. 57,  13.) 
 5037. Suspension, revocation, or refusal of surplus lines brokers license
The Commissioner may suspend, revoke, or refuse to renew the license of a surplus lines broker after notice and hearing as provided under 3 V.S.A. chapter 25, upon any one or more of the following grounds: (1) failure to make accounts and records relating to domestic risks from this State available to the Commissioner during the period when such accounts and records are required to be maintained under section 5033 of this title; (2) closing of the surplus lines brokers office for a period of more than 30 consecutive days, unless permission is granted by the Commissioner; (3) failure to make and file required quarterly reports;(4) failure to transmit required tax on surplus lines premiums;(5) suspension, revocation, or refusal to renew any other license issued by the Commissioner;(6) lack of qualifications as for an original surplus lines brokers license;(7) material violation of any provision of this chapter; or(8) for any other cause for which a license could be denied, revoked, suspended, or renewal refused under section 4804 of this title. (Added 1979, No. 50,  2; amended 1979, No. 197 (Adj. Sess.),  12; 2001, No. 97 (Adj. Sess.),  19; 2011, No. 49,  11, eff. May 26, 2011.) 
 5038. Actions against insurer; service of process
(a) A non-admitted insurer may be sued upon any cause of action arising in this State under any surplus lines insurance contract made by it or certificate, cover note, or other confirmation of such insurance issued or delivered by the surplus lines broker pursuant to the procedure provided in subchapter 2 of chapter 101 of this title. (b) Each surplus lines insurer that assumes a surplus lines coverage shall be deemed thereby to have subjected itself to this chapter. (c) The remedies provided in this chapter are in addition to any other methods provided by law for service of process upon insurers. (Added 1979, No. 50,  2; amended 2019, No. 57,  14.) 
 5039. Penalties
In addition to any other penalty provided for in this chapter or otherwise provided by law, including any suspension, revocation, or refusal to renew a license, any person, firm, association, or corporation violating any provision of this chapter shall be liable for an administrative penalty not exceeding $1,000.00 for the first offense, and not exceeding $2,500.00 for each succeeding offense. (Added 1979, No. 50,  2; amended 1995, No. 167 (Adj. Sess.),  22.) 
 5040. Separability of provisions
If any provision of this chapter, or the application of such provision to any person or circumstances, shall be held invalid, the remainder of the chapter and the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. (Added 1979, No. 50,  2.) 
 5101. Definitions
As used in this chapter:(1) Commissioner means the Commissioner of Financial Regulation.(2) Health maintenance organization means any person who furnishes, either directly or through arrangements with others, comprehensive health care services to an enrolled member in return for periodic payments; the amounts of said payments are agreed upon prior to the time during which the health care services may be furnished; and who is obligated to the member to arrange for or to provide directly available and accessible health care services. (3) Person includes individuals, partnerships, associations, trusts, and corporations.(4) Health care services means physician, hospitalization, laboratory, x-ray service, and medical equipment and supplies, which may include: medical, surgical, and dental care; psychological, obstetrical, osteopathic, optometric, optic, podiatric, chiropractic, nursing, physical therapy services, and pharmaceutical services; health education; preventive medical, rehabilitative, and home health services; inpatient and outpatient hospital services, extended care, nursing home care, convalescent institutional care, laboratory and ambulance services, appliances, drugs, medicines, and supplies; and any other care, service, or treatment of disease or conditions, or the maintenance of the physical and mental well-being of members. (5) Member means any individual who has entered into a contract with a health maintenance organization for health care services or for services related to but not limited to processing, administering, or the payment of claims for health care services or on whose behalf such an arrangement has been made. (6) Evidence of coverage means any certificate, agreement, or contract issued to a member setting out the coverage to which the member is entitled and the rates for that coverage. (7) Provider means any physician, hospital, or other institution, organization, or other person who furnishes health care services. (8) Grievance means a written complaint submitted to the Department or to the health maintenance organization in accordance with the health maintenance organizations formal grievance procedure by or on behalf of a member regarding any aspect of the health maintenance organization relative to the member. (9) Uncovered expenditures mean the costs to the health maintenance organization for health care services that are the obligation of the health maintenance organization, for which a member may also be liable in the event of the health maintenance organizations impairment or insolvency, and for which no alternative arrangements for payment have been made that are acceptable to the Commissioner. (Added 1979, No. 117 (Adj. Sess.); amended 1989, No. 225 (Adj. Sess.),  25; 1993, No. 30,  1, 2, eff. May 21, 1993; 1995, No. 180 (Adj. Sess.),  38 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 96 (Adj. Sess.),  21; 2021, No. 105 (Adj. Sess.),  238, eff. July 1, 2022.) 
 5102. Application; certification, filing, and license fees
(a) No person may operate a health maintenance organization without obtaining a certificate of authority from the Commissioner. (b) Application for a certificate of authority shall be made to the Commissioner and include such information and in such form as the Commissioner prescribes, including the following: (1) A copy of the basic organizational document, if any, of the applicant or other applicable documents, and all amendments to those documents. (2) A copy of the bylaws, rules, and regulations, or similar document, if any, regulating the conduct of the internal affairs of the applicant. (3) A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation, and the partners or members in the case of a partnership or association; a statement as to the character and competence of these persons and such disclosure and conflict of interest statements as required. (4) A copy of the proposed evidence of coverage to be issued to the members and the proposed premium rates for that coverage. (5) A copy of the proposed form of the group contract, if any, that is to be issued to employers, unions, associations, trusts, or other organizations. (6) Financial statements showing the applicants assets, liabilities, and sources of financial support. If the applicants financial affairs are audited by independent certified public accountants, a copy of the applicants most recent regular certified financial statement shall be deemed to satisfy this requirement unless the Commissioner directs that additional or more recent financial information is required. (7) A description of the proposed method of marketing the plan, a financial plan which includes a three-year projection of the initial operating results anticipated, and a statement as to the sources of working capital as well as any other sources of funding. The Commissioner shall adopt such rules relating to financial reserves of the health maintenance organization as he or she deems necessary. These rules shall require financial reserves to be computed in relation to the health maintenance organizations financial risks and the impact of those risks on the health maintenance organizations ability to fulfill its contractual and financial obligations to its members. (8) [Repealed.](9) A statement generally describing the organizational structure of the applicant, its operation, the location of facilities where health care shall be available to members, the types of health care personnel to be used at each location and the approximate number of each personnel type available at each location, the name and location of primary and tertiary care facilities to be used and a projection of utilization for each facility, the method used to monitor the quality of health care services furnished, and the method of resolving grievances initiated by members or providers. (c) Every health maintenance organization subject to this chapter shall pay to the Commissioner for filing an application for a certificate of authority or amendment to a certificate of authority $200.00, and for filing each annual report $100.00. In addition, each organization shall pay a license fee for the year of registration and a renewal fee for each year thereafter of $300.00. (d) The Commissioner shall approve or deny such application within 60 days, based on the Commissioners determination that the application promotes the general good of the State, and of the reliability and financial condition of the applicant. (e)(1) Continuance by the Commissioner of a certificate of authority issued under this section shall be contingent upon satisfactory performance by the organization as to the delivery, continuity, accessibility, and quality of the services to which enrolled members are entitled; compliance with the provisions of Vermont law and rules adopted under the law; and the continuing fiscal soundness of the organization. (2) Each health maintenance organization shall keep current the information required to be disclosed in subsection (b) of this section by reporting all changes or additions in writing to the Commissioner. Changes or additions to the information and documents required by subdivision (b)(1) of this section shall be filed 30 days before the change or addition becomes effective. The Commissioner shall approve such change or addition unless it would interfere with the financial stability of the company, is not in the best interests of members, or the public, or would cause the company to violate any law or rule. If the Commissioner fails to disapprove the change or addition, it shall be deemed approved at the expiration of the 30 days. All other changes or additions shall be filed within 15 days after the end of the month in which each change or addition becomes effective. (3) On or before April 1 of each year, the health maintenance organization shall file with the Commissioner: (A) a report on the operations of the quality assurance program and the grievance procedures describing any changes made in the operations of the quality assurance program and the grievance procedures during the preceding calendar year; (B) the net worth, deposit, and designated reserve calculations made under subsections 5102b(b) and (c) of this title; (C) a report on the health maintenance organizations operations in this State in a form prescribed by the Commissioner; and (D) any other information reasonably required by the Commissioner to evaluate the organizations satisfactory performance under the certificate of authority. (4) In addition to the remedies under section 5109 of this title, if, after notice and hearing, the Commissioner finds that the organization is performing unsatisfactorily, is impaired or insolvent, or has not complied with its plan of operation or any provision of Vermont law, the Commissioner may revoke, suspend, or impose conditions on the organizations certificate of authority. (f) Upon request by a Program for All-Inclusive Care for the Elderly (PACE) authorized under federal Medicare law, or by a Prepaid Inpatient Health Plan (PIHP) or Prepaid Ambulatory Health Plan (PAHP) established in accordance with federal Medicare or Medicaid laws and regulations, the Commissioner may approve the exemption of the PACE program, PIHP, or PAHP from the provisions of this chapter and from any other provisions of this title if the Commissioner determines that the purposes of this chapter and the purposes of any other provision of this title will not be materially and adversely affected by the exemption. In approving an exemption, the Commissioner may prescribe such terms and conditions as the Commissioner deems necessary to carry out the purposes of this chapter and this title. (Added 1979, No. 117 (Adj. Sess.); amended 1991, No. 166 (Adj. Sess.),  14; 1993, No. 30,  3-5, eff. May 21, 1993; 1993, No. 235 (Adj. Sess.),  10a; 1995, No. 180 (Adj. Sess.),  5; 2005, No. 88 (Adj. Sess.),  2, eff. Feb. 15, 2006; 2005, No. 122 (Adj. Sess.),  7; 2007, No. 178 (Adj. Sess.),  7; 2015, No. 23,  85; 2021, No. 105 (Adj. Sess.),  239, eff. July 1, 2022.) 
 5102a. Grievance procedures
A health maintenance organization shall establish and maintain a grievance or complaint handling procedure which has been approved by the Commissioner to provide for the resolution of grievances and complaints initiated by members. The organization shall respond in writing to any grievance or complaint within 15 days, advising the complainant of the resolution of the grievance or complaint or that a resolution is in process and that a response will be furnished in a timely manner. The health maintenance organization shall maintain records on all grievances received under this section until the Department has filed a report of examination on the grievances but no longer than seven years from the date of the grievance. Members shall be provided with a copy of the grievance procedures upon enrollment. (Added 1993, No. 30,  6, eff. May 21, 1993.) 
 5102b. Solvency protections
(a) Before issuing any certificate of authority, the Commissioner shall require that the health maintenance organization have an initial net worth of $1,500,000.00 and shall thereafter maintain the minimum net worth required under subsection (b) of this section. (b) Every health maintenance organization must maintain a minimum net worth equal to the greater of: (1) $1,500,000.00;(2) Two percent of annual premium revenues as reported on the most recent annual financial statement filed with the Commissioner on the first $150,000,000.00 of premium plus one percent of annual premium on the premium in excess of $150,000,000.00; (3) An amount equal to the sum of three months uncovered expenditures as reported on the most recent financial statement filed with the Commissioner; or (4) An amount equal to the sum of ten percent of annual health care expenditures related to its Vermont business except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the Commissioner plus four percent of annual hospital expenditures related to its Vermont business paid on a managed hospital payment basis as reported on the most recent financial statement filed with the Commissioner. (c)(1) Unless otherwise provided in subdivisions (2) through (6) of this subsection, each health maintenance organization shall deposit with the State Treasurer for the benefit of all members of the health maintenance organization cash, securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners or clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States institution, approved by the Commissioner, or other security or collateral acceptable to the Commissioner which at all times shall have a value of not less than the greater of $300,000.00 or 50 percent of the amount provided for in subdivision (b)(4) of this section or such other amount as the Commissioner may require. The health maintenance organization shall, on or before April 1 of each calendar year, calculate the amount of the deposit required under this section and shall deposit with the State Treasurer any additional amount required to meet the minimum required under this subsection. (2) A health maintenance organization that is in operation on May 21, 1993 shall make a deposit equal to one-half of the amount required by the Commissioner under this subsection within 30 days of the effective date of this section. On or before the first day of the next full calendar year, the health maintenance organization shall make a deposit equal to one-half the amount required by the Commissioner under this subsection. (3) The deposit shall be an admitted asset of the health maintenance organization in the determination of net worth. (4) All income from deposits shall be an asset of the organization. A health maintenance organization that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, or any combination of these or other security of equal amount and value. Any securities deposited under this section shall be approved by the Commissioner before being deposited or substituted. (5) The Commissioner may order the deposits of designated reserves to be used for the protection of the health maintenance organizations members and the continuation of health care services to members of a health maintenance organization in the event the Commissioner takes any actions under chapter 145 of this title. The Commissioner may use the deposit for administrative costs directly attributable to the proceeding. If the health maintenance organization is placed in receivership or liquidation, the deposit shall be an asset subject to the provisions of chapter 145 of this title. (6) In lieu of any other requirement of this subsection, the Commissioner may accept the segregation for use in this State of designated reserves established by the health maintenance organization under the laws of another jurisdiction provided that such reserves are found to be adequate by the Commissioner to meet the purpose of this section and the domiciliary jurisdiction approves the commitment of such reserves for use by the Commissioner. (7) In lieu of any other requirement of this subsection, the Commissioner may accept any instrument, surety, or other insurance policy found to be adequate to meet the purposes of this section. (d) Every contract between a health maintenance organization and a participating provider of health care services shall be in writing and shall require that in the event the health maintenance organization fails to pay for health care services as set forth in the contract, the member shall not be liable to the provider for any sums owed by the health maintenance organization. (e) If the Commissioner determines that the premiums received by a health maintenance organization for its Vermont members exceed $2,000,000.00 for any calendar year or that the health maintenance organization was incorporated in a state without solvency protections that are substantially equivalent to those offered under this chapter, the Commissioner may order that Vermont contracts be conducted through an affiliate or subsidiary corporation incorporated under Vermont law. (f) The Commissioner shall require that each health maintenance organization have a plan for handling its impairment or insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined on the date of impairment or insolvency in an inpatient facility until their discharge or expiration of benefits. In considering such a plan, the Commissioner may require: (1) the health maintenance organization to procure insurance to cover the expenses to be paid for continued benefits after an insolvency; (2) provisions in provider contracts that obligate the provider to provide services for the duration of the period after the health maintenance organizations insolvency for which premium payment has been made or until the member has been discharged from inpatient facilities, whichever comes first; (3) insolvency reserves;(4) acceptable letters of credit; and(5) any other arrangements to assure that benefits are continued in accordance with this subsection. (g) If at any time uncovered expenditures exceed ten percent of total health care expenditures, the Commissioner may grant emergency rate increases and require a health maintenance organization to build an uncovered expenditures insolvency deposit with the State Treasurer in an amount not to exceed 120 percent of the health maintenance organizations outstanding liability for uncovered expenditures for members in this State, including incurred but not reported claims. The deposit under this section shall be calculated as of the first day of the month and maintained for the remainder of the month. The amounts deposited under this subsection shall be in addition to the deposit required under subsection (c) of this section. (h) The deposit required under subsection (g) of this section may be used only as provided under this subsection. The Commissioner may order the deposit to be used for administrative costs associated with administering the deposit and for the payment of claims for uncovered expenditures of members of the Vermont portion of its business. Claims for uncovered expenditures shall be paid from the deposit and other available assets on a pro rata basis. The Commissioner may order partial distributions pending final distribution. Any amount of the deposit remaining after final distribution under this section shall be paid over to the liquidator or rehabilitator of the health maintenance organization and may be distributed in accordance with chapter 145 of this title. (i)(1) In the event a health maintenance organization is declared insolvent under chapter 145 of this title, the Commissioner may order all other entities licensed or authorized under this title that participated in the enrollment process with the insolvent health maintenance organization at a groups last regular enrollment period to offer such groups members a 30-day enrollment period commencing upon the date the insolvency is declared by a court of competent jurisdiction. Each such entity shall notify and offer such members of the insolvent health maintenance organization the same coverages and rates that it had offered to the members of the group at its last regular enrollment period. (2) If no other such entity had been offered to some groups enrolled in the insolvent health maintenance organization, or if the Commissioner determines that all other health maintenance organizations lack sufficient health care delivery resources to assure that health care services will be available and accessible to all of the group members of the insolvent health maintenance organization, the Commissioner may allocate equitably the insolvent health maintenance organizations group contracts for such groups among all health maintenance organizations which operate within a portion of the insolvent health maintenance organizations service area, taking into consideration the health care delivery resources of each health maintenance organization. Each health maintenance organization to which a group or groups are so allocated shall notify and offer such group or groups the health maintenance organizations existing coverage which is most similar to each groups coverage with the insolvent health maintenance organization at rates determined in accordance with the successor health maintenance organizations existing rating methodology. (3) The Commissioner may also allocate equitably the insolvent health maintenance organizations nongroup members who are unable to obtain other coverage among all health maintenance organizations which operate within a portion of the insolvent health maintenance organizations service area, taking into consideration the health care delivery resources of each such health maintenance organization. Each health maintenance organization to which nongroup members are allocated shall notify and offer such nongroup members the health maintenance organizations existing coverage for individual or conversion coverage as determined by the type of coverage held in the insolvent health maintenance organization but at rates determined in accordance with the successor health maintenance organizations existing rating methodology. Successor health maintenance organizations which do not offer direct nongroup enrollment may aggregate all of the allocated nongroup members into one group for rating and coverage purposes. Coverage made available under this subsection shall be effective on the date the insolvency is declared. (j) Any rehabilitation, liquidation, or conservation of a health maintenance organization shall be deemed to be the rehabilitation, liquidation, or conservation of an insurance company and shall be conducted under the supervision of the Commissioner pursuant to chapter 145 of this title. (k)(1) Whenever the Commissioner determines that the financial condition of any health maintenance organization is such that its continued operation might be hazardous to its members, creditors, or the general public, or that it has violated any provision of this chapter, the Commissioner may, after notice and hearing, order the health maintenance organization to take such action as may be reasonably necessary to rectify such condition or violation, including one or more of the following: (A) reduce the total amount of present and potential liability for benefits through reinsurance or other method approved by the Commissioner; (B) reduce the volume of new business accepted;(C) suspend or limit the writing of new business for a period of time;(D) increase the health maintenance organizations capital and surplus by contribution; or (E) take such other steps as the Commissioner may deem appropriate under the circumstances.(2) If the Commissioner finds that member protection requires emergency action, the Commissioner may summarily order the health maintenance organization to take any action described in subdivision (1) of this subsection, provided that notice and hearing is issued as soon as practicable after such action is taken. (l) The Commissioner shall adopt rules that establish solvency standards for provider-sponsored networks, including provider-sponsored organizations, for the Medicare Advantage program, as described in 42 U.S.C.  1395w-21, in conformance with the solvency standards established by the Secretary of Health and Human Services under 42 U.S.C.  1395w-26. Provider-sponsored networks shall be licensed under this chapter to offer a Medicare Advantage plan by complying with the solvency rules adopted under this subsection; except that a provider-sponsored network that offers any health plan other than or in addition to a Medicare Advantage plan shall comply with the solvency standards of this chapter instead of those adopted specifically for Medicare Advantage plans under this subsection. A provider-sponsored network licensed under this chapter shall not be required to offer any insurance product apart from Medicare Advantage. As used in this subsection, provider-sponsored network or provider-sponsored organization shall have the same definition as in 42 U.S.C.  1395w-25(d). (m) The Commissioner may enter into contracts with the Secretary of Health and Human Services for the administration of the Medicare Advantage program. (Added 1993, No. 30,  7, eff. May 21, 1993; amended 1997, No. 159 (Adj. Sess.),  4, eff. April 29, 1998; 2005, No. 36,  18, eff. June 1, 2005.) 
 5103. Precertificate activities
The Commissioner, in his or her discretion, may permit an applicant to contact potential members prior to the issuance of a certificate of authority, to discuss the health care services the applicant proposes to offer and the proposed evidences of coverage. (Added 1979, No. 117 (Adj. Sess.).) 
 5104. Filing and approval of rates and forms; supplemental orders
(a)(1) A health maintenance organization which has received a certificate of authority under section 5102 of this title shall file and obtain approval of all policy forms and rates as provided in sections 4062 and 4062a of this title. This requirement shall include the filing of administrative retentions for any business in which the organization acts as a third party administrator or in any other administrative processing capacity. The Commissioner or the Green Mountain Care Board, as appropriate, may request and shall receive any information that the Commissioner or the Board deems necessary to evaluate the filing. In addition to any other information requested, the Commissioner or the Board shall require the filing of information on costs for providing services to the organizations Vermont members affected by the policy form or rate, including Vermont claims experience, and administrative and overhead costs allocated to the service of Vermont members. Prior to approval, there shall be a public comment period pursuant to section 4062 of this title. A health maintenance organization shall file a summary of rate filings pursuant to section 4062 of this title. (2) The Commissioner or the Board shall refuse to approve the form of evidence of coverage, filing, or rate if it contains any provision which is unjust, unfair, inequitable, misleading, or contrary to the law of the State or plan of operation, or if the rates are excessive, inadequate or unfairly discriminatory, fail to protect the organizations solvency, or fail to meet the standards of affordability, promotion of quality care, and promotion of access pursuant to section 4062 of this title. No evidence of coverage shall be offered to any potential member unless the person making the offer has first been licensed as an insurance agent in accordance with chapter 131 of this title. (b) In connection with a rate decision, the Board may also make reasonable supplemental orders and may attach reasonable conditions and limitations to such orders as the Board finds, on the basis of competent and substantial evidence, necessary to ensure that benefits and services are provided at reasonable cost under efficient and economical management of the organization. The Commissioner and, except as otherwise provided by 18 V.S.A.  9375 and 9376, the Green Mountain Care Board, shall not set the rate of payment or reimbursement made by the organization to any physician, hospital, or health care provider. (Added 1979, No. 117 (Adj. Sess.); amended 1991, No. 166 (Adj. Sess.),  15; 1993, No. 30,  8, eff. May 21, 1993; 1993, No. 235 (Adj. Sess.),  10b; 2011, No. 48,  15d, eff. Jan. 1, 2012; 2011, No. 171 (Adj. Sess.),  25a, eff. May 16, 2012; 2013, No. 79,  5k, eff. Jan. 1, 2014.) 
 5105. Examinations
(a) The Commissioner shall make an examination of the affairs of any health maintenance organization organized or holding a certificate of authority as a health maintenance organization in this State as often as the Commissioner deems it necessary, but not less frequently than once in every three years to ensure that the financial and contractual obligations of the health maintenance organization are being met in accordance with Vermont law. The Commissioner may enlarge this three-year period to five years, provided the health maintenance organization is subject to a comprehensive annual audit during such period of a scope satisfactory to the Commissioner, by independent auditors approved by the Commissioner. The Commissioner shall examine a health maintenance organization that is organized in another state as if it were organized in this State. In lieu of such examination, the Commissioner may accept an examination report on the company as prepared by the insurance department of the companys state of domicile. Prior to accepting an examination report from any foreign jurisdiction, the Commissioner shall determine that the examination was performed in a manner and using methods and criteria that are as stringent as those established for Vermont examinations. Nothing in this section shall restrict the Commissioners power to examine a health maintenance organization when the Commissioner deems it to be in the best interests of members or policyholders. (b) All financial and market conduct examinations shall be conducted pursuant to and in conformity with sections 3573, 3574, 3575, and 3576 of this title at the expense of the health maintenance organization and shall be conducted in accordance with guidelines, principles, manuals, instructions, and other procedures promulgated by the National Association of Insurance Commissioners, including the use of statutory accounting principles for financial examinations, together with any useful or necessary modifications or adaptation thereof required or approved by the Commissioner. Every health maintenance organization shall provide the Commissioner with all books and records relating to its operation, including books and records of any affiliate or subsidiary as defined in section 3681 of this title. For the purpose of examinations, the Commissioner may issue subpoenas, administer oaths to, and examine any person and the officers and agents of the health maintenance organization. (Added 1979, No. 117 (Adj. Sess.); amended 1993, No. 30,  9, eff. May 21, 1993; 1999, No. 38,  3, eff. May 20, 1999; 2009, No. 42,  12; 2021, No. 105 (Adj. Sess.),  240, eff. July 1, 2022.) 
 5106. Annual report to the Commissioner
(a) Every organization subject to this chapter, annually, within 90 days of the close of its fiscal year, shall file a report with the Commissioner, said report verified by an appropriate official of the organization, showing its financial condition on the last day of the preceding fiscal year. The report shall be prepared in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual for health maintenance organizations and shall be in such general form and context, as approved by, and shall contain any other information required by the National Association of Insurance Commissioners together with any useful or necessary modifications or adaptations thereof required, approved, or accepted by the Commissioner for the type of organization to be reported upon, and as supplemented by additional information required by the Commissioner. (b) A health maintenance organization shall, when determining liabilities, include an amount estimated in the aggregate to provide for any unearned premium and for the payment of all claims for health care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which such organization is or may be liable, and to provide for the expense of adjustment or settlement of such claims. (Added 1979, No. 117 (Adj. Sess.); amended 1993, No. 30,  10, eff. May 21, 1993; 2011, No. 171 (Adj. Sess.),  29, eff. May 16, 2012.) 
 5107. Powers of health maintenance organizations
(a) Health maintenance organizations may:(1) Buy, sell, lease, encumber, construct, renovate, operate, or maintain hospitals, health care clinics, other health care facilities, and other real and personal property which is incidental to and reasonably necessary for the transaction of the business and for the accomplishment of the purposes of the organization if a certificate of need is obtained in accordance with 18 V.S.A. chapter 221. (2) Furnish health care services through providers employed by or under contract with the organization. No new health care project shall be offered without first obtaining a certificate of need in accordance with 18 V.S.A. chapter 221. (3) Contract with insurance companies licensed in this State or with health service corporations authorized to do business in this State for insurance, indemnity, or reimbursement for the cost of health care services furnished by the organization. (4) Offer to its members, in addition to health care services, insured indemnity benefits. The Commissioner may require any health maintenance organization offering benefits under this subdivision to establish reserves for indemnity benefits or to form an affiliate or subsidiary corporation under chapter 101 of this title, whenever the Commissioner determines that such a requirement is in the best interests of members or policyholders. All of the provisions of subchapter 13 of chapter 101 shall apply to any holding company system that has a health maintenance organization as an affiliate. (5) Receive from governmental or private agencies payments covering all or part of the cost of the health care services furnished by the organization. (6) Enter into contracts to provide services which may include administrative claims processing services. (7) Do all other things necessary for the accomplishment of the purposes of the organization.(b) A health maintenance organization which has a net worth of greater than or equal to eight percent of total assets as last reported under section 5106 of this title and has reported positive earnings in two of the past three years shall provide the Commissioner with written notice within 90 days of the exercise of any power granted under this section that may significantly affect the financial soundness of the organization. (c) A health maintenance organization that has a net worth of less than eight percent of total assets as last reported under section 5106 of this title or has not reported positive earnings in at least two of the past three years shall provide the Commissioner with 30 days prior written notice of any expenditure or financial commitment that in the aggregate will exceed one percent of total expenditures as of the last reporting period. (d) Whenever the Commissioner has reasonable cause to believe that any health maintenance organization has committed or is engaged in or is about to commit or engage in any act, practice, or transaction that may subject it to delinquency proceedings, adversely affect its financial soundness or its Vermont members, or render the continuance of its business hazardous to the public or its members, he or she, after notice and hearing as provided under subsection 5102b(k) of this title may make such orders as are reasonably necessary to correct, eliminate or remedy such conduct, condition, or act. (e) Any financial transaction which in the aggregate will exceed one percent of expenditures as last reported under section 5106 of this title is presumed to be a transaction which may significantly affect the financial soundness of the organization. (f) For the sole purpose of applying the provisions, conditions, and limitations of this chapter and any other section of this title and Title 18 to a health maintenance organization formed as a limited liability company, the references in this chapter and any other section of this title and Title 18 applicable to a health maintenance organization formed as a corporation shall be applied in an equivalent manner to a health maintenance organization formed as a limited liability company or foreign limited liability company. The members of the limited liability company shall be treated in an equivalent manner as shareholders of a corporation. The ownership interests in the limited liability company shall be treated in an equivalent manner as the securities of a corporation. The managers of a limited liability company shall be treated in an equivalent manner as directors or executive officers of a corporation. The person signing the articles of organization of the limited liability company shall be treated in an equivalent manner as the incorporators of a corporation. Nothing in this section shall be construed to affect the tax status, tax elections, or tax benefits of a health maintenance organization formed as a limited liability company or of any of its members. Notwithstanding the application of this section to a health maintenance organization formed as a limited liability company, such limited liability company shall not be deemed to be a corporation for any purpose. (g) [Repealed.] (Added 1979, No. 117 (Adj. Sess.); amended 1993, No. 30,  11, eff. May 21, 1993; 1997, No. 54,  10, 11, eff. June 26, 1997, eff. May 20, 1999; 2003, No. 53,  26; 2021, No. 105 (Adj. Sess.),  241, eff. July 1, 2022.)
 5107a. Application for continuing authority upon merger, consolidation, transfer of control, or sale of contracts
(a) If a health maintenance organization that annually writes more than $10 million of premium in this State intends to merge into or with or consolidate with, transfer more than 10 percent of its stock or other ownership interest, to sell or dispose of all or substantially all of its assets to, or transfer more than 25 percent of its Vermont contracts to any other person, that person may succeed on a continuing basis to the authority possessed by the health maintenance organization if: (1) A plan of merger, consolidation, or operation and an application for continuing authority is approved by the Commissioner. The application for continuing authority must comply with subsections 5102(b) and (c) of this title. The applicant shall provide such additional information as the Commissioner may require. (2) The proposed surviving or acquiring person, if a health maintenance organization within the meaning of subdivision 5101(2) of this title, is qualified to obtain a certificate of authority under the provisions of this chapter. (3) The proposed surviving or acquiring person is in compliance with all of the requirements of this chapter and, if licensed or authorized under any other provision of this title, is in compliance with all applicable laws of this State. (4) The Commissioner finds that the transaction will promote the general good of the members of the health maintenance organization and the public, taking into account the effect the transaction will have on competition in this State and that the applicant is in compliance with this section. (5) The health maintenance organization has obtained all required regulatory approvals from any other state with jurisdiction over the transaction or the Commissioners approval is effective upon the issuance of such approvals. (b) As used in this section, a health maintenance organization includes a health maintenance organization, as defined in subdivision 5101(2) of this title, that is authorized to transact business in this State, and any person who, directly or indirectly, has the power to direct or control the policies or management of a health maintenance organization that is authorized to transact business in this State, whether through an ownership interest or otherwise and the health maintenance organization is affected by a transaction described in subsection (a) of this section. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the voting interests of a health maintenance organization or has the power, directly and indirectly, to appoint one or more directors of the health maintenance organization. (c) In approving the plan or application or in making findings under this section, the Commissioner may consider and rely on the record of any previous proceeding or order of the commissioner of the state of domicile of a health maintenance organization with respect to the transaction. (d) The Commissioner may exempt from the provisions of this section any transaction that does not have a material impact on Vermont members. (Added 1997, No. 159 (Adj. Sess.),  5, eff. April 29, 1998.) 
 5108. Prohibited practices
Section 4724 of this title relating to unfair trade practices shall be construed to apply to health maintenance organizations, except to the extent that the Commissioner determines that the nature of health maintenance organizations renders such section clearly inappropriate. (Added 1979, No. 117 (Adj. Sess.).) 
 5109. Sanctions
Upon satisfactory evidence that any health maintenance organization has violated any law or regulation or in any way has failed in meeting its financial and contractual obligations to its members, including quality assurance as provided by 18 V.S.A.  9414, the Commissioner may, in the Commissioners discretion, pursue any one or more of the following courses of action: (1) Suspend the certificate of authority to operate as a health maintenance organization under this chapter. During the period of suspension, the organization shall not enroll any additional members except new employees of any employer whose employees are enrolled in the health maintenance organization by virtue of their employment, newborn children or other newly acquired dependents of existing members and shall not engage in any advertising or solicitation whatever. (2) Revoke the certificate of authority to operate as a health maintenance organization under this chapter. When the certificate of authority is revoked, the organization shall proceed under the supervision of the Commissioner, immediately following the effective date of the order of revocation, to wind up its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of the organization. It shall engage in no further advertising or solicitation whatsoever. The Commissioner may, by written order, permit such further operation of the organization as the Commissioner may find to be in the best interests of members to the end that members will be afforded the greatest practical opportunity to obtain continuing health care coverage. (3) Impose an administrative penalty of not more than $5,000.00 for each and every unlawful act committed; each violation shall constitute a separate fineable offense. (4) Issue an administrative order requiring the health maintenance organization: to cease or modify inappropriate conduct or practices by it or any of the personnel employed or associated with it; to fulfill its contractual and financial obligations to its members. (5) When the Commissioner has cause to believe that grounds for the denial of an application for a certificate of authority exist or that grounds for the suspension or revocation of a certificate of authority exist, the Commissioner shall notify the health maintenance organization in writing specifically stating the grounds for denial, suspension, or revocation and fixing a time of at least 30 days thereafter for a hearing on the matter. (Added 1979, No. 117 (Adj. Sess.); amended 1993, No. 30,  12, eff. May 21, 1993; 1995, No. 167 (Adj. Sess.),  23; 2021, No. 105 (Adj. Sess.),  242, eff. July 1, 2022.) 
 5110. Name of health maintenance organization
No health maintenance organization, unless licensed as an insurer, may use in its name, evidences of coverage, contracts, or literature, any of the words insurance, casualty, surety, mutual, or any other words descriptive of the insurance, casualty, or surety business or deceptively similar to the name or description of any insurance or surety corporation doing business in this State. (Added 1979, No. 117 (Adj. Sess.).) 
 5111. Rules
The Commissioner may, after notice and hearing, adopt reasonable rules under 3 V.S.A. chapter 25, as are necessary or proper to carry out the provisions of this chapter. (Added 1979, No. 117 (Adj. Sess.); amended 2015, No. 23,  86.) 
 5112. Statutory construction and relationship to other laws
Except as provided in this chapter, and except as provided in section 3315 and chapter 112, subchapter 2 of this title, provisions of the insurance laws and specifically provisions of chapters 123 and 125 of this title shall not be applicable to any health maintenance organization granted a certificate of authority under this chapter. (Added 1979, No. 117 (Adj. Sess.); amended 1991, No. 52,  5, eff. June 6, 1991; 1991, No. 160 (Adj. Sess.),  44, eff. May 11, 1992; 1993, No. 30,  13, eff. May 21, 1993; 2001, No. 71,  10a, eff. June 16, 2001; 2005, No. 191 (Adj. Sess.),  19; 2021, No. 105 (Adj. Sess.),  243, eff. July 1, 2022.) 
 5113. Severability
If any section, term, or provision of this chapter shall be adjudged invalid for any reason, such judgment shall not affect, impair, or invalidate any other section, term, or provision of this chapter, but the remaining section, terms, and provisions shall be and remain in full force and effect. (Added 1979, No. 117 (Adj. Sess.).) 
 5114. Part-time employees
A health maintenance organization shall not exclude part-time employees or refuse to offer the same benefits to part-time employees as it offers to the employee groups of which the part-time employees would be members if they were full-time employees. The insurer shall offer to include the part-time employees as part of the employers employee group, at the full rate to be paid by the employer, at a rate prorated between the employer and the employee or at the employees expense. Part-time employee means any employee who works a minimum of at least 17 1/2 hours per week. (Added 1989, No. 34,  4.) 
 5115. Duty of nonprofit health maintenance organizations
Any nonprofit health maintenance organization subject to this chapter shall offer nongroup plans to individuals in accordance with 33 V.S.A.  1811 without discrimination based on age, gender, industry, and medical history, except as allowed by subdivisions 4080g(b)(7)(B)(ii) and 4080g(c)(8)(B)(ii) of this title and by 33 V.S.A.  1811(f)(2)(B). (Added 1991, No. 160 (Adj. Sess.),  45, eff. July 1, 1993; amended 2005, No. 191 (Adj. Sess.),  54; 2021, No. 105 (Adj. Sess.),  244, eff. July 1, 2022.) 
 6001. Definitions
As used in this chapter, unless the context requires otherwise:(1) Affiliated company means any company in the same corporate system as a parent, an industrial insured, or a member organization by virtue of common ownership, control, operation, or management. (2) Agency captive insurance company means a captive insurance company that is owned or directly or indirectly controlled by one or more insurance agencies or brokerages licensed under the laws of any state and that only insures risks of policies that are placed by or through such agency or agencies, or brokerage or brokerages, as applicable. (3) Association means any legal association of individuals, corporations, limited liability companies, partnerships, associations, or other entities, the member organizations of which or which does itself, whether or not in conjunction with some or all of the member organizations: (A) own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer; or (B) have complete voting control over an association captive insurance company incorporated as a mutual insurer; or (C) constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer; or (D) have complete voting control over an association captive insurance company formed as a limited liability company. (4) Association captive insurance company means any company that insures risks of the member organizations of the association and that also may insure the risks of affiliated companies of the member organizations and the risks of the association itself. (5) Captive insurance company means any pure captive insurance company, association captive insurance company, sponsored captive insurance company, industrial insured captive insurance company, agency captive insurance company, risk retention group, affiliated reinsurance company, or special purpose financial insurance company formed or licensed under the provisions of this chapter. For purposes of this chapter, a branch captive insurance company shall be a pure captive insurance company with respect to operations in this State, unless otherwise permitted by the Commissioner. (6) Commissioner means the Commissioner of Financial Regulation.(7) Controlled unaffiliated business means any person:(A) that is not in the corporate system of a parent and its affiliated companies in the case of a pure captive insurance company, or that is not in the corporate system of an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company; (B) that has an existing contractual relationship with a parent or one of its affiliated companies in the case of a pure captive insurance company, or with an industrial insured or one of its affiliated companies in the case of an industrial insured captive insurance company; and (C) whose risks are managed by a pure captive insurance company or an industrial insured captive insurance company, as applicable, in accordance with section 6019 of this title. (8) Excess workers compensation insurance means, in the case of an employer that has insured or self-insured its workers compensation risks in accordance with applicable State or federal law, insurance in excess of a specified per-incident or aggregate limit established by the Commissioner. (9) Industrial insured means an insured:(A) who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer; (B) whose aggregate annual premiums for insurance on all risks total at least $25,000.00; and (C) who has at least 25 full-time employees.(10) Industrial insured captive insurance company means any company that insures risks of the industrial insureds that comprise the industrial insured group, and that may insure the risks of the affiliated companies of the industrial insureds and the risks of the controlled unaffiliated business of an industrial insured or its affiliated companies. (11) Industrial insured group means any group of industrial insureds that collectively:(A) own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer; (B) have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer; or (C) constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer; or (D) have complete voting control over an industrial insured captive insurance company formed as a limited liability company. (12) Member organization means any individual, corporation, limited liability company, partnership, association, or other entity that belongs to an association. (13) Mutual corporation means a corporation organized without stockholders and includes a nonprofit corporation with members. (14) Parent means a corporation, limited liability company, partnership, other entity, or individual, that directly or indirectly owns, controls, or holds with power to vote more than 50 percent of the outstanding voting: (A) securities of a pure captive insurance company organized as a stock corporation; or(B) membership interests of a pure captive insurance company organized as a nonprofit corporation; or (C) membership interests of a pure captive insurance company organized as a limited liability company. (15) Pure captive insurance company means any company that insures risks of its parent and affiliated companies or controlled unaffiliated business. (16) Risk retention group means a captive insurance company organized under the laws of this State pursuant to the Liability Risk Retention Act of 1986, 15 U.S.C.  3901 et seq., as amended, as a stock or mutual corporation, a reciprocal or other limited liability entity. (Added 1981, No. 28; amended 1981, No. 145 (Adj. Sess.); 1985, No. 170 (Adj. Sess.),  3, eff. May 7, 1986; 1987, No. 168 (Adj. Sess.),  1, eff. May 3, 1988; 1989, No. 225 (Adj. Sess.),  25; 1991, No. 101,  18; 1993, No. 40,  1, eff. June 3, 1993; 1995, No. 180 (Adj. Sess.),  38; 1997, No. 49,  7, 8, eff. June 26, 1997; 1999, No. 38,  4, eff. May 20, 1999; 2001, No. 71,  11, eff. June 16, 2001; 2003, No. 55,  7; 2005, No. 122 (Adj. Sess.),  3; 2007, No. 49,  8, 14; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2017, No. 12,  3, eff. May 1, 2017; 2017, No. 134 (Adj. Sess.),  9.) 
 6002. Licensing; authority
(a) Any captive insurance company, when permitted by its articles of association, charter, or other organizational document, may apply to the Commissioner for a license to do any and all insurance comprised in subdivisions 3301(a)(1), (2), (3)(A)-(C), (E)-(Q), and (4)-(9) of this title and may grant annuity contracts as defined in section 3717 of this title, and may accept or transfer risk by means of a parametric contract; provided, however, that: (1) No pure captive insurance company may insure any risks other than those of its parent and affiliated companies or controlled unaffiliated business. (2) No agency captive insurance company may do any insurance business in this State unless:(A) an insurance agency or brokerage that owns or controls the agency captive insurance company remains in regulatory good standing in all states in which it is licensed; (B) it insures only the risks of the commercial policies that are placed by or through an insurance agency or brokerage that owns or directly or indirectly controls the agency captive insurance company and, if required by the Commissioner in his or her discretion, it provides the Commissioner the form of such commercial policies; (C) it discloses to the original policyholder or policyholders, in a form or manner approved by the Commissioner, that the agency captive insurance company as a result of its affiliation with an insurance agency or brokerage may enter into a reinsurance or other risk-sharing agreement with the agency or brokerage; and (D) if required by the Commissioner in his or her discretion, the business written by an agency captive insurance company is: (i) Fronted by an insurance company licensed under the laws of any state.(ii) Reinsured by a reinsurer authorized or approved by the State of Vermont.(iii) Secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Commissioner. The Commissioner may require the agency captive insurance company to increase the funding of any security arrangement established under this subdivision. If the form of security is a letter of credit, the letter of credit shall be issued or confirmed by a bank approved by the Commissioner. A trust maintained pursuant to this subdivision shall be established in a form and upon terms approved by the Commissioner. (3) No association captive insurance company may insure any risks other than those of its association, those of the member organizations of its association, and those of a member organizations affiliated companies. (4) No industrial insured captive insurance company may insure any risks other than those of the industrial insureds that comprise the industrial insured group, those of their affiliated companies, and those of the controlled unaffiliated business of an industrial insured or its affiliated companies. (5) No risk retention group may insure any risks other than those of its members and owners.(6) No captive insurance company may provide personal motor vehicle or homeowners insurance coverage or any component thereof. (7) No captive insurance company may accept or cede reinsurance except as provided in section 6011 of this title. (8) Any captive insurance company may provide excess workers compensation insurance to its parent and affiliated companies, unless prohibited by the federal law or laws of the state having jurisdiction over the transaction. Any captive insurance company, unless prohibited by federal law, may reinsure workers compensation of a qualified self-insured plan of its parent and affiliated companies. (9) Any captive insurance company that insures risks described in subdivisions 3301(a)(1) and (2) of this title shall comply with all applicable State and federal laws. (10) Any captive insurance company that transfers risk by means of a parametric contract shall comply with all applicable State and federal laws and regulations. As used in this subdivision, parametric contract means a contract to make a payment upon the occurrence of one or more specified triggering events without proof of loss or obligation to indemnify. A parametric contract is not an insurance contract. (b) No captive insurance company shall do any insurance business in this State unless:(1) it first obtains from the Commissioner a license authorizing it to do insurance business in this State; (2) its board of directors or committee of managers or, in the case of a reciprocal insurer, its subscribers advisory committee holds at least one meeting each year in this State; (3) it maintains its principal place of business in this State; and(4) it appoints a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Commissioner shall be an agent of such captive insurance company upon whom any process, notice, or demand may be served. (c)(1) Before receiving a license, a captive insurance company shall:(A) File with the Commissioner a copy of its organizational documents and any other statements or documents required by the Commissioner. (B) Submit to the Commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with such additional information as the Commissioner may reasonably require. In the event of any subsequent material change in any item in such description, the captive insurance company shall submit to the Commissioner for approval an appropriate revision and shall not offer any additional kinds of insurance until a revision of such description is approved by the Commissioner. The captive insurance company shall inform the Commissioner of any material change in rates within 30 days of the adoption of such change. (2) Each applicant captive insurance company shall also file with the Commissioner evidence of the following: (A) the amount and liquidity of its assets relative to the risks to be assumed;(B) the adequacy of the expertise, experience, and character of the person or persons who will manage it; (C) the overall soundness of its plan of operation;(D) the adequacy of the loss prevention programs of its insureds; and(E) such other factors deemed relevant by the Commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations. (3) Information submitted pursuant to this subsection shall be and remain confidential, and may not be made public by the Commissioner or an employee or agent of the Commissioner without the written consent of the company, except that: (A) such information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted such information is a party, upon a showing by the party seeking to discover such information that: (i) the information sought is relevant to and necessary for the furtherance of such action or case; (ii) the information sought is unavailable from other nonconfidential sources; and(iii) a subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the Commissioner; provided, however, that the provisions of this subdivision (3) shall not apply to any risk retention group; and (B) the Commissioner may, in the Commissioners discretion, disclose such information to a public officer having jurisdiction over the regulation of insurance in another state, provided that: (i) such public official shall agree in writing to maintain the confidentiality of such information; and (ii) the laws of the state in which such public official serves require such information to be and to remain confidential. (d) Each captive insurance company shall pay to the Commissioner a nonrefundable fee of $500.00 and each special purpose financial insurance company shall pay to the Commissioner a nonrefundable fee of $5,000.00 for examining, investigating, and processing its application for license, and for issuing same, and the Commissioner is authorized to retain legal, financial, and examination services from outside the Department, the reasonable cost of which may be charged against the applicant. The provisions of section 3576 of this title shall apply to examinations, investigations, and processing conducted under the authority of this section. In addition, each captive insurance company shall pay a license renewal fee for each year thereafter of $500.00, and each special purpose financial insurance company shall pay to the Commissioner a nonrefundable fee of $5,000.00. (e) If the Commissioner is satisfied that the documents and statements that such captive insurance company has filed comply with the provisions of this chapter, and that such captive insurance company has been duly organized, the Commissioner may grant a license authorizing it to do insurance business in this State until April 1 thereafter, which license may be renewed. (Added 1981, No. 28; amended 1987, No. 47,  2, eff. May 13, 1987; 1987, No. 168 (Adj. Sess.),  2, eff. May 3, 1988; 1993, No. 40,  2, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.),  9c, eff. June 21, 1994; 1997, No. 49,  9, eff. June 26, 1997; 1999, No. 38,  5, eff. May 20, 1999; 1999, No. 84 (Adj. Sess.),  10, eff. April 19, 2000; 2003, No. 55,  7; 2003, No. 105 (Adj. Sess.),  18, eff. May 4, 2004; 2007, No. 49,  9; 2009, No. 134 (Adj. Sess.),  25; 2013, No. 29,  47, eff. May 13, 2013; 2017, No. 12,  4, eff. May 1, 2017; 2017, No. 90 (Adj. Sess.),  1, eff. March 8, 2018; 2019, No. 110 (Adj. Sess.),  1, eff. June 15, 2020; 2021, No. 25,  21, eff. May 12, 2021; 2021, No. 139 (Adj. Sess.),  18, eff. May 27, 2022.) 
 6003. Names of companies
No captive insurance company shall adopt a name that is the same, deceptively similar, or likely to be confused with or mistaken for any other existing business name registered in the State of Vermont. (Added 1981, No. 28.) 
 6004. Minimum capital and surplus; letter of credit
(a) Prior to issuing any policies of insurance or entering into any contracts of reinsurance, each captive insurance company shall possess and thereafter maintain unimpaired paid-in capital and surplus of: (1) in the case of a pure captive insurance company, not less than $250,000.00;(2) in the case of an association captive insurance company, not less than $500,000.00;(3) in the case of an industrial insured captive insurance company, not less than $500,000.00;(4) in the case of an agency captive insurance company, not less than $500,000.00;(5) in the case of a risk retention group, not less than $1,000,000.00; and(6) in the case of a sponsored captive insurance company, not less than $100,000.00.(b) The Commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business transacted. (c) Capital and surplus may be in the form of cash, marketable securities, a trust approved by the Commissioner and of which the Commissioner is the sole beneficiary, or an irrevocable letter of credit issued by a bank approved by the Commissioner. The Commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the Commissioner. (d) Within 30 days after commencing business, each captive insurance company shall file with the Commissioner a statement under oath of its president and secretary certifying that the captive insurance company possessed the requisite unimpaired paid-in capital and surplus prior to commencing business. (Added 1981, No. 28; amended 1993, No. 40,  3, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.),  9d; 1999, No. 38,  6, eff. May 20, 1999; 2003, No. 55,  7; 2007, No. 178 (Adj. Sess.),  5; 2009, No. 137 (Adj. Sess.),  18, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.),  37, eff. April 2, 2012; 2015, No. 20,  2, eff. May 7, 2015; 2017, No. 12,  5, eff. May 1, 2017; 2019, No. 110 (Adj. Sess.),  3, eff. June 15, 2020; 2021, No. 25,  22, eff. May 12, 2021.) 
 6005. Dividends
No captive insurance company may pay a dividend out of, or other distribution with respect to, capital or surplus without the prior approval of the Commissioner. Approval of an ongoing plan for the payment of dividends or other distributions shall be conditioned upon the retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by, the Commissioner. Notwithstanding the provisions of 11B V.S.A. chapter 13, a captive insurance company or incorporated protected cell organized under the provisions of Title 11B may make such distributions as are in conformity with its purposes and approved by the Commissioner. (Added 1981, No. 28; amended 1993, No. 40,  4, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.),  9e; 1997, No. 49,  10, eff. June 26, 1997; 1999, No. 38,  7, eff. May 20, 1999; 2003, No. 55,  7; 2019, No. 3,  1, eff. April 18, 2019.) 
 6006. Formation of captive insurance companies in this State
(a) Subject to the approval of the Commissioner, a captive insurance company may be formed as any type of entity permissible under Vermont law. (b)-(c) [Repealed.](d) A captive insurance company incorporated or organized in this State shall have one or more incorporators or one or more organizers, at least one of which shall be a resident of this State. (e)(1) Before any required formation documents are transmitted to the Secretary of State, the incorporators or organizers shall petition the Commissioner to issue a certificate setting forth the Commissioners finding that the establishment and maintenance of the proposed entity will promote the general good of the State. In arriving at such a finding, the Commissioner shall consider: (A) the character, reputation, financial standing, and purposes of the incorporators or organizers; (B) the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors or members of the governing board; and (C) such other aspects the Commissioner deems advisable.(2) The formation documents, the certificate, and the organization fee shall be transmitted to the Secretary of State, who shall record both the formation documents and the certificate. (f) The capital stock of a captive insurance company incorporated as a stock insurer may be authorized with no par value. (g) In the case of a captive insurance company:(1) formed as a corporation, at least one of the members of the board of directors shall be a resident of this State; (2) formed as a reciprocal insurer, at least one of the members of the subscribers advisory committee shall be a resident of this State; (3) formed as a limited liability company, at least one of the managers shall be a resident of this State. (h) Other than captive insurance companies formed as limited liability companies under 11 V.S.A. chapter 21 or as nonprofit corporations under Title 11B, captive insurance companies formed as corporations under the provisions of this chapter shall have the privileges and be subject to the provisions of Title 11A as well as the applicable provisions contained in this chapter. In the event of conflict between the provisions of said general corporation law and the provisions of this chapter, the latter shall control. (i) Captive insurance companies formed under the provisions of this chapter:(1) As limited liability companies shall have the privileges and be subject to the provisions of 11 V.S.A. chapter 21 as well as the applicable provisions contained in this chapter. In the event of a conflict between the provisions of 11 V.S.A. chapter 21 and the provisions of this chapter, the latter shall control. (2) As nonprofit corporations shall have the privileges and be subject to the provisions of Title 11B as well as the applicable provisions contained in this chapter. In the event of conflict between the provisions of Title 11B and the provisions of this chapter, the latter shall control. (j) The provisions of chapter 101, subchapters 3 and 3A of this title, pertaining to mergers, consolidations, conversions, mutualizations, redomestications, and mutual holding companies, shall apply in determining the procedures to be followed by captive insurance companies in carrying out any of the transactions described therein, except that: (1) If the shareholders, members, or policyholders of the captive insurance company have unanimously approved of the merger, the procedures set forth in section 6006a of this title shall apply. (2) The Commissioner may, upon request of an insurer party to a merger authorized under this subsection, waive the requirement of subdivision 3424(6) of this title. (3) The Commissioner may waive the requirements for public notice and hearing or, in accordance with rules that the Commissioner may adopt addressing categories of transactions, modify the requirements for public notice and hearing. If a notice of public hearing is required, but no one requests a hearing ten days before the day set for the hearing, then the Commissioner may cancel the hearing. (4) The provisions of subsections 3423(f) and (h) of this title shall not apply, and the Commissioner may waive or modify the requirement of subdivision 3423(b)(4) of this title, with respect to market value of a converted company as necessary or desirable to reflect applicable restrictions on ownership of companies formed under this chapter. (5) An alien insurer may be a party to a merger authorized under this subsection, provided that the requirements for a merger between a captive insurance company and a foreign insurer under section 3431 of this title shall apply to a merger between a captive insurance company and an alien insurer under this subsection. Such alien insurer shall be treated as a foreign insurer under section 3431 and such other jurisdictions shall be the equivalent of a state for purposes of section 3431. (6) The Commissioner may issue a certificate of general good to permit the formation of a captive insurance company that is established for the purpose of consolidating or merging with or assuming existing insurance or reinsurance business from an existing licensed captive insurance company. The Commissioner may, upon request of such newly formed captive insurance company, waive or modify the requirements of subdivisions 6002(c)(1)(B) and (2) of this title. (7) The Commissioner may waive or modify application of the provisions of chapter 132 and chapter 101, subchapters 3 and 3A of this title and the provisions of Titles 11, 11A, and 11B in order to permit mergers of a non-insurer subsidiary of a captive insurance company with and into the captive insurance company or another of its subsidiaries without approval of the shareholders, members, or subscribers of such captive insurance company and without making available to the shareholders, members, or subscribers dissenters rights otherwise made available in such a merger; provided, however, that the board of directors, managers, or subscribers advisory committee of each of the merging entities shall approve such merger. The Commissioner may condition any such waiver or modification upon a good faith effort by the captive insurance company to provide notice of the merger to its shareholders, members, or subscribers. (k) Captive insurance companies formed as reciprocal insurers under the provisions of this chapter shall have the privileges and be subject to the provisions of chapter 132 of this title in addition to the applicable provisions of this chapter. In the event of a conflict between the provisions of chapter 132 and the provisions of this chapter, the latter shall control. However, in approving assessments levied upon subscribers of a captive insurance company formed as a reciprocal insurer, the Commissioner may exempt the company from any provision of sections 4850 (assessments), 4851 (time limit for assessments), and 4852 (aggregate of liability) of chapter 132. To the extent a reciprocal insurer is made subject to other provisions of this title pursuant to chapter 132, such provisions shall not be applicable to a reciprocal insurer formed under this chapter unless such provisions are expressly made applicable to captive insurance companies under this chapter. The Commissioner may exempt a companys attorney-in-fact from the provisions of section 4840 (attorneys bond) of chapter 132 if: (1) the reciprocal insurer is formed as an association captive;(2) each member of the reciprocal insurer qualifies as industrial insured pursuant to subdivision 6001(9) of this subchapter; or (3) the reciprocal insurer is an incorporated protected cell of a sponsored captive insurance company. (l) The articles of incorporation or bylaws of a captive insurance company formed as a corporation may authorize a quorum of its board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors determined under 11A V.S.A.  8.24(a) or under 11B V.S.A.  8.24. (m) The subscribers agreement or other organizing document of a captive insurance company formed as a reciprocal insurer may authorize a quorum of its subscribers advisory committee to consist of no fewer than one-third of the number of its members. (n) With the Commissioners approval, a captive insurance company organized as a stock insurer may convert to a nonprofit corporation with one or more members by filing with the Secretary of State an irrevocable election for such conversion, provided that: (1) the irrevocable election shall certify that, at the time of the companys original organization and at all times thereafter, the company conducted its business in a manner not inconsistent with a nonprofit purpose; and (2) at the time of the filing of its irrevocable election, the company shall file with both the Commissioner and the Secretary of State amended and restated articles of incorporation consistent with the provisions of this chapter and with Title 11B, duly authorized by the corporation. (o) The following provisions of Title 11B shall not apply to captive insurance companies that are nonprofit corporations: (1) subsection 2.02(c) (relating to the signing of articles of incorporation by directors); and (2) section 11.02, in the case of any merger in which a captive insurance company merges with and into a captive insurance company organized as a nonprofit corporation under Title 11B where the latter is the surviving corporation. (p) In the case of a captive insurance company formed as a limited liability company, a reciprocal insurance company, or mutual insurance company, any proxy executed by the members, subscribers, and policyholders of each shall be valid if executed and transmitted in compliance with 11A V.S.A.  7.22. (q) With the Commissioners prior written approval, a captive insurance company may establish one or more separate accounts and may allocate to them amounts to provide for the insurance of risks of certain of its parents, affiliates, or members, as the case may be, subject to the following: (1) The income, gains, and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account, without regard to other income, gains, or losses of the captive insurance company. (2) Amounts allocated to a separate account in the exercise of the power granted by this subsection are owned by the captive insurer, and the captive insurer may not be nor hold itself out to be a trustee with respect to such amounts. (3) Unless otherwise approved by the Commissioner, assets allocated to a separate account shall be valued in accordance with the rules otherwise applicable to the captive insurers assets. (4) If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the captive insurer may conduct. (5) No sale, exchange, or other transfer of assets may be made by such captive insurer between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made and unless such transfer, whether into or from a separate account is made by a transfer of cash or by a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the Commissioner. The Commissioner may approve other transfers among such accounts if, in his or her opinion, such transfers would be equitable. (6) To the extent such captive insurer deems it necessary to comply with any applicable federal or State laws, such captive insurer, with respect to any separate account, including any separate account that is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of such account, including special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account. (Added 1981, No. 28; 1989, No. 72,  1; amended 1989, No. 72,  1; 1991, No. 41,  5; 1993, No. 85,  3(d), eff. Jan. 1, 1994; 1995, No. 179 (Adj. Sess.),  1d, eff. Jan. 1, 1997; 1997, No. 49,  11, eff. June 26, 1997; 1997, No. 100 (Adj. Sess.),  2, eff. April 16, 1998; 1999, No. 38,  8, eff. May 20, 1999; 1999, No. 86 (Adj. Sess.),  8, eff. April 27, 2000; 2003, No. 55,  7; 2003, No. 105 (Adj. Sess.),  19, eff. May 4, 2004; 2005, No. 36,  11, 12, 13, eff. June 1, 2005; 2007, No. 178 (Adj. Sess.),  10; 2009, No. 42,  30a; 2009, No. 137 (Adj. Sess.),  19, 20, eff. May 29, 2010; 2013, No. 29,  48, eff. May 13, 2013; 2013, No. 103 (Adj. Sess.),  5, eff. April 14, 2014; 2015, No. 20,  1, eff. May 7, 2015; 2017, No. 12,  6, eff. May 1, 2017; 2019, No. 3,  2, eff. April 18, 2019; 2019, No. 110 (Adj. Sess.),  3A, eff. June 15, 2020; 2021, No. 25,  26, eff. May 12, 2021.) 
 6006a. Mergers
(a) Any captive insurance company meeting the qualifications set forth in subdivision 6006(j)(1) of this title may merge with any other insurer, whether licensed in this State or elsewhere, in the following manner: (1) The board of directors of each insurer shall, by a resolution adopted by a majority vote of the members of such board, approve a joint agreement of merger setting forth: (A) the names of the insurers proposed to merge, and the name of the insurer into which they propose to merge, which is hereafter designated as the surviving company; (B) the terms and conditions of the proposed merger and the mode of carrying the same into effect; (C) the manner and basis of converting the ownership interests, if applicable, in other than the surviving insurer into ownership interests or other consideration, securities, or obligations of the surviving insurer; (D) a restatement of such provisions of the articles of incorporation of the surviving insurer as may be deemed necessary or advisable to give effect to the proposed merger; and (E) any other provisions with respect to the proposed merger as are deemed necessary or desirable. (2) The resolution of the board of directors of each insurer approving the agreement shall direct that the agreement be submitted to a vote of the shareholders, members, or policyholders, as the case may be, of each insurer entitled to vote in respect thereof at a designated meeting thereof, or via unanimous written consent of such shareholders, members, or policyholders in lieu of a meeting. Notice of the meeting shall be given as provided in the bylaws, charter, or articles of association, or other governance document, as the case may be, of each insurer and shall specifically reflect the agreement as a matter to be considered at the meeting. (3) The agreement of merger so approved shall be submitted to a vote of the shareholders, members, or policyholders, as the case may be, of each insurer entitled to vote in respect thereof at the meeting directed by the resolution of the board of directors of such company approving the agreement, and the agreement shall be unanimously adopted by the shareholders, members, or policyholders, as the case may be. (4) Following the adoption of the agreement by any insurer, articles of merger shall be adopted in the following manner: (A) Upon the execution of the agreement of merger by all of the insurers parties thereto, there shall be executed and filed, in the manner hereafter provided, articles of merger setting forth the agreement of merger, the signatures of the several insurers parties thereto, the manner of its adoption, and the vote by which adopted by each insurer. (B) The articles of merger shall be signed on behalf of each insurer by a duly authorized officer, in such multiple copies as shall be required to enable the insurers to comply with the provisions of this subchapter with respect to filing and recording the articles of merger, and shall then be presented to the Commissioner. (C) The Commissioner shall approve the articles of merger if he or she finds that the merger will promote the general good of the State in conformity with those standards set forth in section 3305 of this title. If he or she approves the articles of merger, he or she shall issue a certificate of approval of merger. (5) The insurer shall file the articles of merger, accompanied by the agreement of merger and the certificate of approval of merger, with the Secretary of State and pay all fees as required by law. If the Secretary of State finds that they conform to law, he or she shall issue a certificate of merger and return it to the surviving insurer or its representatives. The merger shall take effect upon the filing of articles of merger with the Secretary of State, unless a later effective date is specified therein. (6) The surviving insurer shall file a copy of the certificate of merger from the Secretary of State with the Commissioner. (b) When such merger has been effected as provided in this section:(1) The several insurers parties to the agreement of merger shall be a single captive insurance company that shall be the surviving insurer a party to the agreement of merger into which it has been agreed the other insurers parties to the agreement shall be merged, which surviving insurer shall survive the merger. (2) The separate existence of all of the insurers parties to the agreement of merger, except the surviving captive insurance company, shall cease. (3) The single captive insurance company shall have all of the rights, privileges, immunities, and powers and shall be subject to all of the duties and liabilities of a captive insurance company organized under this chapter. (4) The single captive insurance company shall possess all the rights, privileges, immunities, powers, and franchises of a public as well as of a private nature of each of the insurers so merged; and all property, real, personal, and mixed, and all debts due on whatever account, including subscriptions to shares of capital stock, and all other choses in action and all and every other interest, of or belonging to or due to each of the insurers so merged shall be taken and deemed to be transferred to and vested in such single captive insurance company without further act or deed; and the title to any real estate, or any interest therein, under the laws of this State vested in any such insurers shall not revert or be in any way impaired by reason of the merger. (5) The single captive insurance company shall be responsible and liable for all the liabilities and obligations of each of the insurers so merged in the same manner and to the same extent as if the single insurer had itself incurred the same or contracted therefor; and any claim existing or action or proceeding pending by or against any of the insurers may be prosecuted to judgment as if the merger had not taken place. Neither the rights of creditors nor any liens upon the property of any insurers shall be impaired by the merger, but such liens shall be limited to the property upon which they were liens immediately prior to the time of the merger unless otherwise provided in the agreement of merger. (6) The articles of association or other governing document of the surviving captive insurance company shall be supplanted and superseded to the extent, if any, that any provision or provisions of the articles are restated in the agreement of merger as provided in subsection (a) of this section, and such articles of association or other governing document shall be deemed to be thereby and to that extent amended. (c)(1) In the case of a merger between a domestic and a foreign or alien insurer, the articles of merger shall be regarded as executed by the proper officers of said foreign or alien insurer when such officers are duly authorized to execute same through such action on the part of the directors, shareholders, members, or policyholders, as the case may be, of said foreign or alien insurer as may be required by the laws of the state where the same is incorporated, and upon execution, the articles of merger shall be submitted to the insurance commissioner or other officer at the head of the insurance department of the jurisdiction where such foreign or alien insurer is domiciled. No merger shall take effect until it has been approved by the insurance official of the jurisdiction where the foreign or alien insurer is domiciled nor until a certificate of his or her approval has been filed with the Commissioner, provided that such submission to and approval by the proper official of the other jurisdiction shall not be required unless the same are required by the laws of the foreign or alien jurisdiction. Provided, further, that the domestic captive insurance company involved in the merger shall not through anything contained in this section be relieved of any of the procedural requirements enumerated elsewhere in this section. (2) A merger between a domestic and a foreign or alien captive insurance company shall not take effect unless and until the surviving captive insurance company, if such is a foreign or alien insurer, files with the Commissioner a power of attorney appointing the Commissioner the attorney for service of the foreign or alien insurer, upon whom all lawful process against the insurers may be served. Said power of attorney shall be irrevocable if the foreign or alien insurer has outstanding in this State any contract of insurance, or other obligation whatsoever, and shall by its terms so provide. Service upon the Commissioner shall be deemed sufficient service upon the insurer. (Added 2021, No. 25,  27, eff. May 12, 2021; amended 2021, No. 139 (Adj. Sess.),  19, eff. May 27, 2022.) 
 6006b. Redomestication
(a) Any foreign or alien insurer that qualifies for licensure as a captive insurance company in this State may redomesticate to this State by complying with all of the requirements of law relative to the organization and licensing of a captive insurance company and by filing with the Secretary of State its articles of association, charter, or other organization document, together with appropriate amendments thereto adopted in accordance with the laws of this State bringing such articles of association, charter, or other organizational document into compliance with the laws of this State, along with a certificate of general good issued by the Commissioner and a filing fee per section 3440 of this title. An insurer becoming a domestic captive insurance company through this redomestication process shall pay to the Commissioner such fees as would otherwise be payable by a captive insurance company organizing and becoming licensed or transacting business in this State. The Commissioner may issue a conditional license prior to the effective date of the redomestication in order to facilitate the transaction and provide notice of approval of the transaction to the outgoing jurisdiction. The domestic insurer shall be entitled to the necessary or appropriate certificates and licenses to continue its business and to transact business in this State and shall be subject to the authority and jurisdiction of this State. No insurer redomesticating into this State as a captive insurance company need merge, consolidate, transfer assets, or otherwise engage in any other reorganization, other than as specified in this section. (b) Upon the approval of and compliance with such conditions as may be imposed by the Commissioner, any captive insurance company may transfer its domicile, in accordance with the laws thereof, to any other state or jurisdiction and upon such a transfer shall cease to be a domestic captive insurance company, and its corporate or other legal existence in this State shall cease upon the filing of articles of redomestication with the Secretary of State, or upon such later date if a delayed effective date is specified in the articles of redomestication, accompanied by a certificate of approval of redomestication issued by the Commissioner and proof of acceptance of the insurer by the Secretary of State or analogous officer of the jurisdiction to which the captive insurance company is redomesticating, and upon payment to the Secretary of State of a filing fee per section 3438 of this title. Said articles of redomestication shall contain, at a minimum, the following information: (1) the name, organizational form, date of formation, and jurisdiction of formation of the redomesticating entity; (2) the jurisdiction to which the redomesticating entity will be transferring its domicile and its name following the redomestication date; (3) the registered office and agent of the redomesticating entity following the redomestication date; and (4) a statement that the redomestication has been approved by the appropriate vote of the shareholders or other owners of the redomesticating entity. (c) Upon redomestication in accordance with this section, the foreign or alien insurer shall become a captive insurance company organized under the laws of this State and have all the rights, privileges, immunities, and powers, and be subject to all applicable laws, duties, and liabilities, of domestic insurers of the same type. Such captive insurance company shall possess all rights that obtained prior to the redomestication to the extent permitted by the laws of this State and shall be responsible and liable for all the liabilities and obligations that obtained prior to the redomestication. The certificate of authority, agents, appointments and licenses, rates, and other items that the Commissioner allows, in his or her discretion, that are in existence at the time any insurer transfers its corporate domicile to this or any other state or jurisdiction by redomestication pursuant to this section shall continue in full force and effect upon such transfer. All outstanding policies of any transferring insurer shall remain in full force and effect. (Added 2021, No. 25,  28, eff. May 12, 2021.) 
 6007. Reports and statements
(a) Captive insurance companies shall not be required to make any annual report except as provided in this chapter. (b) Prior to March 1 of each year, and prior to March 15 of each year in the case of pure captive insurance companies, association captive insurance companies, sponsored captive insurance companies, industrial insured captive insurance companies, or agency captive insurance companies, each captive insurance company shall submit to the Commissioner a report of its financial condition, verified by oath of two of its executive officers. Each captive insurance company shall report using generally accepted accounting principles, statutory accounting principles, or international financial reporting standards unless the Commissioner requires, approves, or accepts the use of any other comprehensive basis of accounting, in each case with any appropriate or necessary modifications or adaptations thereof required or approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner. As used in this section, statutory accounting principles shall mean the accounting principles codified in the NAIC Accounting Practices and Procedures Manual. Upon application for admission, a captive insurance company shall select, with explanation, an accounting method for reporting. Any change in a captive insurance companys accounting method shall require prior approval. Except as otherwise provided, each risk retention group shall file its report in the form required by subsection 3561(a) of this title, and each risk retention group shall comply with the requirements set forth in section 3569 of this title. The Commissioner shall by rule propose the forms in which pure captive insurance companies, association captive insurance companies, sponsored captive insurance companies, and industrial insured captive insurance companies shall report. Subdivision 6002(c)(3) of this title shall apply to each report filed pursuant to this section, except that such subdivision shall not apply to reports filed by risk retention groups. (c) Any pure captive insurance company, association captive insurance company, sponsored captive insurance company, industrial insured captive insurance company, or agency captive insurance company may make written application for filing the required report on a fiscal year-end. If an alternative reporting date is granted: (1) the annual report is due 75 days after the fiscal year-end; and(2) in order to provide sufficient detail to support the premium tax return, the captive insurance company shall file prior to March 15 of each year for each calendar year-end, the premium schedule of the Vermont Captive Insurance Company Annual Report. (Added 1981, No. 28; amended 1991, No. 101,  19; 1993, No. 40,  5, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.),  9f, eff. June 21, 1994; 1997, No. 49,  12, eff. June 26, 1997; 1997, No. 100 (Adj. Sess.),  3, eff. April 16, 1998; 1999, No. 38,  9, eff. May 20, 1999; 2001, No. 71,  12, eff. June 16, 2001; 2003, No. 55,  7; 2007, No. 49,  10; 2009, No. 42,  17, eff. May 27, 2009; 2009, No. 137 (Adj. Sess.),  21, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.),  38, eff. April 2, 2012; 2015, No. 74 (Adj. Sess.),  1, eff. April 13, 2016; 2017, No. 12,  1, eff. May 1, 2017; 2017, No. 90 (Adj. Sess.),  2, eff. March 8, 2018; 2021, No. 25,  23, eff. May 12, 2021; 2021, No. 139 (Adj. Sess.),  13, eff. May 27, 2022.) 
 6008. Examinations and investigations
(a) Whenever the Commissioner determines it to be prudent, but not less frequently than once every five years, the Commissioner shall personally, or by some competent person appointed by the Commissioner, inspect and examine each captive insurance company to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with the provisions of this chapter. The expenses and charges of the examination shall be paid to the State by the company or companies examined. (b) The provisions of section 3576 of this title shall apply to examinations conducted under this section. (c) All examination reports, preliminary examination reports or results, working papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the Commissioner or an employee or agent of the Commissioner without the written consent of the company, except to the extent provided in this subsection. Nothing in this subsection shall prevent the Commissioner from using such information in furtherance of the Commissioners regulatory authority under this title. The Commissioner may, in the Commissioners discretion, grant access to such information to public officers having jurisdiction over the regulation of insurance in any other state or country, or to law enforcement officers of this State or any other state or agency of the federal government at any time, so long as such officers receiving the information agree in writing to hold it in a manner consistent with this section. (Added 1981, No. 28; amended 1983, No. 195 (Adj. Sess.),  5(b); 1993, No. 235 (Adj. Sess.),  9g, eff. June 21, 1994; 1997, No. 49,  13, eff. June 26, 1997; 1999, No. 38,  10, eff. May 20, 1999; 2003, No. 55,  7; 2003, No. 105 (Adj. Sess.),  8; 2019, No. 3,  3, eff. April 18, 2019.) 
 6009. Grounds and procedures for suspension or revocation of license
(a) The license of a captive insurance company may be suspended or revoked by the Commissioner for any of the following reasons: (1) insolvency or impairment of capital or surplus;(2) Failure to meet the requirements of section 6004 of this title;(3) refusal or failure to submit an annual report, as required by this chapter, or any other report or statement required by law or by lawful order of the Commissioner; (4) failure to comply with the provisions of its own charter, bylaws, or other organizational document; (5) failure to submit to or pay the cost of examination or any legal obligation relative thereto, as required by this chapter; (6) use of methods that, although not otherwise specifically prohibited by law, nevertheless render its operation detrimental or its condition unsound with respect to the public or to its policyholders; or (7) failure otherwise to comply with the laws of this State.(b) If the Commissioner finds, upon examination, hearing, or other evidence, that any captive insurance company has violated any provision of subsection (a) of this section, the Commissioner may suspend or revoke such companys license if the Commissioner deems it in the best interest of the public and the policyholders of such captive insurance company, notwithstanding any other provision of this title. (Added 1981, No. 28; amended 1997, No. 49,  14, eff. June 26, 1997; 1999, No. 38,  11, eff. May 20, 1999; 2003, No. 55,  7.) 
 6010. Legal investments
(a)(1) Except as may be otherwise authorized by the Commissioner, agency captive insurance companies, association captive insurance companies, sponsored captive insurance companies, protected cells in sponsored captive insurance companies, and risk retention groups shall: (A) comply with the investment requirements contained in sections 3461 through 3472 of this title, as applicable; or (B) submit for approval by the Commissioner the investment policy of the company. In reviewing the investment policy, the Commissioner shall consider diversification as to both type and issue; limits on the aggregate investment that may be made in any category of investment; limits on the aggregate investment in any one business, issuer, or risk; liquidity; and matching of assets and liabilities. The Commissioner shall determine whether the investment policy provides for the reasonable preservation, administration, and management of assets with respect to the risks associated with the companys transactions and whether the investment policy supports the approved business plan. Subdivision 6002(c)(3) of this title shall apply to all information submitted pursuant to this subsection. (2) The Commissioner may require any company subject to this subsection to limit or withdraw from certain investments or discontinue certain investment practices if the Commissioner determines that such investments or practices of the company might be hazardous to the policyholders or the general public. (3) Section 3463a of this title shall apply to agency captive insurance companies, association captive insurance companies, and risk retention groups except to the extent it is inconsistent with approved accounting standards in use by the company. Notwithstanding any other provision of this title to the contrary, the Commissioner may approve the use of alternative, reliable methods of valuation and rating. (b) No pure captive insurance company or industrial insured captive insurance company shall be subject to any restrictions on allowable investments, including those limitations contained in sections 3461-3472 of this title; provided, however, that the Commissioner may prohibit or limit any investment that threatens the solvency or liquidity of any such company. (c) No pure captive insurance company may make a loan to or an investment in its parent company or affiliates without prior written approval of the Commissioner, and any such loan or investment must be evidenced by documentation approved by the Commissioner. Loans of minimum capital and surplus funds required by section 6004 of this title are prohibited. (Added 1981, No. 28; amended 1991, No. 101,  20; 1993, No. 40,  6, eff. June 3, 1993; 1993, No. 235 (Adj. Sess.),  9h, eff. June 21, 1994; 1999, No. 38,  12, eff. May 20, 1999; 2001, No. 71,  13, eff. June 16, 2001; 2003, No. 55,  7; 2005, No. 36,  14, eff. June 1, 2005; 2017, No. 12,  7, eff. May 1, 2017; 2019, No. 3,  4, eff. April 18, 2019; 2019, No. 110 (Adj. Sess.),  7, eff. June 15, 2020.) 
 6011. Reinsurance
(a) Any captive insurance company may provide reinsurance, comprised in subsection 3301(a) of this title, on risks ceded by any other insurer, and may provide reinsurance of annuity contracts as defined in section 3717 of this title that are granted by any other insurer. (b) Any captive insurance company may take credit for the reinsurance of risks or portions of risks ceded to reinsurers complying with the provisions of subsections 3634a(a) through (f) of this title. Prior approval of the Commissioner shall be required for ceding or taking credit for the reinsurance of risks or portions of risks ceded to reinsurers not complying with subsections 3634a(a) through (f) of this title, except for business written by an alien captive insurance company outside the United States. (c) In addition to reinsurers authorized under the provisions of section 3634a of this title, a captive insurance company may take credit for the reinsurance of risks or portions of risks ceded to a pool, exchange, or association acting as a reinsurer which has been authorized by the Commissioner. The Commissioner may require any other documents, financial information, or other evidence that such a pool, exchange, or association will be able to provide adequate security for its financial obligations. The Commissioner may deny authorization or impose any limitations on the activities of a reinsurance pool, exchange, or association that, in the Commissioners judgment, are necessary and proper to provide adequate security for the ceding captive insurance company and for the protection and consequent benefit of the public at large. (d) For all purposes of this chapter, insurance by a captive insurance company of any workers compensation qualified self-insured plan of its parent and affiliates shall be deemed to be reinsurance. (Added 1981, No. 28; 1985, No. 170 (Adj. Sess.),  1, eff. May 7, 1986; amended 1987, No. 168 (Adj. Sess.),  3, eff. May 3, 1988; 1991, No. 249 (Adj. Sess.),  24; 93, No. 40,  7, 8, eff. June 3, 1993; 1999, No. 38,  13, eff. May 20, 1999; 2003, No. 55,  7; 2005, No. 122 (Adj. Sess.),  4.) 
 6012. Rating organizations; memberships
No captive insurance company shall be required to join a rating organization. (Added 1981, No. 28.)
 6013. Exemption from compulsory associations
No captive insurance company shall be permitted to join or contribute financially to any plan, pool, association, or guaranty or insolvency fund in this State, nor shall any such captive insurance company, or any insured or affiliate thereof, receive any benefit from any such plan, pool, association, or guaranty or insolvency fund for claims arising out of the operations of such captive insurance company. (Added 1981, No. 28; amended 1997, No. 49,  15, eff. June 26, 1997; 2003, No. 55,  7.) 
 6014. Tax on premiums collected
(a) Each captive insurance company shall pay to the Commissioner of Taxes on or before March 15 of each year a tax at the rate of 38-hundredths of one percent on the first 20 million dollars and 285-thousandths of one percent on the next 20 million dollars and 19-hundredths of one percent on the next 20 million dollars and 72-thousandths of one percent on each dollar thereafter on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December 31 next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders; provided, however, that no tax shall be due or payable as to considerations received for annuity contracts. (b) Each captive insurance company shall pay to the Commissioner of Taxes on or before March 15 of each year a tax at the rate of 214-thousandths of one percent on the first 20 million dollars of assumed reinsurance premium, and 143-thousandths of one percent on the next 20 million dollars and 48-thousandths of one percent on the next 20 million dollars and 24-thousandths of one percent on each dollar thereafter. However, no reinsurance tax applies to premiums for risks or portions of risks that are subject to taxation on a direct basis pursuant to subsection (a) of this section. No reinsurance premium tax shall be payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of another insurer under common ownership and control if such transaction is part of a plan to discontinue the operations of such other insurer, and if the intent of the parties to such transaction is to renew or maintain such business with the captive insurance company. No reinsurance premium tax shall be payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of a captive insurance companys parent or affiliates if the intent of such exchange is to renew or maintain such business with the captive insurance company. (c)(1) The annual minimum aggregate tax to be paid by a captive insurance company calculated under subsections (a) and (b) of this section shall be $7,500.00. The annual maximum aggregate tax to be paid by a captive insurance company calculated under subsections (a) and (b) of this section shall be $200,000.00. (2) The annual minimum aggregate tax to be paid by a sponsored captive insurance company shall be $7,500.00 and shall apply to the sponsored captive insurance company as a whole and not to each protected cell; such cells shall not be subject to the minimum tax. (3) The annual maximum tax to be paid by a protected cell shall be as calculated under subdivision (1) of this subsection. The annual maximum tax to be remitted by a sponsored captive insurance company shall be the aggregate of the tax liabilities of each protected cell. (d) A captive insurance company failing to make returns as required by 32 V.S.A. chapter 211 or failing to pay within the time required all taxes assessed by this section shall be subject to the provisions of 32 V.S.A.  3202. (e) Subject to the provisions of subsection (c) of this section, two or more captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurance company. (f) As used in this section:(1) common ownership and control shall mean ownership and control of two or more captive insurance companies by the same person or group of persons. (2) ownership and control shall mean:(A) in the case of a stock corporation, the direct or indirect ownership of 80 percent or more of the outstanding voting stock of the corporation. (B) in the case of a mutual or nonprofit corporation, the direct or indirect ownership of 80 percent or more of the surplus and the voting power of such corporation. (C) in the case of a limited liability company, the direct or indirect ownership of 80 percent or more of the membership interests in the limited liability company. (D) in the case of a sponsored captive insurance company, for purposes of this section a protected cell shall be treated as a separate captive insurance company owned and controlled by the protected cells participant, but only if: (i) the participant is the only participant with respect to such protected cell; and(ii) the participant is the sponsor or is affiliated with the sponsor of the sponsored captive insurance company through common ownership and control. (g) The tax provided for in this section shall constitute all taxes collectible under the laws of this State from any captive insurance company, and no other occupation tax or other taxes shall be levied or collected from any captive insurance company by the State or any county, city, or municipality within this State, except meals and rooms taxes, sales and use taxes, and ad valorem taxes on real and personal property used in the production of income. (h) Annually, 11 percent of the premium tax revenues collected pursuant to this section shall be transferred to the Department of Financial Regulation for the regulation of captive insurance companies under this chapter. (i) [Repealed.](j) The tax provided for in this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a multiyear basis. In the case of multiyear policies or contracts, the premium shall be prorated for purposes of determining the tax under this section. (k) A captive insurance company first licensed under this chapter on or after January 1, 2017 shall receive a nonrefundable credit of $5,000.00 applied against the aggregate taxes owed for the first two taxable years for which the company has liability under this section. (Added 1981, No. 28; amended 1985, No. 170 (Adj. Sess.),  2, eff. May 7, 1986; 1987, No. 47,  3, eff. May 13, 1987; 1989, No. 72,  2; 1989, No. 225 (Adj. Sess.),  25(a); 1993, No. 89,  15-17; 1993, No. 152 (Adj. Sess.),  1, eff. May 16, 1994; 1995, No. 180 (Adj. Sess.),  38(a); 1999, No. 38,  14, eff. May 20, 1999; 1999, No. 49,  218; 1999, No. 84 (Adj. Sess.),  11, eff. April 19, 2000; 2001, No. 71,  13a, eff. June 16, 2001; 2003, No. 55,  7, eff. June 4, 2003, see effective date notes set out below; 2007, No. 49,  11, 15; 2009, No. 42,  18, 21, eff. May 27, 2009; 2009, No. 42 ,  20; 2011, No. 21,  20; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 29,  49, eff. May 13, 2013; 2017, No. 73,  30; 2017, No. 90 (Adj. Sess.),  3, eff. March 8, 2018.) 
 6015. Rules and regulations
The Commissioner may adopt and from time to time amend such rules relating to captive insurance companies as are necessary to enable the Commissioner to carry out the provisions of this chapter. (Added 1981, No. 28; amended 2003, No. 55,  7.) 
 6016. Laws applicable
No provisions of this title, other than those contained in this chapter or contained in specific references contained in this chapter, shall apply to captive insurance companies. Risk retention groups shall have the privileges and be subject to the provisions of chapter 142 of this title in addition to the applicable provisions of this chapter. (Added 1981, No. 28; amended 2003, No. 55,  7.) 
 6017. Captive Insurance Regulatory and Supervision Fund
(a)(1) There is hereby created a fund to be known as the Captive Insurance Regulatory and Supervision Fund for the purpose of providing the financial means for the Commissioner of Financial Regulation to administer this chapter, chapter 142, and chapter 142A of this title and for reasonable expenses incurred in promoting the captive insurance industry in Vermont. The transfer of 11 percent of the premium tax under subsection 6014(h) of this title, and all fees and assessments received by the Department pursuant to the administration of these chapters shall be credited to this Fund. Of this amount, not more than three percent of the premium tax under section 6014 may be expended by the Agency of Commerce and Community Development, with approval of the Secretary of Administration, for promotional expenses. All fees received by the Department from reinsurers who assume risk solely from captive insurance companies and are subject to the provisions of subsections 3634a(a) through (f) of this title, shall be deposited into the Captive Insurance Regulatory and Supervision Fund. All fines and administrative penalties, however, shall be deposited directly into the General Fund. (2) All payments from the Captive Insurance Regulatory and Supervision Fund for the maintenance of staff and associated expenses, including contractual services as necessary, shall be disbursed from the State Treasury only upon warrants issued by the Commissioner of Finance and Management, after receipt of proper documentation regarding services rendered and expenses incurred. (b) At the end of each fiscal year, the balance in the Captive Insurance Regulatory and Supervision Fund shall be transferred to the General Fund. (c) The Commissioner of Finance and Management may anticipate receipts to the Captive Insurance Regulatory and Supervision Fund and issue warrants based thereon. (Added 1987, No. 47,  4, eff. May 13, 1987; amended 1989, No. 72,  3; 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 1995, No. 190 (Adj. Sess.),  1; 1999, No. 49,  219; 2003, No. 55,  7; 2003, No. 80 (Adj. Sess.),  76, eff. March 8, 2004; 2009, No. 42,  22; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 179 (Adj. Sess.),  E.801.) 
 6018. Delinquency
Except as otherwise provided in this chapter, the terms and conditions set forth in chapter 145 of this title shall apply in full to captive insurance companies formed or licensed under this chapter; however, the assets of a separate account established under subsection 6006(q) of this chapter shall not be used to pay any expenses or claims other than those attributable to such separate account. (Added 1987, No. 168 (Adj. Sess.),  4, eff. May 3, 1988; amended 1993, No. 40,  9, eff. June 3, 1993; 1999, No. 38,  15, eff. May 20, 1999; 2003, No. 55,  7; 2007, No. 49,  12; 2013, No. 103 (Adj. Sess.),  6, eff. April 14, 2014; 2019, No. 110 (Adj. Sess.),  9, eff. June 15, 2020.) 
 6019. Rules for controlled unaffiliated business
The Commissioner may adopt rules establishing standards to ensure that a parent or its affiliated company, or an industrial insured or its affiliated company, is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by a pure captive insurance company or an industrial insured captive insurance company, respectively; provided, however, that, until such time as rules under this section are adopted, the Commissioner may approve the coverage of such risks by a pure captive insurance company or an industrial insured captive insurance company. (Added 1997, No. 49,  16, eff. June 26, 1997; amended 2003, No. 55,  7; 2007, No. 49,  13.) 
 6020. Conversion to or merger with reciprocal insurer
(a) An association captive insurance company, risk retention group, industrial insured captive insurance company formed as a stock or mutual corporation, or other insurer approved by the Commissioner may be converted to or merged with and into a reciprocal insurer in accordance with a plan therefore and the provisions of this section. (b) Any plan for such conversion or merger shall provide a fair and equitable plan for purchasing, retiring, or otherwise extinguishing the interests of the stockholders and policyholders of a stock insurer, and the members and policyholders of a mutual insurer, including a fair and equitable provision for the rights and remedies of dissenting stockholders, members, or policyholders. (c) In the case of a conversion authorized under subsection (a) of this section:(1) such conversion shall be accomplished under such reasonable plan and procedure as may be approved by the Commissioner; provided, however, that the Commissioner shall not approve any such plan of conversion unless such plan: (A) satisfies the provisions of subsection (b) of this section;(B) provides for a hearing, of which notice is given or to be given to the captive insurance company, its directors, officers, and policyholders, and, in the case of a stock insurer, its stockholders, and in the case of a mutual insurer, its members, all of which persons shall be entitled to attend and appear at such hearing; provided, however, that if notice of a hearing is given and no director, officer, policyholder, member, or stockholder requests a hearing, the Commissioner may cancel such hearing; (C) provides a fair and equitable plan for the conversion of stockholder, member, or policyholder interests into subscriber interests in the resulting reciprocal insurer, substantially proportionate to the corresponding interests in the stock or mutual insurer; provided, however, that this requirement shall not preclude the resulting reciprocal insurer from applying underwriting criteria that could affect ongoing ownership interests; and (D) is approved:(i) in the case of a stock insurer, by a majority of the shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present; and (ii) in the case of a mutual insurer, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting thereof at which a quorum is present; (2) the Commissioner shall approve such plan of conversion if the Commissioner finds that the conversion will promote the general good of the State in conformity with those standards set forth in subdivision 6006(d)(2) of this title; (3) if the Commissioner approves the plan, the Commissioner shall amend the converting insurers certificate of authority to reflect conversion to a reciprocal insurer and issue such amended certificate of authority to the companys attorney-in-fact; (4) upon the issuance of an amended certificate of authority of a reciprocal insurer by the Commissioner, the conversion shall be effective; and (5) upon the effectiveness of such conversion the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary of State of such conversion. (d) A merger authorized under subsection (a) of this section shall be accomplished substantially in accordance with the procedures set forth in sections 3424, 3426, and 3431 of this title, except that, solely for purposes of such merger: (1) the plan of merger shall satisfy the provisions of subsection (b) of this section;(2) the subscribers advisory committee of a reciprocal insurer shall be equivalent to the board of directors of a stock or mutual insurance company; (3) the subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual insurance company; (4) if a subscribers advisory committee does not have a president or secretary, the officers of such committee having substantially equivalent duties shall be deemed the president or secretary of such committee; (5) the Commissioner may, upon request of an insurer party to a merger authorized under subsection (a) of this section, waive the requirement of subdivision 3424(6) of this title; (6) subdivision 3424(7) of this title shall not apply to such merger;(7) the Commissioner shall approve the articles of merger if the Commissioner finds that the merger will promote the general good of the State in conformity with those standards set forth in subdivision 6006(d)(2) of this title. If the Commissioner approves the articles of merger, the Commissioner shall indorse the Commissioners approval thereon and the surviving insurer shall present the same to the Secretary of State at the Secretary of States office; (8) notwithstanding section 6004 of this title, the Commissioner may permit the formation, without surplus, of a captive insurance company organized as a reciprocal insurer, into which an existing captive insurance company may be merged for the purpose of facilitating a transaction under this section; provided, however, that there shall be no more than one authorized insurance company surviving such merger; and (9) an alien insurer may be a party to a merger authorized under subsection (a) of this section; provided, that the requirements for a merger between a domestic and a foreign insurer under section 3431 of this title shall apply to a merger between a domestic and an alien insurer under this subsection. Such alien insurer shall be treated as a foreign insurer under section 3431 and such other jurisdictions shall be the equivalent of a state for purposes of section 3431. (e) A conversion or merger under this section shall have all of the effects set forth in subdivisions 3430(3), (4), and (5) of this title, to the extent such effects are not inconsistent with the provisions of this chapter. (Added 1997, No. 100 (Adj. Sess.),  1, eff. April 16, 1998; amended 1999, No. 38,  16, eff. May 20, 1999; 2003, No. 55,  7; 2009, No. 137 (Adj. Sess.),  22, eff. May 29, 2010.) 
 6024. Dormant captive insurance companies
(a) As used in this section, unless the context requires otherwise, dormant captive insurance company means a captive insurance company that has: (1) ceased transacting the business of insurance, including the issuance of insurance policies; and (2) no remaining liabilities associated with insurance business transactions or insurance policies issued prior to the filing of its application for a certificate of dormancy under this section. (b) A captive insurance company domiciled in Vermont that meets the criteria of subsection (a) of this section may apply to the Commissioner for a certificate of dormancy. The certificate of dormancy shall be subject to renewal every five years and shall be forfeited if not renewed within such time. (c) A dormant captive insurance company that has been issued a certificate of dormancy shall: (1) possess and thereafter maintain unimpaired, paid-in capital and surplus of not less than $25,000.00; provided, however, that if the dormant captive insurance company had never capitalized, it shall not be required to add capital upon entering dormancy; (2) prior to March 15 of each year, submit to the Commissioner a report of its financial condition, verified by oath of two of its executive officers, in a form as may be prescribed by the Commissioner; and (3) pay a license renewal fee of $500.00.(d) A dormant captive insurance company shall not be subject to or liable for the payment of any tax under section 6014 of this chapter. (e) A dormant captive insurance company shall apply to the Commissioner for approval to surrender its certificate of dormancy and resume conducting the business of insurance prior to issuing any insurance policies. (f) A certificate of dormancy shall be revoked if a dormant captive insurance company no longer meets the criteria of subsection (a) of this section. (g) The Commissioner may establish guidelines and procedures as necessary to carry out the provisions of this section. (Added 2013, No. 103 (Adj. Sess.),  1, eff. April 14, 2014; amended 2015, No. 74 (Adj. Sess.),  2, eff. April 13, 2016; 2017, No. 12,  8, eff. May 1, 2017; 2019, No. 110 (Adj. Sess.),  2, eff. June 15, 2020.) 
 6031. Formation
(a) One or more sponsors may form a sponsored captive insurance company under this chapter. In addition to the general provisions of this chapter, the provisions of this subchapter shall apply to sponsored captive insurance companies. (b) Subject to the approval of the Commissioner, a sponsored captive insurance company may be formed as any type of entity permissible under Vermont law. (Added 2003, No. 55,  9; amended 2005, No. 122 (Adj. Sess.),  5; 2009, No. 137 (Adj. Sess.),  23, eff. May 29, 2010; 2019, No. 3,  5, eff. April 18, 2019.) 
 6032. Definitions
As used in this subchapter, unless the context requires otherwise:(1) General account means all assets and liabilities of the sponsored captive insurance company not attributable to a protected cell. (2) Incorporated protected cell means a protected cell that, subject to the approval of the Commissioner, is formed as any type of entity permissible under Vermont law, separate from the sponsored captive insurance company of which it is a part. (3) Participant means an entity as defined in section 6036 of this title, and any affiliates thereof, that are insured by a sponsored captive insurance company, where the losses of the participant are limited through a participant contract to such participants pro rata share of the assets of one or more protected cells identified in such participant contract. (4) Participant contract means a contract by which a sponsored captive insurance company insures the risks of a participant and limits the losses of each such participant to its pro rata share of the assets of one or more protected cells identified in such participant contract. (5) Protected cell means a separate account established by a sponsored captive insurance company formed or licensed under the provisions of this chapter, in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability of the sponsored captive insurance company assumed on behalf of such participants as set forth in such participant contracts, and shall include an incorporated protected cell, as defined in this section. (6) Sponsor means any entity that meets the requirements of section 6035 of this title and is approved by the Commissioner to provide all or part of the capital and surplus required by applicable law and to organize and operate a sponsored captive insurance company. (7) Sponsored captive insurance company means any captive insurance company:(A) in which the minimum capital and surplus required by applicable law is provided by one or more sponsors; (B) that is formed or licensed under the provisions of this chapter;(C) that insures the risks only of its participants or, subject to Commissioner approval, other parties unaffiliated with a participant, through separate participant contracts; and (D) that funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the sponsored captive insurance companys general account. (Added 2003, No. 55,  9; amended 2011, No. 21,  21; 2011, No. 78 (Adj. Sess.),  35, eff. April 2, 2012; 2013, No. 103 (Adj. Sess.),  7, eff. April 14, 2014; 2015, No. 20,  3, eff. May 7, 2015; 2019, No. 3,  6, eff. April 18, 2019; 2021, No. 139 (Adj. Sess.),  15, eff. May 27, 2022.) 
 6033. Supplemental application materials
In addition to the information required by subdivisions 6002(c)(1) and (2) of this title, each applicant-sponsored captive insurance company shall file with the Commissioner the following: (1) materials demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the Commissioner, and how it will report such experience to the Commissioner; (2) a statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the Commissioner or the Commissioners designated agent; (3) all contracts or sample contracts between the sponsored captive insurance company and any participants; and (4) evidence that expenses shall be allocated to each protected cell in a fair and equitable manner. (Added 2003, No. 55,  9.) 
 6034. Protected cells
A sponsored captive insurance company formed or licensed under the provisions of this chapter may establish and maintain one or more protected cells to insure risks of one or more participants or, subject to Commissioner approval, other parties unaffiliated with a participant, subject to the following conditions: (1) The shareholders of a sponsored captive insurance company shall be limited to its participants and sponsors, provided that a sponsored captive insurance company may issue nonvoting securities to other persons on terms approved by the Commissioner. (2) Each protected cell shall be accounted for separately on the books and records of the sponsored captive insurance company to reflect the financial condition and results of operations of such protected cell, net income or loss, dividends or other distributions to participants, and such other factors as may be provided in the participant contract or required by the Commissioner. (3) The assets of a protected cell shall not be chargeable with liabilities arising out of any other insurance business the sponsored captive insurance company may conduct. (4) No sale, exchange, or other transfer of assets may be made by such sponsored captive insurance company between or among any of its protected cells without the consent of such protected cells. (5) No sale, exchange, transfer of assets, dividend, or distribution may be made from a protected cell to a sponsor or participant without the Commissioners approval and in no event shall such approval be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell. (6) All attributions of assets and liabilities to the protected cells and the general account shall be in accordance with the plan of operation approved by the Commissioner. No other attribution of assets or liabilities may be made by a sponsored captive insurance company between its general account and any protected cell or between any protected cells. The sponsored captive insurance company shall attribute all insurance obligations, assets, and liabilities relating to a reinsurance contract entered into with respect to a protected cell to such protected cell. The performance under such reinsurance contract and any tax benefits, losses, refunds, or credits allocated pursuant to a tax allocation agreement to which the sponsored captive insurance company is a party, including any payments made by or due to be made to the sponsored captive insurance company pursuant to the terms of such agreement, shall reflect the insurance obligations, assets, and liabilities relating to the reinsurance contract that are attributed to such protected cell. (7) Each sponsored captive insurance company shall notify the Commissioner in writing within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations. (8) No participant contract shall take effect without the Commissioners prior written approval, and the addition of each new protected cell and withdrawal of any participant or termination of any existing protected cell shall constitute a change in the business plan requiring the Commissioners prior written approval. (9) If required by the Commissioner, in his or her discretion, the business written by a sponsored captive, with respect to each cell, shall be: (A) Fronted by an insurance company licensed under the laws of any state.(B) Reinsured by a reinsurer authorized or approved by the State of Vermont.(C) Secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Commissioner. The Commissioner may require the sponsored captive to increase the funding of any security arrangement established under this subdivision. If the form of security is a letter of credit, the letter of credit must be issued or confirmed by a bank approved by the Commissioner. A trust maintained pursuant to this subdivision shall be established in a form and upon such terms approved by the Commissioner. (Added 1999, No. 38,  17, eff. May 20, 1999; amended 1999, No. 80 (Adj. Sess.),  1, eff. April 11, 2000; 2003, No. 55,  9; 2009, No. 42,  23, eff. May 27, 2009; 2011, No. 21,  22; 2015, No. 20,  4, eff. May 7, 2015; 2019, No. 110 (Adj. Sess.),  4, eff. June 15, 2020; 2021, No. 139 (Adj. Sess.),  16, eff. May 27, 2022.) 
 6034a. Incorporated protected cells
(a) A protected cell of a sponsored captive insurance company may be formed as an incorporated protected cell, as defined in subdivision 6032(2) of this title. (b) Subject to the prior written approval of the sponsored captive insurance company and of the Commissioner, an incorporated protected cell shall be entitled to enter into contracts and undertake obligations in its own name and for its own account. In the case of a contract or obligation to which the sponsored captive insurance company is not a party, either in its own name and for its own account or on behalf of a protected cell, the counterparty to the contract or obligation shall have no right or recourse against the sponsored captive insurance company and its assets other than against assets properly attributable to the incorporated protected cell that is a party to the contract or obligation. (c) The articles of incorporation or articles of organization of an incorporated protected cell shall refer to the sponsored captive insurance company for which it is a protected cell and shall state that the protected cell is incorporated or organized for the limited purposes authorized by the sponsored captive insurance companys license. A copy of the prior written approval of the Commissioner to add the incorporated protected cell, required by subdivision 6034(11) of this title, shall be attached to and filed with the articles of incorporation or the articles of organization. (d) An incorporated protected cell formed after May 7, 2015 shall have its own distinct name or designation, which shall include the words Incorporated Cell or the abbreviation IC. The provisions of Title 11A, chapter 4 and Title 11B, chapter 4 shall not apply to the naming of incorporated protected cells. (e) It is the intent of the General Assembly under this section to provide sponsored captive insurance companies, including those licensed as special purpose financial insurance companies under subchapter 4 of this chapter, with the option to establish one or more protected cells as a separate corporation, mutual corporation, nonprofit corporation, limited liability company, or reciprocal insurer. This section shall not be construed to limit any rights or protections applicable to protected cells not established as corporations, mutual corporations, nonprofit corporations, limited liability companies, or reciprocal insurers. (Added 2011, No. 21,  23; amended 2011, No. 78 (Adj. Sess.),  36, eff. April 2, 2012; 2013, No. 29,  50, eff. May 13, 2013; 2013, No. 103 (Adj. Sess.),  8, eff. April 14, 2014; 2015, No. 20,  5, eff. May 7, 2015; 2017, No. 12,  9, eff. May 1, 2017; 2019, No. 110 (Adj. Sess.),  10, eff. June 15, 2020.) 
 6034b. Separate accounts of protected cells
With the Commissioners prior written approval, a protected cell of a sponsored captive insurance company may establish one or more separate accounts and may allocate to them amounts to provide for the insurance of risks of one or more participants, or controlled unaffiliated business of such participant or participants, subject to the following: (1) The income, gains, and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account, without regard to other income, gains, or losses of the protected cell. (2) Amounts allocated to a separate account in the exercise of the power granted by this subsection are owned by the protected cell, and the protected cell may not be nor hold itself out to be a trustee with respect to such amounts. (3) Unless otherwise approved by the Commissioner, assets allocated to a protected cell shall be valued in accordance with the rules otherwise applicable to the protected cells assets. (4) If and to the extent so provided under the applicable contracts, that portion of the assets of any such protected cell equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the protected cell may conduct. (5) No sale, exchange, or other transfer of assets may be made by such protected cell between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in the case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made and unless such transfer, whether into or from a separate account, is made by a transfer of cash or by a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the Commissioner. The Commissioner may approve other transfers among such accounts if, in his or her opinion, such transfers would be equitable. (6) To the extent such protected cell deems it necessary to comply with any applicable federal or State laws, such protected cell, with respect to any separate account, including any separate account that is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of such account, including special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such protected cell, to manage the business of such account. (Added 2019, No. 110 (Adj. Sess.),  6, eff. June 15, 2020.) 
 6034c. Protected cell conversion
(a)(1) Subject to the prior written approval of the Commissioner, on application of the sponsor and with the prior consent of each participant of the affected protected cells or as otherwise permitted pursuant to a participation agreement and the consent of each affected incorporated protected cell, a sponsored captive insurance company or a sponsored captive insurance company licensed as a special purpose financial insurance company may convert one or more protected cells or incorporated protected cells into a: (A) single protected cell or incorporated protected cell;(B) new sponsored captive insurance company;(C) new sponsored captive insurance company licensed as a special purpose financial insurance company; (D) new special purpose financial insurance company;(E) new pure captive insurance company;(F) new risk retention group;(G) new agency captive insurance company;(H) new industrial insured captive insurance company; or(I) new association captive insurance company.(2) Any such conversion shall be subject to section 6031 and subchapters 1 and 4 of this chapter, as applicable, as well as to a plan or plans of operation approved by the Commissioner, without affecting any protected cells or incorporated protected cells assets, rights, benefits, obligations, and liabilities. (b) Any such conversion shall be deemed for all purposes to be a continuation of each such protected cells or incorporated protected cells existence together with all of its assets, rights, benefits, obligations, and liabilities, as a new protected cell or incorporated protected cell, a licensed sponsored captive insurance company, a sponsored captive insurance company licensed as a special purpose financial insurance company, a pure captive insurance company, a risk retention group, an industrial insured captive insurance company, or an association captive insurance company, as applicable. Any such conversion shall be deemed to occur without any transfer or assignment of any such assets, rights, benefits, obligations, or liabilities and without the creation of any reversionary interest in, or impairment of, any such assets, rights, benefits, obligations, and liabilities. (c) Any such conversion shall not be construed to limit any rights or protections applicable to any converted protected cell or incorporated protected cell and such sponsored captive insurance company or sponsored captive insurance company licensed as a special purpose financial insurance company under this subchapter or under subchapter 4 of this chapter, as applicable, that existed immediately prior to the date of any such conversion. (d)(1) Any protected cell converting into an incorporated protected cell pursuant to this section, or converting into a new captive insurance company or risk retention group pursuant to this section, shall perform such conversion in accordance with: (A) the provisions of 11A V.S.A. chapter 11 if the converted entity is to be a corporation;(B) the provisions of 11 V.S.A. chapter 25, subchapter 10 if the converted entity is to be a limited liability company; or (C) the provisions applicable to any other type of entity permissible under Vermont law if the converted entity is to be such an entity. (2) As used in this subdivision, a protected cell that is not an incorporated protected cell shall be considered an organization as that term is defined in 11A V.S.A.  11.01 and 11 V.S.A.  4141; an other insurer as that term is defined in 8 V.S.A.  6020; and an entity as that term is defined in 11C V.S.A.  102. (Added 2015, No. 74 (Adj. Sess.),  3, eff. April 13, 2016; amended 2019, No. 110 (Adj. Sess.),  5, eff. June 15, 2020; 2021, No. 25,  24, eff. May 12, 2021.) 
 6034d. Sale, transfer, or assignment of protected cells
(a) Subject to the prior written approval of the Commissioner, on application of the sponsor and with the prior consent of each participant of the affected protected cell or as otherwise permitted pursuant to a participation agreement, or the consent of the affected incorporated protected cell, a sponsored captive insurance company or a sponsored captive insurance company licensed as a special purpose financial insurance company may sell, transfer, assign, and otherwise convey a protected cell or incorporated protected cell together with all of the protected cells assets, rights, benefits, obligations, and liabilities to a new or existing sponsored captive insurance company or sponsored captive insurance company licensed as a special purpose financial insurance company, pursuant to a plan or plans of operation approved by the Commissioner. (b) Any such sale, transfer, assignment, or conveyance shall be deemed for all purposes to be a continuation of the protected cells existence together with all of its assets, rights, benefits, obligations, and liabilities, as a protected cell of the transferee. (c) Any such sale, transfer, assignment, or conveyance shall not be construed to limit any rights or protections applicable to the transferred protected cell or incorporated protected cell and the transferor sponsored captive insurance company or sponsored captive insurance company licensed as a special purpose financial insurance company under this subchapter or under section 6048n of this title, as applicable, that existed immediately prior to any such sale, transfer, assignment, or conveyance. (Added 2015, No. 74 (Adj. Sess.),  4, eff. April 13, 2016; amended 2019, No. 110 (Adj. Sess.),  5, eff. June 15, 2020.) 
 6034f. Annual report; books and records
(a) For purposes of subsection 6007(b) of this chapter:(1) Each sponsored captive insurance company shall annually file with the Commissioner such financial reports as the Commissioner requires, which shall include accounting statements detailing the financial experience of each protected cell. (2) Unless otherwise approved in advance by the Commissioner, a sponsored captive insurance company shall maintain its books, records, documents, accounts, vouchers, and agreements in this State. A sponsored captive insurance company shall make its books, records, documents, accounts, vouchers, and agreements available for inspection by the Commissioner at any time. A sponsored captive insurance company shall keep its books and records in such manner that its financial condition, affairs, and operations can be readily ascertained and so that the Commissioner may readily verify its financial statements and determine its compliance with this chapter. (3) Unless otherwise approved in advance by the Commissioner, all original books, records, documents, accounts, vouchers, and agreements shall be preserved and kept available in this State for the purpose of examination and inspection and until such time as the Commissioner approves the destruction or other disposition of such books, records, documents, accounts, vouchers, and agreements. If the Commissioner approves the keeping of the items listed in this subdivision outside this State, the sponsored captive insurance company shall maintain in this State a complete and true copy of each such original. Books, records, documents, accounts, vouchers, and agreements may be photographed, reproduced on film, or stored and reproduced electronically. (Added 2021, No. 139 (Adj. Sess.),  17, eff. May 27, 2022.) 
 6035. Qualification of sponsors
A sponsor of a sponsored captive insurance company may be any person approved by the Commissioner in the exercise of his or her discretion, based on a determination that the approval of such person as a sponsor is consistent with the purposes of this chapter. In evaluating the qualifications of a proposed sponsor, the Commissioner shall consider the type and structure of the proposed sponsor entity, its experience in financial operations, financial stability and strength, business reputation, and such other facts deemed relevant by the Commissioner. A risk retention group shall not be a sponsor of a sponsored captive insurance company. (Added 1999, No. 38,  18, eff. May 20, 1999; amended 1999, No. 80 (Adj. Sess.),  2, eff. April 11, 2000; 2003, No. 55,  9; 2005, No. 122 (Adj. Sess.),  6; 2007, No. 49,  16; 2011, No. 21,  24; 2011, No. 78 (Adj. Sess.),  39, eff. April 2, 2012.) 
 6036. Participants in sponsored captive insurance companies
(a) Associations, corporations, limited liability companies, partnerships, trusts, risk retention groups, sole proprietorships, and other business entities may be participants in any sponsored captive insurance company formed or licensed under this chapter. (b) A sponsor may be a participant in a sponsored captive insurance company.(c) A participant need not be a shareholder of the sponsored captive insurance company or any affiliate thereof. (d) A participant shall not insure any risks other than its own and the risks of affiliated entities or of controlled unaffiliated entities. (Added 1999, No. 38,  19, eff. May 20, 1999; amended 2003, No. 55,  9; 2011, No. 78 (Adj. Sess.),  40, eff. April 2, 2012; 2015, No. 20,  6, eff. May 7, 2015; 2019, No. 3,  7, eff. April 18, 2019.) 
 6037. Investments by sponsored captive insurance companies and protected cells
Notwithstanding the provisions of section 6034 of this title, the assets of two or more protected cells may be combined for purposes of investment, and such combination shall not be construed as defeating the segregation of such assets for accounting or other purposes. Sponsored captive insurance companies and protected cells shall comply with the investment requirements contained in section 6010 of this title. (Added 2003, No. 55,  9; amended 2019, No. 110 (Adj. Sess.),  8, eff. June 15, 2020.) 
 6038. Delinquency of sponsored captive insurance companies
(a) Except as otherwise provided in this section, the provisions of chapter 145 of this title shall apply in full to a sponsored captive insurance company and to each of its protected cells. (b) Upon any order of supervision, rehabilitation, or liquidation of a sponsored captive insurance company or any of its protected cells, the receiver shall manage the assets and liabilities of the sponsored captive insurance company or any of its protected cells pursuant to the provisions of this subchapter. (c) Notwithstanding the provisions of chapter 145 of this title to the contrary:(1) In connection with the conservation, rehabilitation, or liquidation of a sponsored captive insurance company or any of its protected cells, the assets and liabilities of a protected cell shall at all times be kept separate from, and shall not be commingled with, those of other protected cells and the sponsored captive insurance company. (2) The assets of a protected cell may not be used to pay any expenses or claims other than those attributable to such protected cell. (3) Unless the sponsor consents and the Commissioner has granted prior written approval, the assets of the sponsored captive insurance companys general account shall not be used to pay any expenses or claims attributable solely to a protected cell or protected cells of the sponsored captive insurance company. In the event that the assets of the sponsored captive insurance companys general account are used to pay expenses or claims attributable solely to a protected cell or protected cells of the sponsored captive insurance company, the sponsor is not required to contribute additional capital and surplus to the sponsored captive insurance companys general account, notwithstanding the provisions of section 6004 of this title. (4) A sponsored captive insurance companys capital and surplus shall at all times be available to pay any expenses of or claims against the sponsored captive insurance company. (d) Notwithstanding the provisions of chapter 145 of this title or any other provision of law to the contrary, and, in addition to the provisions of this section, in the event of an insolvency of a sponsored captive insurance company or any of its protected cells where the Commissioner determines that one or more protected cells remain solvent, the Commissioner may separate such cells from the sponsored captive insurance company and, on application of the sponsor, may allow for the conversion of such protected cells into one or more new or existing sponsored captive insurance companies, or one or more other captive insurance companies, pursuant to a plan or plans of operation approved by the Commissioner. (e) Notwithstanding the provisions of chapter 145 of this title or any other provision of law to the contrary, and in addition to the provisions of this section, in the event of an insolvency of one or more protected cells of a sponsored captive insurance company, the Commissioner may separate such cell or cells from the sponsored captive insurance company and may allow for the conversion of such protected cell or cells into one or more new or existing sponsored captive insurance companies, or one or more other captive insurance companies, pursuant to a plan or plans of operation approved by the Commissioner. (Added 2003, No. 55,  9; amended 2009, No. 42,  24, eff. May 27, 2009; 2015, No. 20,  7, eff. May 7, 2015; 2021, No. 139 (Adj. Sess.),  14, eff. May 27, 2022.) 
 6039. Claimant recourse
(a) Consistent with the provisions of this subchapter, a creditor of a sponsored captive insurance company shall have recourse against the assets attributable to a protected cell if, and only if it is a creditor of the protected cell. A creditor of a protected cell shall not be entitled to recourse against the assets attributable to any other protected cell or to the assets in the sponsored captive insurance companys general account. (b) When a sponsored captive insurance company has an obligation to a creditor arising from a transaction, or otherwise imposed, with respect to a particular protected cell, the obligation: (1) shall extend only to the assets attributable to that protected cell, and the creditor shall be entitled to recourse only against the assets attributable to that protected cell; and (2) shall not extend to the assets of any other protected cell or to the assets in the sponsored captive insurance companys general account, and the creditor shall not be entitled to recourse against the assets attributable to any other protected cell or to the assets of the sponsored captive insurance companys general account. (c) When an obligation of a sponsored captive insurance company relates solely to its general account, a creditor shall have recourse only against the assets in the general account. (d) The establishment of one or more protected cells alone, and without more, shall not constitute or be deemed to be a fraudulent conveyance, an intent by the sponsored captive insurance company to defraud creditors, or the carrying out of business by the sponsored captive insurance company for any other fraudulent purpose. (Added 2015, No. 20,  8, eff. May 7, 2015.) 
 6041. Establishment of a branch captive insurance company
(a) A branch captive insurance company may be established in this State in accordance with the provisions of this chapter. In addition to the general provisions of this chapter, the provisions of this subchapter shall apply to branch captive insurance companies. (b) No branch captive insurance company shall do any insurance business in this State unless it: (1) maintains the principal place of business for its branch operations in this State; and (2) appoints a principal representative in this State who is a resident of this State; and (3) designates the Commissioner as its agent of such branch captive insurance company upon whom any process, notice, or demand may be served. (c) As used in this section, principal representative shall mean a person designated as such by the branch captive insurance company as its principal representative on such forms and with such information as required by the Commissioner. (d) The provisions of subsection 6006(f) of this title shall not apply to branch captive insurance companies formed in this State. (Added 2003, No. 55,  9; amended 2013, No. 29,  51, eff. May 13, 2013; 2017, No. 90 (Adj. Sess.),  4, eff. March 8, 2018.) 
 6042. Definitions
As used in this subchapter, unless the context requires otherwise:(1) Alien captive insurance company means any insurance company formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards in a form acceptable to the Commissioner on companies transacting the business of insurance in such jurisdiction. (2) Branch business means any insurance business transacted by a branch captive insurance company in this State. (3) Branch captive insurance company means any alien captive insurance company licensed by the Commissioner to transact the business of insurance in this State through a business unit with a principal place of business in this State. (4) Branch operations means any business operations of a branch captive insurance company in this State. (Added 2003, No. 55,  9.) 
 6043. Security required
(a) No branch captive insurance company shall be issued a license unless it shall possess and thereafter maintain, as security for the payment of liabilities attributable to the branch operations: (1) an amount equal to the amount set forth in subdivision 6004(a)(1) of this title as the minimum capital requirement for a pure captive; and in addition (2) reserves on such insurance policies or such reinsurance contracts as may be issued or assumed by the branch captive insurance company through its branch operations, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned premiums with regard to business written through the branch operations; provided, however, the Commissioner may permit a branch captive insurance company to credit against any such reserve requirement any security for loss reserves that the branch captive insurance company may post with a ceding insurer or that may be posted by a reinsurer with the branch captive insurance company, in either case so long as such security remains posted. (b) Subject to the prior approval of the Commissioner, the amounts required in subsection (a) of this section may be held in the form of: (1) a trust formed under a trust agreement and funded by assets acceptable to the Commissioner;(2) an irrevocable letter of credit issued or confirmed by a bank approved by the Commissioner;(3) with respect to the amounts required in subdivision (a)(1) of this section only, cash on deposit with the Commissioner; or (4) any combination thereof. (Added 2003, No. 55,  9; amended 2005, No. 36,  15, eff. June 1, 2005; 2009, No. 42,  25, eff. May 27, 2009.)
 6043. Security required
In the case of a branch captive insurance company, as security for the payment of liabilities attributable to the branch operations, the Commissioner shall require that either a trust fund funded by assets acceptable to the Commissioner or an irrevocable letter of credit be established and maintained in the United States for the benefit of United States policyholders and United States ceding insurers under insurance policies issued or reinsurance contracts issued or assumed by the branch captive insurance company through its branch operations. The amount of such security may be no less than the amount set forth in subdivision 6004(a)(1) of this title and the reserves on such insurance policies or such reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned premiums with regard to business written through the branch operations; provided, however, the Commissioner may permit a branch captive insurance company that is required to post security for loss reserves on branch business by its reinsurer to reduce the funds in the trust account or the amount payable under the irrevocable letter of credit required by this section by the same amount so long as the security remains posted with the reinsurer. If the form of security selected is a letter of credit, the letter of credit must be established by, or issued or confirmed by, a bank chartered in this State or a member bank of the Federal Reserve System. (Added 2003, No. 55,  9; amended 2005, No. 36,  15, eff. June 1, 2005; 2009, No. 42,  25, eff. May 27, 2009.) 
 6045. Branch captive reports
Prior to March 1 of each year, or with the approval of the Commissioner within 60 days after its fiscal year-end, a branch captive insurance company shall file with the Commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the alien captive insurance company is formed, verified by oath of two of its executive officers. If the Commissioner is satisfied that the annual report filed by the alien captive insurance company in its domiciliary jurisdiction provides adequate information concerning the financial condition of the alien captive insurance company, the Commissioner may waive the requirement for completion of the captive annual statement for business written in the alien jurisdiction. (Added 2003, No. 55,  9.) 
 6046. Examination of branch captives
(a) The examination of a branch captive insurance company pursuant to section 6008 of this title shall be of branch business and branch operations only, so long as the branch captive insurance company provides annually to the Commissioner a certificate of compliance, or its equivalent, issued by or filed with the licensing authority of the jurisdiction in which the branch captive insurance company is formed, and demonstrates to the Commissioners satisfaction that it is operating in sound financial condition in accordance with all applicable laws and regulations of such jurisdiction. (b) As a condition of licensure, the alien captive insurance company shall grant authority to the Commissioner for examination of the affairs of the alien captive insurance company in the jurisdiction in which the alien captive insurance company is formed. (Added 2003, No. 55,  9.) 
 6047. Taxation of branch captives
In the case of a branch captive insurance company, the tax provided for in section 6014 of this title shall apply only to the branch business of such company. (Added 2003, No. 55,  9.) 
 6048a. Applicable law
(a) A special purpose financial insurance company shall be subject to the provisions of this subchapter and to the provisions of subchapter 1 of this chapter. In the event of any conflict between the provisions of this subchapter and the provisions of subchapter 1 of this chapter, the provisions of this subchapter shall control. (b) A special purpose financial insurance company shall be subject to all applicable rules adopted pursuant to section 6015 of this chapter that are in effect as of the effective date of this subchapter and that are adopted after the effective date of this subchapter. (c) The Commissioner may, by order, exempt a special purpose financial insurance company from any provision of this chapter or from any rule adopted pursuant to section 6015 of this chapter if the Commissioner determines such provision to be inappropriate based on the special purpose financial insurance companys plan of operation. (Added 2007, No. 49,  17; amended 2013, No. 29,  52, eff. May 13, 2013.) 
 6048b. Existing licenses
Except as otherwise determined by the Commissioner, a captive insurance company that has been licensed by the Commissioner pursuant to this chapter as of the effective date of this subchapter and that is engaged in or that will be engaged in an insurance securitization shall be subject to the provisions of this subchapter as a special purpose financial insurance company. The Commissioner may require such captive insurance company to take any action that the Commissioner determines is reasonably necessary to bring such captive insurance company into compliance with the provisions of this subchapter. The Commissioner may issue an order described in subsection 6048d(b) of this title with respect to such captive insurance company. (Added 2007, No. 49,  17; amended 2013, No. 29,  53.) 
 6048c. Definitions
As used in this subchapter:(1) Ceding insurer means an insurance company approved by the Commissioner and licensed or otherwise authorized to transact the business of insurance or reinsurance in its state or country of domicile, which cedes risk to a special purpose financial insurance company pursuant to a reinsurance contract. (2) Insolvency and insolvent for purpose of applying the provisions of chapter 145 of this title to a special purpose financial insurance company, mean: (A) That the special purpose financial insurance company is unable to pay its obligations when they are due, unless those obligations are the subject of a bona fide dispute; or (B) The special purpose financial insurance company has failed to meet all criteria and conditions for solvency of the special purpose financial insurance company established by the Commissioner by rule or order. (3) Insurance securitization and securitization mean a transaction or a group of related transactions, which may include capital market offerings, that are effected through related risk transfer instruments and facilitating administrative agreements where all or part of the result of such transactions is used to fund the special purpose financial insurance companys obligations under a reinsurance contract with a ceding insurer and by which: (A) proceeds are obtained by a special purpose financial insurance company, directly or indirectly, through the issuance of securities by the special purpose financial insurance company or any other person; or (B) a person provides one or more letters of credit or other assets for the benefit of the special purpose financial insurance company, which the Commissioner authorizes the special purpose financial insurance company to treat as admitted assets for purposes of the special purpose financial insurance companys annual report; where all or any part of such proceeds, letters of credit, or assets, as applicable, are used to fund the special purpose financial insurance companys obligations under a reinsurance contract with a ceding insurer. The terms insurance securitization and securitization do not include the issuance of a letter of credit for the benefit of the Commissioner to satisfy all or part of the special purpose financial insurance companys capital and surplus requirements under section 6048g of this chapter. (4) Management means the board of directors, managing board, or other individual or individuals vested with overall responsibility for the management of the affairs of the special purpose financial insurance company, including officers or other agents elected or appointed to act on behalf of the special purpose financial insurance company. (5) Organizational document means:(A) in the case of a special purpose financial insurance company formed as a stock corporation, the special purpose financial insurance companys articles of incorporation and bylaws; and (B) in the case of a special purpose financial insurance company formed as a limited liability company, the special purpose financial insurance companys articles of organization and operating agreement. (6) Reinsurance contract means a contract between a special purpose financial insurance company and a ceding insurer pursuant to which the special purpose financial insurance company agrees to provide reinsurance to the ceding insurer for risks associated with the ceding insurers insurance or reinsurance business. (7) Security shall have the same meaning as defined in 9 V.S.A.  5102(28) and shall also include any form of debt obligation, equity, surplus certificate, surplus note, funding agreement, derivative, or other financial instrument that the Commissioner designates, by rule or order, as a security for purposes of this subchapter. (8) Special purpose financial insurance company means a captive insurance company that has received a license from the Commissioner to operate as a special purpose financial insurance company pursuant to this subchapter. (9) Special purpose financial insurance company security means:(A) a security issued by a special purpose financial insurance company; or(B) a security issued by a third party, the proceeds of which are obtained directly or indirectly by a special purpose financial insurance company. (10) Surplus note means an unsecured subordinated debt obligation possessing characteristics consistent with paragraph 3 of the National Association of Insurance Commissioners Statement of Statutory Accounting Principles No. 41, as amended from time to time and as modified or supplemented by rule or order of the Commissioner. (Added 2007, No. 49,  17; amended 2013, No. 29,  54, eff. May 13, 2013.) 
 6048d. Licensing; authority
(a) A special purpose financial insurance company may reinsure the risks of a ceding insurer only. A special purpose financial insurance company may purchase reinsurance to cede the risks assumed under a reinsurance contract, subject to the prior approval of the Commissioner. (b) In conjunction with the issuance of a license to a special purpose financial insurance company, the Commissioner may issue an order that includes any provisions, terms, and conditions regarding the organization, licensing, and operation of the special purpose financial insurance company that are deemed appropriate by the Commissioner and that are not inconsistent with the provisions of this chapter. Except as provided in sections 6048l and 6048m of this subchapter, a license issued to a special purpose financial insurance company pursuant to this chapter and any order issued to a special purpose financial insurance company pursuant to this subsection shall not be revoked, suspended, amended, or modified other than as follows: (1) the special purpose financial insurance company consents to such revocation, suspension, amendment, or modification; or (2) the Commissioner makes a showing of clear and convincing evidence demonstrating that such revocation, suspension, amendment, or modification is necessary to avoid irreparable harm to the special purpose financial insurance company or to the ceding insurer. (c) To qualify for a license, a special purpose financial insurance company shall be subject, in addition to the requirements of subsection 6002(c) of this chapter, to the following: (1) The special purpose financial insurance companys plan of operation shall include:(A) a complete description of all significant transactions, including reinsurance, reinsurance security arrangements, securitizations, related transactions or arrangements, and, to the extent not included in the transactions listed in this subdivision (A), a complete description of all parties other than the special purpose financial insurance company and the ceding insurer that will be involved in the issuance of special purpose financial insurance company securities and a description of any pledge, hypothecation, or grant of a security interest in any of the special purpose financial insurance companys assets and in any stock or limited liability company interest in the special purpose financial insurance company; (B) the source and form of the special purpose financial insurance companys capital and surplus; (C) the proposed investment policy of the special purpose financial insurance company;(D) a description of the underwriting, reporting, and claims payment methods by which losses covered by the reinsurance contract are reported, accounted for, and settled; (E) pro forma balance sheets and income statements illustrating one or more adverse case scenarios, as determined under criteria required by the Commissioner, for the performance of the special purpose financial insurance company under all reinsurance contracts; and (F) the proposed rate and method for discounting reserves, if the special purpose financial insurance company is requesting authority to discount its reserves. (2) The special purpose financial insurance company shall submit an affidavit of its president, a vice president, the treasurer, or the chief financial officer that includes the following statements, to the best of such persons knowledge and belief after reasonable inquiry: (A) the proposed organization and operation of the special purpose financial insurance company comply with all applicable provisions of this chapter; (B) the special purpose financial insurance companys investment policy reflects and takes into account the liquidity of assets and the reasonable preservation, administration, and management of such assets with respect to the risks associated with the reinsurance contract and the insurance securitization transaction; and (C) the reinsurance contract and any arrangement for securing the special purpose financial insurance companys obligations under such reinsurance contract, including any agreements or other documentation to implement such arrangement, comply with the provisions of this subchapter. (3) The application shall include copies of all agreements and documentation described in subdivision (1) of this subsection (c) unless otherwise approved by the Commissioner and any other statements or documents required by the Commissioner to evaluate the special purpose financial insurance companys application for licensure. (4) The application shall include an opinion of qualified legal counsel, in a form acceptable to the Commissioner, that the offer and sale of any special purpose financial insurance company securities complies with all applicable registration requirements or applicable exemptions from or exceptions to such requirements of the federal securities laws and that the offer and sale of securities by the special purpose financial insurance company itself comply with all registration requirements or applicable exemptions from or exceptions to such requirements of the securities laws of this State. Such opinions shall not be required as part of the application if the special purpose financial insurance company includes a specific statement in its plan of operation that such opinions will be provided to the Commissioner in advance of the offer or sale of any special purpose financial insurance company securities. (d) The Commissioner may grant a license, which shall be valid through the next April 1 following the date of initial issuance and may be renewed annually thereafter, authorizing the special purpose financial insurance company to transact reinsurance business as a special purpose financial insurance company in this State upon finding that: (1) the proposed plan of operation provides for a reasonable and expected successful operation;(2) the terms of the reinsurance contract and related transactions comply with this subchapter;(3) the proposed plan of operation is not hazardous to any ceding insurer; and(4) the insurance regulator of the state of domicile of each ceding insurer has notified the Commissioner in writing or otherwise has provided assurance satisfactory to the Commissioner that it has approved or has not disapproved the transaction, provided that the Commissioner shall not be precluded from issuing a license to a special purpose financial insurance company in the event that the insurance regulator of the state of domicile of a ceding insurer has not responded with respect to all or any part of the transaction. (e) The special purpose financial insurance company shall provide the Commissioner with a copy of a complete set of executed documentation of an insurance securitization no later than 30 days after the closing on the transactions for such securitization. (f) Subdivision 6002(c)(3) of this chapter shall apply to all information submitted pursuant to subsections (c) and (e) of this section and to any order issued to the special purpose financial insurance company pursuant to subsection (b) of this section. (Added 2007, No. 49,  17; amended 2013, No. 29,  55, eff. May 13, 2013.) 
 6048e. Changes in plan of operation; voluntary dissolution or cessation of business
(a) Any change in the special purpose financial insurance companys plan of operation shall require prior approval of the Commissioner. (b) Any transaction or series of transactions shall be subject to the prior approval of the Commissioner if such transaction or series of transactions: (1) is undertaken to dissolve a special purpose financial insurance company; or(2) results in the termination of all or any part of a special purpose financial insurance companys business; but no prior approval of the Commissioner shall be required for any transaction or series of transactions described in this subdivision (2) if such transaction or series of transactions is done in accordance with a document or agreement described in the special purpose financial insurance companys plan of operation and if the Commissioner is notified in advance of such transaction or series of transactions. (c) A special purpose financial insurance company shall notify the Commissioner in advance of any change in the legal ownership of any security issued by the special purpose financial insurance company. (Added 2007, No. 49,  17; amended 2013, No. 29,  56, eff. May 13, 2013.) 
 6048f. Formation
(a) A special purpose financial insurance company may be incorporated as a stock insurer with its capital divided into shares and held by its stockholders, or it may be organized as a manager-managed limited liability company. (b) A special purpose financial insurance companys organizational documents shall limit the special purpose financial insurance companys authority to transact the business of insurance or reinsurance to those activities that the special purpose financial insurance company conducts to accomplish its purposes as expressed in this subchapter. (Added 2007, No. 49,  17; amended 2013, No. 29,  57.) 
 6048g. Minimum capital and surplus
A special purpose financial insurance company shall not be issued a license unless it shall possess and thereafter maintain unimpaired paid-in capital and surplus of not less than $5,000,000.00. (Added 2007, No. 49,  17; amended 2013, No. 29,  58.) 
 6048h. Securities
(a) A special purpose financial insurance company may:(1) subject to the prior approval of the Commissioner, account for the proceeds of a surplus note issued by the special purpose financial insurance company as surplus; and (2) submit for prior approval of the Commissioner periodic written requests for authorization to make payments of interest on and repayments of principal of surplus notes and other debt obligations issued by the special purpose financial insurance company, provided that the Commissioner shall not approve such payment if the Commissioner determines that such payment would jeopardize the ability of the special purpose financial insurance company or any other person to fulfill his or her respective obligations pursuant to the special purpose financial insurance company securitization agreements, the reinsurance contract, or any related transaction. In lieu of approval of periodic written requests for authorization to make payments of interest on and repayments of principal of surplus notes and other debt obligations issued by the special purpose financial insurance company, the Commissioner may approve a formula or plan, which shall be included in the special purpose financial insurance companys plan of operation as amended from time to time, for payment of interest, principal, or both with respect to such surplus notes and debt obligations. (b) In addition to the provisions of section 6005 of this chapter, no dividend or distribution may be declared or paid by a special purpose financial insurance company if such dividend or distribution would jeopardize the ability of the special purpose financial insurance company or any other person to fulfill the companys or other persons respective obligations pursuant to the special purpose financial insurance company securitization agreements, the reinsurance contract, or any related transaction. (c) A special purpose financial insurance company security shall not be subject to regulation as an insurance or reinsurance contract. An investor in such a security or a holder of such a security shall not be considered to be transacting the business of insurance in this State solely by reason of having an interest in the security. The underwriters placement or selling agents and their partners, commissioners, officers, members, managers, employees, agents, representatives, and advisors involved in an insurance securitization by a special purpose financial insurance company shall not be considered to be insurance producers or brokers or to be conducting business as an insurance or reinsurance company or as an insurance agency, brokerage, intermediary, advisory, or consulting business solely by virtue of their underwriting activities in connection with such securitization. (Added 2007, No. 49,  17; amended 2013, No. 29,  59, eff. May 13, 2013.) 
 6048i. Permitted reinsurance
(a) A special purpose financial insurance company may reinsure only the risks of a ceding insurer, pursuant to a reinsurance contract. A special purpose financial insurance company may not issue a contract of insurance or a contract for assumption of risk or indemnification of loss other than such reinsurance contract. (b) Unless otherwise approved in advance by the Commissioner, a special purpose financial insurance company may not assume or retain exposure to insurance or reinsurance losses for its own account that are not funded by: (1) proceeds from a special purpose financial insurance company securitization or letters of credit or other assets described in subdivision 6048c(3) of this chapter; (2) premium and other amounts payable by the ceding insurer to the special purpose financial insurance company pursuant to the reinsurance contract; and (3) any return on investment of the items in subdivisions (1) and (2) of this subsection.(c) The reinsurance contract shall contain all provisions reasonably required or approved by the Commissioner, which requirements shall take into account the laws applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance provided under such reinsurance contract. (d) A special purpose financial insurance company may cede risks assumed through a reinsurance contract to one or more reinsurers through the purchase of reinsurance, subject to the prior approval of the Commissioner. (e) A special purpose financial insurance company may enter into contracts and conduct other commercial activities related or incidental to and necessary to fulfill the purposes of the reinsurance contract, the insurance securitization, and this subchapter, provided such contracts and activities are included in the special purpose financial insurance companys plan of operation or are otherwise approved in advance by the Commissioner. Such contracts and activities may include: entering into reinsurance contracts; issuing special purpose financial insurance company securities; complying with the terms of these contracts or securities; entering into trust, guaranteed investment contract, swap, or other derivative, tax, administration, reimbursement, or fiscal agent transactions; complying with trust indenture, reinsurance, or retrocession; and other agreements necessary or incidental to effect an insurance securitization in compliance with this subchapter and the special purpose financial insurance companys plan of operation. (f) Unless otherwise approved in advance by the Commissioner, a reinsurance contract shall not contain any provision for payment by the special purpose financial insurance company in discharge of its obligations under the reinsurance contract to any person other than the ceding insurer or any receiver of the ceding insurer. (g) A special purpose financial insurance company shall notify the Commissioner immediately of any action by a ceding insurer or any other person to foreclose on or otherwise take possession of collateral provided by the special purpose financial insurance company to secure any obligation of the special purpose financial insurance company. (Added 2007, No. 49,  17; amended 2013, No. 29,  60, eff. May 13, 2013.) 
 6048j. Disposition of assets; investments
(a) The assets of a special purpose financial insurance company shall be preserved and administered by or on behalf of the special purpose financial insurance company to satisfy the liabilities and obligations of the special purpose financial insurance company incident to the reinsurance contract, the insurance securitization, and other related agreements. (b) In the special purpose financial insurance company securitization, the security offering memorandum or other document issued to prospective investors regarding the offer and sale of a surplus note or other security shall include a disclosure that all or part of the proceeds of such insurance securitization will be used to fund the special purpose financial insurance companys obligations to the ceding insurer. (c) A special purpose financial insurance company shall not be subject to any restriction on investments other than the following: (1) a special purpose financial insurance company shall not make a loan to any person other than as permitted under its plan of operation or as otherwise approved in advance by the Commissioner; and (2) the Commissioner may prohibit or limit any investment that threatens the solvency or liquidity of the special purpose financial insurance company unless the investment is otherwise approved in its plan of operation or in an order issued to the special purpose financial insurance company pursuant to subsection 6048d(b) of this chapter, as either is amended from time to time. (Added 2007, No. 49,  17; amended 2013, No. 29,  61, eff. May 13, 2013.) 
 6048k. Annual report; books and records
(a) For purposes of subsection 6007(b) of this chapter:(1) The Commissioner shall, by rule or order, establish the form and content of the annual report to be filed by a special purpose financial insurance company; and (2) A special purpose financial insurance company shall report using statutory accounting principles, unless the Commissioner requires, approves, or accepts the use of generally accepted accounting principles or other comprehensive basis of accounting, in each case with any appropriate or necessary modifications or adaptations required or approved or accepted by the Commissioner and as supplemented by additional information required by the Commissioner. (b) A special purpose financial insurance company may make written application to file its annual report on a fiscal-year basis. If an alternative reporting date is granted, the Commissioner shall establish the due date and content of any filing required by the special purpose financial insurance company in addition to its annual report. (c) Unless otherwise approved in advance by the Commissioner, a special purpose financial insurance company shall maintain its books, records, documents, accounts, vouchers, and agreements in this State. A special purpose financial insurance company shall make its books, records, documents, accounts, vouchers, and agreements available for inspection by the Commissioner at any time. A special purpose financial insurance company shall keep its books and records in such manner that its financial condition, affairs, and operations can be readily ascertained and so that the Commissioner may readily verify its financial statements and determine its compliance with this chapter. (d) Unless otherwise approved in advance by the Commissioner, all original books, records, documents, accounts, vouchers, and agreements shall be preserved and kept available in this State for the purpose of examination and inspection and until such time as the Commissioner approves the destruction or other disposition of such books, records, documents, accounts, vouchers, and agreements. If the Commissioner approves the keeping of the items listed in this subsection outside this State, the special purpose financial insurance company shall maintain in this State a complete and true copy of each such original. Books, records, documents, accounts, vouchers, and agreements may be photographed, reproduced on film, or stored and reproduced electronically. (Added 2007, No. 49,  17; amended 2009, No. 42,  27, eff. May 27, 2009; 2013, No. 29,  62, eff. May 13, 2013.) 
 6048l. License suspension and revocation
(a) The Commissioner shall notify a special purpose financial insurance company not less than 30 days before suspending or revoking its license pursuant to section 6009 of this chapter, which notice shall state the basis for such suspension or revocation. The special purpose financial insurance company shall be afforded the opportunity for a hearing pursuant to the provisions of the Vermont Administrative Procedure Act, 3 V.S.A. chapter 25. (b) Notwithstanding subsection (a) of this section and 3 V.S.A.  814(c), no prior notice or hearing shall be required if the grounds for suspension or revocation of a special purpose financial insurance companys license pursuant to section 6009 of this chapter relate primarily to the financial condition or soundness of the special purpose financial insurance company or to a deficiency in its assets. (c) For purposes of this subchapter, reference to section 6004 in subdivision 6009(a)(2) of this title shall be construed also as a reference to section 6048g of this subchapter. (Added 2007, No. 49,  17; amended 2013, No. 29,  63, eff. May 13, 2013.) 
 6048m. Delinquency
(a) Except as otherwise provided in this section, the provisions of chapter 145 of this title shall apply in full to a special purpose financial insurance company. (b) Upon any order of supervision, rehabilitation, or liquidation of a special purpose financial insurance company, the receiver shall manage the assets and liabilities of the special purpose financial insurance company pursuant to the provisions of this subchapter. (c) Amounts recoverable by the receiver of a special purpose financial insurance company under a reinsurance contract shall not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation, or liquidation with respect to a ceding insurer, notwithstanding any provision in the contracts or other documentation governing the special purpose financial insurance company securitization. (d) Notwithstanding the provisions of chapter 145 of this title or any other law of this State: (1) An application or petition or a temporary restraining order or injunction issued pursuant to the provisions of chapter 145 of this title with respect to a ceding insurer does not prohibit the transaction of business by a special purpose financial insurance company, including any payment by a special purpose financial insurance company made with respect to a special purpose financial insurance company security, or any action or proceeding against a special purpose financial insurance company or its assets. (2) The commencement of a summary proceeding with respect to a special purpose financial insurance company and any order issued by the court in such summary proceeding shall not prohibit payments by a special purpose financial insurance company and shall not prohibit the special purpose financial insurance company from taking any action required to make such payments, provided such payments are made: (A) pursuant to a special purpose financial insurance company security or reinsurance contract; and (B) consistent with the special purpose financial insurance companys plan of operation and any order issued to the special purpose financial insurance company pursuant to subsection 6048d(b) of this subchapter, as either is amended from time to time. (3) A receiver of a ceding insurer may not void a nonfraudulent transfer by a ceding insurer to a special purpose financial insurance company of money or other property made pursuant to a reinsurance contract. (4) A receiver of a special purpose financial insurance company may not void a nonfraudulent transfer by the special purpose financial insurance company of money or other property: (A) made to a ceding insurer pursuant to a reinsurance contract or made to or for the benefit of any holder of a special purpose financial insurance company security with respect to the special purpose financial insurance company security; and (B) made consistent with the special purpose financial insurance companys plan of operation and any order issued to the special purpose financial insurance company pursuant to subsection 6048d(b) of this subchapter, as either is amended from time to time. (e) With the exception of the fulfillment of the obligations under a reinsurance contract and notwithstanding another provision of this subchapter or other laws of this State, the assets of a special purpose financial insurance company, including assets held in trust, on a funds-withheld basis, or in any other arrangement to secure the special purpose financial insurance companys obligations under a reinsurance contract, shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer pursuant to the provisions of this subchapter for any purpose including distribution to creditors of the ceding insurer. (Added 2007, No. 49,  17; amended 2013, No. 29,  64, eff. May 13, 2013.) 
 6048n. Sponsored captives
In addition to the provisions of sections 6048a-6048m of this subchapter, the provisions of this section shall apply to any sponsored captive insurance company licensed as a special purpose financial insurance company pursuant to this subchapter. (1) A sponsored captive insurance company may be licensed as a special purpose financial insurance company pursuant to the provisions of this subchapter. (2) The special purpose financial insurance company shall be subject to the provisions of subchapter 2 of this chapter. In the event of any conflict between the provisions of this subchapter and the provisions of subchapter 2 of this chapter, the provisions of this subchapter shall control. (3) Unless otherwise approved in advance by the Commissioner, a participant in a special purpose financial insurance company shall be a ceding insurer. Any change in a participant shall be subject to prior approval by the Commissioner. (4) The special purpose financial insurance company on behalf of a protected cell shall be entitled to assert the same claims and defenses in actions in law or equity as if the protected cell were a corporation established under Title 11A of the Vermont Statutes Annotated, including claims and defenses in actions at law or equity alleging alter ego, corporate veil piercing, offset, substantive consolidation, equitable subordination, or recoupment. In connection with the conservation, rehabilitation, or liquidation of a special purpose financial insurance company or one or more of its protected cells, the assets and liabilities of a protected cell shall at all times be kept separate from, and shall not be commingled with, those of other protected cells and the special purpose financial insurance company, and the assets of one protected cell shall not be used to satisfy the obligations or liabilities of another protected cell or the special purpose financial insurance company based on legal or equitable claims or defenses, including alter ego, piercing the corporate veil, offset, substantive consolidation, equitable subordination, or recoupment, unless such claims or defenses would apply to such protected cell if it were a special purpose finance insurance company without separate cells. (5) Notwithstanding subdivision 6034(1) of this chapter, the special purpose financial insurance company may issue securities to any person approved in advance by the Commissioner. (6) Notwithstanding section 6048g of this subchapter, the special purpose financial insurance company shall possess and thereafter maintain unimpaired paid-in capital and surplus of not less than $500,000.00. (7) The general account of a sponsored captive insurance company licensed as a special purpose financial insurance company shall mean all assets and liabilities of the sponsored captive insurance company not attributable to a protected cell. (8)(A) Any security issued by a special purpose financial insurance company with respect to a protected cell and any other contract or obligation of the special purpose financial insurance company with respect to a protected cell shall include the designation of such protected cell and shall include the following statement, or such other statement as may be required by the Commissioner: (i) In the case of a security: The holder of this security shall have no right or recourse against the special purpose financial insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial insurance companys general account, to the extent permitted by Vermont law. (ii) In the case of a contract or obligation: The counterparty to this contract or obligation shall have no right or recourse against the special purpose financial insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial insurance companys general account, to the extent permitted by Vermont law. (B) Notwithstanding the requirements of this subdivision (8) and subject to the provisions of this chapter and other applicable law or regulation, the failure to include such disclosure, in whole or part, in such security, contract, or obligation with respect to a protected cell shall not serve as the sole basis for a creditor, ceding insurer, or any other person to have recourse against the general account of the special purpose financial insurance company in excess of the limitations provided for in subdivision (12)(E) of this subsection, or against the assets of any other protected cell. (9) In addition to the provisions of section 6034 of this chapter, the special purpose financial insurance company shall be subject to the following with respect to its protected cells: (A) The special purpose financial insurance company shall establish a protected cell only for the purpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding insurer or two or more affiliated ceding insurers, with the intent of facilitating an insurance securitization. A separate protected cell shall be established with respect to each separate securitization transaction; and (B) A sale, an exchange, or another transfer of assets may not be made by the special purpose financial insurance company between or among any of its protected cells without the prior approval of the Commissioner. (10) All attributions of assets and liabilities to the protected cells and the general account shall be in accordance with the plan of operation approved by the Commissioner. No other attribution of assets or liabilities may be made by a special purpose financial insurance company between its general account and any protected cell or between any protected cells. The special purpose financial insurance company shall attribute all insurance obligations, assets, and liabilities relating to a reinsurance contract entered into with respect to a protected cell and shall attribute the related insurance securitization transaction, including any securities issued by the special purpose financial insurance company as part of the insurance securitization, to such protected cell. The rights, benefits, obligations, and liabilities of any securities attributable to such protected cell and the performance under such reinsurance contract and the related securitization transaction and any tax benefits, losses, refunds, or credits allocated pursuant to a tax allocation agreement to which the special purpose financial insurance company is a party, including any payments made by or due to be made to the special purpose financial insurance company pursuant to the terms of such agreement, shall reflect the insurance obligations, assets, and liabilities relating to the reinsurance contract and the insurance securitization transaction that are attributed to such protected cell. (11) For purposes of applying the provisions of chapter 145 of this title to a sponsored captive insurance company licensed as a special purpose financial insurance company, the definition of insolvency and insolvent in subdivision 6048c(2) of this title shall be applied separately to each protected cell and to the special purpose financial insurance companys general account. (12) In addition to the provisions of section 6048m of this chapter:(A) Except as otherwise modified in this section, the terms and conditions set forth in chapter 145 of this title pertaining to administrative supervision of insurers and the rehabilitation, receiverships, and liquidation of insurers apply in full to special purpose financial insurance companies or any of the special purpose financial insurance companys protected cells, independently, without causing or otherwise effecting a conservation, rehabilitation, receivership, or liquidation of the special purpose financial insurance company or another protected cell that is not otherwise insolvent. (B) Notwithstanding the provisions of chapter 145 of this title, and without causing or otherwise effecting the conservation or rehabilitation of an otherwise solvent protected cell of a special purpose financial insurance company and subject to the provisions of subdivision (G)(v) of this subdivision (12), the Commissioner may apply by petition to the Superior Court for an order authorizing the Commissioner to conserve, rehabilitate, or liquidate a special purpose financial insurance company domiciled in this State on one or more of the following grounds: (i) embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the special purpose financial insurance company intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial insurance company securities; or (ii) the special purpose financial insurance company is insolvent; or(iii) the holders of a majority in outstanding principal amount of each class of special purpose financial insurance company securities attributable to each particular protected cell requests or consents to conservation, rehabilitation, or liquidation pursuant to the provisions of this subchapter. (C) Notwithstanding the provisions of chapter 145 of this title, the Commissioner may apply by petition to the Superior Court for an order authorizing the Commissioner to conserve, rehabilitate, or liquidate one or more of a special purpose financial insurance companys protected cells, independently, without causing or otherwise effecting a conservation, rehabilitation, receivership, or liquidation of the special purpose financial insurance company generally or another of its protected cells, on one or more of the following grounds: (i) embezzlement, wrongful sequestration, dissipation, or diversion of the assets of the special purpose financial insurance company attributable to the affected protected cell or cells intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial insurance company securities of the affected protected cell or cells; or (ii) the affected protected cell is insolvent; or(iii) the holders of a majority in outstanding principal amount of each class of special purpose financial insurance company securities attributable to that particular protected cell request or consent to conservation, rehabilitation, or liquidation pursuant to the provisions of this subchapter. (D) Except where consent is given as described in subdivisions (B)(iii) and (C)(iii) of this subdivision (12), the Court may not grant relief provided by subdivision (B) or (C) of this subdivision (12) unless, after notice and a hearing, the Commissioner, who shall have the burden of proof, establishes by clear and convincing evidence that relief must be granted. The Courts order may be made in respect of one or more protected cells by name, rather than the special purpose financial insurance company generally. (E) Notwithstanding another provision in this title, regulations adopted under this title, or another applicable law or regulation, upon any order of conservation, rehabilitation, or liquidation of a special purpose financial insurance company, or one or more of the special purpose financial insurance companys protected cells, the receiver shall manage the assets and liabilities of the special purpose financial insurance company or the applicable protected cell pursuant to the provisions of this subchapter. The assets attributable to one protected cell shall not be applied to the liabilities attributable to another protected cell, unless an asset or liability is attributable to more than one protected cell, in which case the receiver shall deal with the asset or liability in accordance with the terms of any relevant governing instrument or contract. Recourse to the special purpose financial insurance companys general account in connection with the conservation, rehabilitation, or liquidation of a protected cell shall be limited to the greater of the amount of assets in the general account as of the date such proceeding is commenced or the required minimum capital for the general account as of the date such proceeding is commenced. Assets attributable to one protected cell shall not be set off against the liabilities attributable to another protected cell, and assets attributable to the special purpose financial insurance companys general account shall not be set off against the liabilities attributable to any protected cell except to the extent provided in the preceding sentence. Relief shall not be granted nor shall any order be issued based on equitable theories of recovery, including substantive consolidation, equitable subordination, or recoupment, to attach or seize the assets of any solvent protected cell for the benefit of another protected cell or special purpose financial insurance company, or to pierce the corporate veil of any protected cell, in connection with the conservation, rehabilitation, or liquidation of a special purpose financial insurance company or one or more protected cells, unless such equitable theories, attachment, seizure, or corporate veil piercing would apply to such cell if it were a special purpose financial insurance company without separate cells. (F) With respect to amounts recoverable under a reinsurance contract, the amount recoverable by the receiver of a special purpose financial insurance company must not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation, or liquidation with respect to the ceding insurer, notwithstanding another provision in the contract or other documentation governing the insurance securitization. (G) Notwithstanding the provisions of chapter 145 of this title or other laws of this State: (i) An application or petition, or a temporary restraining order or injunction issued pursuant to the provisions of chapter 145 of this title, with respect to a ceding insurer, does not prohibit the transaction of business by a special purpose financial insurance company with the ceding insurer, including any payment by a special purpose financial insurance company made pursuant to a security issued by a special purpose financial insurance company with respect to a protected cell, or any action or proceeding against a special purpose financial insurance company or its assets. (ii) The commencement of a summary proceeding or other interim proceeding commenced before a formal delinquency proceeding with respect to a special purpose financial insurance company, and any order issued by the Court, does not prohibit the payment by a special purpose financial insurance company made pursuant to a security issued by a special purpose financial insurance company with respect to a protected cell or special purpose financial insurance company contract or the special purpose financial insurance company from taking any action required to make the payment. (iii) A receiver of a ceding insurer may not void a nonfraudulent transfer by the ceding insurer to a special purpose financial insurance company of money or other property made pursuant to a reinsurance contract. (iv) A receiver of a special purpose financial insurance company may not void a nonfraudulent transfer by the special purpose financial insurance company of money or other property made to a ceding insurer pursuant to a reinsurance contract or made to or for the benefit of any holder of a special purpose financial insurance company security issued with respect to a protected cell, or a special purpose financial insurance company security. (v) In the event of an insolvency of a special purpose financial insurance company where one or more protected cells remain solvent, the Commissioner shall separate the special purpose financial insurance companys solvent protected cells from the insolvent special purpose financial insurance company, shall allow on petition of the sponsor for the conversion of such solvent protected cells into one or more special purpose financial insurance companies, and shall issue such orders as the Commissioner deems necessary to protect the solvency of the remaining solvent protected cells. In the event of an insolvency of a protected cell, the special purpose financial insurance companys assets shall be accounted for and managed in compliance with subdivision (E) of this subdivision (12) and the other laws of this State. (H) Subdivision (G) of this subdivision (12) does not prohibit the Commissioner from taking any action permitted under chapter 145 of this title with respect only to the conservation or rehabilitation of a special purpose financial insurance company with protected cell or cells, provided the Commissioner would have had sufficient grounds to seek to declare the special purpose financial insurance company insolvent; subject to and without otherwise affecting the provisions of subdivision (G)(v) of this subdivision (12). In this case, with respect to the solvent protected cell or cells, the Commissioner may not prohibit payments made by the special purpose financial insurance company pursuant to the special purpose financial insurance company security, reinsurance contract, or otherwise made under the insurance securitization transaction that are attributable to these protected cell or cells or prohibit the special purpose financial insurance company from taking any action required to make these payments. (I) With the exception of the fulfillment of the obligations under a special purpose financial insurance company contract, and notwithstanding another provision of this title or other laws of this State, the assets of a special purpose financial insurance company, including assets held in trust, shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer pursuant to the provisions of this title for any purpose, including distribution to creditors of the ceding insurer. (Added 2007, No. 49,  17; amended 2007, No. 178 (Adj. Sess.),  11; 2009, No. 42,  28, eff. May 27, 2009; 2013, No. 29,  65, eff. May 13, 2013.) 
 6048o. Confidentiality
(a) All documents, materials, or other information, including confidential and privileged documents, examination reports, preliminary examination reports or results, working papers, recorded information, and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an examination made under this subchapter are confidential and shall not be: (1) subject to subpoena;(2) subject to public inspection and copying under the Public Records Act; or(3) discoverable or admissible in evidence in any private civil action.(b) In furtherance of his or her regulatory duties, the Commissioner may:(1) share documents, materials, or other information, including those that are confidential and privileged, with other state, federal, or international regulatory agencies and law enforcement authorities, the National Association of Insurance Commissioners, the North American Securities Administrators Association, self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1, and other self-regulatory organizations and their affiliates or subsidiaries, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information; (2) receive documents, materials, or information, including those that are confidential and privileged, from other state, federal, and international regulatory agencies and law enforcement authorities, the National Association of Insurance Commissioners, the North American Securities Administrators Association, self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1, and other self-regulatory organizations and their affiliates or subsidiaries 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; (3) enter into written agreements with other state, federal, and international regulatory agencies and law enforcement authorities, the National Association of Insurance Commissioners, the North American Securities Administrators Association, self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3 and 78q-1, and other self-regulatory organizations and their affiliates or subsidiaries governing sharing and use of information consistent with this section, including agreements providing for cooperation between the Commissioner and other agencies in relation to the activities of a supervisory college; and (4) participate in a supervisory college for any special purpose financial insurer that is part of an affiliated group with international operations in order to assess the insurers compliance with Vermont laws and regulations, as well as to assess the business strategy, financial condition, risk exposure, risk management, governance processes, and legal and regulatory position. (c) Prior to sharing information under subsection (b) of this section, the Commissioner shall determine that sharing the information will substantially further the performance of the regulatory or law enforcement duties of the recipient and may not be made public by the Commissioner or an employee or agent of the Commissioner without the written consent of the company, except to the extent provided in subsection (b) of this section. (Added 2013, No. 29,  66, eff. May 13, 2013.) 
 6049a. Applicable law
(a) An affiliated reinsurance company shall be subject to the provisions of this subchapter and to the provisions of subchapter 1 of this chapter. In the event of any conflict between the provisions of this subchapter and the provisions of subchapter 1 of this chapter, the provisions of this subchapter shall control. (b) An affiliated reinsurance company shall be subject to all applicable rules adopted pursuant to section 6015 of this chapter that are in effect as of the effective date of this subchapter and those that are adopted after the effective date of this subchapter. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049b. Definitions
As used in this subchapter:(1) Affiliated reinsurance company means a company licensed by the Commissioner pursuant to this subchapter to reinsure risks ceded by one or more ceding insurers that are affiliated companies. Subject to the prior approval of the Commissioner, not more than 10 percent of the risks reinsured may be ceded by ceding insurers that are not affiliated companies. (2) Ceding insurer means an insurance company approved by the Commissioner and licensed or otherwise authorized to transact the business of insurance or reinsurance in its state or country of domicile, which cedes risk to an affiliated reinsurance company pursuant to a reinsurance contract. (3) Organizational documents means the affiliated reinsurance companys articles of incorporation and bylaws and such other documents as shall be approved by the Commissioner. (4) Reinsurance contract means a contract between an affiliated reinsurance company and a ceding insurer pursuant to which the affiliated reinsurance company agrees to provide reinsurance to the ceding insurer. (Added 2017, No. 134 (Adj. Sess.),  10; amended 2019, No. 110 (Adj. Sess.),  11A, eff. June 15, 2020.) 
 6049c. Licensing; authority
(a) An affiliated reinsurance company shall only reinsure the risks of a ceding insurer. An affiliated reinsurance company may cede the risks assumed under a reinsurance contract to another reinsurer, subject to the prior approval of the Commissioner. (b) In conjunction with the issuance of a license to an affiliated reinsurance company, the Commissioner may issue an order that includes any provisions, terms, and conditions regarding the organization, licensing, and operation of the affiliated reinsurance company that are deemed appropriate by the Commissioner and that are not inconsistent with the provisions of this chapter. (c) To qualify for a license, an affiliated reinsurance company shall be subject, in addition to the requirements of subsection 6002(c) of this chapter, to the following: (1) The information submitted to the Commissioner pursuant to subdivision 6002(c)(1)(B) of this chapter shall include: (A) the source and form of the affiliated reinsurance companys capital and surplus;(B) the investment policy of the affiliated reinsurance company, which shall provide for a diversified investment portfolio both as to type and issue and shall include a requirement for liquidity and for the reasonable preservation, administration, and management of such assets with respect to the risks associated with any reinsurance transactions. (2) The application shall include copies of all agreements and documentation, including reinsurance agreements, described in subdivision (1) of this subsection (c) unless otherwise approved by the Commissioner and any other statements or documents required by the Commissioner to evaluate the affiliated reinsurance companys application for licensure. (d) Subdivision 6002(c)(3) of this chapter shall apply to all information submitted pursuant to subsection (c) of this section and to any order issued to the affiliated reinsurance company pursuant to subsection (b) of this section. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049d. Formation
(a) An affiliated reinsurance company may be incorporated as a stock insurer with its capital divided into shares, or in such other organizational form as may be approved by the Commissioner. (b) An affiliated reinsurance companys organizational documents shall limit the affiliated reinsurance companys authority to the transaction of the business of insurance or reinsurance and to those activities that the affiliated reinsurance company conducts to accomplish its purposes as expressed in this subchapter. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049e. Minimum capital and surplus
An affiliated reinsurance company shall not be issued a license unless it possesses and thereafter maintains unimpaired paid-in capital and surplus of not less than $5,000,000.00. The Commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of reinsurance business transacted. Except as otherwise provided in this section, the provisions of chapter 159 of this title, Risk Based Capital for Insurers, shall apply in full to an affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049f. Permitted reinsurance
(a) An affiliated reinsurance company shall only reinsure the risks of a ceding insurer, pursuant to a reinsurance contract. An affiliated reinsurance company shall not issue a contract of insurance or a contract for assumption of risk or indemnification of loss other than such reinsurance contract. (b) The reinsurance contract shall contain all provisions reasonably required or approved by the Commissioner, which requirements shall take into account the laws applicable to the ceding insurer regarding the ceding insurers taking credit for the reinsurance provided under such reinsurance contract. (c) An affiliated reinsurance company may cede risks assumed through a reinsurance contract to one or more reinsurers through the purchase of reinsurance, subject to the prior approval of the Commissioner. Except as otherwise provided in this section, the provisions of chapter 101, subchapter 10 of this title, reinsurance of risks, shall apply in full to an affiliated reinsurance company. (d) Unless otherwise approved in advance by the Commissioner, a reinsurance contract shall not contain any provision for payment by the affiliated reinsurance company in discharge of its obligations under the reinsurance contract to any person other than the ceding insurer or any receiver of the ceding insurer. (e) An affiliated reinsurance company shall notify the Commissioner immediately of any action by a ceding insurer or any other person to foreclose on or otherwise take possession of collateral provided by the affiliated reinsurance company to secure any obligation of the affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049g. Disposition of assets; investments
(a) The assets of an affiliated reinsurance company shall be preserved and administered by or on behalf of the affiliated reinsurance company to satisfy the liabilities and obligations of the affiliated reinsurance company incident to the reinsurance contract and other related agreements. (b) The Commissioner may prohibit or limit any investment that threatens the solvency or liquidity of the affiliated reinsurance company unless the investment is otherwise approved in its plan of operation or in an order issued to the affiliated reinsurance company pursuant to subsection 6049c of this chapter. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049h. Annual report; books and records
(a) For the purposes of subsection 6007(b) of this chapter:(1) Each affiliated reinsurance company shall file its report in the form required by subsection 3561(a) of this title, and each affiliated reinsurance company shall comply with the requirements set forth in section 3569 of this title. (2) An affiliated reinsurance company shall report using statutory accounting principles in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual. Reporting shall be in such general form and context, as approved by, and shall contain any other information required by, the National Association of Insurance Commissioners, with any useful or necessary modifications or adaptions thereof required or approved or accepted by the Commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the Commissioner. (b) Unless otherwise approved in advance by the Commissioner, an affiliated reinsurance company shall maintain its books, records, documents, accounts, vouchers, and agreements in this State. An affiliated reinsurance company shall make its books, records, documents, accounts, vouchers, and agreements available for inspection by the Commissioner at any time. An affiliated reinsurance company shall keep its books and records in such manner that its financial condition, affairs, and operations can be readily ascertained and so that the Commissioner may readily verify its financial statements and determine its compliance with this chapter. (c) Unless otherwise approved in advance by the Commissioner, all original books, records, documents, accounts, vouchers, and agreements shall be preserved and kept available in this State for the purpose of examination and inspection and until such time as the Commissioner approves the destruction or other disposition of such books, records, documents, accounts, vouchers, and agreements. If the Commissioner approves the keeping outside this State of the items listed in this subsection, the affiliated reinsurance company shall maintain in this State a complete and true copy of each such original. Books, records, documents, accounts, vouchers, and agreements may be photographed, reproduced on film, or stored and reproduced electronically. (d) The provisions of sections 3578a (annual financial reporting) and 3579 (qualified accountants) of this title shall apply in full to an affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10; amended 2019, No. 3,  8, eff. April 18, 2019.) 
 6049i. Insurance holding company systems
Except as otherwise provided in this section, the provisions of chapter 101, subchapter 13 of this title shall apply in full to an affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049j. Corporate governance; disclosure
Except as otherwise provided in this section, the provisions of section 3316 of this title shall apply in full to an affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049k. Own risk and solvency assessment
Except as otherwise provided in this section, the provisions of chapter 101, subchapter 7A (own risk and solvency assessment) of this title shall apply in full to an affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049l. Requirements for actuarial opinions
Except as otherwise provided in this section, the provisions of chapter 101, section 3577 (requirements for actuarial opinions) of this title shall apply in full to an affiliated reinsurance company. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6049m. Confidentiality
(a) All documents, materials, and other information, including confidential and privileged documents, examination reports, preliminary examination reports or results, working papers, recorded information, and copies of any of these produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an examination made under this subchapter are confidential and shall not be: (1) subject to subpoena;(2) subject to public inspection and copying under the Public Records Act; or(3) discoverable or admissible in evidence in any private civil action.(b) In furtherance of his or her regulatory duties, the Commissioner may:(1) share documents, materials, and other information, including those that are confidential and privileged, with other state, federal, or international regulatory agencies and law enforcement authorities, the National Association of Insurance Commissioners, the North American Securities Administrators Association, self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1, and other self-regulatory organizations and their affiliates or subsidiaries, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, and other information; (2) receive documents, materials, and information, including those that are confidential and privileged, from other state, federal, and international regulatory agencies and law enforcement authorities, the National Association of Insurance Commissioners, the North American Securities Administrators Association, self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1, and other self-regulatory organizations and their affiliates or subsidiaries 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; (3) enter into written agreements with other state, federal, and international regulatory agencies and law enforcement authorities, the National Association of Insurance Commissioners, the North American Securities Administrators Association, self-regulatory organizations organized under 15 U.S.C.  78f, 78o-3, and 78q-1, and other self-regulatory organizations and their affiliates or subsidiaries governing the sharing and use of information consistent with this section, including agreements providing for cooperation between the Commissioner and other agencies in relation to the activities of a supervisory college; and (4) participate in a supervisory college for any affiliated reinsurance company that is part of an affiliated group with international operations in order to assess the insurers compliance with Vermont laws and regulations, as well as to assess its business strategy, financial condition, risk exposure, risk management, governance processes, and legal and regulatory position. (c) Prior to sharing information under subsection (b) of this section, the Commissioner shall determine that sharing the information will substantially further the performance of the regulatory or law enforcement duties of the recipient and that the information shall not be made public by the Commissioner or an employee or agent of the Commissioner without the written consent of the company, except to the extent provided in subsection (b) of this section. (Added 2017, No. 134 (Adj. Sess.),  10.) 
 6050. Purpose
The purpose of this chapter is to regulate the formation and operation of risk retention groups and purchasing groups in this State formed pursuant to the provisions of the federal Liability Risk Retention Act of 1986 (RRA 1986), to the extent permitted by such law. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6051. Definitions
As used in this chapter:(1) Commissioner means the Commissioner of Financial Regulation of this State, or the commissioner, director, or superintendent of insurance in any other state. (2) Domicile, for purposes of determining the state in which a purchasing group is domiciled, means: (A) for a corporation, the state in which the purchasing group is incorporated; and(B) for an unincorporated entity, the state of its principal place of business.(3) Hazardous financial condition shall have the same meaning as in 15 U.S.C.  3901(a)(7).(4) Insurance shall have the same meaning as in 15 U.S.C.  3901(a)(1).(5) Liability shall have the same meaning as in 15 U.S.C.  3901(a)(2).(6) Personal risk liability shall have the same meaning as in 15 U.S.C.  3901(a)(3).(7) Plan of operation and feasibility study means an analysis which presents the expected activities and results of a risk retention group as required by chapter 141 of this title. (8) Product liability means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred. (9) Purchasing group has the same meaning as in 15 U.S.C.  3901(a)(5).(10) Risk retention group shall have the same meaning as in 15 U.S.C.  3901(a)(4).(11) State means any state of the United States or the District of Columbia. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992; amended 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.)
 6052. Risk retention groups chartered in this State
(a) Pursuant to the provisions of chapter 141 of this title, a risk retention group shall be chartered and licensed to write only liability insurance pursuant to this chapter, must comply with all of the laws, rules, regulations, and requirements applicable to such insurers chartered and licensed in this State under chapter 141 of this title, and with subdivisions 6053(4), (5), (7), and (8) of this title. A risk retention group chartered in this State may provide coverage for payment of punitive damages, the multiplied portion of multiple damages, or other penalties in the nature of compensatory damages, and any such coverage shall be enforceable against such risk retention group in accordance with its terms. (b) Before it may offer insurance in any state, each risk retention group shall also submit for approval to the Commissioner of this State a plan of operation and feasibility study which includes a description of the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer, together with such additional information as the Commissioner may reasonably require. In considering and approving the risk retention groups plan of operation and any subsequent amendments thereto, the Commissioner may limit the net amount of risk retained by a risk retention group. The risk retention group shall submit for approval by the Commissioner an appropriate revision in the event of any subsequent material change in any item of the plan of operation or feasibility study, including any material change in the information called for in subsection (c) of this section, but excluding the identity of policyholders and any changes in rates or rating classification systems. The group shall not offer any additional kinds of liability insurance, in this State or in any other state, until a revision of such plan or study is approved by the Commissioner. The risk retention group shall inform the Commissioner of any material changes in rates or rating classification systems, within 30 days of the adoption of such change. (c)(1) At the time of filing its application for charter, the risk retention group shall provide to the Commissioner in summary form the following information: (A) the identity of the initial policyholders or members of the group or if the identity is not known or cannot be determined, a description of who is eligible to be a policyholder or a member; (B) the identity of the persons that organized the group;(C) the identity of any persons that will act as a managing general agent or reinsurance intermediary for, provide other significant administrative services to, or otherwise influence or control the activities of, the group; (D) summary descriptions of the services, described in subdivision (C) of this subsection, and of any contracts under which the services are to be performed, including the method of compensation therefor; (E) the amount and nature of initial capitalization;(F) plans for the payment of dividends or other distributions of members capital and surplus; and (G) the states in which the group intends to file.(2) The applicant may bind separately any portions of the application or any amendment thereto that contain proprietary information or documents, and request confidential treatment of such portions. As used in this section, proprietary information or documents means certain information or documents furnished by or pertaining to any of the persons specified in subdivision (1) of this subsection (c) that would customarily be treated as confidential or sensitive and the disclosure of which could result in harm or prejudice to the person to whom the information or documents pertain or unfair advantage to another person. Such information includes, trade secrets, historical or projected loss data, or case reserves of members or policyholders, actuarial analyses which include such data or reserves, historical or projected financial data not otherwise publicly available, and similar information or documents. The Commissioner shall determine which portions specified by the applicant fall within the definition of proprietary information or documents and treat such portions as confidential. Provided, however, that nothing herein shall excuse the applicant from making any required disclosure under the RRA 1986, this chapter or chapter 141 of this title, or prohibit the Commissioner from disclosing any proprietary information or documents in the furtherance of any legal or regulatory proceeding. Before using proprietary information or documents in a legal or regulatory proceeding that does not involve the applicant or any person named in the application or any amendment thereto, the Commissioner shall first seek to obtain the same information from nonconfidential sources. If unavailable from nonconfidential sources, the Commissioner shall seek to protect the confidential information or documents from unnecessary disclosure. Upon licensing, the Commissioner shall forward to the National Association of Insurance Commissioners all information required under the RRA 1986 to be submitted to each state where the risk retention group proposes to operate and all other information not deemed confidential under this section. Providing notification to the National Association of Insurance Commissioners is in addition to and shall not be sufficient to satisfy the requirements of section 6053 or any other sections of this chapter. In addition, the Commissioner may provide access to confidential application information with respect to risk retention groups to representatives of the National Association of Insurance Commissioners to inspect (but not copy) such information in connection with accreditation examinations, so long as the National Association of Insurance Commissioners agrees in writing to maintain the confidentiality of such information. (d) The provisions of subsection 6008(c) and sections 3573 and 3574 of this title shall apply to risk retention groups chartered in this State, except that such provisions shall not apply to final examination reports relating to risk retention groups and except that the Commissioner may, in the Commissioners discretion, grant access to any other examination information covered by subsection 6008(c) of this title to representatives of the National Association of Insurance Commissioners to inspect (but not copy) such information in connection with accreditation examinations, so long as the National Association of Insurance Commissioners agrees in writing to maintain the confidentiality of such information. (e) The provisions of chapter 101, subchapter 13 of this title shall apply to risk retention groups chartered in this State. However, no existing rule, regulation, or order promulgated under section 3688 of this title shall apply to a risk retention group chartered in this State unless the rule, regulation, or order or a provision thereof is specific to risk retention groups. The Commissioner shall establish procedures to implement the provisions of chapter 101, subchapter 13 of this title as applied to risk retention groups chartered in this State by rule, regulation, or order. (f) The provisions of chapter 159 of this title (risk based capital for insurers) shall apply to risk retention groups chartered in this State, except that the Commissioner may elect not to take regulatory action as otherwise required by sections 8303-8306 of chapter 159 of this title, provided at least one of the following conditions exist: (1) The Commissioner determines that the risk retention groups members or sponsoring organization, or both, are sufficiently capitalized to support the operations of the risk retention group. As required by the Commissioner, the members or sponsoring organization, or both, shall provide evidence of: (A) an investment grade credit rating from a nationally recognized statistical rating organization or rating of A- or better by the A. M. Best Company; (B) an excess of assets over liabilities of at least $100 million; or(C) an excess of assets over liabilities of at least 10 times the risk retention groups largest net retained per occurrence limit. (2) Each policyholder qualifies as an industrial insured under the law of his or her home state, or under Vermont law, whichever the Commissioner determines to be more stringent. (3) The risk retention groups certificate of authority was issued prior to January 1, 2011 and, based on a minimum of five years of solvent operation, is specifically exempted from the requirements for mandatory action in writing by the Commissioner. (g) This subsection establishes governance standards for a risk retention group.(1) As used in this subsection:(A) Board of directors or board means the governing body of a risk retention group elected by risk retention group members to establish policy, elect or appoint officers and committees, and make other governing decisions. (B) Director means a natural person designated in the articles of the risk retention group or designated, elected, or appointed by any other manner, name, or title to act as a member of the governing body of the risk retention group. (C)(i) Independent director means a director who does not have a material relationship with the risk retention group. A director has a material relationship with a risk retention group if he or she, or a member of his or her immediate family: (I) In any 12-month period, receives from the risk retention group, or from a consultant or service provider to the risk retention group, compensation or other item or items of value in an amount equal to or greater than five percent of the risk retention groups gross written premium or two percent of the risk retention groups surplus, as measured at the end of any fiscal quarter falling in such 12-month period, whichever is greater. This provision also applies to compensation or items of value received by any business with which the director is affiliated. Such material relationship shall continue for one year after receipt of the item or items of value or the compensation falls below the threshold established in this subdivision. (II) Has a relationship with an auditor as follows: Is affiliated with or employed in a professional capacity by a current or former internal or external auditor of the risk retention group. Such material relationship shall continue for one year after the affiliation or employment ends. (aa) Is employed as an executive officer of another business entity that is affiliated with the risk retention group by virtue of common ownership and control, if such entity meets all of the following criteria: (AA) the entity is not an insured of the risk retention group;(BB) the entity has a contractual relationship with the risk retention group; and(CC) the governing board of the entity includes executive officers of the risk retention group, unless a majority of the membership of such entitys governing board is composed of individuals who are members of the governing board of the risk retention group. (bb) Such material relationship shall continue until the employment or service ends.(ii) Notwithstanding subdivision (i) of this subdivision (g)(1)(C), a director who is a direct or indirect owner of the risk retention group is deemed to be independent; and an officer, director, or employee of an insured of the risk retention group is deemed to be independent, unless some other relationship of such officer, director, or employee qualifies as a material relationship. (D) Material service provider includes a captive manager, auditor, accountant, actuary, investment advisor, attorney, managing general underwriter, or other person responsible for underwriting, determination of rates, premium collection, claims adjustment or settlement, or preparation of financial statements, whose aggregate annual contract fees are equal to or greater than five percent of the risk retention groups annual gross written premium or two percent of its surplus, whichever is greater. It does not mean defense counsel retained by a risk retention group, unless his or her annual fees have been equal to or greater than five percent of a risk retention groups annual gross premium or two percent of its surplus, whichever is greater, during three or more of the previous five years. (2) The board shall have a majority of independent directors. The board of directors shall determine whether a director is independent; review such determinations annually; and maintain a record of the determinations, which shall be provided to the Commissioner annually. If the Commissioner disagrees with the boards determination regarding independence, the board, within six months, shall take such actions as are necessary in order to obtain written confirmation from the Commissioner that the board meets the independence requirements set forth in subdivision (1)(C) of this subsection. (3) The term of any material service provider contract entered into with a risk retention group shall not exceed five years. The contract, or its renewal, requires approval of a majority of the risk retention groups independent directors. The board of directors has the right to terminate a contract at any time for cause after providing adequate notice, as defined in the terms of the contract. (4) A risk retention group shall not enter into a material service provider contract without the prior written approval of the Commissioner. (5) A risk retention groups business plan shall include written policies approved by its board of directors requiring the board to: (A) provide evidence of ownership interest to each risk retention group member;(B) develop governance standards applicable to the risk retention group;(C) oversee the evaluation of the risk retention groups management, including the performance of its captive manager, managing general underwriter, or other person or persons responsible for underwriting, rate determination, premium collection, claims adjustment and settlement, or preparation of financial statements; (D) review and approve the amount to be paid under a material service provider contract; and (E) at least annually, review and approve:(i) the risk retention groups goals and objectives relevant to the compensation of officers and material service providers; (ii) the performance of officers and material service providers as measured against the risk retention groups goals and objectives; (iii) the continued engagement of officers and material service providers.(6) A risk retention group shall have an audit committee composed of at least three independent board members. A nonindependent board member may participate in the committees activities, if invited to do so by the audit committee, but he or she shall not serve as a committee member. The Commissioner may waive the requirement of an audit committee if the risk retention group demonstrates to the Commissioners satisfaction that having such committee is impracticable and the board of directors is able to perform sufficiently the committees responsibilities. The audit committee shall have a written charter defining its responsibilities, which shall include: (A) Assisting board oversight of the integrity of financial statements, compliance with legal and regulatory requirements, and qualifications, independence, and performance of the independent auditor or actuary. (B) Reviewing quarterly financial statements and annual audited financial statements with management. (C) Reviewing annual audited financial statements with its independent auditor and, if it deems advisable, the risk retention groups quarterly financial statements as well. (D) Reviewing risk assessment and risk management policies.(E) Meeting with management, either directly or through a designated representative of the committee. (F) Meeting with independent auditors, either directly or through a designated representative of the committee. (G) Reviewing with the independent auditor any audit problems and managements response.(H) Establishing clear hiring policies applicable to the hiring of employees or former employees of the independent auditor by the risk retention group. (I) Requiring the independent auditor to rotate the lead audit partner having primary responsibility for the risk retention groups audit so that no individual performs audit services for the risk retention group for more than five consecutive fiscal years. In a form and manner prescribed by the Commissioner, a risk retention group may request a waiver from the rotation requirement of this subdivision. In determining whether to grant a waiver request, the Commissioner may consider: (i) the number and expertise of the independent auditors partners;(ii) the number of insurance clients the independent auditor has;(iii) the premium volume of the risk retention group;(iv) the number of jurisdictions in which the risk retention group transacts business; and (v) any other factor deemed relevant by the Commissioner.(J) Reporting regularly to the board of directors.(7) The board of directors shall adopt governance standards, which shall be available to risk retention group members through electronic or other means, and provided to risk retention group members, upon request. The governance standards shall include: (A) a process by which risk retention group members elect directors;(B) director qualifications, responsibilities, and compensation;(C) director orientation and continuing education requirements;(D) a process allowing the board access to management and, as necessary and appropriate, independent advisors; (E) policies and procedures for management succession; and(F) policies and procedures providing for an annual performance evaluation of the board.(8) The board of directors shall adopt a code of business conduct and ethics applicable to directors, officers, and employees of the risk retention group and criteria for waivers of code provisions, which shall be available to risk retention group members through electronic or other means, and provided to risk retention group members, upon request. Provisions of the code shall address: (A) conflicts of interest;(B) matters covered under the Vermont corporate opportunities doctrine;(C) confidentiality;(D) fair dealing;(E) protection and proper use of risk retention group assets;(F) standards for complying with applicable laws, rules, and regulations; and(G) mandatory reporting of illegal or unethical behavior affecting operation of the risk retention group. (9) The president or chief executive officer of a risk retention group shall promptly notify the Commissioner in writing of any known material noncompliance with the governance standards established in this subsection. (h) The provisions of subchapter 7A of chapter 101 of this title (own risk and solvency assessment) shall apply to risk retention groups chartered in this State. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992; amended 1993, No. 235 (Adj. Sess.),  9i, eff. June 21, 1994; 1997, No. 49,  17, eff. June 26, 1997; 1999, No. 38,  20, eff. May 20, 1999; 2009, No. 42,  29, 30, eff. May 27, 2009; 2011, No. 21,  25; 2011, No. 78 (Adj. Sess.),  41, eff. April 2, 2012; 2013, No. 103 (Adj. Sess.),  9, eff. April 14, 2014; 2015, No. 20,  9, eff. May 7, 2015; 2015, No. 74 (Adj. Sess.),  6, eff. April 13, 2016; 2017, No. 12,  10, eff. May 1, 2017; 2017, No. 90 (Adj. Sess.),  6, eff. March 8, 2018; 2019, No. 3,  9, eff. April 18, 2019; 2019, No. 110 (Adj. Sess.),  11, eff. June 15, 2020.) 
 6053. Risk retention groups not chartered in this State
Risk retention groups chartered and licensed in states other than this State and seeking to do business as a risk retention group in this State shall comply with the laws of this State as follows: (1) Notice of operations and designation of Commissioner as agent. Before offering insurance in this State, a risk retention group shall submit to the Commissioner: (A) a statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, charter date, its principal place of business, and such other information, including information on its membership, as the Commissioner of this State may require to verify that the risk retention group is qualified under subdivision 6051(11) of this title; (B) a copy of its plan of operations and feasibility study and revisions of such plan or study submitted to the state in which the risk retention group is chartered and licensed; provided, however, that the provision relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which: (i) was defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986; and (ii) was offered before such date by any risk retention group which had been chartered and operating for not less than three years before such date; and (iii) the risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by subsection 6052(b) of this title at the time that such revision has become effective in its chartering state; and (C) a statement of registration, for which a filing fee shall be determined by the Commissioner, that designates the Commissioner as its agent for the purpose of receiving service of legal documents or process. (2) Financial condition. Any risk retention group doing business in this State shall submit to the Commissioner:(A) a copy of the groups financial statement submitted to the state in which the risk retention group is chartered and licensed which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries or a qualified loss reserve specialist, under criteria established by the National Association of Insurance Commissioners; (B) a copy of each examination of the risk retention group as certified by the Commissioner or public official conducting the examination; and (C) upon request by the Commissioner, a copy of any information or document pertaining to any outside audit performed with respect to the risk retention group. (3) Taxation. Each risk retention group subject to the provisions of this section shall be liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this State as provided in 32 V.S.A.  8551, and shall report to the Commissioner the net premiums written for risks resident or located within this State. Such risk retention group shall be subject to taxation, and any applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer. (4) Compliance with Unfair Claims Settlement Practices Law. Any risk retention group, its agents and representatives shall comply with the Unfair Claims Settlement Practices Act of this State, subdivision 4724(9) of this title. (5) Deceptive, false, or fraudulent practices. Any risk retention group shall comply with subdivisions 4724(1)-(5) of this title regarding deceptive, false, or fraudulent acts or practices. (6) Examination regarding financial condition. Any risk retention group may be required to submit to an examination by the Commissioner to determine its financial condition if the Commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within 60 days after a request by the Commissioner of this State. Any such examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the Examiner Handbook of the National Association of Insurance Commissioners. (7) Notice to purchasers. Risk retention groups shall be required to notify purchasers as required by 15 U.S.C.  3902(a)(1)(I).(8) Prohibited acts regarding solicitation or sale. The following acts by a risk retention group are hereby prohibited:(A) The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in such group; and (B) The solicitation or sale of insurance by, or operation of, a risk retention group that is in hazardous financial condition or financially impaired. (9) Prohibition on ownership by an insurance company. No risk retention group shall be allowed to do business in this State if an insurance company, other than an affiliated risk retention group, captive or other policyholder-owned insurance company, or a risk retention group all of whose members are insurance companies, is directly or indirectly a member or owner of such risk retention group. (10) Prohibited coverage. The terms of any insurance policy issued by any risk retention group shall not provide, or be construed to provide, coverage prohibited generally by statute of this State or declared unlawful by the highest court of this State whose law applies to such policy. This subsection shall not be construed to require the preapproval of forms by the Commissioner. (11) Delinquency proceedings. After an examination under subdivision 6053(6) of this title, a risk retention group not chartered in this State and doing business in this State shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment within the meaning of chapter 145 of this title. (12) Penalties. A risk retention group subject to this section that violates any provision of this chapter will be subject to the fines and the penalties including revocation of its right to do business in this State, applicable to licensed insurers generally under this title. (13) Operation prior to enactment of this chapter. In addition to complying with the requirements of this section, any risk retention group operating in this State prior to enactment of this chapter shall, within 30 days after December 31, 1992, comply with the provision of subdivision (1)(A) of this section. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992; amended 1993, No. 40,  10, eff. June 3, 1993; 2021, No. 25,  29, eff. May 12, 2021.) 
 6054. Compulsory associations
(a) No risk retention group shall be required or permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this State, nor shall any risk retention group, or its insureds or claimants against its insureds, receive any benefit from any such fund for claims arising under the insurance policies issued by such risk retention group. (b) When a purchasing group obtains insurance covering its members risks from an insurer not authorized in this State or from a risk retention group, no such risks, wherever resident or located, shall be covered by any insurance guaranty fund or similar mechanism in this State. (c) When a purchasing group obtains insurance covering its members risks from a licensed insurer, only risks resident or located in this State shall be covered by the State Guaranty Fund subject to chapter 112 of this title. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6055. Purchasing groups; Exemption from certain laws
A purchasing group and its insurer or insurers shall be subject to all applicable laws of this State, except that a purchasing group and its insurer or insurers shall be exempt from State laws as provided in 15 U.S.C.  3903(a)(1)  (a)(8). (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6056. Notice and registration requirements of purchasing groups
(a) A purchasing group intending to do business in this State shall, prior to doing business, furnish notice to the Commissioner that shall: (1) be as provided in 15 U.S.C.  3903(d);(2) identify all other states in which the group intends to do business;(3) specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this State; and (4) provide such other information as may be required by the Commissioner to verify that the purchasing group is qualified under subdivision 6051(9) of this title. (b) The purchasing group shall register with and designate the Commissioner as its agent solely for the purpose of receiving service of legal documents or process, except for any groups exempted under 15 U.S.C.  3903(e). Service shall be effected in the manner provided in section 3383 of this title. (c) Each purchasing group that is required to give notice pursuant to subsection (a) of this section shall also furnish such information as may be required by the Commissioner to: (1) verify that the entity qualifies as a purchasing group;(2) determine where the purchasing group is located; and(3) determine appropriate tax treatment under section 6058 of this title.(d) Any purchasing group which was doing business in this State prior to the enactment of this chapter shall, within 30 days after December 31, 1992, furnish notice to the Commissioner pursuant to the provisions of subsection (a) of this section and furnish such information as may be required pursuant to subsections (b) and (c) of this section. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992; amended 2021, No. 25,  30, eff. May 12, 2021.) 
 6057. Restrictions on insurance purchased by purchasing groups
(a) A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent or broker acting pursuant to the surplus lines laws and regulations of such state. (b) A purchasing group which obtains liability insurance from an insurer not admitted in this State or a risk retention group shall inform each of the members of such group which have a risk resident or located in this State that such risk is not protected by an insurance insolvency guaranty fund in this State in writing that such risk retention group or such insurer may not be subject to all insurance laws and regulations of this State. (c) No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole; however, coverage may provide for a deductible or self-insured retention applicable to individual members. (d) Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits which are applicable to all purchases of group insurance. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6058. Purchasing group taxation
Premium taxes and taxes on premiums paid for coverage of risks resident or located in this State by a purchasing group or any members of the purchasing groups shall be: (1) imposed at the same rate and subject to the same interest, fines, and penalties as that applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds; and (2) paid first by such insurance source, and if not by such source, by the agent or broker for the purchasing group, and if not by such agent or broker, then by the purchasing group, and if not by such purchasing group, then by each of its members. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6059. Administrative and procedural authority regarding risk retention groups and purchasing groups
The Commissioner is authorized to make use of any of the powers established under this title to enforce the laws of this State not specifically preempted by the Risk Retention Act of 1986, including the Commissioners administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose penalties, and seek injunctive relief. With regard to any investigation, administrative proceedings, or litigation, the Commissioner can rely on the procedural laws of this State. The injunctive authority of the Commissioner, in regard to risk retention groups, is restricted by the requirement that any injunction be issued by a court of competent jurisdiction. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6060. Duties of agent or brokers to obtain license
(a) Purchasing groups.(1) No person, firm, association, or corporation shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this State for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless such person, firm, association, or corporation is licensed as an insurance agent or broker in accordance with chapter 131 of this title. (2) No person, firm, association, or corporation shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance coverage in this State for any member of a purchasing group under a purchasing groups policy unless such person, firm, association, or corporation is licensed as an insurance agent or broker in accordance with chapter 131 of this title. (3) No person, firm, association, or corporation shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance from an insurer not authorized to do business in this State on behalf of a purchasing group located in this State unless such person, firm, association, or corporation is licensed as a surplus lines broker or excess line broker in accordance with chapter 131 of this title. (b) For purposes of acting as an agent or broker for a purchasing group pursuant to subsection (a) of this section, the requirement of residence in this State shall not apply. (c) Every person, firm, association, or corporation licensed pursuant to the provisions of chapter 131 of this title, on business written through a purchasing group, shall inform each prospective insured of the provisions of the notice required by subsection 6057(c) of this title. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6061. Binding effect of orders issued in United States District Court
An order issued by any District Court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating in any state, or in all states or in any territory or possession of the United States, shall be enforceable in the courts of this State, upon a finding that such a group is in hazardous financial or financially impaired condition. (Added 1991, No. 249 (Adj. Sess.),  23, eff. Dec. 31, 1992.) 
 6070. Application of chapter
(a) This chapter applies to risk retention groups domiciled in this State operating under the provisions of chapters 141 and 142 of this title and to persons serving as managing general agents for such risk retention groups. (b) The provisions of chapter 131, subchapter 2 of this title, pertaining to producer controlled insurers, shall apply to risk retention groups chartered in this State. (Added 1993, No. 235 (Adj. Sess.),  9j, eff. Oct. 1, 1994; amended 2013, No. 103 (Adj. Sess.),  4, eff. April 14, 2014.) 
 6071. Definitions
As used in this chapter:(1)(A) Managing general agent means any person who:(i) manages all or part of the insurance business of a risk retention group and acts as an agent for such risk retention group, and, who, either separately or together with affiliates, underwrites gross written premium in any one-quarter or year that exceeds the greater of: (I) 25 percent of the risk retention groups policyholder surplus or capital; or(II) $250,000.00; and(ii) adjusts or pays, on behalf of the risk retention group, with settlement authority, claims in excess of $25,000.00 per occurrence or $250,000.00 in the aggregate. (B) Managing general agent shall also mean a person who otherwise would be deemed as such, but for the fact that it underwrites gross written premium of less than the amounts specified above, but during the risk retention groups preceding fiscal year underwrote in excess of 10 percent of the risk retention groups gross written premium. (C) Notwithstanding the provisions of subdivisions (1)(A) and (B) of this section, the following persons shall not be considered as managing general agents of a risk retention group: (i) an officer, director, or employee of the risk retention group or of any person described in subdivisions (ii) and (iii) of this subdivision (C), provided the officer or director is not individually licensed as a managing general agent hereunder; (ii) a person affiliated with or under common control with the risk retention group;(iii) an association, society, or other entity, or any person under common ownership or control therewith, that has, directly or indirectly, as its owners or members, persons who are policyholders or are eligible to become policyholders of the risk retention group; and (iv) an attorney-in-fact of a risk retention group organized as a reciprocal, or any person affiliated with or under common control with the attorney-in-fact. (2) Reinsurance intermediary has the same meaning as set forth in subdivision 4815(9) of this title. (3) Risk retention group means a company referred to in section 6070 of this title domiciled in this State. (4) Underwrite means the authority to accept or reject risk on behalf of the risk retention group. (Added 1993, No. 235 (Adj. Sess.),  9j, eff. Oct. 1, 1994; amended 2003, No. 55,  10.) 
 6072. Licensure
(a) A person shall not act in the capacity of managing general agent as defined in subdivision 6071(1)(A) of this title for a risk retention group unless such person is licensed under the provisions of this chapter. A person shall not act in the capacity of managing general agent as defined in subdivision 6071(1)(B) of this title for a risk retention group unless within 90 days of the end of the risk retention groups fiscal year in which such person became a managing general agent, such person becomes licensed under the provisions of this chapter. An officer, director, or employee of a person licensed or exempt from licensure under this chapter shall not be required to be licensed. The Commissioner may exempt any other person upon a finding that the activities to be performed by such person on behalf of a risk retention group are not of the nature or magnitude requiring the protection of this chapter. A person shall not be required to obtain more than one license under this chapter in order to serve as managing general agent for more than one risk retention group. (b) No risk retention group shall employ the services of a reinsurance intermediary to solicit, negotiate, or place reinsurance on its behalf, unless such person is licensed as a reinsurance intermediary under the provisions of chapter 131 of this title or under the provisions of another states law governing reinsurance intermediaries or is licensed as a managing general agent under this chapter and is acting as such for the risk retention group. (c) Application for a license under this section shall be made on a form prescribed by the Commissioner and accompanied by a $30.00 fee plus the initial 12 months licensing fee of $150.00. (d) The Commissioner shall issue a license to any person who has complied with the requirements of this chapter, unless the Commissioner determines that the applicant; anyone named in the application; or any member, principal, officer, or director of the applicant is not competent or trustworthy or that any controlling person of such applicant is not competent or trustworthy to act as a managing general agent or that any of the foregoing persons have given cause for revocation or suspension of such license or have failed to comply with any prerequisite for the issuance of such license. (e) If the applicant for a license is a nonresident that has not duly registered to do business in this State, such applicant, as a condition precedent to receiving or holding a license, shall designate the Secretary of State as agent for service of process in the manner, and with the same legal effect, provided for by section 3370 of this title for designation of service of process upon unauthorized insurers and shall also furnish the Secretary of State with the name and address of a resident of this State upon whom notices or orders of the Commissioner or process affecting such nonresident licensee may be served. Such licensee shall promptly notify the Secretary of State in writing of every change in its designated agent for service of process. (f) A license issued under this chapter shall continue in force not longer than 12 months but shall expire as of 12:01 a.m. on the first day of April of the year next following date of issuance unless the licensee previously filed with the Commissioner, on forms prescribed and furnished by the Commissioner, a request for renewal of such license for an ensuing 12-month period. Such request must be accompanied by payment of a renewal fee equal to the initial licensing fee for such license. (Added 1993, No. 235 (Adj. Sess.),  9j, eff. Oct. 1, 1994; amended 2021, No. 105 (Adj. Sess.),  245, eff. July 1, 2022.) 
 6073. Contract required
(a) No risk retention group shall enter into a managing general agent relationship unless there is in force a written contract between the parties which sets forth the respective responsibilities of each party. (b) The contract shall contain the following minimum provisions:(1) The method for determining compensation and other amounts payable under the contract, and the terms for payment thereof shall be fair and reasonable. (2) The contract may be terminated by the risk retention group for cause upon written notice. (3) The authority to underwrite or settle claims may be suspended by the risk retention group during the pendency of any dispute regarding the cause for termination. (4) The contract shall not result in the transfer of substantial control of the risk retention group or any of the powers vested in the members or board of directors, by statute, articles of incorporation, or bylaws. (5) Separate records of all business written under the contract shall be maintained. The risk retention group shall have access to and the right to copy all accounts and records related to its business in a form usable by the risk retention group. (6) The required use of underwriting, rating, and claims settlement and, if applicable, reinsurance cession standards and procedures approved by the risk retention group. (c) Within 30 days of entering into a contract with a managing general agent, the risk retention group shall provide written notification thereof to the Commissioner. Such notice of appointment shall include a statement of duties which the applicant is expected to perform on behalf of the risk retention group, the lines of insurance for which the applicant is to be authorized to act, a summary of the minimum contract provisions set forth in subsection (b) of this section and any other information reasonably requested by the Commissioner. Information contained in such notification shall be entitled to confidential treatment in accordance with section 6052 of this title. The risk retention group shall give the Commissioner notice of termination of a contract with a managing general agent within 10 days of termination. (Added 1993, No. 235 (Adj. Sess.),  9j, eff. Oct. 1, 1994.) 
 6074. Examination authority
(a) The Commissioner may examine the books and records of a managing general agent or any affiliate thereof pertaining to or arising out of transactions with a risk retention group if the Commissioner reasonably believes that such examination is necessary. (b) All examination reports, work papers, recorded information, documents and copies thereof produced by, obtained by, or disclosed to the Commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the Commissioner or any other person, except as otherwise provided in this section. The Commissioner is authorized to use and make public any report, work paper, or other documents, or any other information discovered or developed during the course of any examination conducted pursuant to this section in the furtherance of any legal or regulatory action. (Added 1993, No. 235 (Adj. Sess.),  9j, eff. Oct. 1, 1994.) 
 6075. Hearing; penalties
(a) If the Commissioner determines, after notice and hearing, that any person licensed under this chapter (i) has violated any provision of this chapter or rules adopted under this chapter, (ii) is not competent or trustworthy, or (iii) has engaged in any activity or has failed to do any act that if known at the time of licensing would have been grounds to refuse licensing, the Commissioner may impose one or more of the following penalties: (1) order the revocation, suspension, or nonrenewal of the persons license;(2) order the termination, suspension, or modification of the contract between such person and the risk retention group; or (3) impose an administrative penalty of not less than $100.00 nor more than $1,000.00 for each violation under this chapter. (b) In imposing any such penalty, the Commissioner shall take into account the seriousness of the violation, whether or not it was willful, and the licensees past record of compliance with this chapter. (c) Any hearing conducted under this chapter shall be conducted in accordance with 3 V.S.A. chapter 25. (Added 1993, No. 235 (Adj. Sess.),  9j, eff. Oct. 1, 1994; amended 2021, No. 105 (Adj. Sess.),  246, eff. July 1, 2022.) 
 7001. Definitions
As used in this chapter:(1) Insurance premium finance company means a person engaged in the business of entering into insurance premium finance agreements or acquiring insurance premium finance agreements from other insurance premium finance companies. For the purpose of this chapter and section 2201 of this title, insurance premium finance company includes any insurance company, insurance agent or broker, or other lender who finances insurance premiums. (2) Insurance premium finance agreement means an agreement by which an insured or prospective insured promises to pay to an insurance premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or broker in payment of premiums of an insurance contract together with interest and a service charge as authorized and limited by this chapter. (3) Licensee means an insurance premium finance company holding a license issued under section 7002 of this title. (4) Person means an individual, partnership, association, business corporation, nonprofit corporation, common law trust, joint stock company, or any other group of individuals however organized. (5) Commissioner means the Commissioner of Financial Regulation. (Added 1983, No. 77,  1; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.)
 7002. License required
(a) No person shall engage in the business of an insurance premium finance company in the State without first having obtained a license as an insurance premium finance company from the Commissioner. (b) The annual license fee shall be $200.00. Licenses may be renewed from year to year as of July 1 of each year upon payment of the fee of $200.00. The license fee shall be paid to the Commissioner. (c) The Commissioner shall have authority, at any time, to require the applicant to disclose fully the identity of all stockholders, partners, officers, and employees and he or she may, in his or her discretion, refuse to issue or renew a license in the name of any firm, partnership, or corporation if he or she is not satisfied that any officer, employee, stockholder, or partner thereof who may materially influence the applicants conduct meets the standards of this chapter. (d) This section shall not apply to any building or savings and loan association, bank, trust company, licensed lender, or credit union authorized to do business in this State, nor to an insurance company or to an insurance agent or insurance broker licensed to do business in this State financing premiums on policies written by such agent or broker; provided, however, that all other provisions of this chapter shall apply to the financing of insurance premiums. (Added 1983, No. 77,  1.) 
 7003. Issuance and renewal of license
(a) Upon the filing of an application and the payment of the license fee, the Commissioner shall make an investigation of each applicant and shall issue a license, if the applicant is qualified in accordance with this chapter. If the Commissioner does not so find, he or she shall within 30 days after he or she has declined such application, at the request of the applicant, give the applicant a full hearing. (b) The Commissioner shall issue or renew a license as may be applied for when he or she is satisfied that the person to be licensed: (1) is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for; (2) has a good business reputation and has had experience, training, or education so as to be qualified in the business for which the license is applied for; and (3) if a corporation, is a corporation incorporated under the laws of this State or a foreign corporation authorized to transact business in this State. (Added 1983, No. 77,  1.) 
 7004. Revocation or suspension of license; appeal
(a) The Commissioner may revoke or suspend the license of any insurance premium finance company when after investigation the Commissioner finds that: (1) the license issued to such company was obtained by fraud;(2) there was any misrepresentation or material omission in the application for the license;(3) the holder of such license has otherwise shown himself or herself untrustworthy or incompetent to act as an insurance premium finance company; or (4) such company has violated any of the provisions of this chapter.(b) Before the Commissioner shall revoke, suspend, or refuse to renew the license of any insurance premium finance company, the licensee shall be entitled to a hearing in accordance with 3 V.S.A. chapter 25, the Vermont Administrative Procedure Act. In lieu of revoking or suspending the license for any of the causes enumerated in this section, after hearing as provided in this section, the Commissioner may subject such company to a penalty of not more than $200.00 for each offense when in the Commissioners judgment the Commissioner finds that the public interest would not be harmed by the continued operation of such company. The amount of any penalty shall be paid by such company to the Commissioner. (c) If the Commissioner refuses to issue to any person a license as an insurance premium finance company, or the Commissioner revokes, suspends, or refuses to renew the license of any insurance premium finance company, or the Commissioner imposes a penalty on such company after a hearing as provided under subsection (b) of this section, the applicant or licensee may appeal from such refusal to issue a license or from such adjudication in accordance with 3 V.S.A. chapter 25, the Vermont Administrative Procedure Act. (Added 1983, No. 77,  1; amended 2021, No. 105 (Adj. Sess.),  247, eff. July 1, 2022.) 
 7005. Books and records
(a) Every insurance premium finance company shall maintain complete and accurate records of each of its insurance premium finance transactions and these records shall be open to examination and investigation by the Commissioner. The Commissioner may at any time during regular business hours examine such records at any location at which such records are maintained. The reasonable and necessary expenses for the examination and investigation, as determined by the Commissioner, shall be paid by the insurance premium finance company. (b) Every insurance premium finance company shall preserve its records of such insurance premium finance transactions, including cards used in a card system, if any, for at least two years after making the final entry in respect to any insurance premium finance agreement. The preservation of records in photographic, microfilm, microfiche, computer, or data processing form shall constitute compliance with this requirement. (Added 1983, No. 77,  1.) 
 7006. Form of insurance premium finance agreement
(a) An insurance premium finance agreement shall:(1) be dated and signed by or on behalf of the insured, and the printed portion thereof shall be in at least eight-point type; (2) contain the name and place of business of the insurance agent or broker negotiating the related insurance contract, the name and residence or the place of business of the insured as specified by the insured, the name and place of business of the insurance premium finance company to which payments are to be made, a brief description of the insurance contracts involved, and the amount of premiums under the insurance contracts; and (3) set forth the following items where applicable:(A) the total amount of the premiums;(B) the amount of the down payment;(C) the principal balance (the difference between subdivisions (A) and (B) of this subdivision (3)); (D) the amount of the interest;(E) the balance payable by the insured (total of items listed in subdivisions (C) and (D) of this subdivision (3)); (F) the number of installments required, the amount of each installment expressed in dollars, and the due date or period thereof; and (G) the annual percentage rate of interest charged under the agreement.(b) The items set out in subdivision (a)(3) of this section need not be stated in the sequence or order in which they appear in such subdivision (a)(3), and additional items may be included only to explain the computations made in determining the amount to be paid by the insured. (Added 1983, No. 77,  1; amended 2021, No. 105 (Adj. Sess.),  248, eff. July 1, 2022.) 
 7007. Limitation on interest and other charges
(a) An insurance premium finance company shall not charge, contract for, receive, or collect an interest charge or any fee, other than as permitted by this chapter. (b) The interest is to be computed on the balance of the premiums due (after subtracting the down payment made by the insured in accordance with the insurance premium finance agreement) from the effective date of the insurance contract, for which the premiums are being advanced, to and including the date when the final installment of the insurance premium finance agreement is payable. (c) The interest rate shall not exceed the rates permitted by 9 V.S.A.  41a(b)(5), or a nonrefundable charge of $15.00 per insurance premium finance agreement, whichever is greater, except as provided in this section. If the insurance policy that is the subject of the insurance premium finance agreement is for other than personal, family, or household purposes, then the parties to the contract may agree upon any rate of interest that shall be stated in the insurance premium finance agreement. The interest permitted by this subsection anticipates timely repayment in consecutive monthly installments equal in amount for a period of one year. For repayment in greater or lesser periods or in unequal, irregular, or other than monthly installments, the interest may be computed at an equivalent effective rate having due regard for the timely payments of installments. (d) Notwithstanding the provisions of any insurance premium finance agreement, an insured may prepay the obligation in full at any time. In such event, the insured shall receive a refund credit, which refund credit shall be computed according to the actuarial method on the assumption that all payments were made as originally scheduled. Where the amount of the refund credit is less than $1.00, no refund need be made, unless specifically requested by the insured. (Added 1983, No. 77,  1; amended 2021, No. 105 (Adj. Sess.),  249, eff. July 1, 2022.) 
 7008. Delinquency and collection charges
(a) An insurance premium finance agreement may provide for the payment by the insured of a delinquency charge of $1.00 to a maximum of five percent of the amount of the delinquent installment which is in default for a period of five days or more, whichever is greater. (b) An insurance premium finance agreement may provide for payment of reasonable collection and court costs, and attorneys fees of not more than 25 percent of the outstanding indebtedness. (c) None of the charges referred to in this section shall be considered directly or indirectly in determining whether a violation of the usury laws has occurred under an insurance premium finance agreement. (Added 1983, No. 77,  1.) 
 7009. Cancellation of insurance contract upon default
(a) When an insurance premium finance agreement contains a power of attorney enabling the insurance premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled by the insurance premium finance company unless such cancellation is effectuated in accordance with this section. (b) Not less than ten days written notice shall be mailed to the insured, at his or her last known address as shown on the records of the insurance premium finance company, of the intent of the insurance premium finance company to cancel the insurance contract unless the default is cured within such ten day period. (c) After expiration of such ten day period, the insurance premium finance company may thereafter cancel such insurance contract or contracts by mailing to the insurer a notice of cancellation. The insurance contract shall be cancelled as if such notice of cancellation had been submitted by the insured himself or herself, but without requiring the return of the insurance contract or contracts. Such cancellation shall be effective no less than 10 days after mailing of the notice to the insurer. The insurance premium finance company shall also mail at least 10 days notice of cancellation to the insured at his or her last known address as shown on the records of the insurance premium finance company. However, if the policy being cancelled is a policy defined in subdivision 4222(1) of this title, then the notice of cancellation shall be given by certified mail, return receipt requested, to the insured by the insurance premium finance company. (d) All statutory, regulatory, and contractual restrictions providing that the insurance contract may not be cancelled unless notice is given to a governmental agency, mortgagee, or other third party shall apply where cancellation is effected under the provisions of this section. The insurer shall give the prescribed notice on behalf of itself or the insured to any governmental agency, mortgagee, or other third party on or before the second business day after the day it receives the notice of cancellation from the insurance premium finance company and shall determine the effective date of cancellation taking into consideration the number of days notice required to complete the cancellation. (Added 1983, No. 77,  1.) 
 7010. Return premiums
Whenever a financed insurance contract is cancelled, the insurer shall return whatever gross unearned premiums are due under the insurance contract directly to the insurance premium finance company for the account of the insured or insureds as soon as reasonably possible, but in no event shall the period for payment exceed 60 days after the effective date of cancellation of the insurance contract. In the event that the crediting of return premiums to the account of the insured results in a surplus over the amount due from the insured, the insurance premium finance company shall refund such excess to the insured provided that no such refund shall be required if it amounts to less than $1.00, unless specifically requested by the insured. (Added 1983, No. 77,  1.) 
 7011. Penalties for violations
Any insurance premium finance company who willfully and knowingly violates the provisions of any section of this chapter shall be fined not more than $2,000.00 for each offense or imprisoned not more than five years, or both. Any insurance premium finance agreement, not invalid for any other reason, in the making or collection of which any act shall have been done which constitutes an offense under this section shall be void and the insurance premium finance company shall have no right to collect or receive any principal, interest, or charges whatsoever. Any insurance premium finance company who violates the provisions of this chapter shall be liable to pay an administrative penalty of not more than $2,000.00 for each such offense. (Added 1983, No. 77,  1; amended 1995, No. 167 (Adj. Sess.),  24.) 
 7031. Definitions
As used in this chapter:(1) Ancillary state means any state other than a domiciliary state.(2) Commissioner means the Commissioner of Financial Regulation.(3) Creditor is a person having any claim, whether matured or unmatured, liquidated or unliquidated, secured or unsecured, absolute, fixed, or contingent. (4) Delinquency proceeding means any proceeding instituted against an insurer for the purpose of liquidating, rehabilitating, reorganizing, or conserving such insurer, and any summary proceeding under sections 7041 and 7042 of this title. Formal delinquency proceeding means any liquidation or rehabilitation proceeding. (5) Department means the Department of Financial Regulation.(6) Doing business, as used in this chapter only, includes any of the following acts, whether effected by mail or otherwise: (A) the issuance or delivery of contracts of insurance to persons resident in this State;(B) the solicitation of applications for contracts of insurance, or other negotiations preliminary to the execution of contracts of insurance; (C) the collection of premiums, membership fees, assessments or other consideration for contracts of insurance; (D) the transaction of matters subsequent to execution of contracts of insurance and arising out of them; or (E) operating under a license or certificate of authority, as an insurer, issued by the Commissioner. (7) Domiciliary state means the state in which an insurer is incorporated or organized or, in the case of an alien insurer, its state of entry. (8) Fair consideration is given for property or obligation:(A) when in exchange for such property or obligation, as a fair equivalent therefore, and in good faith, property is conveyed or services are rendered or an obligation is incurred or an antecedent debt is satisfied; or (B) when such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared to the value of the property or obligation obtained. (9) Foreign country means any other jurisdiction not in any state.(10) General assets mean all property, real, personal, or otherwise, not specifically mortgaged, pledged, deposited, or otherwise encumbered for the security or benefit of specified persons or classes of persons. As to specifically encumbered property, general assets include all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, shall be treated as general assets. (11) Guaranty association means the Vermont Property and Casualty Insurance Guaranty Association created in accordance with the provisions of chapter 101, subchapter 9 of this title, the Vermont Life and Health Insurance Guaranty Association created in accordance with the provisions of chapter 112 of this title, and any other similar entity now or hereafter created by the General Assembly of this State for the payment of claims of insolvent insurers. Foreign guaranty association means any similar entities now in existence in or hereafter created by the legislature of any other State. (12) Insolvency or insolvent means:(A) for an insurer issuing only assessable insurance policies:(i) the inability to pay any obligation within 30 days after it becomes payable; or(ii) if an assessment be made within 30 days after such date, the inability to pay any obligation 30 days following the date specified in the first assessment notice issued after the date of loss. (B) for any insurer, other than an insurer described in subdivision (A) of this subdivision (12), that it is unable to pay its obligations when they are due, or when its assets admitted pursuant to this title do not exceed its liabilities plus the greater of: (i) any capital and surplus required by law for its organization; or(ii) the total par or stated value of its authorized and issued capital stock.(C) as used in this subdivision (12), liabilities includes reserves required by statute or by general regulations of the Department or specific requirements imposed by the Commissioner upon a subject company at the time of admission or subsequent to its admission. (13) Insurer means any person who has done, purports to do, is doing or is licensed to do an insurance business, and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization, supervision, or conservation by, any insurance commissioner. As used in this chapter, insurer shall also include: (A) all insurers who are doing, or have done, an insurance business in this State, and against whom claims arising from that business may exist now or in the future; (B) all insurers who purport to do an insurance business in this State;(C) all insurers who have insureds resident in this State;(D) all other persons organized or in the process of organizing with the intent to do an insurance business in this State; (E) all nonprofit hospital and medical service plans, subject to the provisions of chapters 123 and 125 of this title; (F) all fraternal benefit societies subject to the provisions of chapter 121 of this title;(G) all title insurance companies;(H) all captive insurance companies, risk retention groups, and other similar entities regulated pursuant to this title; (I) all mutual workers compensation insurance associations subject to the provisions of chapter 117 of this title; (J) all health maintenance organizations and other prepaid health care delivery plans regulated pursuant to this title; (K) municipal pools, continuing care retirement communities, and other specialty insurers subject to regulation by the Department; and (L) all mutual insurance holding companies and stock insurance holding companies of a reorganized stock insurance company as provided in chapter 101, subchapter 3A of this title. (14) Preferred claim means any claim with respect to which the terms of this chapter accord priority of payment from the general assets of the insurer. (15) Receiver means receiver, liquidator, rehabilitator, or conservator as the context requires. (16) Reciprocal state means any state other than this State in which in substance and effect subsection 7057(a) and sections 7093, 7094, and 7096 through 7098 of this title are in force, and in which provisions are in force requiring that the commissioner or equivalent official be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers. (17) Secured claim means any claim secured by mortgage, trust, deed, pledge, deposit as security, escrow, or otherwise, but not including special deposit claims or claims against general assets. The term also includes claims that have become liens upon specific assets by reason of judicial process. (18) Special deposit claim means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any claim secured by general assets. (19) State means any state, district, or territory of the United States and the Panama Canal Zone. (20) Transfer shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein, or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by the debtor. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 1995, No. 180 (Adj. Sess.),  38; 1999, No. 86 (Adj. Sess.),  9, eff. April 27, 2000; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  250, eff. July 1, 2022.) 
 7032. Jurisdiction and venue
(a) A delinquency proceeding shall not be commenced under this chapter by anyone other than the Commissioner and a court shall have no jurisdiction to entertain, hear, or determine any proceeding commenced by any other person. (b) A court of this State shall have no jurisdiction to entertain, hear, or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation, or receivership of any insurer; or praying for an injunction or restraining order or other relief preliminary to, incidental to or relating to such proceedings other than in accordance with this chapter. (c) In addition to other grounds for jurisdiction provided by the law of this State, a court of this State having jurisdiction of the subject matter has jurisdiction over a person served pursuant to the Vermont Rules of Civil Procedure or other applicable provisions of law in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this State: (1) if the person served is an agent, broker, or other person who has at any time written policies of insurance for or has acted in any manner whatsoever on behalf of an insurer against which a delinquency proceeding has been instituted, in any action resulting from or incident to such a relationship with the insurer; or (2) if the person served is a reinsurer who has at any time entered into a contract of reinsurance with an insurer against which a delinquency proceeding has been instituted, or is an agent or broker of or for the reinsurer, in any action on or incident to the reinsurance contract; or (3) if the person served is or has been an officer, director, manager, trustee, organizer, promoter, or person in a position of comparable authority or influence over an insurer against which a delinquency proceeding has been commenced, in any action resulting from such a relationship with the insurer; or (4) if the person served is or was at the time of the institution of the delinquency proceeding against the insurer holding assets in which the receiver claims an interest on behalf of the insurer, in any action concerning the assets; or (5) if the person served is obligated to the insurer in any way whatsoever, in any action on or incident to the obligation. (d) If the Court on motion of any party finds that any action should as a matter of substantial justice be tried in a forum outside this State, the Court may enter an appropriate order to stay further proceedings on the action in this State. (e) All actions authorized by this section shall be brought in the Superior Court of Washington County. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7033. Injunctions and orders
(a) A receiver appointed in a proceeding under this chapter may at any time apply for, and any court of general jurisdiction may grant, restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to prevent: (1) the transaction of further business;(2) the transfer of property;(3) interference with the receiver or with a proceeding under this chapter;(4) waste of the insurers assets;(5) dissipation and transfer of bank accounts;(6) the institution or further prosecution of any actions or proceedings;(7) the obtaining of preferences, judgments, attachments, garnishments, or liens against the insurer, its assets or its policyholders; (8) the levying of execution against the insurer, its assets or its policyholders;(9) the making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer; (10) the withholding from the receiver of books, accounts, documents, or other records relating to the business of the insurer; or (11) any other threatened or contemplated action that might lessen the value of the insurers assets or prejudice the rights of policyholders, creditors, or shareholders, or the administration of any proceeding under this chapter. (b) The receiver may apply to a court outside the State for the relief described in subsection (a) of this section. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7034. Cooperation of officers, owners, and employees
(a) An officer, manager, director, trustee, owner, employee, or agent of any insurer, or any other persons with authority over or in charge of any segment of the insurers affairs, shall cooperate with the Commissioner in any proceeding under this chapter or any investigation preliminary to the proceeding. The term person as used in this section shall include any person who exercises control directly or indirectly over activities of the insurer through any holding company or other affiliate of the insurer. To cooperate shall include the following: (1) to reply promptly in writing to any inquiry from the Commissioner requesting such a reply; and (2) to make available to the Commissioner any books, accounts, documents, or other records or information or property of or pertaining to the insurer and in his or her possession, custody, or control. (b) A person shall not obstruct or interfere with the Commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental to a delinquency proceeding. (c) This section shall not be construed to abridge otherwise existing legal rights, including the right to resist a petition for liquidation or other delinquency proceedings, or other orders. (d) A person described in subsection (a) of this section who fails to cooperate with the Commissioner, or any person who obstructs or interferes with the Commissioner in the conduct of any delinquency proceeding or any investigation preliminary or incidental to a delinquency proceeding, or who violates any order the Commissioner issued validly under this chapter may: (1) be sentenced to pay a fine not exceeding $10,000.00 or to undergo imprisonment for a term of not more than one year, or both; or (2) after a hearing, be subject to the imposition by the Commissioner of a civil penalty not to exceed $10,000.00 and shall be subject further to the revocation or suspension of any insurance licenses issued by the Commissioner. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7035. Continuation of delinquency proceedings
Every proceeding heretofore commenced under the laws in effect before May 29, 1991, except a liquidation proceeding in which a liquidation order has been entered by the Superior Court, shall be deemed to have commenced under this chapter for the purpose of conducting the proceeding henceforth, except that in the discretion of the Commissioner the proceeding may be continued, in whole or in part, as it would have been continued had this chapter not been enacted. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7036. Condition on release from delinquency proceedings
An insurer subject to delinquency proceedings, whether formal or informal, shall not:(1) be released from such proceeding, unless the proceeding is converted into a judicial rehabilitation or liquidation proceeding; (2) be permitted to solicit or accept new business or request or accept the restoration of any suspended or revoked license or certificate of authority; (3) be returned to the control of its shareholders or private management; or(4) have any of its assets returned to the control of its shareholders or private management until all payments of or on account of the insurers contractual obligations by all guaranty associations, along with all expenses thereof and interest on all such payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the insurer shall have been approved by the guaranty association. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7041. Commissioners summary orders and supervision proceedings
(a) Whenever the Commissioner has reasonable cause to believe, and determines after a hearing held under subsection (e) of this section, that any domestic insurer has committed or engaged in, or is about to commit or engage in, any act, practice, or transaction that would subject it to delinquency proceedings under this chapter, he or she may make and serve upon the insurer and any other persons involved such orders as are reasonably necessary to correct, eliminate, or remedy such conduct, condition, or ground. (b) If upon examination or at any other time the Commissioner has reasonable cause to believe and determines that any domestic insurer is in such condition as to render the continuance of its business hazardous to the public or to holders of its policies or certificates of insurance, or if such domestic insurer gives its consent, then the Commissioner shall: (1) notify the insurer of the determination; and(2) furnish to the insurer a written list of the Commissioners requirements to abate the determination. (c) If the Commissioner makes a determination to supervise an insurer subject to an order under subsection (a) or (b) of this section, the Commissioner shall notify the insurer that it is under the supervision of the Commissioner. During the period of supervision, the Commissioner may appoint a supervisor to supervise such insurer. The order appointing a supervisor shall direct the supervisor to enforce orders issued under subsections (a) and (b) of this section and may also require that the insurer may not do any of the following things during the period of supervision, without the prior approval of the Commissioner or the supervisor: (1) dispose of, convey, or encumber any of the insurers assets or its business in force;(2) withdraw from any of the insurers bank accounts;(3) lend any of the insurers funds;(4) invest any of the insurers funds;(5) transfer any of the insurers property;(6) incur any debt, obligation, or liability;(7) merge or consolidate with another company;(8) enter into any new reinsurance contract or treaty; or(9) restrict the writing of new or renewal business.(d) An insurer subject to an order under this section shall comply with the lawful requirements of the Commissioner and, if placed under supervision, shall have 60 days from the date the supervision order is served within which to comply with the requirements of the Commissioner. In the event of the insurers failure to comply with the supervision order, the Commissioner may institute proceedings under section 7051 or 7056 of this title to have a rehabilitator or liquidator appointed, or extend the period of supervision. (e) The notice of hearing held under subsection (a) of this section and any order issued pursuant to subsection (a) of this section shall be served upon the insurer pursuant to the provisions of 3 V.S.A. chapter 25. The notice of hearing shall state the time and place of hearing and the conduct, condition, or ground upon which the Commissioner may base the order. Unless mutually agreed between the Commissioner and the insurer, the hearing shall occur not less than 10 days nor more than 30 days after notice is served and shall be held at the offices of the Department of Financial Regulation or in some other place convenient to the parties as determined by the Commissioner. Unless the insurer requests a public hearing, hearings and hearing records under subsection (a) of this section shall be private and shall not be subject to the provisions of 1 V.S.A. chapter 5, subchapters 2 and 3 (the Vermont Open Meeting Law and the Public Records Act). (f)(1) An insurer subject to an order under subsection (b) of this section may request a hearing to review that order. The hearing shall be held as provided in subsection (e) of this section. The request for a hearing shall not stay the effect of the order. (2) If the Commissioner issues an order under subsection (b) of this section, the insurer may, at any time, waive the opportunity for a hearing before the Commissioner and apply for immediate judicial relief by means of any remedy afforded by law without first exhausting administrative remedies. Subsequent to a hearing before the Commissioner, a party to the proceedings whose interests are substantially affected shall be entitled to judicial review of an order issued by the Commissioner. (g) During the period of supervision, the insurer may request the Commissioner to review an action taken or proposed to be taken by the supervisor, specifying the reasons why the action complained of is believed not to be in the best interests of the insurer. (h) If a person has violated a supervision order issued under this section that as to him or her was then still in effect, he or she shall be liable to pay a civil penalty imposed by the Superior Court of Washington County not to exceed $10,000.00. (i) The Commissioner may apply for, and any court of general jurisdiction may grant, restraining orders, preliminary and permanent injunctions, and other orders as may be deemed necessary and proper to enforce a supervision order. (j) In the event that a person, subject to the provisions of this chapter, including those persons described in subsection 7034(a) of this title, shall knowingly violate a valid order of the Commissioner issued under the provisions of this section and, as a result of the violation, the net worth of the insurer is reduced or the insurer suffers loss it would not otherwise have suffered, such person shall become personally liable to the insurer for the amount of the reduction or loss. The Commissioner or supervisor is authorized to bring an action on behalf of the insurer in the Superior Court of Washington County to recover the amount of the reduction or loss together with costs. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 1995, No. 180 (Adj. Sess.),  38(a); 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2015, No. 23,  6; 2021, No. 105 (Adj. Sess.),  251, eff. July 1, 2022.) 
 7042. Courts seizure order
(a) The Commissioner may file in the Superior Court of Washington County a petition alleging, with respect to a domestic insurer: (1) that there exist grounds that would justify a court order for a formal delinquency proceeding against an insurer under this chapter; (2) that the interests of policyholders, creditors, or the public will be endangered by delay; and (3) the contents of an order deemed necessary by the Commissioner.(b) Upon filing a petition under subsection (a) of this section, the court may issue immediately, ex parte and without a hearing, an order directing the Commissioner to take possession and control of all or a part of the property, books, accounts, documents, and other records of an insurer, and of the premises occupied by it for transaction of its business; and enjoining the insurer and its officers, managers, agents, and employees from disposing of its property and from transacting its business except with the written consent of the Commissioner. (c) The court shall specify in the order issued under subsection (b) of this section its duration, which shall be such time as the court deems necessary for the Commissioner to ascertain the condition of the insurer. On motion of either party or on its own motion, the court may from time to time hold such hearings as it deems desirable after such notice as it deems appropriate, and may extend, shorten, or modify the terms of the seizure order. The court shall vacate the seizure order if the Commissioner fails to commence a formal proceeding under this chapter after having had a reasonable opportunity to do so. An order of the court pursuant to a formal proceeding under this chapter shall vacate the seizure order. (d) Entry of a seizure order under this section shall not constitute an anticipatory breach of any contract of the insurer. (e) An insurer subject to an ex parte order under this section may petition the court at any time after the issuance of the order for a hearing and review of the order. The court shall hold a hearing and review the order not more than 30 days after the request. A hearing under this subsection may be held privately in chambers and it shall be so held if the insurer proceeded against so requests. (f) If, at any time after the issuance of such an order, it appears to the court that a person whose interest is or will be substantially affected by the order did not appear at the hearing and has not been served, the court may order that notice be given. An order that notice be given shall not stay the effect of any order previously issued by the court. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  252, eff. July 1, 2022.) 
 7043. Confidentiality of hearings
Administrative and judicial proceedings under sections 7041 and 7042 of this title, all records of the insurer, other documents, and all Department files and Court records and papers, so far as they pertain to or are a part of the record of the proceedings, shall be and remain confidential except as is necessary to obtain compliance with orders of the Commissioner or the Court, unless the Superior Court of Washington County, after privately hearing arguments from the parties in chambers, shall order otherwise; or unless the insurer requests that the matter be made public. Until a Court order permitting the matter to be made public issues, or the issuer requests that the matter be made public, all papers filed with the Superior Court of Washington County shall be held in a confidential file. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7051. Grounds for rehabilitation
The Commissioner may petition the Superior Court of Washington County for an order authorizing him or her to rehabilitate a domestic insurer or an alien insurer domiciled in this State on one or more of the following grounds: (1) The insurer is in such condition that the further transaction of business would be hazardous financially to its policyholders, creditors, or the public. (2) There is reasonable cause to believe that there has been embezzlement from the insurer, wrongful sequestration or diversion of the insurers assets, forgery or fraud affecting the insurer, or other illegal conduct in, by, or with respect to the insurer that if established would endanger assets in an amount threatening the solvency of the insurer. (3) The insurer has failed to remove any person who in fact has executive authority in the insurer, whether an officer, manager, general agent, employee, or other person; provided that the person has been found after notice and hearing by the Commissioner to be dishonest or untrustworthy in a way affecting the insurers business. (4) Control of the insurer, whether by stock ownership or otherwise, and whether direct or indirect, is in a person or persons found after notice and hearing by the Commissioner to be untrustworthy. (5) A person who in fact has executive authority in the insurer, whether an officer, manager, general agent, director or trustee, employee, or other person, has refused to be examined under oath by the Commissioner concerning the insurers affairs, whether in this State or elsewhere; and, after reasonable notice of the allegation, the insurer has failed promptly and effectively to terminate the employment and status of the person and all his or her influence on management. (6) After demand by the Commissioner to examine the books and the records of the insurer, the insurer has failed to promptly make available for examination any of its own property, books, accounts, documents, or other records, or those of a subsidiary or related company within the control of the insurer, or those of a person having executive authority in the insurer so far as the records pertain to the insurer. (7) Without first obtaining the written consent of the Commissioner, the insurer has transferred, or attempted to transfer, in a manner contrary to the provisions of chapter 101 of this title or other applicable statute, substantially its entire property or business, or has entered into any transaction the effect of which is to merge, consolidate, or reinsure substantially its entire property or business in or with the property or business of any other person. (8) The insurer or its property has been or is the subject of an application for the appointment of a receiver, trustee, custodian, conservator, or sequestrator or similar fiduciary of the insurer or its property otherwise than as authorized under the insurance laws of this State, and such appointment has been made or is imminent, and such appointment might oust the courts of this State of jurisdiction or might prejudice orderly delinquency proceedings under this chapter. (9) Within the previous three years the insurer has willfully violated its charter or articles of incorporation, its bylaws, any provisions of this title, or a valid order of the Commissioner. (10) The insurer has failed to pay within 60 days after due date any obligation to any state or any subdivision thereof or any judgment entered in any state, if the court in which such judgment was entered had jurisdiction over such subject matter except that nonpayment shall not be a ground until 60 days after a good faith effort by the insurer to contest the obligation has been terminated, whether the contest is before the Commissioner or before a court, or the insurer has systematically attempted to compromise or renegotiate previously agreed settlements with its creditors on the ground that it is financially unable to pay its obligations in full. (11) The insurer has failed to file its annual report or other financial report required by statute within the time allowed by law and, after written demand by the Commissioner, has failed to give an adequate explanation immediately. (12) The board of directors or the holders of a majority of the shares entitled to vote, or a majority of those individuals entitled to the control of an insurer, requests or consents to rehabilitation under this chapter. (13) The insurer is insolvent. (Added 1991, No. 45,  2, eff. May 29, 1991.)
 7052. Rehabilitation orders
(a) An order to rehabilitate the business of a domestic insurer, or an alien insurer domiciled in this State, shall appoint the Commissioner and the Commissioners successors in office the rehabilitator and shall direct the rehabilitator immediately to take possession of the assets of the insurer and to administer them under the general supervision of the court. The filing or recording of the order with the Clerk of the Superior Court of Washington County or town clerk of the town in which the principal business of the company is conducted, or the town in which its principal office or place of business is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that town clerk would have imparted. The order to rehabilitate the insurer shall by operation of law vest title to all assets of the insurer in the rehabilitator. (b) Any order issued under this section shall require accounting to the court by the rehabilitator. Accountings shall be at such intervals as the court specifies in this order but no less frequently than semiannually. Each accounting shall include a report concerning the rehabilitators opinion as to the likelihood that a plan under subsection 7053(d) of this title will be prepared by the rehabilitator and the timetable for doing so. (c) Entry of an order of rehabilitation shall not constitute an anticipatory breach of any contracts of the insurer nor shall it be grounds for retroactive revocation or retroactive cancellation of any contracts of the insurer, unless such revocation or cancellation is done by the rehabilitator pursuant to section 7053 of this chapter. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  253, eff. July 1, 2022.) 
 7053. Powers and duties of the rehabilitator
(a) The Commissioner as rehabilitator may appoint one or more special deputies, who shall have all the powers and responsibilities of the rehabilitator granted under this section, and the Commissioner may employ such counsel, clerks, assistants, and other personnel as deemed necessary. The compensation of the special deputy, counsel, clerks, and assistants and all expenses of taking possession of the insurer and of conducting the proceedings shall be fixed by the Commissioner, with the approval of the Court and shall be paid out of the funds or assets of the insurer. The persons appointed under this section shall serve at the pleasure of the Commissioner. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the administrative costs incurred, the Commissioner may advance the costs so incurred out of any appropriation for the maintenance of the Department. Amounts so advanced for expenses of administration shall be repaid to the Commissioner for the use of the Department out of the first available money of the insurer. (b) The rehabilitator may take such action as he or she deems necessary or appropriate to reform and revitalize the insurer. He or she shall have all the powers of the directors, officers, and managers, whose authority shall be suspended, except as they are redelegated by the rehabilitator. He or she shall have full power to direct and manage, to hire and discharge employees subject to any contract rights they may have, and to deal with the property and business of the insurer. (c) If it appears to the rehabilitator that there has been criminal or tortious conduct, or breach of any contractual or fiduciary obligation detrimental to the insurer by any officer, manager, agent, broker, employee, or other person, he or she may pursue all appropriate legal remedies on behalf of the insurer. (d) If the rehabilitator determines that reorganization, consolidation, conversion, reinsurance, merger, or other transformation of the insurer is appropriate, he or she shall prepare a plan to effect such changes. Upon application of the rehabilitator for approval of the plan, and after such notice and hearings as the Court may prescribe, the Court may either approve or disapprove the plan proposed, or may modify it and approve it as modified. A plan approved under this subsection shall be, in the judgment of the Court, fair and equitable to all parties concerned. If the plan is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the policies of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for such period and to such an extent as may be necessary. (e) The rehabilitator shall have the power under sections 7065 and 7066 of this title to avoid fraudulent transfers. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7054. Actions by and against rehabilitator
(a) A court in this State before which an action or proceeding in which the insurer is a party, or is obligated to defend a party, is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for 90 days and such additional time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The rehabilitator shall take such action respecting the pending litigation as he or she deems necessary in the interests of justice and for the protection of creditors, policyholders, and the public. The rehabilitator shall immediately consider all litigation pending outside this State and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer. (b) A statute of limitations or defense of laches shall not run with respect to any action by or against an insurer between the filing of a petition for appointment of a rehabilitator for that insurer and the order granting or denying that petition. An action by or against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the order of rehabilitation is entered or the petition is denied. The rehabilitator may, upon an order for rehabilitation, within one year or such other longer time as applicable law may permit, institute an action or proceeding on behalf of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7055. Termination of rehabilitation
(a) Whenever the Commissioner believes further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policyholders, or the public, or would be futile, the Commissioner may petition the Superior Court of Washington County for an order of liquidation. A petition under this subsection shall have the same effect as a petition under section 7056 of this title. The Court shall permit the directors of the insurer to take such actions as are reasonably necessary to defend against the petition but may order payment from the estate of the insurer of costs and other expenses of defense only if the directors make a showing to the satisfaction of the Court that they incurred such expenses in good faith and with a reasonable belief that they would prevail. (b) The protection of the interests of insureds, claimants, and the public requires the timely performance of all insurance policy obligations. If the payment of policy obligations is suspended in substantial part for a period of six months at any time after the appointment of the rehabilitator and the rehabilitator has not filed an application for approval of a plan under subsection 7053(d) of this title, the rehabilitator shall petition the Court for an order of liquidation on grounds of insolvency. (c) The rehabilitator may at any time petition the Superior Court of Washington County for an order terminating rehabilitation of an insurer. The Court shall also permit the directors of the insurer to petition the Court for an order terminating rehabilitation of the insurer and may order payment from the estate of the insurer of such costs and other expenses of such petition only if the directors make a showing to the satisfaction of the Court that they incurred such expenses in good faith and with a reasonable belief that they would prevail. If the Court upon a petition or upon its own motion finds that rehabilitation has been accomplished and that grounds for rehabilitation under section 7051 of this title no longer exist, it shall order that the insurer be restored to possession of its property and the control of the business. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7056. Grounds for liquidation
The Commissioner may petition the Superior Court of Washington County for an order directing the Commissioner to liquidate a domestic insurer or an alien insurer domiciled in this State on the basis of one or more of the following grounds: (1) one or more grounds for an order of rehabilitation under section 7051 of this title exist, whether or not there has been a prior order directing the rehabilitation of the insurer; or (2) the insurer is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors, or the public. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7057. Liquidation orders
(a) An order to liquidate the business of a domestic insurer shall appoint the Commissioner and the Commissioners successors in office liquidator and shall direct the liquidator immediately to take possession of the assets of the insurer and to administer them under the general supervision of the court. The liquidator shall be vested by operation of law with the title to all the property, contracts, and rights of action, and all the books and records of the insurer ordered liquidated, wherever located, as of the entry of the final order of liquidation. The filing or recording of the order with the Superior Court of Washington County or the town clerk of the town in which its principal office or place of business is located or, in the case of real estate, with the town clerk of the town where the property is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that town clerk would have imparted. (b) Upon issuance of the order, the rights and liabilities of any such insurer and of its creditors, policyholders, shareholders, members, and all other persons interested in its estate shall become fixed as of the date of entry of the order of liquidation, except as provided in sections 7058 and 7076 of this title. (c) An order to liquidate the business of an alien insurer domiciled in this State shall be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets of the U.S. branch of the alien insurer shall be the only assets and business included in the order. (d) At the time of petitioning for an order of liquidation, or at any time thereafter, the Commissioner, after making appropriate findings of an insurers insolvency, may petition the court for a judicial declaration of such insolvency. After providing such notice and hearing as it deems proper, the court may make the declaration. (e) Any order issued under this section shall require accounting to the court by the liquidator. Accountings shall include (at a minimum) the assets and liabilities of the insurer and all funds received or disbursed by the liquidator during the current period. Accountings shall be filed within one year of the liquidation order and at least annually thereafter. (f)(1) No order of liquidation shall be stayed pending appeal unless the persons challenging the order of liquidation on appeal post a bond satisfactory to cover all legal costs of defending the appeal and all loss and expense costs to the estate attributable to the delay by reason of the stay pending appeal. (2) In the event an order of liquidation is set aside upon any appeal, the company shall not be released from delinquency proceedings unless and until all funds advanced by any guaranty association, including reasonable administrative expenses in connection therewith relating to obligations of the company, shall be repaid in full, together with interest at the judgment rate of interest or unless an arrangement for repayment thereof has been made with the consent of all applicable guaranty associations. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  254, eff. July 1, 2022.) 
 7058. Continuance of coverage
(a) All policies, including bonds and other noncancellable business, other than life or health insurance or annuities, in effect at the time of issuance of an order of liquidation shall continue in force only for the lesser of: (1) a period of 30 days from the date of entry of the liquidation orders;(2) the expiration of the policy coverage;(3) the date when the insured has replaced the insurance coverage with equivalent insurance in another insurer or otherwise terminated the policy; (4) the liquidator has effected a transfer of the policy obligation pursuant to subdivision 7060(a)(9) of this title; or (5) the date proposed by the liquidator and approved by the Court to cancel coverage.(b) An order of liquidation under section 7057 of this title shall terminate coverages at the time specified in subsection (a) of this section for purposes of any other statute. (c) Policies of life or health insurance or annuities shall continue in force for such period and under such terms as is provided for by any applicable guaranty association or foreign guaranty association. (d) Policies of life or health insurance or annuities or any period or coverage of such policies not covered by a guaranty association or foreign guaranty association shall terminate under subsections (a) and (b) of this section. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7059. Dissolution of insurer
The Commissioner may petition for an order dissolving the corporate existence of a domestic insurer or the U.S. branch of an alien insurer domiciled in this State at the time the Commissioner applies for a liquidation order. The court shall order dissolution of the corporation upon petition by the Commissioner upon or after the granting of a liquidation order. If the dissolution has not previously been ordered, it shall be effected by operation of law upon the discharge of the liquidator if the insurer is insolvent but may be ordered by the court upon the discharge of the liquidator if the insurer is under a liquidation order for some other reason. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  255, eff. July 1, 2022.) 
 7060. Powers of liquidator
(a) The liquidator shall have the power to:(1) Appoint a special deputy to act for him or her and to determine reasonable compensation for the special deputy. The special deputy shall have all powers of the liquidator granted by this section. The special deputy shall serve at the pleasure of the liquidator. (2) Employ employees and agents, legal counsel, actuaries, accountants, appraisers, consultants, and such other personnel as he or she may deem necessary to assist in the liquidation. (3) Fix the reasonable compensation of employees and agents, legal counsel, actuaries, accountants, appraisers, and consultants with the approval of the Court. (4) Pay reasonable compensation to persons appointed and to defray from the funds or assets of the insurer all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer. In the event that the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the Commissioner may advance the costs so incurred out of any appropriation for the maintenance of the Department. Any amounts so advanced for expenses of administration shall be repaid to the Commissioner for the use of the Department out of the first available moneys of the insurer. (5) Hold hearings, subpoena witnesses to compel their attendance, administer oaths, examine any person under oath, and compel any person to subscribe to testimony after it has been correctly reduced to writing; and in connection with such proceedings, require the production of any books, papers, records, or other documents which he or she deems relevant to the inquiry. (6) Audit the books and records of all agents of the insurer insofar as those records relate to the business activities of the insurer. (7) Collect all debts and moneys due and claims belonging to the insurer, wherever located, and for this purpose: (A) institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against such debts; (B) do such other acts as are necessary or expedient to collect, conserve, or protect its assets or property, including the power to sell, compound, compromise, or assign debts for purposes of collection upon such terms and conditions as he or she deems best; and (C) pursue any creditors remedies available to enforce his or her claims.(8) Conduct public and private sales of the property of the insurer.(9) Use assets of the estate of an insurer under a liquidation order to transfer policy obligations to a solvent assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under section 7081 of this title. (10) Acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon, or otherwise dispose of or deal with, any property of the insurer at its market value or upon such terms and conditions as are fair and reasonable. He or she shall also have power to execute, acknowledge, and deliver any and all deeds, assignments, releases, and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with the liquidation. (11) Borrow money on the security of the insurers assets or without security and execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation. Any such funds borrowed may be repaid as an administrative expense and have priority over any other claims in Class 1 of section 7081 of this title under the priority of distribution. (12) Enter into such contracts as are necessary to carry out the order to liquidate, and affirm or disavow any contracts to which the insurer is a party. (13) Continue to prosecute and institute in the name of the insurer or in his or her own name any and all suits and other legal proceedings, in this State or elsewhere, and abandon the prosecution of claims he or she deems unprofitable to pursue further. If the insurer is dissolved under section 7059 of this title, he or she shall have the power to apply to any court in this State or elsewhere for leave to substitute himself or herself for the insurer as plaintiff. (14) Prosecute any action which may exist in behalf of the creditors, members, policyholders, or shareholders of the insurer against any officer of the insurer, or any other person. (15) Remove any or all records and property of the insurer to the offices of the Commissioner or to such other place as may be convenient for the purposes of efficient and orderly execution of the liquidation. Guaranty associations and foreign guaranty associations shall have such reasonable access to the records of the insurer as is necessary for them to carry out their statutory obligations. (16) Deposit in one or more banks in this State such sums as are required for meeting current administration expenses. (17) Invest all sums not currently needed, unless the Court orders otherwise.(18) File any necessary documents for record in the office of any recorder of deeds or record office in this State or elsewhere where property of the insurer is located. (19) Assert all defenses available to the insurer as against third persons, including statutes of limitation, statutes of frauds, and the defense of usury. A waiver of any defense by the insurer after a petition in liquidation has been filed shall not bind the liquidator. Whenever a guaranty association or foreign guaranty association has an obligation to defend any suit, the liquidator shall give precedence to such obligation and may defend only in the absence of a defense by such guaranty associations or if the potential recovery is above the limits covered by the guaranty association or otherwise not covered by such association. (20) Exercise and enforce all the rights, remedies, and powers of any creditor, shareholder, policyholder, or member; including any power to avoid any transfer or lien that may be given by the general law and that is not provided by the provisions of sections 7065 through 7067 of this title. (21) Intervene in any proceeding wherever instituted that might lead to the appointment of a receiver or trustee, and act as the receiver or trustee whenever the appointment is offered. (22) Enter into agreements with any receiver or commissioner of any other state relating to the rehabilitation, liquidation, conservation, or dissolution of an insurer doing business in both states. (23) Exercise all powers now held or hereafter conferred upon receivers by the laws of this State not inconsistent with the provisions of this chapter. (b)(1) If a company placed in liquidation issued liability policies on a claims made basis, which provided an option to purchase an extended period to report claims, then the liquidator may make available to holders of such policies, for a charge, an extended period to report claims as stated herein. The extended reporting period shall be made available only to those insureds who have not secured substitute coverage. The extended period made available by the liquidator shall begin upon termination of any extended period to report claims in the basic policy and shall end at the earlier of the final date for filing of claims in the liquidation proceeding or 18 months from the order of liquidation. (2) The extended period to report claims made available by the liquidator shall be subject to the terms of the policy to which it relates. The liquidator shall make available such extended period within 60 days after the order of liquidation at a charge to be determined by the liquidator subject to approval of the Court. Such offer shall be deemed rejected unless it is accepted in writing and the charge is paid within 90 days after the order of liquidation. No commissions, premium taxes, assessments, or other fees shall be due on the charge pertaining to the extended period to report claims. (c) The enumeration, in this section, of the powers and authority of the liquidator shall not be construed as a limitation upon him or her, nor shall it exclude in any manner the liquidators right to do such other acts not herein specifically enumerated or otherwise provided for, as may be necessary or appropriate for the accomplishment of or in aid of the purpose of liquidation. (d) Notwithstanding the powers of the liquidator as stated in subsections (a) and (b) of this section, the liquidator shall have no obligation to defend claims or to continue to defend claims subsequent to the entry of a liquidation order. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7061. Notice to creditors and others
(a) Unless the Court otherwise directs, the liquidator shall give or cause to be given notice of the liquidation order as soon as possible: (1) by first class mail and either by telegram or telephone to the insurance commissioner of each jurisdiction in which the insurer is doing business; (2) by first class mail to any guaranty association or foreign guaranty association which is or may become obligated as a result of the liquidation; (3) by first class mail to all insurance agents of the insurer;(4) by first class mail to all persons known or reasonably expected to have claims against the insurer including all policyholders, at their last known address as indicated by the records of the insurer; and (5) by publication in a newspaper of general circulation in the county in which the insurer has its principal place of business and in such other locations as the liquidator deems appropriate. (b) Notice to potential claimants under subsection (a) of this section shall require claimants to file with the liquidator their claims together with proper proofs thereof under section 7075 of this title, on or before a date the liquidator shall specify in the notice. Although an earlier date may be set by the liquidator, the last day to file claims shall be no later than 18 months following the order of liquidation. The liquidator need not require persons claiming cash surrender values or other investment values in life insurance and annuities to file a claim. All claimants shall have a duty to keep the liquidator informed of any changes of address. (c)(1) Notice under subsection (a) of this section to agents of the insurer and to potential claimants who are policyholders shall include, where applicable, notice that coverage by state guaranty associations may be available for all or part of policy benefits in accordance with applicable state guaranty laws. (2) The liquidator shall promptly provide to the guaranty associations such information concerning the identities and addresses of such policyholders and their policy coverages as may be within the liquidators possession or control, and otherwise cooperate with guaranty associations to assist them in providing to such policyholders timely notice of the guaranty associations coverage of policy benefits, including, as applicable, coverage of claims and continuation or termination of coverages. (d) If notice is given in accordance with this section, the distribution of assets of the insurer under this chapter shall be conclusive with respect to all claimants, whether or not they received notice. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7062. Duties of agents
(a) Every person who receives notice in the form prescribed in section 7061 of this title that an insurer which he or she represents as an agent is the subject of a liquidation order, shall within 30 days of such notice provide to the liquidator (in addition to the information he or she may be required to provide pursuant to section 7034 of this title) the information in the agents records related to any policy issued by the insurer through the agent, and, if the agent is a general agent, the information in the general agents records related to any policy issued by the insurer through an agent under contract to him or her, including the name and address of such sub-agent. A policy shall be deemed issued through an agent if the agent has a property interest in the expiration of the policy, or if the agent has had in his or her possession a copy of the declarations of the policy at any time during the life of the policy, except where the ownership of the expiration of the policy has been transferred to another. (b) An agent who fails to give notice or file a report of compliance as required in subsection (a) of this section may be subject to payment of a penalty of not more than $1,000.00 and may have his or her license suspended, after a hearing held by the Commissioner. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7063. Actions by and against liquidator
(a) Upon issuance of an order appointing a liquidator of a domestic insurer or of an alien insurer domiciled in this State, no action shall be brought against the insurer or liquidator, whether in this State or elsewhere, nor shall any such existing actions be maintained or further presented after issuance of such order. The courts of this State shall give full faith and credit to injunctions against actions against the liquidator or the company or the continuation of existing actions against the liquidator or the company, when such injunctions are included in an order to liquidate an insurer issued pursuant to corresponding provisions in other states. Whenever, in the liquidators judgment, protection of the estate of the insurer necessitates intervention in an action against the insurer that is pending outside this State, he or she may intervene in the action. The liquidator may defend any action in which he or she intervenes under this section at the expense of the estate of the insurer. (b) The liquidator may, upon or after an order for liquidation, within two years or such time in addition to two years as applicable law may permit, institute an action or proceeding on behalf of the estate of the insurer upon any cause of action against which the period of limitation fixed by applicable law has not expired at the time of the filing of the petition upon which such order is entered. Where, by agreement, a period of limitation is fixed for instituting a suit or proceeding upon any claim, or for filing any claim, proof of claim, proof of loss, demand, notice, or the like, or where in any proceeding, judicial or otherwise, a period of limitation is fixed, either in the proceeding or by applicable law, for taking any action, filing any claim or pleading, or doing any act, and where in any such case the period had not expired at the date of the filing of the petition; the liquidator may, for the benefit of the estate, take any such action or do any such act, required of or permitted to the insurer, within a period of 180 days subsequent to the entry of an order for liquidation, or within such further period as is shown to the satisfaction of the Court not to be unfairly prejudicial to the other party. (c) A statute of limitation or defense of laches shall not run with respect to any action against an insurer between the filing of a petition for liquidation against an insurer and the denial of the petition. An action against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the petition is denied. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7064. Collection and list of assets
(a) As soon as practicable after the liquidation order but not later than 120 days thereafter, the liquidator shall prepare in duplicate a list of the insurers assets. The list shall be amended or supplemented from time to time as the liquidator may determine. One copy shall be filed in the Superior Court of Washington County and one copy shall be retained for the liquidators files. All amendments and supplements shall be similarly filed. (b) The liquidator shall reduce the assets to a degree of liquidity that is consistent with the effective execution of the liquidation. (c) A submission to the Court for disbursement of assets in accordance with section 7073 of this title fulfills the requirements of subsection (a) of this section. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7065. Fraudulent transfers prior to petition
(a) Every transfer made or suffered and every obligation incurred by an insurer within one year prior to the filing of a successful petition for rehabilitation or liquidation under this chapter is fraudulent as to then existing and future creditors if made or incurred without fair consideration, or with actual intent to hinder, delay, or defraud either existing or future creditors. A transfer made or an obligation incurred by an insurer ordered to be rehabilitated or liquidated under this chapter, which is fraudulent under this section, may be avoided by the receiver, except as to a person who in good faith is a purchaser, lienor, or obligee, for a present fair equivalent value, and except that a purchaser, lienor, or obligee, who in good faith has given a consideration less than fair for such transfer, lien, or obligation, may retain the property, lien or obligation as security for repayment. The Court may, on due notice, order any such transfer or obligation to be preserved for the benefit of the estate, and in that event, the receiver shall succeed to and may enforce the rights of the purchaser, lienor, or obligee. (b)(1) A transfer of property other than real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee under subsection 7067(c) of this title. (2) A transfer of real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee. (3) A transfer which creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created. (4) Any transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition. (5) The provisions of this subsection apply whether or not there are or were creditors who might have obtained any liens or persons who might have become bona fide purchasers. (c) A transaction of the insurer with a reinsurer shall be deemed fraudulent and may be avoided by the receiver under subsection (a) of this section if: (1) the transaction consists of the termination, adjustment, or settlement of a reinsurance contract in which the reinsurer is released from any part of its duty to pay the originally specified share of losses that had occurred prior to the time of the transactions, unless the reinsurer gives a present fair equivalent value for the release; and (2) any part of the transaction took place within one year prior to the date of filing of the petition through which the receivership was commenced. (d) Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection (a) of this section shall be personally liable therefore and shall be bound to account to the liquidator. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7066. Fraudulent transfer after petition
(a) After a petition for rehabilitation or liquidation has been filed, a transfer of any of the real property of the insurer made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value; or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid, for which amount the transferee shall have a lien on the property so transferred. The commencement of a proceeding in rehabilitation or liquidation shall be constructive notice upon the recording of a copy of the petition for or order of rehabilitation or liquidation with the recorder of deeds in the county where any real property in question is located. The exercise by a court of the United States or any state or jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state shall not be impaired by the pendency of such a proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale. (b) After a petition for rehabilitation or liquidation has been filed and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted: (1) A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value; or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid, for which amount the transferee shall have a lien on the property so transferred. (2) A person indebted to the insurer or holding property of the insurer may, if acting in good faith, pay the indebtedness or deliver the property, or any part thereof, to the insurer or upon his or her order, with the same effect as if the petition were not pending. (3) A person having actual knowledge of the pending rehabilitation or liquidation shall be deemed not to act in good faith. (4) A person asserting the validity of a transfer under this section shall have the burden of proof. Except as elsewhere provided in this section, no transfer by or on behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator shall be valid against the liquidator. (c) Every person receiving any property from the insurer or any benefit thereof which is a fraudulent transfer under subsection (a) of this section shall be personally liable therefore and shall be bound to account to the liquidator. (d) Nothing in this chapter shall impair the negotiability of currency or negotiable instruments. (Added 1991, No. 45,  2, eff. May 29, 1991.)
 7067. Voidable preferences and liens
(a)(1) A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under this chapter, the effect of which transfer may be to enable the creditor to obtain a greater percentage of this debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, then such transfers shall be deemed preferences if made or suffered within one year before the filing of the successful petition for rehabilitation, or within two years before the filing of the successful petition for liquidation, whichever time is shorter. (2) A preference may be avoided by the liquidator if:(A) the insurer was insolvent at the time of the transfer of property;(B) the transfer of property was made within four months before the filing of the petition;(C) the creditor receiving it or to be benefited by it or the creditors agent acting with reference to it had, at the time when the transfer of property was made, reasonable cause to believe that the insurer was insolvent or was about to become insolvent; or (D) the creditor receiving transferred property was an officer, or any employee or attorney or other person who was in fact in a position of comparable influence in the insurer to an officer whether or not he or she held such position, or any shareholder holding directly or indirectly more than five per centum of any class of any equity security issued by the insurer, or any other person, firm, corporation, association, or aggregation of persons with whom the insurer did not deal at arms length. (3) Where the preference is voidable, the liquidator may recover the property or, if it has been converted, its value from any person who has received or converted the property; except where a bona fide purchaser or lienor has given less than fair equivalent value, he or she shall have a lien upon the property to the extent of the consideration actually given by him or her. Where a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator. (b)(1) A transfer of property other than real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee. (2) A transfer of real property shall be deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee. (3) A transfer that creates an equitable lien shall not be deemed to be perfected if there are available means by which a legal lien could be created. (4) A transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition. (5) The provisions of this subsection apply whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers. (c)(1) A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of such proceedings upon the entry or docketing of a judgment or decree, or upon attachment, garnishment, execution, or like process, whether before, upon, or after judgment or decree and whether before or upon levy. It does not include liens that under applicable law are given a special priority over other liens that are prior in time. (2) A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of subsection (b) of this section, if such consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials. Such a lien could not, however, become superior and such a purchase could not create superior rights for the purpose of subsection (b) of this section through any acts subsequent to the obtaining of such a lien or subsequent to such a purchase that requires the agreement or concurrence of any third party or that requires any further judicial action or ruling. (d) A transfer of property for or on account of a new and contemporaneous consideration that is deemed under subsection (b) of this section to be made or suffered after the transfer because of delay in perfecting it does not thereby become a transfer for or on account of an antecedent debt if any acts required by the applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers rights are performed within 21 days or any period expressly allowed by the law, whichever is less. A transfer to secure a future loan, if such a loan is actually made, or a transfer that becomes security for a future loan, shall have the same effect as a transfer for or on account of a new and contemporaneous consideration. (e) If any lien deemed voidable under subdivision (a)(2) of this section has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of an insurer before the filing of a petition under this chapter that results in a liquidation order, the indemnifying transfer or lien shall also be deemed voidable. (f) The property affected by any lien deemed voidable under subsections (a) and (e) of this section shall be discharged from such lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety shall pass to the liquidator, except that the court may on due notice order any such lien to be preserved for the benefit of the estate and the court may direct that such conveyance be executed as may be proper or adequate to evidence the title of the liquidator. (g) The Superior Court of Washington County shall have summary jurisdiction of any proceeding by the liquidator to hear and determine the rights of any parties under this section. Reasonable notice of hearing in the proceeding shall be given to all parties in interest, including the obligee of a releasing bond or other like obligation. Where an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of any party in interest, shall in the same proceeding ascertain the value of the property or lien, and if the value is less than the amount for which the property is indemnity or less than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as ascertained by the court, to the liquidator, within such reasonable times as the court shall fix. (h) The liability of the surety under a releasing bond or other like obligation shall be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and avoided by the liquidator, or where the property is retained under subsection (g) of this section to the extent of the amount paid to the liquidator. (i) If a creditor has been preferred, and afterward in good faith gives the insurer further credit without security of any kind, for property that becomes a part of the insurers estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference that would otherwise be recoverable. (j) If an insurer shall, directly or indirectly, within four months before the filing of a successful petition for liquidation under this chapter, or at any time in contemplation of a proceeding to liquidate it, pay money or transfer property to an attorney for services rendered or to be rendered, the transactions may be examined by the court on its own motion or shall be examined by the court on petition of the liquidator and shall be held valid only to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the liquidator for the benefits of the estate provided that where the attorney is in a position of influence in the insurer or an affiliate thereof payment of any money or the transfer of any property to the attorney for services rendered or to be rendered shall be governed by the provision of subdivision (a)(2)(D) of this section. (k)(1) Every officer, manager, employee, shareholder, member, subscriber, attorney, or any other person acting on behalf of the insurer who knowingly participates in giving any preference when such person has reasonable cause to believe the insurer is or is about to become insolvent at the time of the preference shall be personally liable to the liquidator for the amount of the preference. It is permissible to infer that there is a reasonable cause to so believe if the transfer was made within four months before the date of filing of this successful petition for liquidation. (2) Every person receiving any property from the insurer or the benefit thereof as a preference voidable under subsection (a) of this section shall be personally liable therefor and shall be bound to account to the liquidator. (3) Nothing in this subsection shall prejudice any other claim by the liquidator against any person. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  256, eff. July 1, 2022.) 
 7068. Claims of holders of void or voidable rights
(a) No claims of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment, or encumbrance voidable under this chapter shall be allowed unless he or she surrenders the preference, lien, conveyance, transfer, assignment, or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim shall not be allowed unless the money is paid or the property is delivered to the liquidator within 30 days from the date of the entering of the final judgment, except that the Court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding. (b) A claim allowable under subsection (a) of this section by reason of the avoidance, whether voluntary or involuntary, of a preference, lien, conveyance, transfer, assignment, or encumbrance, may be filed as an excused late filing under section 7074 of this title if filed within 30 days from the date of the avoidance, or within the further time allowed by the Court under subsection (a) of this section. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7069. Setoffs
(a) Mutual debts or mutual credits whether arising out of one or more contracts between the insurer and another person in connection with any action or proceeding under this chapter shall be set off and the balance only shall be allowed or paid, except as provided in subsections (b) and (c) of this section and section 7072 of this title. (b) No setoff or counterclaim shall be allowed in favor of any person where:(1) the obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer; (2) the obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff; (3) the obligation of the insurer is owed to an affiliate of such person, or any other entity or association other than the person; (4) the obligation of the person is owed to an affiliate of the insurer, or any other entity or association other than the insurer; (5) the obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; (6) the obligation of the person is to pay to the insurer sums held in a fiduciary capacity for the insurer; or (7) the person alone or together with any other member of its insurance company holding system owns 50 percent or more of the voting stock of the insurer. (c) The receiver shall provide persons with accounting statements identifying debts which are currently due and payable. Where a person owes to the insurer currently due and payable balances, against which the person asserts setoff of mutual credits which may become due and payable from the insurer in the future, the person shall promptly pay to the receiver the currently due and payable amount; provided that, notwithstanding section 7081 of this title, the receiver shall promptly and fully refund, to the extent of the persons prior payments, any mutual credits that become due and payable to the person by the insurer. (Added 1991, No. 45,  2, eff. date, see note set below.) 
 7070. Assessments
(a) As soon as practicable but not more than two years from the date of an order of liquidation under section 7057 of this title of an insurer issuing assessable policies, the liquidator shall make a report to the court setting forth: (1) the reasonable value of the assets of the insurer;(2) the insurers probable total liabilities;(3) the probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment; and (4) a recommendation as to whether or not an assessment should be made and in what amount.(b)(1) Upon the basis of the report provided in subsection (a) of this section, including any supplements and amendments, the Superior Court of Washington County may levy one or more assessments against all members of the insurer who are subject to assessment. (2) Subject to any applicable legal limits on assessability, the aggregate assessment shall be for the amount that the sum of the probable liabilities, the expenses of administration, and the estimated cost of collection of the assessment exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically. (c) After levy of assessment under subsection (b) of this section, the liquidator shall issue an order directing each member who has not paid the assessment pursuant to the order to show cause why the liquidator should not pursue a judgment for such assessment. (d) The liquidator shall give notice of the order to show cause by publication and by first-class mail to each member liable under the order mailed to the members last known address as it appears on the insurers records, at least 20 days before the return day of the order to show cause. (e)(1) If a member does not appear and serve duly verified objections upon the liquidator on or before the return day of the order to show cause under subsection (c) of this section, the court shall make an order adjudging the member liable for the amount of the assessment against the member pursuant to subsection (c) of this section, together with costs, and the liquidator shall have a judgment against the member for the assessment. (2) If on or before such return day, the member appears and serves duly verified objections upon the liquidator, the Commissioner may hear and determine the matter or may appoint a referee to hear it and make such order as the facts warrant. In the event that the Commissioner determines that such objections do not warrant relief from assessment, the member may request the court to review the matter and vacate the order to show cause. (f) The liquidator may enforce any order or collect any judgment under subsection (e) of this section by any lawful means. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  257, eff. July 1, 2022.) 
 7071. Reinsurers liability
The amount recoverable by the liquidator from reinsurers shall not be reduced as a result of the delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurers obligation to the insurers estate except when the reinsurance contract provided for direct coverage of a named insured and the payment was made in discharge of that obligation. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7072. Recovery of premiums owed
(a)(1) An agent, broker, premium finance company, or any other person, other than the insured, responsible for the payment of a premium shall be obligated to pay any unpaid premium for the full policy term due the insurer at the time of the declaration of insolvency, or the inception of the receivership, whichever is sooner, whether earned or unearned, as shown on the records of the insurer. The liquidator shall also have the right to recover from such person any part of an unearned premium that represents commission of such person. Credits or setoffs or both shall not be allowed to an agent, broker, or premium finance company for any amounts advanced to the insurer by the agent, broker, or premium finance company on behalf of, but in the absence of a payment by, the insured. (2) An insured shall be obligated to pay any unpaid earned premium due the insurer at the time of the declaration of insolvency, or the inception of the receivership, whichever is sooner, as shown on the records of the insurer. (b) Upon satisfactory evidence of a violation of this section, the Commissioner may pursue either one or both of the following courses of action: (1) Suspend or revoke or refuse to renew the licenses of such offending party or parties.(2) Impose a penalty of not more than $1,000.00 for each and every act in violation of this section by said party or parties. (c) Before the Commissioner shall take any action as set forth in subsection (b) of this section, he or she shall give written notice to the person, company, association, or exchange accused of violating the law, stating specifically the nature of the alleged violation; and fixing a time and place, at least ten days thereafter, when a hearing on the matter shall be held. After hearing, or upon failure of the accused to appear at the hearings, the Commissioner, if he or she shall find a violation, shall impose one or both of the penalties provided by subsection (b) of this section as he or she deems advisable. (d) When the Commissioner shall take action in any or all of the ways set out in subsection (b) of this section, the party aggrieved may appeal the Commissioners decision to the Supreme Court. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7073. Domiciliary liquidators proposal to distribute assets
(a) Within 120 days of a final determination of insolvency of an insurer by a court of competent jurisdiction of this State, the liquidator shall make application to the court for approval of a proposal to disburse assets out of marshalled assets, from time to time as such assets become available, to a guaranty association or foreign guaranty association having obligations because of such insolvency. If the liquidator determine that there are insufficient assets to disburse, the application required by this section shall be considered satisfied by a filing by the liquidator stating the reasons for this determination. (b) A proposal under subsection (a) of this section shall at least include provisions for: (1) Reserving amounts for the payment of expenses of administration and the payment of claims of secured creditors, to the extent of the value of the security held, and claims falling within the priorities established in Classes 1 and 2 of section 7081 of this title. (2) Disbursement of the assets marshalled to date and subsequent disbursement of assets as they become available. (3) Equitable allocation of disbursements to each of the guaranty associations and foreign guaranty associations entitled to such disbursements. (4) Securing by the liquidator from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the liquidator such assets, together with income earned on assets previously disbursed, as may be required to pay claims of secured creditors and claims falling within the priorities established in section 7081 of this title in accordance with such priorities. A bond shall not be required of any such association. (5) A full report to be made by each association to the liquidator accounting for all assets so disbursed to the association, all disbursements made from such assets, any interest earned by the association on such assets, and any other matter as the court may direct. (c) The liquidators proposal shall provide for disbursements to the associations in amounts estimated at least equal to the claim payments made or to be made thereby for which such associations could assert a claim against the liquidator and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such claim payments made or to be made by the association, then disbursements shall be in the amount of available assets. (d) The liquidators proposal shall, with respect to an insolvent insurer writing life or health insurance or annuities, provide for disbursements of assets to any guaranty association or any foreign guaranty association covering life or health insurance or annuities or to any other entity or organization reinsuring, assuming, or guaranteeing policies or contracts of insurance under the acts creating such associations. (e) Notice of an application under this section shall be given to the association in and to the commissioners of insurance of each of the states. Notice shall be deemed to have been given when deposited in the U.S. certified mails, first-class postage prepaid, at least 30 days prior to submission of such application to the court. Action on the application may be taken by the court, provided the notice required by this subsection has been given and provided further that the liquidators proposal complies with the provisions of subdivisions (b)(1) and (b)(2) of this section. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  258, eff. July 1, 2022.) 
 7074. Filing of claims
(a) Proof of all claims shall be filed with the liquidator in the form required by section 7075 of this title on or before the last day for filing specified in the notice required under section 7061 of this title, except that proof of claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires. (b) The liquidator may permit a claimant making a late filing to share in distributions, whether past or future, as if he or she were not late, to the extent that any such payment will not prejudice the orderly administration of the liquidation, under the following circumstances: (1) the existence of the claim was not known to the claimant and he or she filed the claim as promptly thereafter as reasonably possible after learning of it; (2) a transfer to a creditor was avoided under sections 7065 through 7067 of this title, or was voluntarily surrendered under section 7068 of this title, and the filing satisfies the conditions of section 7068 of this title; or (3) the valuation under section 7080 of this title, of security held by a secured creditor shows a deficiency, which is filed within 30 days after the valuation. (c) The liquidator shall permit late filing claims to share in distributions, whether past or future, as if they were not late, if such claims are claims of a guaranty association or foreign guaranty association for reimbursement of covered claims paid or expenses incurred, or both, subsequent to the last day for filing where such payments were made and expenses incurred as provided by law. (d) The liquidator may consider any claim filed late which is not covered by subsection (b) of this section, and permit it to receive distributions which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late-filing claimant shall receive, at each distribution, the same percentage of the amount allowed on his or her claim as is then being paid to claimants of any lower priority. This shall continue until his or her claim has been paid in full. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7075. Proof of claim
(a) Proof of claim shall consist of a statement signed by the claimant that includes all the following that are applicable: (1) the particulars of the claim including the consideration given for it;(2) the identity and amount of the security on the claim;(3) the payments made on the debt, if any;(4) that the sum claimed is justly owing and that there is no setoff, counterclaim, or defense to the claim; (5) any right of priority of payment or other specific right asserted by the claimants;(6) a copy of the written instrument which is the foundation of the claim; and(7) the name and address of the claimant and his or her attorney.(b) No claim need be considered or allowed if it does not contain all the information in subsection (a) of this section. The liquidator may require that a prescribed form be used, and may require that other information and documents be included. (c) At any time the liquidator may request the claimant to present information or evidence supplementary to that required under subsection (a) of this section and may take testimony under oath, require production of affidavits or depositions, or otherwise obtain additional information or evidence. (d) No judgment or order against an insured or the insurer entered after the date of filing of a successful petition for liquidation, and no judgment or order against an insured or the insurer entered at any time by default or by collusion need be considered as evidence of liability or of quantum of damages. No judgment or order against an insured or the insurer entered within four months before the filing of the petition need be considered as evidence of liability or of the quantum of damages. (e) All claims of a guaranty association or foreign guaranty association shall be in such form and contain such substantiation as may be agreed to by the association and the liquidator. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7076. Special claims
(a) The claim of a third party which is contingent only on his or her first obtaining a judgment against the insured shall be considered and allowed as if there were no such contingency. (b) A claim may be allowed even if contingent, if it is filed in accordance with section 7074 of this title. It may be allowed and the claimant may participate in all distributions declared after it is filed to the extent that it does not prejudice the orderly administration of the liquidation. (c) Claims that are due except for the passage of time shall be treated as absolute claims are treated, except that such claims may be discounted at the legal rate of interest. (d) Claims made under employment contracts by directors, principal officers, or persons in fact performing similar functions or having similar functions or having similar powers are limited to payment for services rendered prior to the issuance of any order of rehabilitation or liquidation under section 7052 or 7057 of this title. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7077. Special provisions for third party claims
(a) Whenever any third party asserts a cause of action against an insured of an insurer in liquidation, the third party may file a claim with the liquidator. (b) Whether or not the third party files a claim, the insured may file a claim on his or her own behalf in the liquidation. If the insured fails to file a claim by the date for filing claims specified in the order of liquidation or within 60 days after mailing of the notice required by section 7061 of this title, whichever is later, the insured is an unexcused late filer. (c)(1) The liquidator shall make recommendations to the Court under section 7082 of this title, for the allowance of an insureds claim under subsection (b) of this section after consideration of the probable outcome of any pending action against the insured on which the claim is based, the probable damages recoverable in the action and the probable costs and expenses of defense. After allowance by the Court, the liquidator shall withhold any dividends payable on the claim, pending the outcome of litigation and negotiation with the insured. Whenever it seems appropriate, he or she shall reconsider the claim on the basis of additional information and amend his or her recommendations to the Court. The insured shall be afforded the same notice and opportunity to be heard on all changes in the recommendation as in its initial determination. The Court may amend its allowance as it thinks appropriate. As claims against the insured are settled or barred, the insured shall be paid from the amount withheld the same percentage dividend as was paid on other claims of like property, based on the lesser of: (A) the amount actually recovered from the insured by action or paid by agreement plus the reasonable costs and expense of defense; or (B) the amount allowed on the claims by the Court.(2) After all claims are settled or barred, any sum remaining from the amount withheld shall revert to the undistributed assets of the insurer. Delay in final payment under this subsection shall not be a reason for unreasonable delay of final distribution and discharge of the liquidator. (d) If several claims founded upon one policy are filed, whether by third parties or as claims by the insured under this section, and the aggregate allowed amount of the claims to which the same limit of liability in the policy is applicable exceeds that limit, each claim as allowed shall be reduced in the same proportion so that the total equals the policy limit. Claims by the insured shall be evaluated as under subsection (c) of this section. If any insureds claim is subsequently reduced under subsection (c) of this section, the amount thus freed shall be apportioned ratably among the claims which have been reduced under this subsection. (e) No claim may be presented under this section if it is or may be covered by any guaranty association or foreign guaranty association. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7078. Disputed claims
(a) When a claim is denied in whole or in part by the liquidator, written notice of the determination shall be given to the claimant or the claimants attorney by first class mail at the address shown in the proof of claim. Within 60 days from the mailing of the notice, the claimant may file objections with the liquidator. If no such filing is made, the claimant may not further object to the determination. (b) Whenever objections are filed with the liquidator and the liquidator does not alter his or her denial of the claim as a result of the objections, the liquidator shall ask the Court for a hearing as soon as practicable and give notice of the hearing by first class mail to the claimant or the claimants attorney and to any other persons directly affected, not less than ten nor more than 30 days before the date of the hearing. The matter may be heard by the Court or by a Court-appointed referee who shall submit findings of fact along with a recommendation. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7079. Claims of surety
Whenever a creditor whose claim against an insurer is secured, in whole or in part, by the undertaking of another person, fails to prove and file that claim, the other person may do so in the creditors name, and shall be subrogated to the rights of the creditor, whether the claim has been filed by the creditor or by the other person in the creditors name, to the extent that he or she discharges the undertaking. In the absence of an agreement with the creditor to the contrary, the other person shall not be entitled to any distribution, until the amount paid to the creditor on the undertaking plus the distributions paid on the claim from the insurers estate to the creditor equals the amount of the entire claim of the creditor. Any excess received by the creditor shall be held by him or her in trust for such other person. The term other person, as used in this section, does not apply to a guaranty association or foreign guaranty association. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7080. Secured creditors claims
(a) The value of any security held by a secured creditor shall be determined in one of the following ways, as the Court may direct: (1) by converting the same into money according to the terms of the agreement pursuant to which the security was delivered to such creditors; or (2) by agreement, arbitration, compromise, or litigation between the creditor and the liquidator. (b) The determination made under subsection (a) of this section shall be under the supervision and control of the Court with due regard for the recommendation of the liquidator. The amount so determined shall be credited upon the secured claim, and any deficiency shall be treated as an unsecured claim. If the claimant shall surrender his or her security to the liquidator, the entire claim shall be allowed as if unsecured. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7081. Priority of distribution
The priority of distribution of claims from the insurers estate shall be in accordance with the order in which each class of claims is set forth in this section. Every claim in each class shall be paid in full or adequate funds retained for such payment before the members of the next class receive any payment. No subclass shall be established within any class. The order of distribution of claims shall be: (1) Class 1. The costs and expenses of administration, during conservation, rehabilitation, and liquidation, including the following: (A) actual and necessary costs of preserving or recovering the assets of the insurer;(B) compensation for all services rendered in the conservation, rehabilitation, and liquidation;(C) necessary filing fees;(D) fees and mileage payable to witnesses; and(E) authorized reasonable attorneys fees and other professional services rendered in the conservation, rehabilitation, and liquidation. (2) Class 2.(A) The administrative expenses of guaranty associations. For purposes of this section, these expenses shall be the reasonable expenses incurred by guaranty associations where the expenses are not payments or expenses which are required to be incurred as direct policy benefits in fulfillment of the terms of the insurance contract or policy, and that are of the type and nature that, but for the activities of the guaranty association otherwise would have been incurred by the receiver, including evaluations of policy coverage, activities involved in the adjustment and settlement of claims under policies, including those of in-house or outside adjusters, and the reasonable expenses incurred in connection with the arrangements for ongoing coverage through transfer to other insurers, policy exchanges, or maintaining policies in force. The receiver may in his or her sole discretion approve as an administrative expense under this section any other reasonable expenses of the guaranty association if the receiver finds: (i) The expenses are not expenses required to be paid or incurred as direct policy benefits by the terms of the policy. (ii) The expenses were incurred in furtherance of activities that provided a material economic benefit to the estate as a whole, irrespective of whether the activities resulted in additional benefits to covered claimants. The Court shall approve such expenses, unless it finds the receiver abused his or her discretion in approving the expenses. (B) If the receiver determines that the assets of the estate will be sufficient to pay all Class 1 claims in full, Class 2 claims shall be paid currently, provided that the liquidator shall secure from each of the associations receiving disbursements pursuant to this section an agreement to return to the liquidator such disbursements, together with investment income actually earned on such disbursements, as may be required to pay Class 1 claims. No bond shall be required of any such association. (3) Class 3. All claims under policies including such claims of the federal or any state or local government for losses incurred, including third party claims, claims for unearned premiums, and all claims of a guaranty association or foreign guaranty association, other than claims included in Class 2, for payment of covered claims or covered obligations of the insurer. It shall include claims of members of a health maintenance organization, if the member is liable to any provider for services provided under the plan; provided, however, claims of providers obligated by statute or agreement to hold members of a health maintenance organization harmless from liability for services provided under the plan shall be Class 6 claims. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values shall be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered by the claimant, shall not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligation of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to his or her employee shall be treated as a gratuity. (4) Class 4. Claims of the federal government other than those claims included in Class 3. (5) Class 5. Debts due employees for services, benefits, contractual or otherwise due arising out of such reasonable compensation to employees for services performed to the extent that they do not exceed two months of monetary compensation and represent payment for services performed within six months before the filing of the petition for liquidation or, if rehabilitation preceded liquidation, within one year before the filing of the petition for rehabilitation. Principal officers and directors shall not be entitled to the benefit of this priority except as otherwise approved by the liquidator and the Court. This priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of employees. (6) Class 6. Claims of any person, including claims of state or local governments, except those specifically classified elsewhere in this section. Class 6 includes claims of providers obligated by statute or agreement to hold members of a health maintenance organization harmless from liability for services provided under the plan, and claims of attorneys for fees and expenses owed them by a person for services rendered in opposing a formal delinquency proceeding. In order to prove the claim, the claimant must show that the insurer which is the subject of the delinquency proceeding incurred such fees and expenses based on its best knowledge, information, and belief, formed after reasonable inquiry indicating opposition was in the best interests of the person, was well-grounded in fact, and was warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that opposition was not pursued for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of the litigation. (7) Class 7. Claims of any state or local government for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remaining amount of such claims shall be postponed to the class of claims under subdivision (9) of this section. (8) Class 8. Claims filed late or any other claims other than claims under subdivisions (9) and (10) of this section. (9) Class 9. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies shall be limited in accordance with law. (10) Class 10. The claims of shareholders or other owners in their capacity as shareholders. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2001, No. 71,  14, eff. June 16, 2001.)
 7082. Liquidators recommendations to the Court
(a) The liquidator shall review all claims duly filed in the liquidation and shall make such further investigation as he or she shall deem necessary. He or she may compound, compromise, or in any other manner negotiate the amount for which claims will be recommended to the court except where the liquidator is required by law to accept claims as settled by any person or organization, including any guaranty association or foreign guaranty association. Unresolved disputes shall be determined under section 7078 of this title. As soon as practicable, the liquidator shall present to the Court a report of the claims against the insurer with recommendations. The report shall include the name and address of each claimant and the amount of the claim finally recommended, if any. If the insurer has issued annuities or life insurance policies, the liquidator shall report the persons to whom, according to the records of the insurer, amounts are owed as cash surrender values or other investment value and the amounts owed. (b) The Court may approve, disapprove, or modify the report on claims by the liquidator. Reports that are not modified by the Court within a period of 60 days following submission by the liquidator shall be treated by the liquidator as allowed claims, subject to later modification or to rulings made by the Court pursuant to section 7078 of this title. No claim under a policy of insurance shall be allowed for an amount in excess of the applicable policy limits. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7083. Distribution of assets
Under the direction of the court, the liquidator shall pay distributions in a manner that will ensure the proper recognition of priorities and a reasonable balance between the expeditious completion of the liquidation and the protection of unliquidated and undetermined claims, including third party claims. Distribution of assets in kind may be made at valuations set by agreement between the liquidator and the creditor and approved by the court. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  259, eff. July 1, 2022.) 
 7084. Unclaimed and withheld funds
(a) All unclaimed funds subject to distribution remaining in the liquidators hands when the liquidator is ready to apply to the court for discharge, including the amount distributable to any creditor, shareholder, member, or other person who is unknown or cannot be found, shall be deposited with the State Treasurer and shall be paid without interest except in accordance with section 7081 of this title to the person entitled to such funds or to the persons legal representative upon proof satisfactory to the State Treasurer of the persons right to the funds. Any amount on deposit not claimed within seven years from the discharge of the liquidator shall be deemed to have been abandoned and shall be escheated without formal escheat proceedings and be deposited with the General Fund. (b) All funds withheld under section 7077 of this title and not distributed shall upon discharge of the liquidator be deposited with the State Treasurer and paid by him or her in accordance with section 7077 of this title. Any sums remaining that under section 7077 of this title would revert to the undistributed assets of the insurer shall be transferred to the State Treasurer and become the property of the State under subsection (a) of this section, unless the Commissioner in his or her discretion petitions the court to reopen the liquidation under section 7086 of this title. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  260, eff. July 1, 2022.) 
 7085. Termination of proceedings
(a) When all assets justifying the expense of collection and distribution have been collected and distributed under this chapter, the liquidator shall apply to the Court for discharge. The Court may grant the discharge and make any other orders, including an order to transfer any remaining funds that are uneconomic to distribute, as may be deemed appropriate. (b) Any other person may apply to the Court at any time for an order under subsection (a) of this section. If the application is denied, the applicant shall pay the costs and expenses of the liquidator in resisting the application, including reasonable attorneys fees. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7086. Reopening liquidation
After the liquidation proceeding has been terminated and the liquidator discharged, the Commissioner or other interested party may at any time petition the Superior Court of Washington County to reopen the proceedings for good cause, including the discovery of additional assets. If the Court is satisfied that there is justification for reopening, it shall so order. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7087. Disposition of records during and after termination of liquidation
Whenever it shall appear to the Commissioner that the records of any insurer in process of liquidation or completely liquidated are no longer useful and are no longer required by law to be retained, the Commissioner may recommend to the Court and the Court shall direct what records should be retained for future reference and what should be destroyed. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7088. External audit of the receivers books
The Superior Court of Washington County may, as it deems desirable, cause audits to be made of the books of the Commissioner relating to any receivership established under this chapter, and a report of each audit shall be filed with the Commissioner and with the Court. The books, records, and other documents of the receivership shall be made available to the auditor at any time without notice. The expense of each audit shall be considered a cost of administration of the receivership. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7091. Conservation of property of foreign or alien insurers found in this State
(a) If a domiciliary liquidator has not been appointed, the Commissioner may apply to the Superior Court of Washington County by verified petition for an order directing the Commissioner to act as conservator to conserve the property of an alien insurer not domiciled in this State or a foreign insurer on any one or more of the following grounds: (1) any of the grounds established by section 7051 of this title;(2) any of the insurers property has been sequestered by official action in its domiciliary state, or in any other state; (3) enough of the insurers property has been sequestered in a foreign country to give reasonable cause to fear that the insurer is or may become insolvent; (4)(A) the insurers certificate of authority to do business in this State has been revoked or none was ever issued; and (B) there are residents of this State with outstanding claims or outstanding policies.(b) When an order is sought under subsection (a) of this section, the court shall cause the insurer to be given such notice and time to respond to the order as is reasonable under the circumstances. (c) The court may issue the order in whatever terms it shall deem appropriate. The filing or recording of the order with the Superior Court of Washington County or the town clerk of the town in which the principal business of the company is located shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that town clerk would have imparted. (d) The conservator may at any time petition for and the court may grant an order under section 7092 of this title to liquidate assets of a foreign or alien insurer under conservation or, if appropriate, for an order under section 7094 of this title, to be appointed ancillary receiver. (e) The conservator may at any time petition the court for an order terminating conservation of an insurer. If the court finds that the conservation is no longer necessary, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make such finding and issue such order at any time upon motion of any interested party, but if such motion is denied, all costs, including reasonable attorneys fees, shall be assessed against such party. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  261, eff. July 1, 2022.) 
 7092. Liquidation of property of foreign or alien insurers found in this State
(a) If no domiciliary receiver has been appointed, the Commissioner may apply to the Superior Court of Washington County by verified petition for an order directing the Commissioner to liquidate the assets found in this State of a foreign insurer or an alien insurer not domiciled in this State, on any of the following grounds: (1) any of the grounds established in section 7051 or 7056 of this title; or(2) any of the grounds established in subdivisions 7091(a)(2) through (4) of this title.(b) When an order is sought under subsection (a) of this section, the court shall cause the insurer to be given such notice and time to respond to the order as is reasonable under the circumstances. (c) If it shall appear to the court that the best interests of creditors, policyholders, and the public require, the court may issue an order to liquidate in whatever terms it shall deem appropriate. The filing or recording of the order with the Superior Court of Washington County or the town clerk of the town in which the principal business of the company is located or the town in which its principal office or place of business is located shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that town clerk would have imparted. (d) If a domiciliary liquidator is appointed in a reciprocal state while a liquidation is proceeding under this section, the liquidator under this section shall thereafter act as ancillary receiver under section 7094 of this title. If a domiciliary liquidator is appointed in a nonreciprocal state while a liquidation is proceeding under this section, the liquidator under this section may petition the court for permission to act as ancillary receiver under section 7094 of this title. (e) On the same grounds as are established in subsection (a) of this section, the Commissioner may petition any appropriate federal district court to be appointed receiver to liquidate that portion of the insurers assets and business over which the court will exercise jurisdiction, or any lesser part thereof that the Commissioner deems desirable for the protection of the policyholders and creditors in this State. (f) The court may order the Commissioner, when the Commissioner has liquidated the assets of a foreign or alien insurer under this section, to pay claims of residents of this State against the insurer under such rules as to the liquidation of insurers under this chapter as are otherwise compatible with the provisions of this section. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2021, No. 105 (Adj. Sess.),  262, eff. July 1, 2022.) 
 7093. Domiciliary liquidators in other states
(a) The domiciliary liquidator of an insurer domiciled in a reciprocal state shall, except as to special deposits and security on secured claims under subsection 7094(c) of this title, be vested by operation of law with the title to all of the assets, property, contracts, and rights of action, agents balances, and all of the books, accounts, and other records of the insurer located in this State. The date of vesting shall be the date of the filing of the petition, if that date is specified by the domiciliary law for the vesting of property in the domiciliary state. Otherwise, the date of vesting shall be the date of entry of the order directing possession to be taken. The domiciliary liquidator shall have the immediate right to recover balances due from agents and to obtain possession of the books, accounts, and other records of the insurer located in this State. He or she also shall have the right to recover all other assets of the insurer located in this State, subject to section 7094 of this title. (b) If a domiciliary liquidator is appointed for an insurer not domiciled in a reciprocal state, the Commissioner of this State shall be vested by operation of law with the title to all of the property, contracts, and rights of action, and all of the books, accounts, and other records of the insurer located in this State, at the same time that the domiciliary liquidator is vested with title in the domicile. The Commissioner of this State may petition for a conservation or liquidation order under section 7091 or 7092 of this title, or for an ancillary receivership under section 7094 of this title, or after approval by the Superior Court of Washington County may transfer title to the domiciliary liquidator, as the interests of justice and the equitable distribution of the assets require. (c) Claimants residing in this State may file claims with the liquidator or ancillary receiver, if any, in this State or with the domiciliary liquidator, if the domiciliary law permits. The claims must be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceedings. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7094. Ancillary formal proceedings
(a) If a domiciliary liquidator has been appointed for an insurer not domiciled in this State, the Commissioner may file a petition with the Superior Court of Washington County requesting appointment as ancillary receiver in this State if the Commissioner finds that: (1) there are sufficient assets of the insurer located in this State to justify the appointment of an ancillary receiver; or (2) the protection of creditors or policyholders in this State so requires.(b) The Court may issue an order appointing an ancillary receiver in whatever terms it shall deem appropriate. The filing or recording of the order with the Superior Court of Washington County or the town clerk of the town in which its principal office or place of business is located; or, in the case of real estate, with the town clerk of the town where the property is located, shall impart the same notice as a deed, bill of sale, or other evidence of title duly filed or recorded with that town clerk would have imparted. (c) When a domiciliary liquidator has been appointed in a reciprocal state, then the ancillary receiver appointed in this State may, whenever necessary, aid and assist the domiciliary liquidator in recovering assets of the insurer located in this State. The ancillary receivers shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this State, and shall pay the necessary expenses of the proceedings. The ancillary receiver shall promptly transfer all remaining assets, books, accounts, and records to the domiciliary liquidator. Subject to this section, the ancillary receiver and his or her deputies shall have the same powers and be subject to the same duties with respect to the administration of assets as a liquidator of an insurer domiciled in this State. (d) When a domiciliary liquidator has been appointed in this State, ancillary receivers appointed in reciprocal states shall have, as to assets and books, accounts, and other records in their respective states, corresponding rights, duties, and powers to those provided in subsection (c) of this section for ancillary receivers appointed in this State. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7095. Ancillary summary proceedings
The Commissioner in his or her sole discretion may institute proceedings under subchapter 2 of this chapter at the request of the Commissioner or other appropriate insurance official of the domiciliary state of any foreign or alien insurer having property located in this State. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7096. Claims of nonresidents against insurers domiciled in this State
(a) In a liquidation proceeding begun in this State against an insurer domiciled in this State, claimants residing in foreign countries or in states not reciprocal states must file claims in this State, and claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary liquidator. Claims must be filed on or before the last date fixed for the filing of claims in the domiciliary liquidation proceeding. (b) Claims belonging to claimants residing in reciprocal states may be proved either in the liquidation proceeding in this State as provided in this chapter, or in ancillary proceedings, if any, in the reciprocal states. If notice of the claims and opportunity to appear and be heard is afforded the domiciliary liquidator of this State as provided in subsection 7097(b) of this title with respect to ancillary proceedings, the final allowance of claims by the courts in ancillary proceedings in reciprocal states shall be conclusive as to amount and as to priority against special deposits or other security located in such ancillary states, but shall not be conclusive with respect to priorities against general assets under section 7081 of this title. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7097. Claims of residents against insurers domiciled in reciprocal states
(a) In a liquidation proceeding in a reciprocal state against an insurer domiciled in that state, claimants against the insurer who resides within this State may file claims either with the ancillary receiver, if any, in this State, or with the domiciliary liquidator. Claims must be filed on or before the last dates fixed for the filing of claims in the domiciliary liquidation proceeding. (b) Claims belonging to claimants residing in this State may be proved either in the domiciliary state under the law of that state, or in ancillary proceedings, if any, in this State. If a claimant elects to prove his or her claim in this State, the claimant shall file the claim with the liquidator in the manner provided in sections 7074 and 7075 of this title. The ancillary receiver shall make his or her recommendation to the court as provided under section 7082 of this title. The ancillary receiver shall also arrange a date for hearing if necessary under section 7078 of this title and shall give notice to the liquidator in the domiciliary state, either by certified mail or by personal service at least 40 days prior to the date set for hearing. If the domiciliary liquidator, within 30 days after the giving of such notice, gives notice in writing to the ancillary receiver and to the claimant, either by certified mail or by personal service, of his or her intention to contest the claim, the domiciliary liquidator shall be entitled to appear or to be represented in any proceeding in this State involving the adjudication of the claim. (c) The final allowance of the claim by the courts of this State shall be accepted as conclusive as to amount and as to priority against special deposits or other security located in this State. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7098. Attachment, garnishment and levy of execution
During the pendency in this or any other state of a liquidation proceeding, whether called by that name or not, no action or proceeding in the nature of an attachment, garnishment, or levy of execution shall be commenced or maintained in this State against the delinquent insurer or its assets. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7099. Interstate priorities
(a) In a liquidation proceeding in this State involving one or more reciprocal states, the order of distribution of the domiciliary state shall control as to all claims of residents of this and reciprocal states. All claims of residents of reciprocal states shall be given equal priority of payment from general assets regardless of where such assets are located. (b) The owners of special deposit claims against an insurer for which a liquidator is appointed in this or any other state shall be given priority against the special deposits in accordance with the statutes governing the creation and maintenance of the deposits. If there is a deficiency in any deposit, so that the claims secured by it are not fully discharged from it, the claimants may share in the general assets, but the sharing shall be deferred until general creditors, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit. (c) The owner of a secured claim against an insurer for which a liquidator has been appointed in this or any other state may surrender his or her security and file a claim as a general creditor, or the claim may be discharged by resort to the security in accordance with section 7080 of this title, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. (Added 1991, No. 45,  2, eff. May 29, 1991.) 
 7100. Subordination of claims for noncooperation
If an ancillary receiver in another state or foreign country, whether called by that name or not, fails to transfer to the domiciliary liquidator in this State any assets within his or her control other than special deposits, diminished only by the expenses of the ancillary receivership, if any, the claims filed in the ancillary receivership, other than special deposit claims or secured claims, shall be placed in the class of claims under subdivision 7081(9) of this title. (Added 1991, No. 45,  2, eff. May 29, 1991; amended 2001, No. 71,  15, eff. June 16, 2001.) 
 7111. Definitions
As used in this chapter:(1) Assuming company means a Vermont-domiciled company established specifically to acquire a closed block under a legacy insurance transfer plan approved by the Commissioner. (2) Closed block means a block, line, or group of commercial non-admitted insurance policies or reinsurance agreements or both: (A) which a transferring insurer has ceased to offer, write, or sell to new applicants;(B) for which all policy periods have been fully expired for not less than 60 months;(C) for which active premiums are no longer being paid; and(D) which is not workers compensation, health, life, or any other personal line of insurance.(3) Comment period means the 60-day period starting on the date notice is issued by an assuming company under subsection 7112(h) of this chapter. The Commissioner may, in his or her discretion, extend the comment period for up to an additional 30 days. (4) Commissioner means the Commissioner of Financial Regulation.(5) Controlling party means a person having control of an assuming company or transferring insurer. Control shall have the same meaning as in section 3681 of this title. (6) Department means the Department of Financial Regulation.(7) Domicile regulator means the primary insurance regulatory authority of the domicile jurisdiction of a transferring insurer. (8) Inward reinsurance agreement means a contract of reinsurance between a transferring insurer and another insurance company with respect to which a transferring insurer is a party as the reinsurer. (9) Inward reinsurance counterparty means an insurance company, other than the transferring insurer, that is a party to an inward reinsurance agreement as the reinsured. (10) Legacy insurance transfer means the transfer of a closed block in accordance with the requirements of this chapter. (11) Legacy insurance transfer plan or plan means a plan that sets forth all provisions and includes all documentation regarding a legacy insurance transfer required under subsection 7112(b) of this chapter. (12) Non-admitted insurance means any property and casualty insurance permitted to be placed directly or through a surplus lines broker with a non-admitted insurer eligible to accept such insurance. (13) Non-admitted insurer means, with respect to a state, an insurer not licensed to engage in the business of insurance in such state. The term does not include a risk retention group or a captive insurance company. (14) Outward reinsurance agreement means a contract of reinsurance between a transferring insurer and another insurance company with respect to which a transferring insurer is a party as the reinsured. (15) Outward reinsurance counterparty means an insurance company, other than the transferring insurer, that is a party to an outward reinsurance agreement as the reinsurer. (16) Party means:(A) the assuming company;(B) the transferring insurer;(C) with respect to any policy to be transferred under a plan, each policyholder;(D) with respect to any inward reinsurance agreement to be transferred under a plan, each inward reinsurance counterparty; and (E) any other person the Commissioner approves as a party with respect to such proceeding.(17) Plan summary means a written statement of the key terms and provisions of a plan as required under subdivision 7112(b)(19) of this chapter. (18) Policy means a contract of property and casualty insurance that is neither a contract of reinsurance nor a contract of workers compensation, health, life, or any other personal line of insurance. (19) Policyholder means the person identified as the policyholder or first named in a policy. (20) Reinsurance agreement means an inward reinsurance agreement or an outward reinsurance agreement. (21) Reinsurance agreement counterparty means an inward reinsurance agreement counterparty or an outward reinsurance counterparty. (22) Transferring insurer means a non-admitted insurer that is transferring a closed block to an assuming company under a legacy insurance transfer plan. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7112. Application; fee; plan
(a) An assuming company shall file a plan with the Commissioner and, at the time of filing, shall pay to the Commissioner the fee described in subdivision 7116(a)(1) of this chapter. (b) A plan shall include the following:(1) A list of all policies and inward reinsurance agreements in the closed block to be transferred under the plan. (2) A list of all outward reinsurance agreements attaching to policies or inward reinsurance agreements in the closed block. (3) A list of all policyholders and inward reinsurance counterparties to policies and inward reinsurance agreements in the closed block to be transferred under the plan. (4) The identities of the transferring insurer and the assuming company and their respective controlling parties, if any. (5) Certificates issued by the domicile regulator of the transferring insurer and, if applicable, of any controlling party that is a regulated insurance company, in each case attesting to the good standing of the transferring insurer and the controlling party under the insurance regulatory laws of the jurisdiction of their respective domiciles; or, if any such certificate is not obtainable under the laws or practices of a domicile regulator, a certificate of the transferring insurer or the controlling party, as applicable, attesting to the foregoing, verified by oath of two of its executive officers. (6) A letter of no objection, or the equivalent, from the domicile regulator of the transferring insurer confirming that the regulator has no objection to the transfer of the closed block under the plan; or, if any such certificate is not obtainable under the laws or practices of a domicile regulator, a certificate of the transferring insurer or the controlling party, as applicable, attesting to the foregoing, verified by oath of two of its executive officers. (7) A list of policies and inward reinsurance agreements in the closed block to be transferred under the plan, if any, which by their terms and conditions prohibit assignment and assumption of the rights, liabilities, and obligations of the transferring insurer without the prior written consent of the respective policyholder or inward reinsurance counterparty, together with a statement describing such terms and conditions of any such policy or inward reinsurance agreement. (8) The most recent audited financial statements and annual reports of the transferring insurer filed with its domicile regulator and such other financial information, if any, with respect to the transferring insurer or any controlling party of the transferring insurer, as the Commissioner may reasonably require. (9) An actuarial study or opinion in a form satisfactory to the Commissioner that quantifies the liabilities to be transferred to the assuming company under the policies or inward reinsurance agreements in the closed block. (10) A statement of the outward reinsurance agreement assets, if any, attaching to any policy or inward reinsurance agreement in the closed block. (11) Three years of pro-forma financial statements demonstrating the solvency of the assuming company. (12) Officers certificates of the transferring insurer and the assuming company attesting that each has obtained all required internal approvals and authorizations regarding the plan and completed all necessary and appropriate actions relating to the plan. (13) The form of notice to be provided under the plan to any policyholder or inward reinsurance counterparty in connection with any policy or inward reinsurance agreement in the closed block and how such notice shall be provided. (14) The form of notice to be provided under the plan to any outward reinsurance counterparty attaching to any policy or inward reinsurance agreement in the closed block and how such notice shall be provided. (15) A statement describing any pending dispute between the transferring insurer and any policyholder or inward reinsurance counterparty in connection with any policy or inward reinsurance agreement in the closed block or any disputed claim by a third party with respect to any policy or inward reinsurance agreement in the closed block. (16) A statement describing the assuming companys proposed investment policies, officers, directors, key employees, and other arrangements regarding matters such as: (A) any contemplated third-party claims management and administration arrangements;(B) operations, management, and solvency relating to the closed block; and(C) a detailed plan for annual or other periodic financial reporting to the Commissioner, including an annual financial audit with actuarial opinion. (17) A statement from the assuming company consenting to the jurisdiction of the Commissioner with regard to ongoing oversight of operations, management, and solvency relating to the closed block, including the authority of the Commissioner to conduct examinations under section 7117 of this chapter and to set reasonable standards for oversight of the assuming company, including oversight standards relating to: (A) material transactions with affiliates;(B) adequacy of surplus; and(C) dividends and other distributions, including limitations on extraordinary dividends.(18) A statement from the assuming company submitting to the jurisdiction and authority of the Commissioner of Insurance, or the equivalent regulatory authority, in states in which policyholders or reinsurance counterparties reside, for the purposes of implementing each such states Unfair Claims Settlement Practices Act, or its equivalent, if any, in such states market conduct statutory framework and confirmation of the delivery of such statements of submission. (19) A plan summary that includes all information regarding the plan as reasonably required by the Commissioner. (20) The statement described in subsection (c) of this section regarding the information and documents submitted as part of or with respect to a plan that are confidential. (21) Any other information the Commissioner may reasonably require with respect to the plan in the exercise of his or her discretion. (c)(1) Information in the plan identifying policyholders and reinsurance counterparties shall be exempt from public inspection and copying under the Public Records Act. (2) The plan shall include a statement of the information and documentation included in the plan that the assuming company or the transferring insurer requests be given confidential treatment. The Commissioner shall determine whether information designated in the statement, including any information designated as trade secrets, is exempt from public inspection and copying under the Public Records Act. If such information is exempt, it shall not be subject to subpoena and shall not be made public by the Commissioner or by any other person; provided, however, the Commissioner may in his or her discretion grant access to such information to public officers having jurisdiction over the regulation of insurance in any other state or country, to public officers of a foreign or alien financial regulatory authority, or to state or federal law enforcement officers pursuant to a validly issued subpoena or search warrant, provided that such officers receiving the information agree in writing to hold it in a manner consistent with this subsection. (d) Within 10 business days of the date the application is filed and the fee payable under subsection (a) of this section is paid in full, the Commissioner shall notify the assuming company whether the plan is complete. In his or her discretion, the Commissioner may extend the 10-business-day application review period for an additional 10 business days. With the written consent of the assuming company, the application review period may be extended beyond 20 business days. (e) Upon submission of a plan, the assuming company shall have a continuing obligation to notify the Commissioner promptly and in a full and accurate manner of any material change to information in the plan. (f) If the Commissioner notifies the assuming company that the plan is not complete, the Commissioner shall specify any modifications, supplements, or amendments to the plan that are required, and any additional information or documentation with respect to the plan that must be provided to the Commissioner before the Commissioner issues the notice referenced in subsection (d) of this section. (g) If the Commissioner notifies the assuming company that the plan is complete, the Commissioner shall set a date, time, and place for a hearing on the plan as required under subsection (m) of this section. (h) Within 30 days of the date the Commissioner notifies the assuming company under subsection (g) of this section that the plan is complete, the assuming company shall cause direct written notice to be provided, in the form and manner specified in the plan, to all policyholders and reinsurance counterparties listed in the plan. The notice shall: (1) comply with the plan and the provisions of 3 V.S.A.  809(b);(2) include the plan summary;(3) describe the effect of the plan and the transfer on each policyholder and reinsurance counterparty and on his or her respective policy or reinsurance agreement, as applicable; (4) state the right of each policyholder or inward reinsurance counterparty to:(A) accept or object to the plan, together with a description of the means by which a policyholder or inward reinsurance counterparty may expressly accept or object to the plan and the effect of such acceptance or objection; (B) file written comments on the plan with the Commissioner; and(C) appear and present evidence on the plan at the hearing;(5) describe the terms and conditions under which a policyholder or inward reinsurance counterparty shall be deemed to have accepted the plan; (6) specify the date, time, and place of the hearing on the plan;(7) include all other information reasonably required by the Commissioner; and(8) be published in two newspapers of general nationwide circulation on two separate occasions, as determined by the Commissioner. (i) During the comment period:(1) any party may file written comments on the plan with the Commissioner;(2) any policyholder or inward reinsurance counterparty may, by delivery of such notice in accordance with the terms and conditions of the plan and prior to the expiration of the comment period, provide an express written notice that he or she accepts or objects to the plan; and (3) the assuming company shall file with the Commissioner such additional documentation and information regarding the plan as the Commissioner may reasonably require. (j) In the event that, prior to the expiration of the comment period, any policyholder or inward reinsurance counterparty provides express written notice that he or she objects to the plan and specifies the policy or agreement with respect to which such objection is made, the assuming company shall, not later than 15 days after the end of the comment period, submit to the Commissioner either: (1) an amended list of policies and reinsurance agreements in the plan, excluding such policyholder or inward reinsurance counterparty and its respective policy or inward reinsurance agreement from the plan; or (2) an express written notice from such policyholder or inward reinsurance counterparty accepting the plan and consenting to the transfer having the full force and effect of a statutory novation of its respective policy or reinsurance agreement, as applicable, and withdrawing and rescinding its prior notice of objection. (k) Except as provided in subsection 7114(f) of this chapter, any policyholder or inward reinsurance counterparty that, prior to the expiration of the comment period, has not provided express written notice objecting to the plan shall be deemed to have accepted the plan and the transfer shall have the full force and effect of a statutory novation of his or her respective policy or inward reinsurance agreement, as applicable. (l) Notwithstanding any provision of this chapter to the contrary, if a policy or inward reinsurance agreement contains a provision prohibiting the transfer of the policy or inward reinsurance agreement without the consent of the policyholder or inward reinsurance counterparty, then such policy or inward reinsurance agreement shall not be transferred under this chapter unless the applicable policyholder or inward reinsurance counterparty provides written consent to the proposed transfer. (m) The hearing on the plan shall be held not later than 60 days after the end of the comment period. In his or her discretion, the Commissioner may postpone the hearing for an additional 10 days. With the written consent of the assuming company, the hearing may be postponed beyond 70 days. Each party participating in the hearing shall bear his or her own costs and attorneys fees. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014; amended 2021, No. 105 (Adj. Sess.),  263, eff. July 1, 2022.) 
 7113. Plan review
(a) The Commissioner may retain an actuary to conduct an actuarial study quantifying the liabilities under insurance policies and reinsurance agreements to be transferred to the assuming company under the plan and is authorized to retain any other legal, financial, and examination services from outside the Department necessary to assist in plan review. (b) In reviewing the plan, the Commissioner shall take into account all written comments filed with respect to the plan, all evidence taken at the hearing, and any other factors the Commissioner reasonably deems relevant with respect to the plan. In all cases, the Commissioner shall make findings with respect to each of the following: (1) the solvency of the assuming company before and after the implementation of the proposed plan; (2) the adequacy of the assuming companys proposals described in the statement required under subdivision 7112(b)(16) of this chapter; (3) the adequacy of the assuming companys consent to jurisdiction required under subdivision 7112(b)(17) of this chapter; (4) the ability of the assuming company to comply with all requirements of the policies and inward reinsurance agreements, including the capacity of the assuming company regarding the administration of claims in process on or after the effective date of the transfer; (5) whether any outward reinsurance agreement relating to any policy or policies in the closed block will be adversely affected by the transfer; (6) whether the plan materially adversely affects the interests of any party or outward reinsurance counterparty, including the interests of any policyholder or inward reinsurance counterparty who has accepted or has been deemed to have accepted the plan; (7) whether policyholders or inward reinsurance counterparties, together with their respective insurance policies and inward reinsurance agreements, have been excluded from the plan as required under subsections 7112(j) and (l) of this chapter; and (8) the fairness of the plan to all parties. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.)
 7114. Order
(a) Within 30 days of the date the hearing is held on the plan, the Commissioner shall issue an order setting forth the amount of fees payable by the assuming company under subdivision 7116(a)(2) of this chapter, payable not later than 14 days after the date of such order. Upon receipt of such payment, the Commissioner shall within five days issue an order approving or disapproving the plan in whole or in part. Whenever it is not practicable to issue an order within 30 days, the Commissioner may extend such time up to an additional 30 days. If the order approves the plan, the order shall: (1) include the terms and conditions of the Commissioners oversight with regard to ongoing oversight of the operations, management, and solvency relating to the closed block and any specific standards that the assuming company will be required to comply with, including standards relating to: (A) material transactions with affiliates;(B) adequacy of surplus; and(C) dividends and other distributions, including limitations on dividends;(2) set forth the tax payable by the assuming company under subsection 7116(b) of this chapter, which tax shall be payable not later than 14 days after the date of such order; (3) not be effective until such time as the costs and transfer tax described in this subsection have been paid in full. (b) The Commissioner shall not approve a plan unless the Commissioner finds that the assuming company has: (1) sufficient assets to meet its liabilities;(2) sufficient procedures in place for the handling of claims;(3) consented to sufficient regulatory oversight by the Department; and(4) excluded from the plan any policy or agreement required to be excluded under subsections 7112(j) and (l) of this chapter. (c) An order issued under subsection (a) of this section approving the plan shall have the full force and effect of a statutory novation with respect to all policyholders and reinsurance counterparties and their respective policies and reinsurance agreements under the plan and shall provide that the transferring insurer shall have no further rights, obligations, or liabilities with respect to such policies and reinsurance agreements, and that the assuming company shall have all such rights, obligations, and liabilities as if it, instead of the transferring insurer, were the original party to such policies and reinsurance agreements. (d) The Commissioner may issue any other orders he or she reasonably deems necessary to fully implement an order issued under subsection (a) of this section. (e) No order issued under subsection (a) or (d) of this section shall be construed to modify or amend the terms of a policy or reinsurance agreement, other than with respect to matters specifically subject to modification or amendment under this chapter. (f) If a policyholder or inward reinsurance counterparty provides express written notice that he or she objects to the plan after the comment period has expired, and provides evidence reasonably satisfactory to the Commissioner that he or she was not provided notice of the plan in the form and manner previously approved by the Commissioner, or if an outward reinsurance counterparty or other party provides express written notice that he or she objects to a plan, the Commissioner may not approve the plan with respect to such party unless the Commissioner determines that the plan: (1) does not materially adversely affect the objecting party; and(2) otherwise complies with the requirements of this chapter.(g) At any time before the Commissioner issues the order described in subsection (a) of this section, the assuming company may file an amendment to the plan, subject to the Commissioners approval. (h) At any time before the Commissioner issues the order described in subsection (a) of this section, the assuming company may withdraw the plan without prejudice. Upon such withdrawal, however, the Commissioner shall issue an order setting forth the amount of fees payable by the assuming company under subdivision 7116(a)(2) of this chapter, payable not later than 14 days after the date of such order. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7115. Jurisdiction; appeals
(a) The Commissioner shall have exclusive regulatory jurisdiction with respect to the review and approval or denial of any plan. (b) Any party aggrieved by a final order of the Commissioner may appeal that order to the Vermont Supreme Court under 3 V.S.A.  815. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7116. Fee; costs; transfer tax
(a) To cover the costs of processing and reviewing a plan under this chapter, the assuming company shall pay to the Commissioner the following nonrefundable fees at the times set forth in subsections 7112(a) and 7114(a) of this chapter: (1) an administrative fee in the amount of $30,000.00; and(2) the reasonable costs of persons retained by the Commissioner under subsection 7113(a) of this chapter. (b) When a plan is approved, the assuming company shall pay the Commissioner a transfer tax equal to the sum of: (1) one percent of the first $100,000,000.00 of the gross liabilities transferred, including direct and assumed unpaid claims, losses, and loss adjustment expenses with no reductions for amounts ceded; and (2) 0.5 percent of the gross liabilities transferred that exceed $100,000,000.00, including direct and assumed unpaid claims, losses, and loss adjustment expenses with no reductions for amounts ceded. (c) All fees and payments received by the Department under subsection (a) of this section and 10 percent of the transfer tax under subsection (b) of this section shall be credited to the Insurance Regulatory and Supervision Fund under section 80 of this title. The remaining 90 percent of the transfer tax shall be deposited directly into the General Fund and reserved in the General Fund Balance Reserve established under 32 V.S.A.  308c. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014; amended 2013, No. 179 (Adj. Sess.),  E.228, eff. Feb. 19, 2014.) 
 7117. Examinations
(a) The Commissioner has the authority to order any assuming company to produce any records, books, and papers in the possession of the assuming company or its affiliates necessary to ascertain the financial condition or legality of conduct of the assuming company. (b) The Commissioner shall exercise his or her authority under subsection (a) of this section only if he or she has reason to believe the interests of the assuming companys policyholders may be adversely affected under the plan. (c) The Commissioner may retain, at the assuming companys expense, attorneys, actuaries, accountants, and other experts not otherwise a part of the Commissioners staff reasonably necessary to assist with an examination under this section. Any persons so retained shall be under the direction and control of the Commissioner and shall act in a purely advisory capacity. (d) Each assuming company that produces records, books, and papers for examination under this section shall pay the expense of such examination. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7118. Applicable laws
(a) Chapter 157 (transfer and novation of insurance contracts) of this title shall not apply to any legacy insurance transfer under this chapter. (b) In the event of any conflict between a provision of this chapter and any other provision of this title, such provision of this chapter shall control. (c) A proposed legacy insurance transfer shall be a contested case under 3 V.S.A. chapter 25, except that a party shall be limited as defined in subdivision 7111(16) of this chapter. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7119. Assuming company; Board; principal place of business; registered agent
No assuming company shall be a party to a legacy insurance transfer under this chapter unless: (1) its board of directors or committee of managers holds at least one meeting each year in this State; (2) it maintains its principal place of business in this State; and(3) it appoints a registered agent to accept service of process and to otherwise act on its behalf in this State; provided that whenever such registered agent cannot with reasonable diligence be found at the registered office of the assuming company, the Secretary of State shall be an agent of such assuming company upon whom any process, notice, or demand may be served. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7120. Posting of plans on website
The Commissioner shall require that all plans filed with the Department are posted on the Departments website, along with any other notice or other information the Commissioner deems appropriate, excluding any information designated as confidential under subsection 7112(c) of this chapter. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7121. Regulation of assuming companies and service providers
(a) An assuming company shall be subject to all rules adopted by the Commissioner under this chapter and also shall be subject to: (1) chapter 145 (supervision, rehabilitation, and liquidation of insurers) of this title;(2) the market conduct and unfair trade practices provisions of chapter 129 (insurance trade practices) of this title, as deemed applicable by the Commissioner; and (3) in addition to the initial transfer tax required under subsection 7116(b) of this chapter, an annual renewal fee of $300.00. (b) An assuming company shall not be subject to the requirements of chapter 101, subchapter 9 (Property and Casualty Insurance Guaranty Association) of this title. (c) The Commissioner may adopt rules regarding the provision of services to an assuming company by persons other than any director, officer, or employee of the assuming company with respect to the administration of policies and reinsurance agreements assumed by the assuming company under a legacy insurance transfer, including licensing or other requirements. (d) The Commissioner may adopt any other rules necessary or appropriate to carry out the provisions of this chapter. (Added 2013, No. 93 (Adj. Sess.),  3, eff. Feb. 19, 2014.) 
 7122. Scope and purpose
(a) The purpose of this chapter is to promote the public welfare by creating a comprehensive legal framework within which travel insurance may be sold in Vermont. (b) The requirements of this chapter apply to travel insurance that covers any resident of this State, and is sold, solicited, negotiated, or offered in this State, and the policies and certificates of which are delivered or issued for delivery in this State. It shall not apply to cancellation fee waivers or travel assistance services, except as expressly provided in this chapter. (c) All other applicable provisions of this States insurance laws shall continue to apply to travel insurance except that the specific provisions of this chapter shall supersede any general provisions of law that would otherwise be applicable to travel insurance. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7123. Definitions
As used in this chapter:(1) Aggregator site means a website that provides access to information regarding insurance products from more than one insurer, including product and insurer information, for use in comparison shopping. (2) Blanket travel insurance means a policy of travel insurance issued to any eligible group providing coverage for specific classes of persons defined in the policy with coverage provided to all members of the eligible group without a separate charge to individual members of the eligible group. (3) Cancellation fee waiver means a contractual agreement between a supplier of travel services and its customer to waive some or all of the nonrefundable cancellation fee provisions of the suppliers underlying travel contract with or without regard to the reason for the cancellation or form of reimbursement. A cancellation fee waiver is not insurance. (4) Eligible group means two or more persons who are engaged in a common enterprise, or have an economic, educational, or social affinity or relationship, including any of the following: (A) any entity engaged in the business of providing travel or travel services, including a tour operator, lodging provider, vacation property owner, hotel or resort, travel club, travel agency, property manager, cultural exchange program, or common carrier, or the operator, owner, or lessor of a means of transportation of passengers, including to an airline, cruise line, railroad, steamship company, or public bus carrier, wherein with regard to any particular travel or type of travel or travelers, all members or customers of the group have a common exposure to risk attendant to such travel; (B) any college, school, or other institution of learning, covering students, teachers, employees, or volunteers; (C) any employer covering any group of employees, volunteers, contractors, board of directors, dependents, or guests; (D) any sports team, camp, or sponsor thereof, covering participants, members, campers, employees, officials, supervisors, or volunteers; (E) any religious, charitable, recreational, educational, or civic organization, or branch thereof, covering any group of members, participants, or volunteers; (F) any financial institution or financial institution vendor, or parent holding company, trustee, or agent of or designated by one or more financial institutions or financial institution vendors, including accountholders, credit card holders, debtors, guarantors, or purchasers; (G) any incorporated or unincorporated association, including a labor union, having a common interest, constitution, and bylaws and organized and maintained in good faith for purposes other than obtaining insurance for members or participants of such association covering its members; (H) any trust or the trustees of a fund established, created, or maintained for the benefit of and covering members, employees, or customers, subject to the Commissioners permitting the use of a trust and the States premium tax provisions in section 7125 of this chapter, of one or more associations meeting the requirements of subdivision (4)(G) of this section; (I) any entertainment production company covering any group of participants, volunteers, audience members, contestants, or workers; (J) any volunteer fire department, ambulance, rescue, police, court, or any first aid, civil defense, or other such volunteer group; (K) any preschool, daycare institution for children or adults, or senior citizen club;(L) any automobile or truck rental or leasing company covering a group of individuals who may become renters, lessees, or passengers defined by their travel status on the rented or leased vehicles, provided that the common carrier, the operator, owner, or lessor of a means of transportation or the automobile or truck rental or leasing company is the policyholder under a policy to which this section applies; or (M) any other group where the Commissioner has determined that the members are engaged in a common enterprise, or have an economic, educational, or social affinity or relationship, and that issuance of the policy would not be contrary to the public interest. (5) Fulfillment materials means documentation sent to the purchaser of a travel protection plan confirming the purchase and providing the travel protection plans coverage and assistance details. (6) Group travel insurance means travel insurance issued to any eligible group.(7) Limited lines travel insurance producer means a:(A) licensed managing general agent or third-party administrator;(B) licensed insurance producer, including a limited lines producer, designated by an insurer as the travel insurance supervising entity as set forth in subsection 7124(f) of this title; or (C) travel administrator.(8) Offer and disseminate means to provide general information, including a description of the coverage and price, as well as to process the application and collect premiums. (9) Primary certificate holder means an individual person who elects and purchases travel insurance under a group policy. (10) Primary policyholder means an individual person who elects and purchases individual travel insurance. (11) Travel administrator means a person who directly or indirectly underwrites, collects charges, collateral, or premiums from, or adjusts or settles claims on residents of this State, in connection with travel insurance, except that a person shall not be considered a travel administrator if that persons only actions that would otherwise cause it to be considered a travel administrator are among the following: (A) a person working for a travel administrator to the extent that the persons activities are subject to the supervision and control of the travel administrator; (B) an insurance producer selling insurance or engaged in administrative and claims-related activities within the scope of the producers license; (C) a travel retailer offering and disseminating travel insurance and registered under the license of a limited lines travel insurance producer in accordance with this chapter; (D) an individual adjusting or settling claims in the normal course of that individuals practice or employment as an attorney-at-law and who does not collect charges or premiums in connection with insurance coverage; or (E) a business entity that is affiliated with a licensed insurer while acting as a travel administrator for the direct and assumed insurance business of an affiliated insurer. (12) Travel assistance services means noninsurance services for which the consumer is not indemnified based on a fortuitous event and where providing the service does not result in transfer or shifting of risk that would constitute the business of insurance. Travel assistance services include the provision of security advisories; destination information; vaccination and immunization information services; travel reservation services; entertainment, activity, or event planning; translation assistance; emergency messaging; international legal and medical referrals; medical case monitoring; coordination of transportation arrangements; emergency cash transfer assistance; medical prescription replacement assistance; passport and travel document replacement assistance; lost luggage assistance; or concierge services. Travel assistance services are not insurance and not related to insurance. (13)(A) Travel insurance means insurance coverage for personal risks incident to planned travel, including: (i) interruption or cancellation of a trip or event;(ii) loss of baggage or personal effects;(iii) damages to accommodations or rental vehicles;(iv) sickness, accident, disability, or death occurring during travel;(v) emergency evacuation;(vi) repatriation of remains; or(vii) any other contractual obligations to indemnify or pay a specified amount to the traveler upon determinable contingencies related to travel as approved by the Commissioner. (B) Travel insurance does not include major medical plans that provide comprehensive medical protection for travelers with trips lasting six months or longer, including, for example, those working overseas as expatriates, or any other product that requires a specific insurance producer license. (14) Travel protection plan means a plan that provides one or more of the following: travel insurance, travel assistance services, or cancellation fee waivers. (15) Travel retailer means a business entity that makes, arranges, or offers travel services and may offer and disseminate travel insurance as a service to its customers on behalf of and under the direction of a limited lines travel insurance producer. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7124. Licensing and registration
(a) The Commissioner may issue to an individual or a business entity that has complied with the requirements of this chapter and filed an application for such limited lines travel insurance producer license in a form and manner prescribed by the Commissioner, a limited lines travel insurance producer license, which authorizes the limited lines travel insurance producer to sell, solicit, or negotiate travel insurance through a licensed insurer. A person may not act as a limited lines travel insurance producer or travel retailer unless properly licensed or registered, respectively. (b) A travel retailer may offer and disseminate travel insurance under a limited lines travel insurance producer license only if the following conditions are met: (1) The limited lines travel insurance producer or travel retailer provides to purchasers of travel insurance: (A) a description of the material terms or the actual material terms of the insurance coverage at the time of purchase; (B) a description of the process for filing a claim;(C) a description of the review and cancellation process for the travel insurance policy; and (D) the identity and contact information of the insurer and limited lines travel insurance producer. (2) At the time of licensure, the limited lines travel insurance producer has established and maintains a register on a form prescribed by the Commissioner of each travel retailer that offers travel insurance on the limited lines travel insurance producers behalf. The register shall be maintained and updated annually by the limited lines travel insurance producer and shall include the name, address, and contact information of the travel retailer and an officer or person who directs or controls the travel retailers operations, and the travel retailers Federal Tax Identification Number. The limited lines travel insurance producer shall submit such register within 30 days of request by the Commissioner. The limited lines travel insurance producer shall also certify that the travel retailer registered complies with 18 U.S.C.  1033. The grounds for the suspension and revocation and the penalties applicable to resident insurance producers under 8 V.S.A.  4804 shall be applicable to the limited lines travel insurance producers and travel retailers. (3) The limited lines travel insurance producer has designated one of its employees who is a licensed individual producer as the person responsible for the limited lines travel insurance producers compliance with the travel insurance laws, rules, and regulations of the State. This person shall be identified as the Designated Responsible Licensed Producer (DRLP). (4) The DRLP, president, secretary, treasurer, and any other officer or person who directs or controls the limited lines travel insurance producers insurance operations has complied with the fingerprinting requirements applicable to insurance producers in the resident state of the limited lines travel insurance producer. (5) The limited lines travel insurance producer has paid all applicable insurance producer licensing fees as set forth in section 4800 of this title. (6) The limited lines travel insurance producer requires each employee and authorized representative of the travel retailer whose duties include offering and disseminating travel insurance to receive a program of instruction or training, which may be subject to review by the Commissioner. The training material shall, at a minimum, contain instructions on the types of insurance offered, ethical sales practices, and required disclosures to prospective customers. (c) Any travel retailer offering or disseminating travel insurance shall make available to prospective purchasers brochures or other written materials that have been approved by the travel insurer. Such materials shall include information that, at a minimum: (1) provides the identity and contact information of the insurer and the limited lines travel insurance producer; (2) explains that the purchase of travel insurance is not required in order to purchase any other product or service from the travel retailer; and (3) explains that an unlicensed travel retailer is permitted to provide general information about the insurance offered by the travel retailer, including a description of the coverage and price, but is not qualified or authorized to answer technical questions about the terms and conditions of the insurance offered by the travel retailer or to evaluate the adequacy of the customers existing insurance coverage. (d) A travel retailers employee or authorized representative who is not licensed as an insurance producer may not: (1) evaluate or interpret the technical terms, benefits, or conditions of the offered travel insurance coverage; (2) evaluate or provide advice concerning a prospective purchasers existing insurance coverage; or (3) hold themself out as a licensed insurer, licensed producer, or insurance expert.(e) A travel retailer whose insurance-related activities, and those of its employees and authorized representatives, are limited to offering and disseminating travel insurance on behalf of and under the direction of a limited lines travel insurance producer meeting the conditions stated in this section is authorized to do so and receive related compensation for such services, upon registration by the limited lines travel insurance producer as described in subdivision (b)(2) of this section. (f) As the insurers designee, a limited lines travel insurance producer is responsible for the acts of each of its registered travel retailers related to the offer and dissemination of travel insurance and shall use reasonable means to ensure the travel retailers compliance with this chapter. (g) Any person licensed in a major line of authority as an insurance producer is authorized to sell, solicit, and negotiate travel insurance. A property and casualty insurance producer is not required to become appointed by an insurer in order to sell, solicit, or negotiate travel insurance. (h) The limited lines travel insurance producer and any travel retailer offering and disseminating travel insurance under a limited lines travel insurance producer license shall be subject to the provisions of sections 13 and 4804 and chapter 129 of this title. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7125. Premium tax
(a) A travel insurer shall pay premium tax, as provided in 32 V.S.A.  8551, on travel insurance premiums paid by any of the following:(1) a primary policyholder who is a resident of this State;(2) a primary certificate holder who is a resident of this State who elects coverage under a group travel insurance policy; or (3) a blanket travel insurance policyholder that is a resident in or has its principal place of business or the principal place of business of an affiliate or subsidiary that has purchased blanket travel insurance in this State for eligible blanket travel insurance group members, subject to any apportionment rules that apply to the insurer across multiple taxing jurisdictions or that permit the insurer to allocate premium on an apportioned basis in a reasonable and equitable manner in those jurisdictions. (b) A travel insurer shall:(1) document the state of residence or principal place of business of the policyholder or certificate holder, as required in subsection (a) of this section; and (2) report as premium only the amount allocable to travel insurance and not any amounts received for travel assistance services or cancellation fee waivers. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7126. Travel protection plans
A travel protection plan may be offered for one price for the combined features that the travel protection plan offers in this State if: (1) the travel protection plan clearly discloses to the consumer, at or prior to the time of purchase, that it includes travel insurance, travel assistance services, or cancellation fee waivers, as applicable, and provides information and an opportunity, at or prior to the time of purchase, for the consumer to obtain additional information regarding the features and pricing of each; (2) the person offering the travel protection plan that includes a travel insurance policy complies with section 7127 of this title; and (3) the fulfillment materials:(A) describe and delineate the travel insurance, travel assistance services, and cancellation fee waivers in the travel protection plan; and (B) include the travel insurance disclosures and the contact information for persons providing travel assistance services and cancellation fee waivers, as applicable. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7127. Sales practices
(a) All persons offering travel insurance to residents of this State are subject to chapter 129 of this title, except as otherwise provided in this section. In the event of a conflict between this chapter and other provisions of this title regarding the sale and marketing of travel insurance and travel protection plans, the provisions of this chapter shall control. (b) Offering or selling a travel insurance policy that could never result in payment of any claims for any insured under the policy is an unfair trade practice under chapter 129 of this title. (c)(1) All documents provided to consumers prior to the purchase of travel insurance, including sales materials, advertising materials, and marketing materials, shall be consistent with the travel insurance policy itself, including forms, endorsements, policies, rate filings, and certificates of insurance. (2) For a travel insurance policy or certificate that contains preexisting condition exclusions:(A) information and an opportunity to learn more about the preexisting condition exclusions shall be provided prior to the time of purchase and in the coverages fulfillment materials; and (B) the policy or certificate may only exclude preexisting conditions for which medical advice or treatment was recommended by or received from a health care provider within a six-month period preceding the effective date of coverage. (3)(A) The fulfillment materials and the information described in subdivisions 7124(b)(1)(B)(D) of this title shall be provided to a policyholder or certificate holder as soon as practicable following the purchase of a travel protection plan. Unless the insured has either started a covered trip or filed a claim under the travel insurance coverage, a policyholder or certificate holder may cancel a policy or certificate for a full refund of the travel protection plan price from the date of purchase of a travel protection plan until at least: (i) 15 days following the date of delivery of the travel protection plans fulfillment materials by U.S. mail; or (ii) 10 days following the date of delivery of the travel protection plans fulfillment materials by means other than U.S. mail. (B) As used in this subdivision (3), delivery means handing fulfillment materials to the policyholder or certificate holder or sending fulfillment materials by U.S. mail or electronic means to the policyholder or certificate holder. (4) A travel insurer shall disclose in the policy documentation and fulfillment materials whether the travel insurance is primary or secondary to other applicable coverage. (5) Where travel insurance is marketed directly to a consumer through an insurers website or by others through an aggregator site, it shall not be an unfair trade practice or other violation of law where an accurate summary or short description of coverage is provided on the web page, provided the consumer has access to the full provisions of the policy through electronic means. (d) A person offering, soliciting, or negotiating travel insurance or travel protection plans on an individual or group basis may not do so by using negative option or opt out, which would require a consumer to take an affirmative action to deselect coverage, such as by unchecking a box on an electronic form, when the consumer purchases a trip. (e) Marketing blanket travel insurance coverage as free is an unfair trade practice under chapter 129 of this title. (f) Where a consumers destination jurisdiction requires insurance coverage, it shall not be an unfair trade practice to require that a consumer choose between the following options as a condition of purchasing a trip or travel package: (1) purchasing the coverage required by the destination jurisdiction through the travel retailer or limited lines travel insurance producer supplying the trip or travel package; or (2) agreeing to obtain and provide proof of coverage that meets the destination jurisdictions requirements prior to departure. (g) For any travel insurance policy or certificate that provides coverage for sickness, sickness shall include any mental disorder as defined by the American Psychiatric Association DSM-5, or its current equivalent that is diagnosed or treated by a properly qualified medical professional. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7128. Travel administrators
(a) A person shall not act or represent themself as a travel administrator for travel insurance in this State unless that person: (1) is a licensed property and casualty insurance producer in this State for activities permitted under that producer license; (2) holds a valid managing general agent license in this State; or(3) holds a valid third-party administrator license in this State.(b) A travel administrator and its employees are exempt from the licensing requirements of section 4803 of this title for travel insurance it administers. (c) An insurer is responsible for the acts of a travel administrator administering travel insurance underwritten by the insurer and is responsible for ensuring that the travel administrator maintains all books and records relevant to the insurer to be made available by the travel administrator to the Commissioner upon request. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7129. Policy
(a) Notwithstanding any other provision of this title to the contrary, travel insurance shall be classified and filed for purposes of rates and forms under an inland marine line of insurance; provided, however, that travel insurance that provides coverage for sickness, accident, disability, or death occurring during travel, either exclusively or in conjunction with related coverages such as emergency evacuation or repatriation of remains, or incidental limited property and casualty benefits such as baggage or trip cancellation, may be filed under either an accident and health line of insurance or an inland marine line of insurance. (b) Travel insurance may be provided under an individual, group, or blanket policy.(c) Eligibility and underwriting standards for travel insurance may be developed and provided based on travel protection plans designed for individual or identified marketing or distribution channels, provided those standards also meet the States underwriting standards for inland marine. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.) 
 7130. Rulemaking authority
The Commissioner may adopt rules to implement the provisions of this chapter. (Added 2021, No. 139 (Adj. Sess.),  10, eff. August 25, 2022.)
 8001. Definitions
As used in this chapter:(1) Commissioner means the Commissioner of Financial Regulation.(2) Continuing care means the furnishing in a facility, pursuant to a continuing care contract, of board and a variety of living arrangements together with nursing, medical, health and health-related services, assistance with the personal activities of daily living, or any combination of these services, including a priority commitment for nursing care, to two or more individuals who are not related by consanguinity or affinity to the person furnishing such care, for a term in excess of one year or for the duration of that individuals life, including mutually terminable contracts. Lodging and services need not be provided at the same location. (3) Continuing care contract means a contract under which a provider is to furnish continuing care to a specified individual in return for payment of an entrance fee which is in addition to, or in lieu of, the payment of regular periodic charges for the care and services involved. (4) Department means the Department of Financial Regulation.(5) Entrance fee means an initial or deferred transfer to a provider of a sum of money or other property, or portion thereof, made or promised to be made as consideration for acceptance of a specified individual as a resident in a facility. A fee which is less than the sum of the regular periodic charges for six months of residency shall not be considered an entrance fee for the purposes of this chapter. (6) Facility means a place or places in which a resident receives continuing care.(7) Continuing care insurance means, as used in this chapter, the agreement to fund the cost of continuing care pursuant to a continuing care contract. (8) Occupancy date means the date a living unit is available for occupancy by the resident or the date on which the resident personally occupies the living unit, whichever occurs first. (9) Person means an individual, trust, state, partnership, committee, corporation, association, or other organizations such as joint-stock companies or insurance companies, or a political subdivision or instrumentality of a state, including a municipal corporation. (10) Provider means the person who enters into a contract to provide continuing care to a resident. (11) Rate means the cost of services and insurance per exposure base unit, or cost per unit of insurance, or charge to residents for services rendered, prior to the application of individual risk variations based upon loss or expense considerations. (12) Resident means the individual designated in a continuing care contract as the one who is to receive continuing care. (13) Resident assistance fund means a fund established in accordance with section 8018 of this title. Supplementary rate information includes any manual, schedule, or plan of rates, classification system, rating schedule, minimum premium, policy fee, rating rule, rating plan, or any other similar information needed or used to determine the applicable rate in effect or to be in effect for a resident. (Added 1987, No. 247 (Adj. Sess.),  1; amended 1989, No. 225 (Adj. Sess.),  25; 1995, No. 180 (Adj. Sess.),  38; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 8002. Certificate of authority; authority of the Department
(a) A provider shall not receive any entrance fee or portion thereof, or enter into a continuing care contract unless the provider has obtained a certificate of authority from the Commissioner. However, a refundable payment of $1,000.00 or less and a processing fee of $250.00 or less shall not be considered entrance fees for the purposes of this chapter. The Commissioner is authorized to modify the amounts of refundable payments and processing fees to reflect increased costs or inflation. (b) The application for the certificate of authority shall include the following information: the name and address of the provider that will operate the facility, a copy of the proposed continuing care contract and escrow agreement to be used by the applicant, a schedule of all fees to be charged, a description of the applicants refund policy and, if the applicant is not an individual, a description of the applicant. This description shall include the names and addresses of members of its board of directors, if any; its affiliation with or sponsorship by other organizations, if any, and a statement of the financial responsibility of such organizations; the applicants financial, marketing plans, and proposed marketing materials; a plan for establishment of a resident assistance fund; an actuarial report demonstrating financial feasibility; and such other information as the Commissioner may require. An applicant shall submit sufficient evidence of: (1) the amount and liquidity of its assets relative to the risks to be assumed;(2) the adequacy of the expertise, experience, and character of the person or persons who will manage it; and (3) the overall soundness of its plan of operation.(c) The Commissioner shall acknowledge receipt of an application within 15 days of the day it is received. If the application is not complete, the Commissioner shall notify the applicant, in writing, that additional information is required. (d) The Commissioner shall act on the application within 90 days after an application is determined to be complete. The Commissioner may approve, approve with conditions, or deny a certificate of authority. (e) The Commissioner shall not issue a certificate of authority unless he or she determines that the application conforms to the requirements of this chapter and that the provider has demonstrated financial feasibility in accordance with the information submitted pursuant to subsection (b) of this section. (f) The certificate of authority of a provider shall remain in effect until revoked, after notice and hearing, upon a determination that the provider has violated any provision of this chapter, any rule adopted according to the provisions of this chapter, or order of the Commissioner. (g) Providers who have been granted a certificate of authority shall be subject to the provisions of subchapter 7 of chapter 101 of this title, examination and reporting; and sections 3661, 3686, and 3687 of this title. The Commissioner shall conduct an examination whenever deemed necessary but at least twice in the first six years of operation and at least once every five years thereafter. The Commissioner may waive or modify subchapter 7 of chapter 101 of this title and sections 3661, 3686, and 3687 as appropriate to the special characteristics of continuing care retirement communities. (h) Review of rates and fees. (1) Rate standards. (A) Excessive: Rates are excessive if they are producing or are likely to produce unreasonably high profits for the services provided, the excess of revenue over expenses is not reasonably related to the financial requirements of the provider, or expenses are unreasonable when compared to like or similar services provided. (B) Inadequacy: Rates are inadequate if they are insufficient to sustain projected losses and expenses in the class or classes of business to which they apply or the use of such rates has or, if continued, will have the effect of substantially lessening competition or the tendency to create a monopoly in any market. (C) Unfair discrimination: Unfair discrimination exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and expenses. A rate is not unfairly discriminatory because different premiums result for a class of residents with like loss exposures but different expenses, or like expenses but different loss exposures, so long as the rate equitably reflects the differences with reasonable accuracy. This provision shall not prohibit a provider from establishing a rate structure which subsidizes a portion of the units within a facility. (2) Rating methods or criteria. In reviewing the Commissioner shall utilize the following criteria:(A) Basic factor in rates. Due consideration shall be given to past and prospective loss and expense experience within, and as reasonable and necessary outside this State; to catastrophic hazards; to a reasonable provision for underwriting profit; to contingencies; to trends within and outside this State, to additional sums for leveling premium rates over time or for dividends or savings to be allowed or returned to residents; and to all other relevant factors. (B) Classification. Risks may be classified in any lawful and reasonable way for the collection of statistics and establishment of rates. Rates for new residents may be established prospectively for individual risks in accordance with rating plans or schedules which provide for recognition of probable variations in hazards, expenses, or both. (C) Expenses. The expense provisions included in the rates to be used by a provider shall reflect the operating methods of the provider, and, so far as is determinable and reasonable, its own actual and anticipated expense experience for the kind of services provided, or any subdivision thereof. (D) Profits. The rates may contain an allowance providing for a reasonable profit. In determining the reasonableness of profit, consideration shall be given to all relevant investment income and a provision for contingencies may be included. (3) Filing of rates and other rating information. Every provider shall file with the Commissioner all rates and supplementary rate information which are to be used in this State. Such rates and information shall be provided to the Commissioner at least 60 days before the effective date. (4) Use of rates and rate review. The Commissioner has the authority to review rates pursuant to the criteria set forth in this section. The Commissioner may disapprove a rate if the Commissioner finds that it is excessive, inadequate, or discriminatory. (A) A prefiled rate may be disapproved by the Commissioner before its effective date. Existing rates shall remain in effect until a final determination is made on the proposed rate. (B) A rate may be disapproved at any time subsequent to the effective date. The rate shall remain in effect until a new rate is finally determined. (i) Advertising and marketing materials shall be consistent with the provisions of this chapter. Upon request by the Commissioner, the provider shall submit such materials to the Commissioner for review. In the event the Commissioner determines that the materials are inconsistent with the provisions of this chapter, he or she shall order the provider to desist from further use of those materials. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8003. Sale or transfer of ownership
Any provider desiring to sell or transfer ownership of a continuing care facility shall notify the department 30 days in advance of completion of such sale or transfer. The Commissioner may revoke, after notice and hearing, and upon written findings of fact, the certificate of authority of any provider based on a substantial change in control or ownership of such provider, if such change is found not to be in the best interests of the residents of the facility: (1) in that the facility is in danger of becoming insolvent;(2) the care of current or prospective residents is threatened; or(3) the monthly rates paid by residents would be adversely impacted. (Added 1987, No. 247 (Adj. Sess.),  1.)
 8004. Lien on behalf of residents; rehabilitation or liquidation
(a) Prior to the issuance of a certificate of authority under this chapter, or at such other time as the Commissioner may determine it is in the best interests of residents of a facility, the Commissioner may file a lien on the real and personal property of the provider or facility to secure the obligations of the provider pursuant to existing and future contracts for continuing care. A lien filed under this section shall be effective for a period of ten years following such filing and may be extended by the Commissioner upon a finding that such extension is advisable for the protection of residents of the facility. The lien may be foreclosed upon the liquidation of the facility or the insolvency of the provider and in such event the proceeds thereof shall be used in full or partial satisfaction of obligations of the provider pursuant to contracts for continuing care then in effect. The lien provided for in this section shall be subordinate to the lien of any mortgage on the property of the provider used to fund the costs of acquiring, developing, or constructing and funding the reserves thereof, and may be subordinated with the written consent of the Commissioner to the claims of other persons if the Commissioner shall determine such subordination to be advisable for the efficient operation of the facility. A lien filed by the Commissioner under this section does not displace any previously perfected lien. (b) If, at any time, the Commissioner determines, after notice and an opportunity for the provider to be heard, that: (1) a portion of a reserve fund escrow required under this chapter has been or is proposed to be released; (2) a provider has been or will be unable, in such a manner as may endanger the ability of the provider to fully perform its obligations pursuant to contracts for continuing care, to meet the most recent pro forma income or cash flow projections filed by the provider; (3) a provider has failed to maintain the reserves required under this chapter; or(4) a provider is insolvent, or in imminent danger of becoming subject to a delinquency proceeding under chapter 145 of this title or insolvent; the Commissioner may apply to the appropriate court for an order directing or authorizing the Commissioner to seize the property of, to rehabilitate or to liquidate a provider under chapter 145 of this title. (c) In furtherance of the welfare of the persons who have previously contracted with the provider for continuing care, the proceeds of any lien obtained by the Commissioner pursuant to this section shall be distributed in the following order of priority: (1) used on behalf of residents of a facility being liquidated;(2) used in full or partial refund of entrance fees;(3) used to pay other creditors as provided by law. (Added 1987, No. 247 (Adj. Sess.),  1; amended 1999, No. 38,  21, eff. May 20, 1999.)
 8005. Continuing care contracts
(a) A continuing care contract shall be in writing and shall contain at a minimum the provisions required in subsection (d) of this section. (b) All contract forms and the form of any attachments, addenda, or attachments by reference shall be filed with, and approved by, the Commissioner prior to use by the provider. The Commissioner shall have the authority to require disclosure of contract provisions and omissions in the contract. The Commissioner shall have the same authority and be subject to the same procedures in approving contracts under this section as provided for approving applications under subsections 8002(c) and (d) of this title. A single contract form may be used for several types of plans offered by the provider, as long as the Commissioner determines that the use of such forms will not have the tendency to be confusing. (c) All text in contract forms, except as provided in subdivision (d)(14) of this section, shall be printed in a type the size of which shall be uniform and not less than 10-point. (d) The contract shall include at least the following provisions:(1) Termination rights. A statement of the residents termination rights under section 8006 of this title.(2) Living unit. A description of the particular living unit the resident will occupy.(3) Fees. A listing of all fees and the amounts which are required to be paid by the resident, including processing fees, entrance fees or portion thereof, and periodic fees if any. A statement of the values of all properties, if any, subject to transfer under the contract to the provider shall be included. (4) Fee adjustments. A statement of the bases upon which periodic fees may be adjusted. The contract shall provide that the resident will be notified at least 60 days in advance of any change in scope or price of any component of care or service. (5) Effect of civil marriage. A statement relating to the civil marriage of a resident, of fee changes, terms affecting entry of a spouse to the facility, and consequences if the spouse does not meet entry requirements. (6) Occupancy date. An occupancy date shall be specified; however, a provider shall not require a resident to move into the facility on a date which is less than 30 days after the date on which the contract is executed. For facilities under development, the occupancy date may be estimated. (7) Charges. A listing of all services to which the resident is entitled without additional charge. The contract shall clearly specify any additional services available at the facility for which additional charges will be made, the extent to which nursing care is provided, and the charges for that care. Services such as additional meals, personal care, medical care, drugs, and burial which a resident might reasonably expect to be included in the contract, but which are not covered under the contract, shall be specified. (8) Failure to pay. A statement describing whether, and under what circumstances, the resident shall be permitted to remain at the facility in the event he or she is unable to pay periodic or other charges according to the contract, and a statement describing eligibility for participation in the resident assistance fund. (9) Transfers. A statement explaining the conditions under which a resident may be transferred from his or her living unit and the conditions governing reoccupancy of that unit; any financial adjustment to be made in the case of a resident who permanently transfers to another unit in the facility providing a different level of care, or a hospital and who permanently gives up his or her living unit; whether the provider has any responsibility to provide services following care in another facility; whether a refund will be due if the resident vacates his or her living unit and the provider will not permit reoccupancy by the resident. (10) Death, divorce, or transfer of spouse. In instances where the living unit is shared, the options available to a resident upon the death, divorce, or transfer of a resident spouse shall be listed. The contract shall specify how each option affects the monthly rate. The contract shall also specify the options available to a person if his or her spouse dies prior to occupancy of a unit. No resident shall be required to move to another living unit because of the death or transfer of a second resident occupying the same living unit. (11) Preexisting conditions. A statement of any limitations on the providers responsibility for costs associated with the treatment or medication of an ailment or illness existing prior to the date of occupancy. In such case, the medical or surgical exceptions shall be listed in the contract. (12) Absence from facility. A statement explaining whether any reimbursement is to be made by the provider for the support, maintenance, board, or lodging supplied to a resident who requires medical attention while absent from the facility. The contract shall designate any credit or allowance a resident will receive when absent from the facility for an extended period of time. (13) Interest in assets. A statement of the residents proprietary interest in the assets of the facility, if any. (14) Refunds. A statement, in clear and understandable language, in print no smaller than the largest used in the body of the agreement, highlighted by boldface, underlining, or one size larger type, of the terms governing a refund of any portion of the entrance fee, and periodic fees. (e) The contract may include the following provisions:(1) a clause restricting transfer or assignment of a residents rights and privileges under the contract; (2) a clause permitting the provider, in the event the resident breaches the contract, to waive the breach without relinquishing the providers right to insist that the resident comply with the remaining terms of the contract; (3) a clause requiring that the resident reimburse the provider for any loss or damage beyond normal wear and tear suffered by the provider as the result of carelessness or negligence on the part of the resident; and (4) a clause providing for subrogation of any cause of action a resident might have as a result of injuries sustained by a resident due to the negligence of a third party, and for a lien on any judgment, settlement, or recovery, for any additional expense incurred by the provider in caring for the resident as a result of such injury, and requiring the cooperation of the resident in assisting the diligent prosecution of any claim or action against such third party. (f) The contract shall not contain any language purporting to absolve the provider from liability for negligence. (Added 1987, No. 247 (Adj. Sess.),  1; amended 2009, No. 3,  12a, eff. Sept. 1, 2009.) 
 8006. Termination of contract; notice
(a) A person who enters into a continuing care contract with a provider may voluntarily terminate the contract within 30 days of executing such contract, and shall receive a refund of all money paid according to the provisions of subdivision 8007(c)(1) of this title. A person may voluntarily terminate the contract at any other time subject to the applicable refund provisions of subdivisions 8007(c)(2) and (3) of this chapter. (b) If the resident dies before the occupancy date or, through illness, injury, or incapacity, is precluded from becoming a resident under the terms of the continuing care contract, the contract shall terminate. (c) A provider may terminate a contract only for good and sufficient cause. The provider shall give the resident at least 90 days written notice prior to termination, and shall send a copy of the notice to the Department. Good and sufficient cause includes: (1) a material failure on the part of the resident to abide by rules adopted for residents or a material breach by the resident of the continuing care contract, provided that failure to abide by the rules or contract that are caused, in whole or in part, by a diagnosable medical or psychiatric illness shall not be a basis for terminating the contract; and (2) making any material misrepresentation or omission in connection with the application forms, financial statements, or other information submitted by the resident, except that the provisions of the contract, exclusive of financial statements, shall be incontestable after it has been in force during the lifetime of the resident for a period of two years from its date of execution. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8007. Refunds
(a) Unless otherwise provided in this section, all refunds of entrance fees shall be made within 60 days of the day notice of termination is given. Refunds shall be made less any additional costs specifically incurred by the provider at the request of the resident and set forth in writing as a separate addendum. Refunds shall be made according to the following provisions. (b) If the contract is terminated:(1) due to death prior to the occupancy date or 90 days thereafter, or if the person is precluded from becoming a resident under the continuing care contract due to illness, injury, or incapacity, the provider shall refund within 10 days all entrance fees received in connection with the contract; (2) due to death after the first 90 days but within the first year of occupancy, at least 50 percent of the entrance fee shall be refunded. (c) If the contract is voluntarily terminated by the resident and:(1) occurs within 30 days of the date the contract was entered, the provider shall refund all money paid or property transferred in connection with the contract within 10 days; (2) occurs more than 30 days after the contract is entered into and within the first 90 days of occupancy, the resident shall receive a refund of the entrance fee less an amount up to four percent of the entrance fee; (3) occurs more than 90 days after occupancy, a refund shall be calculated on a pro rata basis with the provider retaining no more than two percent of the entrance fee per month of occupancy. (d) If the contract is terminated by the provider, the provider shall refund an amount equal to the entrance fee divided by the residents years of expected lifetime at the time of admission multiplied by his or her years of lifetime at the time of discharge or dismissal. For purposes of this subsection, years of expected lifetime shall be computed on the basis of the mortality tables used by the department under the provisions of section 3784 of this title at the time of the discharge or dismissal. However, in any event refunds shall not be less than ten percent of the entrance fee. Refunds due under this subsection shall be due and payable within ten days of the date that the resident relinquishes possession of the living unit. (e) If less than 80 percent of individual units are contracted, a provider may apply to the Commissioner for permission to delay the refund period under subdivisions (c)(2) and (3) of this section for up to 24 months or until receipt of an entrance fee for the same or a comparable unit, whichever is earlier. If the Commissioner determines that the financial condition of the provider requires such an extension, he or she may order partial distribution of the refund in order to protect a resident from undue hardship. (f) Notwithstanding the other refund provisions of this section, if the facility is not available for occupancy a provider may elect to defer payment of refunds of up to 50 percent of the entrance fee received from or on behalf of the resident until receipt of an entrance fee for the same or a comparable unit or until the facility is occupied, whichever occurs first. However, in no event shall the provider defer payment of a refund for more than 24 months. (g) In the event a provider defers payment of the refund beyond 60 days under subsections (e) and (f) of this section, it shall pay interest to the resident at a rate which is two percentage points above the prime rate charged by banks, as that term is defined in 32 V.S.A.  3108(a). (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8008. Escrow of entrance fees
(a) In the event the facility is not in operation at the time entrance fees are paid, the entrance fees or portions thereof shall be deposited in an escrow account. Such escrowed fees shall not be released to the provider until the following conditions are satisfied: (1) Commitments are received from persons who have entered into continuing care contracts for a minimum of 60 percent of the residential units. As used in this subdivision, commitment means payment of at least ten percent of the entrance fee. (2) One hundred percent of the financing for construction and operation of the facility has been arranged. As used in this subdivision, financing includes all funds which, when combined with entrance fees and periodic fees receivable under signed contracts, are sufficient to complete construction of the facility and to provide enough working capital to enable the facility to operate in a self-sufficient manner. (3) The provider has obtained or caused to be obtained a guaranteed maximum price contract for construction of the facility. (4) The provider has obtained or caused to be obtained all permits and regulatory approvals necessary for operation of the facility except those dependent upon completion of construction. (b) In the case of a contract for a previously occupied residential unit, fees shall be held in escrow until 60 days prior to the occupancy date. (c) If the provider is unable to satisfy the conditions set forth in subsection (a) of this section within a reasonable period of time, the Commissioner may order that escrowed fees be released and refunded. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8009. Reserve requirements
A provider shall maintain a reserve fund equal to annual principal and interest payments on all debt or 15 percent of annual operating expenses, whichever is greater. The Department may require that these funds be placed in an escrow account, or other similarly secure investment where the funds are protected. The Department shall approve any withdrawal or borrowing from these funds, and shall monitor repayment. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8010. Disclosure
(a) A provider shall maintain financial records for the facility, including independently audited financial statements, and copies of all inspection reports pertaining to that facility that have been issued by any governmental agency and filed with the provider. A copy of each such report shall be retained in the facilitys records for not less than five years from the date the report is filed or issued. Each facility shall also maintain all annual reports and statements that have been filed with the Department or any state, local or federal agency. The records and information required to be maintained under this section shall be available for review upon request by residents and applicants during normal business hours. Copies of these documents will be provided for a reasonable copying fee. (b) Notwithstanding the provisions of subsection (a) of this section, records, reports, or documents, which by state or federal law or regulation are deemed confidential, shall not be distributed or made available until such confidential status has expired. (c) Every provider shall prepare a summary of the most recent audited financial statement, indicating in the summary where the contents of the complete statement may be inspected. A copy of the statement shall be maintained at the facility and a copy of the summary shall be prominently displayed in the facility. (d) Proposed changes in policies, programs, and services shall be posted, and explained to residents. (e) Before entering into a contract to furnish continuing care, the provider, or the agent of the provider, shall provide the prospective resident or his or her legal representative with the following information: (1) a copy of the continuing care contract form;(2) a summary of the providers most recent annual financial statement; and(3) such additional information as may be required by the Department. (Added 1987, No. 247 (Adj. Sess.),  1.)
 8011. Resident associations; annual resident meeting
(a) Residents of a facility have the right to self-organization and the right to engage in activities for the purpose of keeping informed on the operation of the facility, or for the purpose of other mutual aid. (b) Annually, the governing body of a facility, or its designated representative, shall hold a meeting with the residents of that facility for the purpose of discussing, at a minimum, the following subjects: income and expenditures of the facility, financial trends and issues as they apply to the facility and any proposed changes in policies, programs, or services. Upon request of the residents, a member of the board of directors, a general partner, or a principal owner shall attend such meeting. Residents shall be given at least seven days advance notice of the annual meeting. An agenda and any materials to be distributed by the governing body at the meeting shall be posted in a conspicuous place in the facility and copies shall be available to residents upon request. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8012. Enforcement
(a) The Commissioner may, after notice and an opportunity for hearing, impose an administrative penalty of not more than $15,000.00 against any person who violates a provision of this chapter. The hearing before the Commissioner shall be a contested case subject to the provisions of 3 V.S.A. chapter 25. (b) A provider who violates a provision of this chapter shall be subject to a fine not to exceed $15,000.00, or imprisonment for a period not to exceed one year, or both. (c) The Department, or the Attorney General at the request of the Department, may bring an action to enforce the provisions of this chapter in the Superior Court. The Court may grant temporary and permanent injunctive relief and may exercise all the powers available to it. (Added 1987, No. 247 (Adj. Sess.),  1; 1995, No. 167 (Adj. Sess.),  25.) 
 8013. Hearing on denial of certificate or rate application
An adverse decision by the Commissioner under section 8002 of this title shall state the grounds and particulars on which the decision was based in such detail as to reasonably inform the affected party. Any party aggrieved by the decision may file a written notice and request a hearing before the Commissioner within 30 days of the decision. The appeal provisions set forth in 3 V.S.A. chapter 25 shall apply. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8014. Rules
The Commissioner may adopt rules under 3 V.S.A. chapter 25 necessary to carry out the provisions of this chapter. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8015. Nondiscrimination
The provisions of 9 V.S.A.  4503 as they relate to age shall not apply to providers offering continuing care under the provisions of this chapter. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8016. Fees for administration of this chapter
(a) An application for a certificate of authority shall be accompanied by a fee of $1,500.00.(b) The Department shall be reimbursed for any expenses it reasonably incurs itself or by its agents in pursuing the following statutory duties: (1) review of rates charged by operators;(2) review of contract forms;(3) monitoring compliance with statutory and regulatory requirements;(4) general enforcement of statutory requirements; and(5) preparation and publication of a consumers guide. The Commissioner shall annually, before August 16, apportion the expenses incurred in performing the enumerated duties among providers based on their annual gross revenue for their most recent fiscal year. (c) The Department shall be reimbursed by a provider for any expenses reasonably incurred by the Department or by its agents, in pursuing its financial and market conduct examinations, reviewing the sale or transfer of a facility to another operator, conducting specific enforcement actions, and carrying out investigations and rehabilitation activities under this chapter. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8017. Consumers guide
The Commissioner shall publish and distribute a consumers guide to continuing care retirement communities and a directory of such facilities. (Added 1987, No. 247 (Adj. Sess.),  1.) 
 8018. Resident Assistance Fund
(a) A provider shall establish a Resident Assistance Fund for the purpose of assisting residents who are unable to meet a portion of periodic or other charges of the provider. (b) The Fund shall be established by an initial contribution of at least $25,000.00 from the provider and may contain any additional amounts contributed by the provider or residents. (c) The Fund, including any interest earned on monies in the Fund, shall be used for the sole purpose of assisting residents who have financial difficulties which impair their ability to meet monthly fees and other charges. (d) The Fund shall be administered by the operator of the facility and a committee of residents, designated by the residents, for the exclusive benefit of the residents in a manner approved by the Commissioner. (e) The Fund shall be subject to an annual independent audit. The independent audit may be filed and submitted in accordance with one of the following methods: (1) an audited financial statement of the Fund shall be included as a separate schedule of supplementary information in the providers audited annual statement required under subsection 8002(g) of this title; or (2) an audited financial statement of the Fund shall be submitted annually to the residents and the Commissioner. (Added 1987, No. 247 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  13.) 
 8081. Purpose
The purpose of this chapter is to promote the public interest, to promote the availability of long-term care insurance policies, to protect applicants for long-term care insurance from unfair or deceptive sales or enrollment practices, to establish standards for long-term care insurance, to facilitate public understanding and comparison of long-term care insurance policies, and to facilitate flexibility and innovation in the development of long-term care insurance coverage. (Added 2003, No. 124 (Adj. Sess.),  2.) 
 8082. Definitions
As used in this chapter:(1) Applicant means:(A) In the case of an individual long-term care insurance policy, the individual who seeks to contract for benefits. (B) In the case of a group long-term care insurance policy, the proposed certificate holder.(2) Certificate means, as used in this chapter, any certificate issued under a group long-term care insurance policy, which policy has been delivered or issued for delivery in this State. (3) Commissioner means the Commissioner of Financial Regulation.(4) Group long-term care insurance means a long-term care insurance policy that is delivered or issued for delivery in this State and issued to: (A) One or more employers or labor organizations or to a trust or to the trustees of a fund established by one or more employers or labor organizations, or a combination thereof, for employees or former employees or a combination thereof, or for members or former members or a combination thereof, of the labor organizations; (B) Any professional, trade, or occupational association for its members or former or retired members, or combination thereof, if the association: (i) is composed of individuals all of whom are or were actively engaged in the same profession, trade, or occupation; and (ii) has been maintained in good faith for purposes other than obtaining insurance; or(C)(i) An association or a trust or the trustees of a fund established, created, or maintained for the benefit of members of one or more associations. Prior to advertising, marketing, or offering the policy within this State, the association or associations or the insurer of the association or associations shall file evidence with the Commissioner that the association or associations have at the outset a minimum of 100 persons and have been organized and maintained in good faith for purposes other than that of obtaining insurance, have been in active existence for at least one year, and have a constitution and bylaws that provide that: (I) The association or associations hold regular meetings not less than annually to further purposes of the members; (II) Except for credit unions, the association or associations collect dues or solicit contributions from members; and (III) The members have voting privileges and representation on the governing board and committees.(ii) Forty-five days after the filing, the association or associations will be deemed to satisfy the organizational requirements, unless the Commissioner makes a finding that the association or associations do not satisfy those organizational requirements. (D) A group other than as described in subdivisions (A), (B), and (C) of this subdivision (4), subject to a finding by the Commissioner that: (i) the issuance of the group policy is not contrary to the best interests of the public;(ii) the issuance of the group policy would result in economies of acquisition or administration; and (iii) the benefits are reasonable in relation to the premiums charged.(5) Long-term care insurance means any insurance policy or rider advertised, marketed, offered, or designed to provide coverage for not less than 12 consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis, for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital. The term includes group and individual annuities and life insurance policies or riders that provide directly or supplement long-term care insurance. The term also includes a policy or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. The term also includes qualified long-term care insurance contracts. Long-term care insurance may be issued by insurers; fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations; or any similar organization to the extent it is otherwise authorized to issue life or health insurance. Long-term care insurance shall not include any insurance policy that is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage. With regard to life insurance, this term does not include life insurance policies that accelerate the death benefit specifically for one or more of the qualifying events of terminal illness, medical conditions requiring extraordinary medical intervention or permanent institutional confinement, and that provide the option of a lump-sum payment for those benefits where neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long-term care. Notwithstanding any other provision of this chapter, any product advertised, marketed, or offered as long-term care insurance shall be subject to the provisions of this chapter. (6) Policy means, as used in this chapter, any policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in this State by an insurer; fraternal benefit society; nonprofit health, hospital, or medical service corporation; prepaid health plan; health maintenance organization; or any similar organization. (7)(A) Qualified long-term care insurance contract or federally tax-qualified long-term care insurance contract means an individual or group insurance contract that meets the requirements of Section 7702B(b) of the Internal Revenue Code of 1986, as amended, as follows: (i) The only insurance protection provided under the contract is coverage of qualified long-term care services. A contract shall not fail to satisfy the requirements of this subdivision (7) by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate. (ii) The contract does not pay or reimburse expenses incurred for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act, as amended, or would be so reimbursable but for the application of a deductible or coinsurance amount. The requirements of this subdivision (7) do not apply to expenses that are reimbursable under Title XVIII of the Social Security Act only as a secondary payer. A contract shall not fail to satisfy the requirements of this subdivision (7) by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate. (iii) The contract is guaranteed renewable, within the meaning of Section 7702B(b)(1)(C) of the Internal Revenue Code of 1986, as amended.(iv) The contract does not provide for a cash surrender value or other money that can be paid, assigned, pledged as collateral for a loan, or borrowed except as provided in subdivision (v) of this subdivision (7)(A). (v) All refunds of premiums and all policyholder dividends or similar amounts under the contract are to be applied as a reduction in future premiums or to increase future benefits, except that a refund on the event of the death of the insured or a complete surrender or cancellation of the contract cannot exceed the aggregate premiums paid under the contract. (vi) The contract meets the consumer protection provisions set forth in Subsection 7702B(g) of the Internal Revenue Code of 1986, as amended.(B) Qualified long-term care insurance contract or federally tax-qualified long-term care insurance contract also means the portion of a life insurance contract that provides long-term care insurance coverage by rider or as part of the contract and that satisfies the requirements of Subsections 7702B(b) and (e) of the Internal Revenue Code of 1986, as amended. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  264, eff. July 1, 2022.) 
 8083. Extraterritorial jurisdiction
No group long-term care insurance coverage may be offered to a resident of this State under a group policy issued in another state to a group described in subdivision 8082(4)(D) of this title, unless this State or another state having statutory and regulatory long-term care insurance requirements substantially similar to those adopted in this State has made a determination that such requirements have been met. All other jurisdiction shall be pursuant to section 4062 of this title. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8084. Disclosure standards
(a) The Commissioner shall adopt rules establishing standards for full and fair disclosure of the terms of a long-term care insurance policy. (b) The disclosure standards established under subsection (a) of this section shall include provisions setting forth the manner, content, and required disclosures for the sale of long-term care insurance policies, terms of renewability, initial and subsequent conditions of eligibility, nonduplication of coverage provisions, coverage of dependents, preexisting conditions, termination of insurance, continuation, conversion, probationary periods, limitations, exceptions, reductions, elimination periods, requirements for replacement, recurrent conditions, and definitions of terms. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8084a. Required disclosure of rating practices to consumers
(a) Other than policies for which no applicable premium rate or rate schedule increases can be made, insurers shall provide all of the information listed in this subsection to the applicant at the time of application or enrollment, unless the method of application does not allow for delivery at that time. In such a case, an insurer shall provide all of the information listed in this subsection to the applicant not later than at the time of delivery of the policy or certificate: (1) a statement that the policy may be subject to rate increases in the future;(2) an explanation of potential future premium rate revisions and the policyholders or certificate holders option in the event of a premium rate revision; (3) the premium rate or rate schedules applicable to the applicant that will be in effect until a request is made for an increase; (4) a general explanation for applying premium rate or rate schedule adjustments that shall include: (A) a description of when premium rate or rate schedule adjustments will be effective; and (B) the right to a revised premium rate or rate schedule as provided in subdivision (2) of this subsection if the premium rate or rate schedule is changed; and (5) information regarding each premium rate increase on this policy form or similar policy forms over the past 10 years for this State or any other state that, at a minimum, identifies: (A) the policy forms for which premium rates have been increased;(B) the calendar years during which the form was available for purchase; and(C) the amount or percent of each increase. The percentage may be expressed as a percentage of the premium rate prior to the increase and may also be expressed as minimum and maximum percentages if the rate increase is variable by rating characteristics. (b) In certain circumstances, the Commissioner may waive the disclosures required to be made by an insurer under subdivision (a)(5) of this section where such disclosures relate to blocks of business acquired by such an insurer from nonaffiliated insurers or the long-term care policies acquired from nonaffiliated insurers, and when the increases that would otherwise be required to be disclosed occurred prior to the acquisition of such block or policies. Similarly, the Commissioner may waive the premium disclosures required by subdivision (a)(5) of this subsection, as relates to a rate increase on a long-term care policy form acquired from nonaffiliated insurers or a block of policy forms acquired from nonaffiliated insurers on or before the end of a 24-month period following the acquisition of the block of policies, and where disclosure of the rate increase had been made by the selling insurer prior to the acquisition. When making a decision to waive the disclosures required under subdivision (a)(5) of this section, the Commissioner shall consider such factors as whether making the disclosures would be unfair or punitive to the acquiring insurer and whether nondisclosure would harm Vermont consumers. (c) The insurer may, in a fair manner, provide explanatory information related to the rate increases. (d) An applicant shall, at the time of application, unless the method of application does not allow for acknowledgment at that time, in such a case, not later than at the time of delivery of the policy or certificate, sign an acknowledgment that the insurer made the disclosure required under subdivisions (a)(1) and (5) of this section. (e) An insurer shall provide notice of an upcoming premium rate schedule increase to all policyholders or certificate holders, if applicable, at least 45 days prior to the implementation of the premium rate schedule increase by the insurer. The notice shall include the information required by subsection (a) of this section when the rate increase is implemented. (Added 2005, No. 20,  1, eff. May 11, 2005; amended 2021, No. 105 (Adj. Sess.),  265, eff. July 1, 2022.) 
 8084b. Suitability
(a) This section shall not apply to life insurance policies that accelerate benefits for long-term care. (b) The issuer, meaning every insurer, health care service plan, or other entity marketing long-term care insurance, shall: (1) develop and use suitability standards to determine whether the purchase or replacement of long-term care insurance is appropriate for the needs of the applicant; (2) train its agents in the use of its suitability standards;(3) maintain a copy of its suitability standards and make them available for inspection upon request by the Commissioner; and (4) file with the Commissioner a copy of the issuers personal worksheet form.(c)(1) To determine whether the applicant meets the standards developed by the issuer, the agent and issuer shall develop procedures that take the following into consideration: (A) the ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage; (B) the applicants goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs; and (C) the values, benefits, and costs of the applicants existing insurance, if any, when compared to the values, benefits, and costs of the recommended purchase or replacement. (2) The issuer and, where an agent is involved, the agent shall make reasonable efforts to obtain the information set out in subsection (c) of this section. The efforts shall include presentation to the applicant, at or prior to application, of the personal worksheet used by the issuer. The issuer may request the applicant to provide information to comply with its suitability standards. (3) A completed personal worksheet shall be returned to the issuer prior to the issuers consideration of the applicant for coverage, except the personal worksheet need not be returned for sales of employer group coverage to employees and their spouses. (4) The sale or dissemination outside the company or agency by the issuer or agent of information obtained through the personal worksheet is prohibited. (d) The issuer shall use the suitability standards it has developed pursuant to this section in determining whether issuing long-term care insurance coverage to an applicant is appropriate. (e) Agents shall use the suitability standards developed by the issuer in marketing long-term care insurance. (f) If the issuer determines that the applicant does not meet its financial suitability standards, or if the applicant has declined to provide the information, the issuer may reject the application. In the alternative, the issuer shall send the applicant a letter by which the applicant may choose to purchase the policy knowing that the issuer had determined that the applicant did not meet the financial suitability standards. However, if the applicant has declined to provide financial information, the issuer may use some other method to verify the applicants intent. Either the applicants returned letter or a record of the alternative method of verification shall be made part of the applicants file. (g) The issuer shall report annually to the Commissioner the total number of applications received from residents of this State, the number of those who declined to provide information on the personal worksheet, the number of applicants who did not meet the suitability standards, and the number of those who chose to confirm after receiving a suitability letter. (Added 2005, No. 20,  1, eff. May 11, 2005.) 
 8085. Minimum benefits and coverage; general
(a) The Commissioner shall adopt rules establishing standards for minimum benefits and coverage that must be provided by a long-term care insurance policy to carry out the purposes of subsection (b) of this section. Nothing in this section prohibits an insurer from underwriting in accordance with that insurers underwriting standards and the requirements of section 8086 of this title. (b) No long-term care insurance policy may:(1) be cancelled, nonrenewed, or otherwise terminated on grounds other than by cancellation by the insured individual or certificate holder; nonpayment of premiums by the insured individual or certificate holder; all amounts potentially payable under the terms of the policy having been fully paid out; or except as provided for in section 8094 of this title; (2) contain a provision establishing a new waiting period in the event existing coverage is converted to or replaced by a new or other form within the same company, except with respect to an increase in benefits voluntarily selected by the insured individual or group policyholder; (3) provide coverage for skilled nursing care only or provide significantly more coverage for skilled care in a facility than coverage for lower levels of care; (4) deny benefits or coverage on the basis that the need for services arises from a mental condition or Alzheimers disease and related disorders; (5) be issued without including a provision covering home health care benefits that complies with the standards for minimum benefits and coverage established by rule under subsection (a) of this section; (6) fail to offer adult day care benefits, either in the policy or as an optional rider, that comply with the standards for minimum benefits and coverage established by rule under subsection (a) of this section; (7) be offered without including an option for inflation adjustment protection that complies with the standards for minimum benefits and coverage established by rule under subsection (a) of this section; (8) include a deductible or elimination period in excess of 100 days, computed in a manner prescribed by the Commissioner by rule, for any covered benefit; (9) require payment of premiums more frequently than monthly; or(10) be represented as having a premium described as level, fixed, or by similar words, if the premium is not, in fact, fixed and may be increased. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005; amended 2013, No. 96 (Adj. Sess.),  23.) 
 8086. Preexisting conditions
(a) No long-term care insurance policy or certificate shall use a definition of preexisting condition that is more restrictive than the following: preexisting condition means a condition for which medical advice or treatment was recommended by or received from a provider of health care services within six months preceding the effective date of coverage of an insured person. (b) No long-term care insurance policy or certificate may exclude coverage for a loss or confinement that is the result of a preexisting condition, unless such loss or confinement begins within six months following the effective date of coverage of an insured person. (c) The Commissioner may by rule extend the limitation periods established in subsections (a) and (b) of this section as to specific age group categories in specific policy forms upon findings that the extension is in the best interests of the public. (d) The definition of preexisting condition does not prohibit an insurer from using an application form designed to elicit the complete health history of an applicant and, on the basis of the answers on that application, from underwriting in accordance with that insurers established underwriting standards. Unless otherwise provided in the policy or certificate, a preexisting condition, regardless of whether it is disclosed on the application, need not be covered until the waiting period described in subsection (b) of this section expires. No long-term care insurance policy or certificate may exclude or use waivers or riders of any kind to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions beyond the waiting period described in subsection (b) of this section. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005; amended 2021, No. 105 (Adj. Sess.),  266, eff. July 1, 2022.) 
 8087. Prior institutionalization
No long-term care insurance policy shall condition benefits upon a period of prior hospitalization or upon admission to a facility for the same or related condition that led to hospitalization or admission to the facility. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8088. Loss ratio standards
The Commissioner may adopt rules establishing loss ratio standards for long-term care insurance policies, provided that a specific reference to long-term care insurance policies is contained in the rule. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8089. Right to return; free look
(a) Individual long-term care insurance policyholders shall have the right to return the policy within 30 days of its delivery and to have the premium refunded if, after examination of the policy, the policyholder is not satisfied for any reason. Individual long-term care insurance policies shall have a notice prominently printed on the first page of the policy stating in substance that the policyholder shall have the right to return the policy within 30 days of its delivery and to have the premium refunded if, after examination of the policy, the policyholder is not satisfied for any reason. (b) A person insured under a long-term care insurance policy issued pursuant to a direct response solicitation shall have the right to return the policy within 30 days of its delivery and to have the premium refunded if after examination the insured person is not satisfied for any reason. Long-term care insurance policies issued pursuant to a direct response solicitation shall have a notice prominently printed on the first page stating in substance that the insured person shall have the right to return the policy within 30 days of its delivery and to have the premium refunded if after examination the insured person is not satisfied for any reason. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8090. Outline of coverage for applicant; certificate
(a) An outline of coverage shall be delivered to a prospective applicant for long-term care insurance at the time of initial solicitation through means that prominently direct the attention of the recipient to the document and its purpose. The Commissioner shall prescribe a standard format, including style, arrangement, overall appearance, and the content of an outline of coverage. (b) In the case of agent solicitations, an agent shall deliver the outline of coverage prior to the presentation of an application or enrollment form. (c) In the case of direct response solicitations, the outline of coverage shall be presented in conjunction with any application or enrollment form. (d) In the case of a policy issued to a group defined in subdivision 8082(4)(A) of this chapter, an outline of coverage shall not be required to be delivered, provided that the information described in subsection (e) of this section is contained in other materials relating to enrollment. Upon request, these other materials shall be made available to the Commissioner. (e) The outline of coverage shall include:(1) a description of the principal benefits and coverage provided in the policy;(2) a statement of the principal exclusions, reductions, and limitations contained in the policy; (3) a statement of the terms under which the policy or certificate, or both, may be continued in force or discontinued, including any reservation in the policy of a right to change premium. Continuation or conversion provisions of group coverage shall be specifically described; (4) a statement that the outline of coverage is a summary only, not a contract of insurance, and that the policy or group master policy contains governing contractual provisions; (5) a description of the terms under which the policy or certificate may be returned and the premium refunded; (6) a brief description of the relationship of cost of care and benefits; and(7) a statement that discloses to the policyholder or certificate holder whether the policy is intended to be a federally tax-qualified long-term care insurance contract under Subsection 7702B(b) of the Internal Revenue Code of 1986, as amended. (f) A certificate issued pursuant to a group long-term care insurance policy delivered or issued for delivery in this State shall include: (1) a description of the principal benefits and coverage provided in the policy;(2) a statement of the principal exclusions, reductions, and limitations contained in the policy; and (3) a statement that the group master policy determines governing contractual provisions.(g) If an application for a long-term care insurance contract or certificate is approved, the issuer shall deliver the contract or certificate of insurance to the applicant not later than 30 days after the date of approval. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005; amended 2021, No. 105 (Adj. Sess.),  267, eff. July 1, 2022.) 
 8091. Policy summary for life insurance policy providing long-term care benefits
(a) If an individual life insurance policy provides long-term care benefits within the policy or by rider, a policy summary shall be delivered at the time of policy delivery. In the case of direct response solicitations, the insurer shall deliver the policy summary upon the applicants request, but regardless of request shall make delivery not later than at the time of policy delivery. In addition to complying with all applicable requirements, the summary shall also include: (1) an explanation of how the long-term care benefit interacts with other components of the policy, including deductions from death benefits; (2) an illustration of the amount of benefits, the length of benefits, and the guaranteed lifetime benefits if any, for each covered person; (3) any exclusions, reductions, and limitations on benefits of long-term care;(4) a statement that any long-term care inflation protection option required by subdivision 8085(b)(6) of this title is not available under this policy; (5) if applicable to the policy type, the summary shall also include:(A) a disclosure of the effects of exercising other rights under the policy;(B) a disclosure of guarantees related to long-term care costs of insurance charges; and(C) current and projected maximum lifetime benefits.(b) The provisions of the policy summary listed in this section may be incorporated into a basic illustration required to be delivered or into the life insurance policy summary that is required to be delivered in accordance with the Departments rules. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005; amended 2021, No. 105 (Adj. Sess.),  268, eff. July 1, 2022.) 
 8092. Acceleration of life insurance death benefit; monthly report
Anytime a long-term care benefit, funded through a life insurance vehicle by the acceleration of the death benefit, is in benefit payment status, a monthly report shall be provided to the policyholder. The report shall include: (1) any long-term care benefits paid out during the month;(2) an explanation of any changes in the policy, such as death benefits or cash values, due to long-term care benefits being paid out; and (3) the amount of long-term care benefits existing or remaining. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.)
 8093. Denial of claims; written explanation
(a) If a claim under a long-term care insurance contract is denied, the issuer shall, within 60 days of the date of a written request by the policyholder or certificate holder, or a representative thereof: (1) provide a written explanation of the reasons for the denial; and(2) make available all information directly related to the denial.(b) After completion of all internal appeals, the policyholder or certificate holder may appeal the insurers benefit trigger determination to an independent review organization designated by the Commissioner, upon payment of a filing fee of no more than $15.00. The filing fee may be waived or reduced upon a finding by the Commissioner that the financial circumstances of the insured warrant a waiver or reduction. All other costs of the independent review shall be paid by the insurer. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005; amended 2009, No. 137 (Adj. Sess.),  28.) 
 8094. Incontestability period
(a) For a policy or certificate that has been in force for less than six months, an insurer may rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim upon a showing of misrepresentation that is material to the acceptance for coverage. (b) For a policy or certificate that has been in force for at least six months but less than two years, an insurer may rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim upon a showing of misrepresentation that is both material to the acceptance for coverage and which pertains to the condition for which benefits are sought. (c) After a policy or certificate has been in force for two years, it is not contestable upon the grounds of misrepresentation alone, but may be contested only upon a showing that the insured knowingly and intentionally misrepresented relevant facts relating to the insureds health. (d) If an insurer has paid benefits under the long-term care insurance policy or certificate, the benefit payments may not be recovered by the insurer in the event that the policy or certificate is rescinded. (e) In the event of the death of the insured, this section shall not apply to the remaining death benefit of a life insurance policy that accelerates benefits for long-term care. In this situation, the remaining death benefits under these policies shall be governed by sections 3731 and 4065 of this title. In all other situations, this section shall apply to life insurance policies that accelerate benefits for long-term care. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8095. Nonforfeiture benefits
(a) Except as provided in subsection (b) of this section, a long-term care insurance policy may not be delivered or issued for delivery in this State unless the policyholder or certificate holder has been offered the option of purchasing a policy or certificate that includes a nonforfeiture benefit. The offer of a nonforfeiture benefit may be in the form of a rider that is attached to the policy. In the event the policyholder or certificate holder declines the nonforfeiture benefit, the insurer shall provide a contingent benefit upon lapse of the policy that shall be available for a specified period of time following a substantial increase in premium rates. (b) When a group long-term care insurance policy is issued, the offer required in subsection (a) of this section shall be made to the group policyholder. However, if the policy is issued as group long-term care insurance as defined in subdivision 8082(4)(D) of this title, other than to a continuing care retirement community or other similar entity, the offering shall be made to each proposed certificate holder. (c) The Commissioner shall adopt rules specifying the type or types of nonforfeiture benefits to be offered as part of long-term care insurance policies and certificates, the standards for nonforfeiture benefits, and the rules regarding contingent benefit upon lapse of the policy, including a determination of the specified period of time during which a contingent benefit upon lapse will be available and the substantial premium rate increase that triggers a contingent benefit upon lapse as described in subsection (a) of this section. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8096. Secondary notice of cancellation
The Commissioner shall adopt the National Association of Insurance Commissioners model rule regarding secondary notice of cancellation of long-term care policies. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8097. Authority to adopt rules
The Commissioner shall adopt reasonable rules to promote premium adequacy and to protect the policyholder in the event of substantial rate increases, and to establish minimum standards for marketing practices, agent compensation, field issuance, agent testing, penalties, and reporting practices for long-term care insurance. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8098. Buyers guide
The Commissioner shall require that a person offering long-term care insurance distribute to applicants a buyers guide in a form prescribed by the Commissioner. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8099. Enforcement
(a) No policy may be advertised, marketed, or offered as long-term care insurance unless it complies with the provisions of this chapter and rules adopted under this chapter. (b) In addition to any other remedy or sanction provided by law, after notice and opportunity for hearing, the Commissioner may assess an administrative penalty in an amount not to exceed $10,000.00 or up to three times the amount of any commissions paid, whichever is greater, for each violation against any person who violates any provision of this chapter. (c) A person who violates a provision of this chapter shall be fined not more than $10,000.00 or imprisoned for not more than six months, or both. (d) The Department or the Attorney General at the request of the Department may bring an action to enforce the provisions of this chapter in Washington Superior Court. (Added 2003, No. 124 (Adj. Sess.),  2, eff. Jan. 1, 2005.) 
 8101. Report of material transactions required
(a) Every insurer domiciled in this State shall file a report with the Commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements unless such acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements have been submitted to the Commissioner for review, approval, or information purposes by the insurer pursuant to other provisions of the insurance laws, regulations, or other requirements. (b) The report required in subsection (a) of this section shall be filed within 15 days of the end of the calendar month in which the transaction occurs. (c) One complete copy of the report, including any exhibits or other attachments filed as part thereof, shall be filed with the department and with the National Association of Insurance Commissioners. (d) All reports obtained by or disclosed to the Commissioner under this chapter shall be confidential and shall not be subject to subpoena nor made public by the Commissioner, the National Association of Insurance Commissioners, or any other person, except to the insurance departments of other states, without the prior written consent of the insurer to which it pertains, unless the Commissioner, after the insurer has had notice and an opportunity to be heard, determines that the interest of policyholders, shareholders or the public will be served by the publication thereof, in which event the Commissioner may publish all or any part thereof in such manner as he or she may deem appropriate. (Added 1993, No. 235 (Adj. Sess.),  6, eff. June 21, 1994.) 
 8102. Acquisitions and dispositions of assets
(a)(1) For the purposes of this chapter, asset acquisition shall include every purchase, lease, exchange, merger, consolidation, succession, or other acquisition other than the construction or development of real property by or for the reporting insurer or the acquisition of materials for such purpose. (2) For the purposes of this chapter, asset disposition shall include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment (whether for the benefit of creditors or otherwise), abandonment, destruction, or other disposition. (b) The following information is required to be disclosed in any report of a material asset acquisition or disposition: (1) Date of the transaction.(2) Manner of acquisition or disposition.(3) Description of the assets involved.(4) Nature and amount of the consideration given or received.(5) Purpose of, or reason for, the transaction.(6) Manner by which the amount of consideration was determined.(7) Gain or loss recognized or realized as a result of the transaction.(8) Identity of each person from whom the assets were acquired or to whom they were disposed.(c) Materiality. No acquisition or disposition of assets need be reported pursuant to section 8101 of this title if the acquisition or disposition is not material. For purposes of this chapter, a material asset acquisition (or the aggregate of any series of related acquisitions during any 30-day period) or asset disposition (or the aggregate of any series of related dispositions during any 30-day period) is one that is nonrecurring, not in the ordinary course of business and involves more than five percent of the reporting insurers total admitted assets as reported in its most recent annual statement filed with the department under section 3561 of this title. (d) Insurers are required to report material asset acquisitions and dispositions on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or a 100 percent reinsurance agreement that affects the solvency and integrity of the insurers reserves and such insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than $1,000,000.00 total direct plus assumed written premiums during the calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement is less than five percent of the insurers capital and surplus. (Added 1993, No. 235 (Adj. Sess.),  6, eff. June 21, 1994.) 
 8103. Nonrenewals, cancellations, or revisions of ceded reinsurance agreements
(a) Scope. Except as provided in subsection (c) of this section, a report as prescribed by section 8101 of this title is required to be filed without regard to which party has initiated the nonrenewal, cancellation or revision of ceded reinsurance agreements whenever one or more of the following conditions exist: (1) an entire cession has been cancelled, nonrenewed, or revised and ceded indemnity and loss adjustment expense reserves after the nonrenewal, cancellation, or revision are less than 50 percent of the reserves that would have been ceded had the nonrenewal, cancellation, or revision not occurred; (2) an authorized or accredited reinsurer has been replaced on an existing cession by an unauthorized reinsurer and the revision affects more than 10 percent of the cession; or (3) collateral requirements previously established for an unauthorized reinsurer have been reduced and the revision affects more than 10 percent of the cession. (b) The following information is required to be disclosed in any report of a material nonrenewal, cancellation, or revision of a ceded reinsurance agreement: (1) the effective date of the nonrenewal, cancellation, or revision;(2) a description of the transaction, including identification of the initiator thereof;(3) the purpose of, or reason for, the transaction; and(4) if applicable, the identity of any replacement reinsurers.(c) Exemptions. (1) Nonrenewals, cancellations, or revisions of ceded reinsurance agreements are not material and are exempt from the reporting requirements under this chapter if the nonrenewal, cancellation, or revision is one that affects: (A) less than 50 percent of an insurers ceded written premium, for property and casualty business including accident and health when written as property/casualty business, or (B) less than 50 percent of the total reserve credit taken for life, annuity and accident and health business ceded, on an annualized basis as indicated in the insurers most recently filed annual statement. (2) Provided, however, that no filing is required if:(A) the insurers ceded written premium on an annualized basis, is less than 10 percent of the direct plus assumed written premium prior to any cession; or (B) the total reserve credit taken for business ceded represents, on an annualized basis, less than 10 percent of the statutory reserve requirement prior to any cession. (d) Insurers are required to report all material nonrenewals, cancellations, or revisions of ceded reinsurance agreements on a nonconsolidated basis unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurers reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than $1,000,000.00 total direct plus assumed written premiums during the calendar year that are not subject to a pooling arrangement and the net income from business not subject to a pooling arrangement represents less than five percent of the insurers capital and surplus. (Added 1993, No. 235 (Adj. Sess.),  6, eff. June 21, 1994.) 
 8201. Purpose
The purpose of this chapter is to regulate the transfer and novation of contracts of insurance, including annuities, through the assumption of the contract. (Added 1993, No. 235 (Adj. Sess.),  7.) 
 8202. Scope
(a) The requirements of this chapter apply to any insurer authorized to transact business in this State who contracts to assume or transfer the obligations or risks on contracts of insurance, including annuities, pursuant to an assumption reinsurance agreement. (b) This chapter does not apply to:(1) any reinsurance agreement or transaction in which the ceding insurer continues to remain directly liable for insurance obligations or risks under the contracts of insurance that are subject to the reinsurance agreement; (2) the substitution of one insurer for another upon the expiration of insurance coverage pursuant to statutory or contractual requirements and the issuance of a new contract of insurance by another insurer; (3) the transfer of contracts of insurance pursuant to a merger or consolidation of two or more insurers to the extent that those transactions are regulated by statute; (4) any insurer subject to a judicial order of liquidation or rehabilitation;(5) any reinsurance agreement or transaction to which a state insurance guaranty association is a party, provided that policyholders do not lose any rights or claims afforded under their original policies pursuant to subchapter 9 of chapter 101 or chapter 112 of this title; or (6) the transfer of liabilities from one insurer to another under a single group policy upon the written request of the group policyholder. (Added 1993, No. 235 (Adj. Sess.),  7.) 
 8203. Definitions
As used in this chapter:(1) Assuming insurer means the insurer which acquires an insurance obligation or risk from the transferring insurer pursuant to an assumption reinsurance agreement. (2) Assumption reinsurance agreement means any contract, whether or not coupled with a reinsurance or indemnity agreement, which: (A) transfers insurance obligations or risks of existing or in-force contracts of insurance from a transferring insurer to an assuming insurer; and (B) is intended to effect a novation of the transferred contract of insurance with the result that the assuming insurer becomes directly and solely liable to the policyholders of the transferring insurer and the transferring insurers insurance obligations or risks under the contracts are extinguished. (3) Contract of insurance means any written agreement between an insurer and policyholder pursuant to which the insurer, in exchange for premium or other consideration, agrees to assume an obligation or risk of the policyholder or to make payments on behalf of, or to, the policyholder or any beneficiary. Contract of insurance includes all property, casualty, life, health, accident, surety, title, and annuity business authorized to be written pursuant to the insurance laws of this State. (4) Home service business means insurance business on which premiums are collected on a weekly or monthly basis by an agent of the insurer. (5) Notice of transfer means the written notice to policyholders required by subsection 8204(a) of this title. (6) Policyholder means any individual or entity who owns or has the right to terminate or otherwise alter the terms of a contract of insurance. It includes any certificateholder whose certificate is in force on the proposed effective date of the assumption, if the certificateholder has the right to keep the certificate in force without change in benefit following termination of the group policy. The right to keep the certificate in force referred to in this subdivision shall not include the right to elect individual coverage arising out of a group contract continued pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA), Section 601, et seq., of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.  1161 et seq. or subchapter 2 of chapter 107 of this title. (7) Transferring insurer means the insurer which transfers an insurance obligation or risk to an assuming insurer pursuant to an assumption reinsurance agreement. (Added 1993, No. 235 (Adj. Sess.),  7.) 
 8204. Assumption, transfer, and notice requirements
(a) Except as provided in, and subject to, subsection 8207(d) of this title, the transferring insurer shall provide or cause to be provided to each policyholder a notice of transfer by first-class mail, addressed to the policyholders last known address or to the address to which premium notices or other policy documents are sent or, with respect to home service business, by personal delivery with receipt acknowledged by the policyholder. A notice of transfer shall also be sent to the transferring insurers agents or brokers of record on the affected policies. (b) The notice of transfer shall state or provide:(1) the date the transfer and novation of the policyholders contract of insurance is proposed to take place; (2) the name, address, and telephone number of the assuming and transferring insurer;(3) that the policyholder has the right to either consent to or reject the transfer and novation; (4) the procedures and time limit for consenting to or rejecting the transfer and novation;(5) a summary of any effect that consent to or rejection of the transfer and novation will have on the policyholders rights, including disclosure of the possible loss of insurability; (6) a statement that the assuming insurer is licensed to write the type of business being assumed in the state where the policyholder resides, or is otherwise authorized, as provided in this chapter, to assume such business; (7) the name and address of the person at the transferring insurer to whom the policyholder should send a written statement of acceptance or rejection of the transfer and novation; (8) the address and telephone number of the insurance department of the state where the policyholder resides so that the policyholder may write or call the insurance department for further information regarding the financial condition of the assuming insurer; and (9) the following financial data for both companies:(A) ratings for the last five years if available or for such lesser period as is available from two nationally recognized insurance rating services acceptable to the Commissioner, including the rating services explanation of the meaning of the ratings. If ratings are unavailable for any year of the five-year period, this fact shall also be disclosed, together with those ratings that are available; (B) balance sheets as of December 31 for the previous three years if available or for such lesser period as is available and as of the date of the most recent quarterly statement; (C) a copy of the managements discussion and analysis that was filed as a supplement to the previous years annual statement; and (D) an explanation of the reason for the transfer.(c) The form contained in section 8208 of this title may be used as general guidance in complying with the requirements of subsection (b) of this section. (d) The notice of transfer shall include a pre-addressed, postage-paid response card that a policyholder may return as his or her written statement of acceptance or rejection of the transfer and novation. (e) Prior approval by the Commissioner is required for any transaction where an insurer domiciled in this State assumes or transfers obligations or risks on contracts of insurance under an assumption reinsurance agreement. An insurer domiciled in this State shall not assume obligations or risks on contracts of insurance issued to or owned by policyholders residing in any other state unless it is licensed in the other state, or the insurance regulatory official of that state has approved the assumption. (f) Prior to the transfer of any of the obligations or risks on contracts of insurance issued to or owned by residents of this State that is the subject of this chapter, any licensed foreign insurer that enters into an assumption reinsurance agreement shall obtain the Commissioners approval under subsection (g) of this section or shall apply to the Commissioner for a determination that the requirements imposed on the transaction by the state of domicile of each participating insurer are substantially similar to the requirements of this chapter. An insurer making a request for a determination of substantial similarity shall file or cause to be filed with the Commissioner the assumption certificate, a copy of the proposed notice of transfer, an analysis of the requirements to be imposed by its state of domicile, and an affidavit that the transaction is subject to requirements substantially similar to this chapter. The Commissioner shall review the submissions and determine whether the requirements are substantially similar to the requirements of this chapter. If the law of the state of domicile permits the policyholder a longer period of time for consent or rejection than provided by section 8205 of this title, the Commissioner may, at the request of the insurer, waive the time limitations in section 8205 of this title in determining substantial similarity. If the Commissioner does not act on the insurers request for a determination of substantial similarity within 30 days of receipt, the insurers request shall be deemed approved. If the Commissioner determines that the requirements imposed on the licensed foreign insurers are not substantially similar to the requirements of this chapter, then the requirements of subsection (g) of this section shall apply to the transfer. (g) Any licensed foreign insurer that enters into an assumption reinsurance agreement that proposes to transfer the obligations or risks on contracts of insurance issued to or owned by residents of this State, subject to all other requirements of this chapter with respect to residents of this State, shall submit the transaction to the Commissioner for approval. If the Commissioner does not act on the insurers request within 60 days of receipt, the insurers request shall be deemed approved. The Commissioner may extend by not more than an additional 30 days the period within which he or she may so affirmatively approve or disapprove any such transaction by giving notice to the insurer of such extension before expiration of the initial 60-day period. At the end of any such period of extension and in the absence of an affirmative approval or disapproval, any such transaction shall be deemed approved. (h) The following factors, along with such other factors as the Commissioner deems appropriate under the circumstances, shall be considered by the Commissioner in reviewing a request for approval: (1) the financial condition of the transferring and assuming insurers and the effect the transaction is expected to have on the financial condition of each company; (2) the competence, experience, and integrity of those persons who control the operation of the assuming insurer; (3) any plans the assuming party has with respect to the administration of the policies subject to the proposed transfer; (4) whether the transfer is fair and reasonable to the policyholders of both companies; and (5) whether the notice of transfer to be provided by the insurer is fair, adequate, and not misleading. (i) No insurer shall transfer obligations or risks on contracts of insurance issued to or owned by residents of this State to any insurer that is not licensed in this State. (j) Except as provided in, and subject to, subsection 8207(d) of this title, the Commissioner may modify the notice requirements of this chapter if the Commissioner determines that the transfer is between affiliates or that the transfer is not contemplated within the purposes of this chapter. (Added 1993, No. 235 (Adj. Sess.),  7; amended 1993, No. 235 (Adj. Sess.),  11a, eff. July 1, 1996; 2009, No. 137 (Adj. Sess.),  7f; 2021, No. 105 (Adj. Sess.),  269, eff. July 1, 2022.) 
 8205. Policyholder rights
(a) Policyholders shall have the right to accept or reject the transfer and novation of their contracts of insurance. Policyholders electing to reject the assumption transaction shall return to the transferring insurer the pre-addressed, postage-paid response card or other written notice and indicate thereon that the assumption is rejected (collectively referred to as the Response Card). (b) Payment of any premium to the assuming company during the 12-month period after notice is received shall be deemed to indicate the policyholders consent to the transfer to the assuming insurer and a novation shall be deemed to have been effected provided that the premium notice states in a manner calculated to give the policyholder notice that payment of the premium to the assuming insurer shall constitute acceptance of the transfer, unless the policyholder reserves the right to reject the transfer. The premium notice shall also provide a method for the policyholder to pay the premium while reserving the right to reject the transfer. With respect to any home service business or any other business not using premium notices, the Commissioner must approve the disclosures and procedures used to inform policyholders of the proposed assumption or transfer, which notice, at a minimum, must meet the requirements set forth in section 8204 of this title. (c) After no fewer than 12 months from the mailing of the initial notice of transfer required under subsection 8204(a) of this title, if positive consent to, or rejection of, the transfer and assumption has not been received as provided in subsection (a) of this section or consent has not been deemed to have occurred under subsection (b) of this section, the transferring company shall send to the policyholder a second and final notice of transfer as provided in section 8204 of this title. If the policyholder does not accept or reject the transfer during the two-month period immediately following the date on which the transferring insurer mails the second and final notice of transfer, the policyholders consent will be deemed to have occurred and novation of the contract will be effected. With respect to the home service business or any other business not using premium notices, the 12- and two-month periods shall be measured from the date of delivery of the notice of transfer pursuant to section 8204 of this title. (d) The transferring insurer will be deemed to have received the response card on the date it is postmarked. A policyholder may also send his or her response card by facsimile or other electronic transmission or by registered mail, express delivery or courier service, in which case the response card shall be deemed to have been received by the assuming insurer on the date of actual receipt by the transferring insurer. (Added 1993, No. 235 (Adj. Sess.),  7.) 
 8206. Effect of consent
If a policyholder consents or is deemed to have consented to the transfer pursuant to section 8205 of this title or if the transfer is effected under subsection 8207(b) of this title, there shall be a novation of the contract of insurance subject to the assumption reinsurance agreement with the result that the transferring insurer shall thereby be relieved of all insurance obligations or risks transferred under the assumption reinsurance agreement and the assuming insurer shall become directly and solely liable to the policyholder for those insurance obligations or risks. (Added 1993, No. 235 (Adj. Sess.),  7.) 
 8207. Commissioners powers
(a) Except as provided in subsection 8204(f) of this title, the Commissioner shall approve all forms used by an insurer in a transaction under this subchapter, including the notice of transfer, the assumption contract, any related reinsurance or indemnity contract, the proposed assumption certificate, and any proposed premium or other notice proposed to give notice of and to reserve a policyholders right to make premium payments without consenting to the assumption or transfer. (b) If an insurer domiciled in this State or in a jurisdiction having a substantially similar law is deemed by the domiciliary commissioner to be in hazardous financial condition or an administrative proceeding has been instituted against it for the purpose of reorganizing or conserving the insurer, and the transfer of the contracts of insurance is in the best interests of the policyholders, as determined by the domiciliary commissioner, a transfer and novation may be effected notwithstanding the provisions of this chapter to the contrary. The Commissioner shall approve the transfer and the form of notice to policyholders, which shall describe the circumstances that require the transfer. The Commissioner may, in the Commissioners discretion, permit assumption based on implied consent. (c) Any insurer failing, without just cause, to file timely any form as required in this chapter shall be required to pay a penalty of not more than $10,000.00 for each form, with a maximum penalty of $100,000.00. In assessing any penalty under this provision, the Commissioner shall consider whether the violation was willful, the amount of the violators gain, the damages to Vermont policyholders, the remedial actions taken by the violator, and any other factors the Commissioner finds relevant. The Commissioner may void any transfer and restore the status quo if the transfer was not approved in accordance with section 8204 of this title. In determining whether to void a transfer, the Commissioner shall consider the interests of policyholders, creditors, and the public. Insurers charged with a violation of this chapter shall be entitled to notice and an opportunity to be heard in accordance with 3 V.S.A. chapter 25. No private right of action shall arise from this section. (d) In the case of policyholders who do not reside in this State, and where the insurance regulatory authority in such other state has approved or intends to approve the notice requirements and other policyholder rights with respect to such policyholders, the Commissioner shall defer to the decisions of such other insurance regulatory authority. In the case of policyholders who do not reside in this State, and where the insurance regulatory authority in such other state has not established an obligation to file forms used by an insurer in a transaction under this subchapter, the Commissioner may modify notice requirements and other policyholder rights when in his or her judgment it appears that the interests of the policyholders and insurers are best served by the exercise of such discretion. Factors to be considered in making this determination shall include the following: (1) the existence of duplicative or conflicting requirements in other jurisdictions;(2) the number of Vermont policyholders affected by a proposed assumption transaction;(3) the number of states that have adopted assumption reinsurance requirements substantially similar to those set forth in this chapter; (4) the impact of the assumption reinsurance transaction on the insurance companies involved in a transaction; (5) the possibility of adverse consequences to policyholders choosing to opt out of an assumption transaction; (6) the possibility of adverse consequences to policyholders if a significant number of other policyholders opt out of the transaction; (7) the economic consequences of imposing notice and policyholder rights provisions on Vermont domestic insurance companies; and (8) such other factors that the Commissioner deems to be relevant.(e) The Commissioner may modify or waive the notice, consent, and other requirements of this chapter where the transfer of the obligations or risks on contracts of insurance pursuant to an assumption reinsurance agreement is part of a voluntary plan of dissolution by the transferring insurer, and where the Commissioner is satisfied the transfer will adequately protect the interests of the affected policyholders. (Added 1993, No. 235 (Adj. Sess.),  7; amended 1995, No. 58,  1; 2005, No. 36,  16, eff. June 1, 2005; 2009, No. 137 (Adj. Sess.),  7g; 2021, No. 105 (Adj. Sess.),  270, eff. July 1, 2022.) 
 8208. Form of notice of transfer
NOTICE OF TRANSFER IMPORTANT: THIS NOTICE AFFECTS YOUR CONTRACT RIGHTS. PLEASE READ IT CAREFULLY. The AB Insurance company has agreed to replace us as your insurer under (insert policy/certificate name and number) effective (insert date). The AB Insurance Companys principal place of business is (insert address). Financial information concerning both companies is attached, including (1) ratings for the last five years, if available, or for such lesser period as is available from two nationally recognized insurance rating services; (2) balance sheets for the previous three years, if available, or for such lesser period as is available and as of the date of the most recent quarterly statement; (3) a copy of the Managements Discussion and Analysis that was filed as a supplement to the previous years annual statement; and (4) an explanation of the reason for the transfer. You may obtain additional information concerning AB Insurance Company from reference materials in your local library or by contacting your Insurance Commissioner at (insert address and phone number). The AB Insurance Company is licensed to write this coverage in your state. The Commissioner of Insurance in your state has reviewed the potential effect of the proposed transaction, and has approved the transaction (if the commissioner has approved the transaction). You may choose to consent to or reject the transfer of your policy to AB Insurance Company. If you want your policy transferred, you may notify us in writing by signing and returning the enclosed pre-addressed, postage-paid card. Payment of your premium to the AB Insurance Company will also constitute consent to the transfer of your policy unless you reject or reserve the right to reject the transfer when you make your payment. Your next premium notice will tell you how to pay the premium and keep your policy in force while reserving your right to reject the transfer. If you do not want your policy transferred, you must notify us in writing that you reject the transfer. You may use the enclosed pre-addressed, postage-paid card to notify us that you reject the transfer. If you reject the transfer, you may keep your policy with us or exercise any option under your policy. If we do not receive notice of rejection, you will, as a matter of law, be deemed to have consented to the transfer effective (insert date). However, before this consent is final you will be provided a second notice of the transfer 12 months from now. After the second notice is provided, you will have two months to reply. If you pay your premium to the AB Insurance Company without reserving your right to reject the transfer, you will not receive a second notice. You may also notify us of your consent to or rejection of the transfer of your policy by writing to us at: Insert name, address and facsimile number of contact person. If you accept this transfer, AB Insurance Company will be your insurer. It will have direct responsibility to you for the payment of all claims, benefits and for all other policy obligations. We will no longer have any obligations to you. If you accept this transfer, you should make all premium payments and claims submissions to AB Insurance Company and direct all questions to AB Insurance Company. If you have any further questions about this agreement, you may contact XY Insurance (the transferring insurer) or AB Insurance Company. For your convenience, we have enclosed a pre-addressed postage-paid response card. Please take time now to read the enclosed notice and complete and return the response card to us. [Notice Date] RESPONSE CARD
 8301. Definitions
As used in this chapter:(1) Adjusted risk based capital report means a risk based capital report that has been adjusted by the Commissioner in accordance with subsection 8302(e) of this title. (2) Commissioner means the Commissioner of Financial Regulation.(3) Corrective order means an order issued by the Commissioner specifying corrective actions that the Commissioner has determined are required under this chapter. (4) Domestic insurer means any insurance company organized in this State under subchapter 1 of chapter 101 of this title, any fraternal benefit society organized in this State under chapter 121 of this title, any health maintenance organization organized in this State under chapter 139 of this title, and any entity organized in this State under chapter 123 or 125 of this title. (5) Fraternal benefit society means any insurance company licensed under chapter 121 of this title. (6) Foreign insurer means any entity licensed to transact business in this State that is required to file a risk based capital statement in the state where the entity is domiciled. (7) Health maintenance organization means any entity organized in the State under chapter 139 of this title. (8) Life or health insurer means an insurance company that insures lives or health as defined in subdivisions 3301(a)(1) and (2) of this title, an entity organized in this State under chapter 123 or 125 of this title, or a licensed property and casualty insurer writing only accident and health insurance. (9) NAIC means the National Association of Insurance Commissioners.(10) Negative trend means, with respect to a life or health insurer or fraternal benefit society, negative trend over a period of time as determined in accordance with the trend test calculation included in the life or fraternal risk based capital instructions. (11) Property and casualty insurer means any insurance company that insures property or casualty as defined in subdivisions 3301(a)(3) and (7) of this title, but shall not include monoline mortgage guaranty insurers, financial guaranty insurers, or title insurers. (12) Risk based capital instructions means the risk based capital report form and the related instructions adopted by the NAIC and approved by the Commissioner. (13) Risk based capital level means one of the following four levels: company action level risk based capital, regulatory action level risk based capital, authorized control level risk based capital, or mandatory control level risk based capital. (A) Company action level risk based capital means, with respect to any insurer, the product of 2.0 and its authorized control level risk based capital. (B) Regulatory action level risk based capital means, with respect to any insurer, the product of 1.5 and its authorized control level risk based capital. (C) Authorized control level risk based capital means the number determined under the risk based capital formula in accordance with the risk based capital instructions. (D) Mandatory control level risk based capital means, with respect to any insurer, the product of 0.70 and its authorized control level risk based capital. (14) Risk based capital plan means a comprehensive financial plan containing the elements specified in subsection 8303(b) of this title. If the Commissioner rejects the risk based capital plan and it is revised by the insurer, with or without the Commissioners recommendation, the plan shall be called the revised risk based capital plan. (15) Risk based capital report means the report required in section 8302 of this title.(16) Total adjusted capital means the sum of:(A) the insurers statutory capital and surplus reported in the insurers annual statement under section 3561 of this title; and (B) such other items, if any, as the risk based capital instructions may provide. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 1995, No. 180 (Adj. Sess.),  38(a); 2009, No. 137 (Adj. Sess.),  14; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 29,  36, eff. May 13, 2013; 2021, No. 25,  11, eff. May 12, 2021.)
 8302. Risk based capital report
(a) Each domestic insurer shall annually prepare and submit to the Commissioner a report of its risk based capital level for the calendar year just ended. The report shall be filed prior to March 1 each year and shall be in the form and contain such information as is required by the risk based capital instructions. (b) Each domestic insurer shall file its risk based capital report:(1) with the NAIC in accordance with the risk based capital instructions; and(2) with the insurance commissioner of any state in which the insurer is authorized to do business, if the insurance commissioner of that state has notified the insurer of its request in writing. Any report required under this subdivision shall be filed not later than the later of 15 days from the receipt of notice to file the report with that state or the filing date provided in subsection (a) of this section. (c) A life or health insurers or fraternal benefit societys risk based capital shall be determined in accordance with the formula set forth in the risk based capital instructions. The formula shall take into account and may adjust for the covariance between the following factors determined in each case by applying the factors in the manner set forth in the risk based capital instructions: (1) the risk with respect to the insurers assets;(2) the risk of adverse insurance experience with respect to the insurers liabilities and obligations; (3) the interest rate risk with respect to the insurers business; and(4) all other business risks and such other relevant risks as are set forth in the risk based capital instructions. (d) A property and casualty insurers or health maintenance organizations risk based capital shall be determined in accordance with the formula set forth in the risk based capital instructions. The formula shall take into account and may adjust for the covariance between the following factors determined in each case by applying the factors in the manner set forth in the risk based capital instructions: (1) asset risk;(2) credit risk;(3) underwriting risk; and(4) all other business risks and such other relevant risks as are set forth in the risk based capital instructions. (e) If a domestic insurer files a risk based capital report that in the judgment of the Commissioner is inaccurate, then the Commissioner shall adjust the risk based capital report to correct the inaccuracy and shall notify the insurer of the adjustment. The notice shall contain a statement of the reason for the adjustment. A risk based capital report adjusted by the Commissioner under this subsection shall be referred to as an adjusted risk based capital report. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 2013, No. 29,  37, eff. May 13, 2013; 2021, No. 25,  12, eff. May 12, 2021.) 
 8303. Company action level event
(a) Company action level event means any of the following events:(1) The filing of a risk based capital report by an insurer that indicates that:(A) the insurers total adjusted capital is greater than or equal to its regulatory action level risk based capital but less than its company action level risk based capital; (B) in the case of a life or health insurer or a fraternal benefit society, the insurer or society has total adjusted capital that is greater than or equal to its company action level risk based capital but less than the product of its authorized control level risk based capital and 3.0 and has a negative trend; (C) in the case of a property and casualty insurer, the insurer has total adjusted capital that is greater than or equal to its company action level risk based capital but less than the product of its authorized control level risk based capital and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty risk based capital instructions; or (D) in the case of a health maintenance organization, the insurer has total adjusted capital that is greater than or equal to its company action level risk based capital but less than the product of its authorized control level risk based capital and 3.0 and triggers the trend test determined in accordance with the trend test calculation included in the health risk based capital instructions. (2) The notification by the Commissioner to the insurer of an adjusted risk based capital report that indicates an event in subdivision (1) of this subsection, provided the insurer does not challenge the adjusted risk based capital report under section 8307 of this title. (3) If, under section 8307 of this title, an insurer challenges an adjusted risk based capital report that indicates the event in subdivision (1) of this subsection, the notification by the Commissioner to the insurer that the Commissioner has, after a hearing, rejected the insurers challenge. (b) An insurer shall prepare and submit to the Commissioner a risk based capital plan within 45 days of filing a risk based capital report or within 45 days of a final adjusted risk based capital report showing a company action level event. The risk based capital plan shall be a comprehensive financial plan and shall: (1) Identify the conditions in the insurer that contribute to the company action level event. (2) Contain proposals of corrective actions that the insurer intends to take that would result in the elimination of the company action level event. (3) Provide projections of the insurers financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital, and surplus. The projections for both new and renewal business should include separate projections for each major line of business and separately identify each significant income, expense, and benefit component. (4) Identify the key assumptions impacting the insurers projections and the sensitivity of the projections to the assumptions. (5) Identify the quality of, and problems associated with, the insurers business, including its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance. (c) The Commissioner shall notify the insurer whether the proposed risk based capital plan is approved within 60 days of its submission. If the Commissioner disapproves the plan, the notice shall set forth the reasons for the disapproval and may notify the insurer of revisions that will render the risk based capital plan satisfactory to the Commissioner. Upon notice that a proposed plan is disapproved, the insurer shall prepare and submit a revised risk based capital plan within 45 days of the Commissioners notice of disapproval or, if the Commissioners notice of disapproval is appealed under section 8307 of this title, within 45 days of a Commissioners determination adverse to the insurer. (d) In the event of a notification by the Commissioner to an insurer that the insurers risk based capital plan or revised risk based capital plan is unsatisfactory, the Commissioner may at the Commissioners discretion, subject to the insurers right to a hearing under section 8307 of this title, specify in the notification that the notification constitutes a regulatory action level event. (e) Each domestic insurer required to file a risk based capital plan or revised risk based capital plan under this section shall file a copy of the plan with the insurance commissioner in any state in which the insurer is authorized to do business if: (1) such state has a provision that is substantially similar to section 8308 of this title; or (2) the insurance commissioner of that state has notified the insurer of its request for the filing in writing. Plans required to be filed under this subdivision shall be filed not later than the later of: (A) 15 days after notice to file a copy of its risk based capital plan or revised risk based capital plan with the state; or (B) the date on which the risk based capital plan or revised risk based capital plan is required to be filed under section 8304 of this title. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 2009, No. 137 (Adj. Sess.),  15; 2013, No. 29,  38, eff. May 13, 2013; 2021, No. 25,  13, eff. May 12, 2021.) 
 8304. Regulatory action level event
(a) The following are deemed to be regulatory action level events and subject to the requirements of this section: (1) A risk based capital report or final adjusted risk based capital report which indicates that the insurers total adjusted capital is greater than or equal to its authorized control level risk based capital, but less than its regulatory action level risk based capital. (2) Late filing of a risk based capital report that is not excused by the Commissioner and cured within 10 days of the filing date. (3) Failure to file a risk based capital plan within the time provided in section 8303 of this title. (4) Notice by the Commissioner that a plan submitted by the insurer under section 8303 of this title is disapproved and that the disapproval has been deemed by the Commissioner as constituting a regulatory action level event. (5) Notice by the Commissioner of a failure to adhere to its risk based capital plan or revised risk based capital plan where the failure has a substantial adverse effect on the ability of the insurer to eliminate the regulatory action level event in accordance with its plan. (b) An insurer shall prepare and submit to the Commissioner a risk based capital plan within 45 days of filing a risk based capital report or within 45 days of notice of a final adjusted risk based capital report showing a regulatory action level event. (c) The Commissioner shall order such examination and analysis as the Commissioner deems necessary of the assets, liabilities, and operations of the insurer including a review of its risk based capital plan or revised risk based capital plan. Subsequent to the examination or analysis, the Commissioner shall issue an order specifying such corrective actions as the Commissioner shall determine are required. In determining corrective actions, the Commissioner may take into account the results of any examination and analysis of the insurers assets, liabilities, and operations, including any sensitivity test undertaken pursuant to the risk based capital instructions. (d) The Commissioner may retain actuaries, investment experts, and other consultants as the Commissioner deems necessary to review the insurers risk based capital plan or revised risk based capital plan, examine or analyze the assets, liabilities, and operations of the insurer, and formulate the corrective order with respect to the insurer. The fees, costs, and expenses relating to consultants shall be borne by the affected insurer or such other party as directed by the Commissioner. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994.) 
 8305. Authorized control level event
(a) The following are deemed to be authorized control level events and subject to the requirements of this section: (1) A risk based capital report or final adjusted risk based capital report which indicates that the insurers total adjusted capital is greater than or equal to its mandatory control level risk based capital but less than its authorized control level risk based capital. (2) The failure of the insurer to comply with a corrective order after it is no longer subject to appeal under section 8307 of this title. (b) Upon the occurrence of an event described in subsection (a) of this section, the Commissioner shall take such actions as he or she deems necessary to protect policyholders and creditors of the insurer, including those actions permitted under section 8304 and chapter 145 of this title. In the event the Commissioner seeks an order under chapter 145 of this title, the authorized control level event shall be deemed sufficient grounds for the Commissioners order, and the Commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in that chapter. In the event the Commissioner takes actions under this subsection pursuant to an adjusted risk based capital report, the insurer shall be entitled to such protections as are afforded to insurers under the provisions of section 7041 of this title pertaining to summary proceedings. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994.) 
 8306. Mandatory control level event
(a) A risk based capital report or final adjusted risk based capital report which indicates that the insurers total adjusted capital is less than its mandatory control level risk based capital shall be a mandatory control level event and subject to the requirements of this section. (b) Upon the occurrence of an event described in subsection (a) of this section, the Commissioner shall take such actions as are necessary to place the insurer under regulatory control under chapter 145 of this title. In the event the Commissioner seeks an order under chapter 145 of this title, the mandatory control level event shall be deemed sufficient grounds for issuance of an order, and the Commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in chapter 145 of this title. In the event the Commissioner takes actions under this subsection pursuant to an adjusted risk based capital report, the insurer shall be entitled to such protections as are afforded to insurers under the provisions of section 7041 of this title pertaining to summary proceedings. Notwithstanding any of the foregoing, the Commissioner may forego action for up to 90 days after the mandatory control level event if he or she finds there is a reasonable expectation that the mandatory control level event will be eliminated within the 90-day period. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994.) 
 8307. Hearings
Upon receipt of any notice required under subsection 8302(e), 8303(c) or (d), subdivision 8304(a)(4) or (5), or subsection 8304(c) of this title, any insurer aggrieved by any action taken under those sections may appeal to the Commissioner within five days of receipt of notice of the action. The hearing shall be subject to 3 V.S.A. chapter 25. Upon receipt of the insurers request for a hearing, the Commissioner shall set a date for the hearing, which date shall be not less than 10 nor more than 30 days after the date of the insurers request. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 2013, No. 29,  39, eff. May 13, 2013; 2021, No. 25,  14, eff. May 12, 2021.) 
 8308. Confidentiality and prohibition on announcements
(a) All risk based capital reports, to the extent the information in the report is not required to be set forth in a publicly available annual statement schedule, and risk based capital plans, including the results or report of any examination or analysis of an insurer performed pursuant to this chapter and any corrective order issued by the Commissioner pursuant to examination or analysis, with respect to any domestic insurer or foreign insurer that are filed with the Commissioner, constitute information that might be damaging to the insurer if made available to its competitors and therefore shall be kept confidential and privileged by the Commissioner. This information shall not be made available for public inspection and copying under the Public Records Act, shall not be subject to subpoena, shall not be subject to discovery, and shall not be admissible in evidence in any private civil action. However, the Commissioner is authorized to use the documents, materials, or other information for the purpose of enforcement actions taken by the Commissioner under this chapter or any other provision of the insurance laws of this State. (b) Neither the Commissioner nor any person who received documents, materials, or other information while acting under the authority of the Commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a) of this section. (c) In furtherance of his or her duties under this chapter, the Commissioner may:(1) share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a) of this section, with other state, federal, and international regulatory agencies; with the NAIC and its affiliates and subsidiaries; and with state, federal, and international law enforcement authorities, provided the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information; (2) receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and 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; and (3) enter into agreements governing sharing and use of information consistent with this subsection. (d) 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 subsection (c) of this section. (e) Except as otherwise required under this chapter, the making, publishing, disseminating, circulating, or placing before the public, directly or indirectly in any manner, the risk based capital levels of any insurer, or of any component derived in the calculation, by any insurer, agent, broker, or other person engaged in any manner in the insurance business is prohibited. Any person violating this section shall be subject to an administrative penalty of up to $500.00. (f) The Commissioner may, in his or her discretion, permit the correction of any material misstatement published by a party unrelated to the insurer concerning any aspect of the insurers risk based capital level or any component thereof. A correction permitted under this section may be used solely to rebut the material misstatement. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 1995, No. 167 (Adj. Sess.),  26; 2013, No. 29,  40, eff. May 13, 2013; 2021, No. 25,  15, eff. May 12, 2021; 2021, No. 105 (Adj. Sess.),  271, eff. July 1, 2022.) 
 8309. Supplemental provisions
(a) The provisions of this chapter are in addition to any other provisions of the laws of this State, and shall not preclude or limit any other powers or duties of the Commissioner under such laws, including chapter 145 of this title. (b) The Commissioner may adopt rules necessary for the implementation of this chapter.(c) The Commissioner may exempt from the application of this chapter any domestic property and casualty insurer which: (1) writes direct business only in this State;(2) writes direct annual premiums of $2,000,000.00 or less; and(3) assumes no reinsurance in excess of five percent of direct premium written. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 2013, No. 29,  41, eff. May 13, 2013.)
 8310. Foreign insurers
(a) A foreign insurer shall, upon the written request of the Commissioner, submit to the Commissioner a risk based capital report for the calendar year just ended. The requested report shall be filed not later than the later of 15 days from the receipt of notice to file the report with this State or the filing date provided in subsection 8302(a) of this title. (b) A foreign insurer shall, at the written request of the Commissioner, promptly submit to the Commissioner a copy of any risk based capital plan that is filed with the insurance commissioner of any other state. (c) Upon the occurrence of an event under section 8303 (company action level event), 8304 (regulatory action level event), or 8305 (authorized control level event) of this title with respect to any foreign insurer as determined under the risk based capital statute applicable in the state of domicile of the insurer or, if no risk based capital statute is in force in that state, under the provisions of this chapter, if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file a risk based capital plan in the manner specified under that states risk based capital statute or, if no risk based capital statute is in force in that state, then under section 8303 of this title, the Commissioner may require the foreign insurer to file a risk based capital plan with the Commissioner. The failure of the foreign insurer to file a risk based capital plan shall be grounds to order the insurer to cease and desist from writing new insurance business in this State. (d) The Commissioner may make application to the Washington Superior Court for an order under chapter 145 of this title for the liquidation of property of the insurer found in this State in the event the insurer has not been placed under such an order in its state of domicile after reporting an event under section 8305 or 8306 of this title. The occurrence of an event under sections 8305 and 8306 of this title shall be considered adequate grounds for the application. The Commissioner may order an insurer reporting an event under section 8305 or 8306 to cease and desist from writing new business in this State. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994; amended 2013, No. 29,  42, eff. May 13, 2013.) 
 8311. Notices
All notices by the Commissioner to an insurer under this chapter shall be effective upon mailing if sent by registered or certified mail, or, in the case of any other type of transmission, shall be effective upon the insurers receipt of such notice. (Added 1993, No. 235 (Adj. Sess.),  8, eff. June 21, 1994.) 
 8312. Confidentiality of risk based capital reports
All risk based capital reports concerning insurance companies that are not included in section 8308 of this title that are submitted to the Department by the NAIC or other states are confidential and shall not be disclosed by the Department. (Added 1993, No. 235 (Adj. Sess.),  9, eff. June 21, 1994; amended 2021, No. 25,  16, eff. May 12, 2021.) 
 8313. Immunity
There shall be no liability on the part of and no cause of action shall arise against the Commissioner or the Department of Financial Regulation or its employees or agents for any action taken by them in the performance of their powers and duties under this chapter. (Added 2013, No. 29,  43, eff. May 13, 2013.) 
 8500. Definitions
As used in this chapter:(1) Advertisement means any material designed to create public interest in a product, or induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy as more specifically defined in the rules and operating procedures of the Commission. (2) Bylaws means those bylaws established by the Commission for its governance, or for directing or controlling the Commissions actions or conduct. (3) Commission means the Interstate Insurance Product Regulation Commission established by this compact. (4) Commissioner means the chief insurance regulatory official of a state, including commissioner, superintendent, director, or administrator. (5) Compacting state means any state which has enacted this compact legislation and which has not withdrawn pursuant to subsection 8512(a) of this chapter, or been terminated pursuant to subsection 8512(b) of this chapter. (6) Domiciliary state means the state in which an insurer is incorporated or organized; or, in the case of an alien insurer, its state of entry. (7) Insurer means any entity licensed by a state to issue contracts of insurance for any of the lines of insurance covered by this chapter. (8) Member means the person chosen by a compacting state as its representative to the Commission, or his or her designee. (9) NAIC means the National Association of Insurance Commissioners.(10) Noncompacting state means any state which is not at the time a compacting state.(11) Operating procedures means procedures adopted by the Commission implementing a rule, uniform standard, or a provision of this compact. (12) Product means the form of a policy or contract, including any application, endorsement, or related form which is attached to and made a part of the policy or contract, and any evidence of coverage or certificate, for an individual or group annuity, life insurance, disability income, or long-term care insurance product that an insurer is authorized to issue. (13) Rule means a statement of general or particular applicability and future effect adopted by the Commission, including a uniform standard developed pursuant to section 8505 of this chapter, designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of the Commission, which shall have the force and effect of law in the compacting states. (14) State means any state, district, or territory of the United States of America.(15) Third-party filer means an entity that submits a product filing to the Commission on behalf of an insurer. (16) Uniform standard means a standard adopted by the Commission for a product line, pursuant to section 8505 of this chapter, and shall include all of the product requirements in aggregate; provided, that each uniform standard shall be construed, whether express or implied, to prohibit the use of any inconsistent, misleading, or ambiguous provisions in a product, and the form of the product made available to the public shall not be unfair, inequitable, or against public policy as determined by the Commission. (Added 2005, No. 70,  2.) 
 8501. Establishment of the Commission and venue
(a) The compacting states hereby create and establish a joint public agency known as the Interstate Insurance Product Regulation Commission. Pursuant to section 8502 of this chapter, the Commission will have the power to develop uniform standards for product lines, receive and provide prompt review of products filed with the Commission, and give approval to those product filings satisfying applicable uniform standards, provided it is not intended for the Commission to be the exclusive entity for receipt and review of insurance product filings. Nothing in this chapter shall prohibit any insurer from filing its product in any state wherein the insurer is licensed to conduct the business of insurance, and any such filing shall be subject to the laws of the state where filed. (b) The Commission is a body corporate and politic and an instrumentality of the compacting states. (c) The Commission is a nonprofit entity, separate and distinct from the individual compacting states. (d) The Commission is solely responsible for its liabilities except as otherwise specifically provided in this compact. (e) Venue is proper and judicial proceedings by or against the Commission shall be brought solely and exclusively in a court of competent jurisdiction where the principal office of the Commission is located. (Added 2005, No. 70,  2; amended 2021, No. 105 (Adj. Sess.),  272, eff. July 1, 2022.) 
 8502. Powers of the Commission
The Commission shall have the following powers:(1) To adopt rules, pursuant to section 8505 of this chapter, which shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in this compact. (2) To exercise its rulemaking authority and establish reasonable uniform standards for products covered under the compact, and advertisement related to the compact, which shall have the force and effect of law and shall be binding in the compacting states, but only for those products filed with the Commission, provided that a compacting state shall have the right to opt out of such uniform standard pursuant to section 8505 of this chapter, to the extent and in the manner provided in this compact, and, provided further, that any uniform standard established by the Commission for long-term care insurance products may provide the same or greater protections for consumers as, but shall not provide less than, those protections set forth in the National Association of Insurance Commissioners Long-Term Care Insurance Model Act and Long-Term Care Insurance Model Regulation, respectively, adopted as of 2001. The Commission shall consider whether any subsequent amendments to the NAIC Long-Term Care Insurance Model Act or Long-Term Care Insurance Model Regulation adopted by the NAIC require amending of the uniform standards established by the Commission for long-term care insurance products. (3) To receive and review in an expeditious manner products filed with the Commission, and rate filings for disability income and long-term care insurance products, and give approval of those products and rate filings that satisfy the applicable uniform standard, where such approval shall have the force and effect of law and be binding on the compacting states to the extent and in the manner provided in the compact. (4) To receive and review in an expeditious manner advertisement relating to long-term care insurance products for which uniform standards have been adopted by the Commission, and give approval to all advertisement that satisfies the applicable uniform standard. For any product covered under this compact, other than long-term care insurance products, the Commission shall have the authority to require an insurer to submit all or any part of its advertisement with respect to that product for review or approval prior to use if the Commission determines that the nature of the product is such that an advertisement of the product could have the capacity or tendency to mislead the public. The actions of Commission as provided in this section shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in the compact. (5) To exercise its rulemaking authority and designate products and advertisement that may be subject to a self-certification process without the need for prior approval by the Commission. (6) To adopt operating procedures, pursuant to section 8505 of this chapter, which shall be binding in the compacting states to the extent and in the manner provided in this compact. (7) To bring and prosecute legal proceedings or actions in its name as the Commission, provided that the standing of any state insurance department to sue or be sued under applicable law shall not be affected. (8) To issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence. (9) To establish and maintain offices.(10) To purchase and maintain insurance and bonds.(11) To borrow, accept, or contract for services of personnel, including employees of a compacting state. (12) To hire employees, professionals, or specialists, and elect or appoint officers, and to fix their compensation, define their duties, and give them appropriate authority to carry out the purposes of the compact, and determine their qualifications; and to establish the Commissions personnel policies and programs relating to, among other things, conflicts of interest, rates of compensation, and qualifications of personnel. (13) To accept any and all appropriate donations and grants of money, equipment, supplies, materials, and services, and to receive, utilize, and dispose of the same, provided that at all times the Commission shall strive to avoid any appearance of impropriety. (14) To lease, purchase, accept appropriate gifts or donations of, or otherwise to own, hold, improve, or use, any property, real, personal, or mixed, provided that at all times the Commission shall strive to avoid any appearance of impropriety. (15) To sell, convey, mortgage, pledge, lease, exchange, abandon, or otherwise dispose of any property, real, personal, or mixed. (16) To collect and remit filing fees to compacting states as may be set forth in the bylaws, rules, or operating procedures. (17) To enforce compliance by compacting states with rules, uniform standards, operating procedures, and bylaws. (18) To provide for dispute resolution among compacting states.(19) To advise compacting states on issues relating to insurers domiciled or doing business in noncompacting jurisdictions, consistent with the purposes of this compact. (20) To provide advice and training to those personnel in state insurance departments responsible for product review and to be a resource for state insurance departments. (21) To establish a budget and make expenditures.(22) To borrow money.(23) To appoint committees, including advisory committees comprising members, state insurance regulators, state legislators or their representatives, insurance industry and consumer representatives, and such other interested persons as may be designated in the bylaws. (24) To provide and receive information from and to cooperate with law enforcement agencies.(25) To adopt and use a corporate seal.(26) To perform such other functions as may be necessary or appropriate to achieve the purposes of this compact consistent with the state regulation of the business of insurance. (Added 2005, No. 70,  2; amended 2021, No. 105 (Adj. Sess.),  273, eff. July 1, 2022.) 
 8503. Organization of the Commission
(a) Membership. Each compacting state shall have and be limited to one member. Each member shall be qualified to serve in that capacity pursuant to applicable law of the compacting state. Any member may be removed or suspended from office as provided by the law of the state from which the member shall be appointed. Any vacancy occurring in the Commission shall be filled in accordance with the laws of the compacting state wherein the vacancy exists. Nothing in this chapter shall be construed to affect the manner in which a compacting state determines the election or appointment and qualification of its own Commissioner. The Commissioner of the Vermont Department of Financial Regulation, or the Commissioners designee, shall be the member appointed by Vermont to the Commission. (b) Voting. Each member shall be entitled to one vote and shall have an opportunity to participate in the governance of the Commission in accordance with the bylaws. Notwithstanding any provision of this chapter to the contrary, no action of the Commission with respect to the adoption of a uniform standard shall be effective unless two-thirds of the members vote in favor thereof. (c) Bylaws. (1) The Commission shall, by a majority of the members, prescribe bylaws to govern its conduct as may be necessary or appropriate to carry out the purposes and exercise the powers of the compact, including: (A) establishing the fiscal year of the Commission;(B) providing reasonable procedures for appointing and electing members, as well as holding meetings, of the Management Committee; (C) providing reasonable standards and procedures:(i) for the establishment and meetings of other committees; and(ii) governing any general or specific delegation of any authority or function of the Commission;(D) providing reasonable procedures for calling and conducting meetings of the Commission that consist of a majority of Commission members, ensuring reasonable advance notice of each such meeting, and providing for the right of citizens to attend each such meeting with enumerated exceptions designed to protect the publics interest, the privacy of individuals, and insurers proprietary information, including trade secrets. The Commission may meet in camera only after a majority of the entire membership votes to close a meeting en toto or in part. As soon as practicable, the Commission must make public a copy of the vote to close the meeting, revealing the vote of each member with no proxy votes allowed, and votes taken during such meeting; (E) establishing the titles, duties, authority, and reasonable procedures for the election of the officers of the Commission; (F) providing reasonable standards and procedures for the establishment of the personnel policies and programs of the Commission. Notwithstanding any civil service or other similar laws of any compacting state, the bylaws shall exclusively govern the personnel policies and programs of the Commission; (G) adopting a code of ethics to address permissible and prohibited activities of Commission members and employees; and (H) providing a mechanism for winding up the operations of the Commission and the equitable disposition of any surplus funds that may exist after the termination of the compact after the payment and reserving of all of its debts and obligations. (2) The Commission shall publish its bylaws in a convenient form and file a copy of its bylaws and a copy of any amendment to its bylaws with the appropriate agency or officer in each of the compacting states. (d) Management committee. (1) A Management Committee comprising no more than 14 members shall be established as follows: (A) one member from each of the six compacting states with the largest premium volume for individual and group annuities, life, disability income, and long-term care insurance products determined from the records of the NAIC for the prior year; (B) four members from those compacting states with at least two percent of the market based on the premium volume described in subdivision (1)(A) of this subsection, other than the six compacting states with the largest premium volume, selected on a rotating basis as provided in the bylaws; and (C) four members from those compacting states with less than two percent of the market, based on the premium volume described in subdivision (1)(A) of this subsection, with one selected from each of the four zone regions of the NAIC as provided in the bylaws. (2) The Management Committee shall have such authority and duties as may be set forth in the bylaws, including: (A) managing the affairs of the Commission in a manner consistent with the bylaws and purposes of the Commission; (B) establishing and overseeing an organizational structure within, and appropriate procedures for, the Commission to provide for the creation of uniform standards and other rules, receipt and review of product filings, administrative and technical support functions, review of decisions regarding the disapproval of a product filing, and the review of elections made by a compacting state to opt out of a uniform standard, provided that a uniform standard shall not be submitted to the compacting states for adoption unless approved by two-thirds of the members of the Management Committee; (C) overseeing the offices of the Commission; and(D) planning, implementing, and coordinating communications and activities with other state, federal, and local government organizations in order to advance the goals of the Commission. (3) The Commission annually shall elect officers from the Management Committee, with each having such authority and duties, as may be specified in the bylaws. (4) The Management Committee may, subject to the approval of the Commission, appoint or retain an executive director for such period, upon such terms and conditions and for such compensation as the Commission may deem appropriate. The executive director shall serve as secretary to the Commission but shall not be a member of the Commission. The executive director shall hire and supervise such other staff as may be authorized by the Commission. (e) Legislative and advisory committees. A Legislative Committee comprising state legislators or their designees shall be established to monitor the operations of, and make recommendations to, the Commission, including the Management Committee, provided that the manner of selection and term of any Legislative Committee member shall be as set forth in the bylaws. Prior to the adoption by the Commission of any uniform standard, revision to the bylaws, annual budget, or other significant matter as may be provided in the bylaws, the Management Committee shall consult with and report to the Legislative Committee. (f) Advisory committees. (1) The Commission shall establish two advisory committees, one of which shall comprise consumer representatives independent of the insurance industry and the other shall comprise insurance industry representatives. (2) The Commission may establish additional advisory committees as its bylaws may provide for the carrying out of its functions. (g) Corporate records of the Commission. The Commission shall maintain its corporate books and records in accordance with the bylaws. (h) Qualified immunity, defense, and indemnification. (1) The members, officers, executive director, employees, and representatives of the Commission shall be immune from suit and liability, either personally or in their official capacity, for any claim for damage to or loss of property or personal injury or other civil liability caused by or arising out of any actual or alleged act, error, or omission that occurred, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of Commission employment, duties, or responsibilities, provided that nothing in this subdivision shall be construed to protect any such person from suit and liability for any damage, loss, injury, or liability caused by the intentional or willful and wanton misconduct of that person. (2) The Commission shall defend any member, officer, executive director, employee, or representative of the Commission in any civil action seeking to impose liability arising out of any actual or alleged act, error, or omission that occurred within the scope of Commission employment, duties, or responsibilities, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of Commission employment, duties, or responsibilities, provided that nothing in this chapter shall be construed to prohibit that person from retaining the persons own counsel, and provided further that the actual or alleged act, error, or omission did not result from that persons intentional or willful and wanton misconduct. (3) The Commission shall indemnify and hold harmless any member, officer, executive director, employee, or representative of the Commission for the amount of any settlement or judgment obtained against that person arising out of any actual or alleged act, error, or omission that occurred within the scope of Commission employment, duties, or responsibilities, or that such person had a reasonable basis for believing occurred within the scope of Commission employment, duties, or responsibilities, provided that the actual or alleged act, error, or omission did not result from the intentional or willful and wanton misconduct of that person. (Added 2005, No. 70,  2; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  274, eff. July 1, 2022.) 
 8504. Meetings and acts of the Commission
(a) The Commission shall meet and take such actions as are consistent with the provisions of this compact and the bylaws. (b) Each member of the Commission shall have the right and power to cast a vote to which that compacting state is entitled and to participate in the business and affairs of the Commission. A member shall vote in person or by such other means as provided in the bylaws. The bylaws may provide for members participation in meetings by telephone or other means of communication. (c) The Commission shall meet at least once during each calendar year. Additional meetings shall be held as set forth in the bylaws. (Added 2005, No. 70,  2.) 
 8505. Rules and operating procedures; rulemaking functions of the Commission and opting out of uniform standards
(a) Rulemaking authority. The Commission shall adopt reasonable rules, including uniform standards, and operating procedures in order to effectively and efficiently achieve the purposes of this compact. Notwithstanding the foregoing, in the event the Commission exercises its rulemaking authority in a manner that is beyond the scope of the purposes of this chapter, or the powers granted under this chapter, such an action by the Commission shall be invalid and have no force and effect. (b) Rulemaking procedure. Rules and operating procedures shall be made pursuant to a rulemaking process that conforms to the Model State Administrative Procedure Act of 1981 as amended, as may be appropriate to the operations of the Commission. Before the Commission adopts a uniform standard, the Commission shall give written notice to the relevant state legislative committees in each compacting state responsible for insurance issues of its intention to adopt the uniform standard. The Commission in adopting a uniform standard shall consider fully all submitted materials and issue a concise explanation of its decision. (c) Effective date and opt out of a uniform standard. A uniform standard shall become effective 90 days after its adoption by the Commission or such later date as the Commission may determine; provided, however, that a compacting state may opt out of a uniform standard as provided in this section. Opt out means any action by a compacting state to decline to adopt or participate in an adopted uniform standard. All other rules and operating procedures, and amendments to such rules and operating procedures, shall become effective as of the date specified in each rule, operating procedure, or amendment. (d) Opt out procedure. (1) A compacting state may opt out of a uniform standard, either by legislation or rule duly adopted by the insurance department under the compacting states Administrative Procedure Act. The Vermont Department of Financial Regulation may adopt an emergency rule for the purposes of this subsection. If a compacting state elects to opt out of a uniform standard by rule, it must give written notice to the Commission not later than 10 business days after the uniform standard is adopted, or at the time the state becomes a compacting state and find that the uniform standard does not provide reasonable protections to the citizens of the state, given the conditions in the state. The Commissioner shall make specific findings of fact and conclusions of law, based on a preponderance of the evidence, detailing the conditions in the state that warrant a departure from the uniform standard and determining that the uniform standard would not reasonably protect the citizens of the state. The Commissioner must consider and balance the following factors and find that the conditions in the state and needs of the citizens of the state outweigh both the intent of the legislature to participate in, and the benefits of, an interstate agreement to establish national uniform consumer protections for the products subject to this chapter and the presumption that a uniform standard adopted by the Commission provides reasonable protections to consumers of the relevant product. (2) Notwithstanding the foregoing, a compacting state may, at the time of its enactment of this compact, prospectively opt out of all uniform standards involving long-term care insurance products by expressly providing for such opt out in the enacted compact, and such an opt out shall not be treated as a material variance in the offer or acceptance of any state to participate in this compact. Such an opt out shall be effective at the time of enactment of this compact by the compacting state and shall apply to all existing uniform standards involving long-term care insurance products and those subsequently adopted. (e) Effect of opt out. (1) If a compacting state elects to opt out of a uniform standard, the uniform standard shall remain applicable in the compacting state electing to opt out until such time as the opt out legislation is enacted into law or the opt out rule becomes effective. (2) Once the opt out of a uniform standard by a compacting state becomes effective as provided under the laws of that state, the uniform standard shall have no further force and effect in that state unless and until the legislation or regulation implementing the opt out is repealed or otherwise becomes ineffective under the laws of the state. If a compacting state opts out of a uniform standard after the uniform standard has been made effective in that state, the opt out shall have the same prospective effect as provided under section 8512 of this chapter for withdrawals. (f) Stay of uniform standard. If a compacting state has formally initiated the process of opting out of a uniform standard by rule, and while the regulatory opt out is pending, the compacting state may petition the Commission, at least 15 days before the effective date of the uniform standard, to stay the effectiveness of the uniform standard in that state. The Commission may grant a stay if it determines the regulatory opt out is being pursued in a reasonable manner and there is a likelihood of success. If a stay is granted or extended by the Commission, the stay or extension thereof may postpone the effective date by up to 90 days, unless affirmatively extended by the Commission, provided a stay may not be permitted to remain in effect for more than one year unless the compacting state can show extraordinary circumstances that warrant a continuance of the stay, including the existence of a legal challenge that prevents the compacting state from opting out. A stay may be terminated by the Commission upon notice that the rulemaking process has been terminated. (g) Not later than 30 days after a rule or operating procedure is adopted, any person may file a petition for judicial review of the rule or operating procedure, provided that the filing of such a petition shall not stay or otherwise prevent the rule or operating procedure from becoming effective unless the court finds that the petitioner has a substantial likelihood of success. The court shall give deference to the actions of the Commission consistent with applicable law and shall not find the rule or operating procedure to be unlawful if the rule or operating procedure represents a reasonable exercise of the Commissions authority. (Added 2005, No. 70,  2; amended 2021, No. 105 (Adj. Sess.),  275, eff. July 1, 2022.) 
 8506. Commission records and enforcement
(a) The Commission shall adopt rules establishing conditions and procedures for public inspection and copying of its information and official records, except such information and records involving the privacy of individuals and insurers trade secrets. The Commission may adopt additional rules under which it may make available to federal and state agencies, including law enforcement agencies, records and information otherwise exempt from disclosure, and may enter into agreements with such agencies to receive or exchange information or records subject to nondisclosure and confidentiality provisions. (b) Except as to privileged records, data, and information, the laws of any compacting state pertaining to confidentiality or nondisclosure shall not relieve any compacting state Commissioner of the duty to disclose any relevant records, data, or information to the Commission; provided, that disclosure to the Commission shall not be deemed to waive or otherwise affect any confidentiality requirement; and further provided, that, except as otherwise expressly provided in this chapter, the Commission shall not be subject to the compacting states laws pertaining to confidentiality and nondisclosure with respect to records, data, and information in its possession. Confidential information of the Commission shall remain confidential after such information is provided to any Commissioner. (c) The Commission shall monitor compacting states for compliance with duly adopted bylaws, rules, including uniform standards, and operating procedures. The Commission shall notify any noncomplying compacting state in writing of its noncompliance with Commission bylaws, rules, or operating procedures. If a noncomplying compacting state fails to remedy its noncompliance within the time specified in the notice of noncompliance, the compacting state shall be deemed to be in default as set forth in section 8513 of this chapter. (d) The Commissioner of any state in which an insurer is authorized to do business, or is conducting the business of insurance, shall continue to exercise his or her authority to oversee the market regulation of the activities of the insurer in accordance with the provisions of the states law. The Commissioners enforcement of compliance with the compact is governed by the following provisions: (1) With respect to the Commissioners market regulation of a product or advertisement that is approved or certified to the Commission, the content of the product or advertisement shall not constitute a violation of the provisions, standards, or requirements of the compact except upon a final order of the Commission, issued at the request of a Commissioner after prior notice to the insurer and an opportunity for hearing before the Commission. (2) Before a Commissioner may bring an action for violation of any provision, standard, or requirement of the compact relating to the content of an advertisement not approved or certified to the Commission, the Commission, or an authorized Commission officer or employee, must authorize the action. However, authorization pursuant to this subdivision does not require notice to the insurer, opportunity for hearing or disclosure of requests for authorization, or records of the Commissions action on such requests. (Added 2005, No. 70,  2.) 
 8507. Dispute resolution
The Commission shall attempt, upon the request of a member, to resolve any disputes or other issues that are subject to this compact and which may arise between two or more compacting states, or between compacting states and noncompacting states, and the Commission shall adopt an operating procedure providing for resolution of such disputes. (Added 2005, No. 70,  2.) 
 8508. Product filing and approval
(a) Insurers and third-party filers seeking to have a product approved by the Commission shall file the product with, and pay applicable filing fees to, the Commission. Nothing in this chapter shall be construed to restrict or otherwise prevent an insurer from filing its product with the insurance department in any state where the insurer is licensed to conduct the business of insurance, and such filing shall be subject to the laws of the states where filed. (b) The Commission shall establish appropriate filing and review processes and procedures pursuant to Commission rules and operating procedures. Notwithstanding any provision of this chapter to the contrary, the Commission shall adopt rules to establish conditions and procedures under which the Commission will provide public access to product filing information. In establishing such rules, the Commission shall consider the interests of the public in having access to such information, as well as protection of personal medical and financial information and trade secrets, that may be contained in a product filing or supporting information. (c) Any product approved by the Commission may be sold or otherwise issued in those compacting states for which the insurer is legally authorized to do business. (Added 2005, No. 70,  2; amended 2021, No. 105 (Adj. Sess.),  276, eff. July 1, 2022.) 
 8509. Review of Commission decisions regarding filings
(a) Not later than 30 days after the Commission has given notice of a disapproved product or advertisement filed with the Commission, the insurer or third-party filer whose filing was disapproved may appeal the determination to a review panel appointed by the Commission. The Commission shall adopt rules to establish procedures for appointing such review panels and provide for notice and hearing. An allegation that the Commission, in disapproving a product or advertisement filed with the Commission, acted arbitrarily, capriciously, or in a manner that is an abuse of discretion or otherwise not in accordance with the law, is subject to judicial review in accordance with subsection 8501(e) of this chapter. (b) The Commission shall have authority to monitor, review, and reconsider products and advertisement subsequent to their filing or approval upon a finding that the product does not meet the relevant uniform standard. Where appropriate, the Commission may withdraw or modify its approval after proper notice and hearing, subject to the appeal process in subsection (a) of this section. (Added 2005, No. 70,  2.) 
 8510. Finance
(a) The Commission shall pay or provide for the payment of the reasonable expenses of its establishment and organization. To fund the cost of its initial operations, the Commission may accept contributions and other forms of funding from the National Association of Insurance Commissioners, compacting states, and other sources. Contributions and other forms of funding from other sources shall be of such a nature that the independence of the Commission concerning the performance of its duties shall not be compromised. (b) The Commission shall collect a filing fee from each insurer and third-party filer filing a product with the Commission to cover the cost of the operations and activities of the Commission and its staff in a total amount sufficient to cover the Commissions annual budget. (c) The Commissions budget for a fiscal year shall not be approved until it has been subject to notice and comment as set forth in section 8505 of this chapter. (d) The Commission shall be exempt from all taxation in and by the compacting states.(e) The Commission shall not pledge the credit of any compacting state, except by and with the appropriate legal authority of that compacting state. (f) The Commission shall keep complete and accurate accounts of all its internal receipts, including grants and donations, and disbursements of all funds under its control. The internal financial accounts of the Commission shall be subject to the accounting procedures established under its bylaws. The financial accounts and reports including the system of internal controls and procedures of the Commission shall be audited annually by an independent certified public accountant. Upon the determination of the Commission, but no less frequently than every three years, the review of the independent auditor shall include a management and performance audit of the Commission. The Commission shall make an annual report to the governors and legislatures of the compacting states, which shall include a report of the independent audit. The Commissions internal accounts shall not be confidential and such materials may be shared with the Commissioner of any compacting state upon request; provided, however, that any work papers related to any internal or independent audit, and any information regarding the privacy of individuals and insurers proprietary information, including trade secrets, shall remain confidential. (g) No compacting state shall have any claim to or ownership of any property held by or vested in the Commission or to any Commission funds held pursuant to the provisions of this compact. (Added 2005, No. 70,  2.) 
 8511. Compacting states; effective date and amendment
(a) Any state is eligible to become a compacting state.(b) The compact shall become effective and binding upon legislative enactment of the compact into law by two compacting states; provided, the Commission shall become effective for purposes of adopting uniform standards for, reviewing, and giving approval or disapproval of, products filed with the Commission that satisfy applicable uniform standards only after 26 states are compacting states or, alternatively, by states representing greater than 40 percent of the premium volume for life insurance, annuity, disability income, and long-term care insurance products, based on records of the NAIC for the prior year. Thereafter, it shall become effective and binding as to any other compacting state upon enactment of the compact into law by that state. (c) Amendments to the compact may be proposed by the Commission for enactment by the compacting states. No amendment shall become effective and binding upon the Commission and the compacting states unless and until all compacting states enact the amendment into law. (Added 2005, No. 70,  2.) 
 8512. Withdrawal
(a) Once effective, the compact shall continue in force and remain binding upon each and every compacting state; provided, that a compacting state may withdraw from the compact (withdrawing state) by enacting a statute specifically repealing the statute which enacted the compact into law. (b) The effective date of withdrawal is the effective date of the repealing statute. However, the withdrawal shall not apply to any product filings approved or self-certified, or any advertisement of such products, on the date the repealing statute becomes effective, except by mutual agreement of the Commission and the withdrawing state unless the approval is rescinded by the withdrawing state as provided in subsection (e) of this section. (c) The Commissioner of the withdrawing state shall immediately notify the management committee in writing upon the introduction of legislation repealing this compact in the withdrawing state. (d) The Commission shall notify the other compacting states of the introduction of such legislation within 10 days after its receipt of notice thereof. (e) The withdrawing state is responsible for all obligations, duties, and liabilities incurred through the effective date of withdrawal, including any obligations the performance of which extends beyond the effective date of withdrawal, except to the extent those obligations may have been released or relinquished by mutual agreement of the Commission and the withdrawing state. The Commissions approval of products and advertisement prior to the effective date of withdrawal shall continue to be effective and be given full force and effect in the withdrawing state, unless formally rescinded by the withdrawing state in the same manner as provided by the laws of the withdrawing state for the prospective disapproval of products or advertisement previously approved under state law. (f) Reinstatement following withdrawal of any compacting state shall occur upon the effective date of the withdrawing state reenacting the compact. (Added 2005, No. 70,  2.) 
 8513. Default
(a) If the Commission determines that any compacting state has at any time defaulted (defaulting state) in the performance of any of its obligations or responsibilities under this compact, the bylaws or duly adopted rules or operating procedures, after notice and hearing as set forth in the bylaws, all rights, privileges, and benefits conferred by this compact on the defaulting state shall be suspended from the effective date of default as fixed by the Commission. The grounds for default include, but are not limited to, failure of a compacting state to perform its obligations or responsibilities and any other grounds designated in Commission rules. The Commission shall immediately notify the defaulting state in writing of the defaulting states suspension pending a cure of the default. The Commission shall stipulate the conditions and the time period within which the defaulting state must cure its default. If the defaulting state fails to cure the default within the time period specified by the Commission, the defaulting state shall be terminated from the compact and all rights, privileges, and benefits conferred by this compact shall be terminated from the effective date of termination. (b) Product approvals by the Commission or product self-certifications, or any advertisement in connection with such product, that are in force on the effective date of termination shall remain in force in the defaulting state in the same manner as if the defaulting state had withdrawn voluntarily pursuant to section 8512 of this chapter. (c) Reinstatement following termination of any compacting state requires a reenactment of the compact. (Added 2005, No. 70,  2.) 
 8514. Dissolution of compact
(a) The compact dissolves effective upon the date of the withdrawal or default of the compacting state which reduces membership in the compact to one compacting state. (b) Upon the dissolution of this compact, the compact becomes null and void and shall be of no further force or effect, and the business and affairs of the Commission shall be wound up and any surplus funds shall be distributed in accordance with the bylaws. (Added 2005, No. 70,  2.) 
 8515. Severability and construction
(a) The provisions of this compact shall be severable; and if any phrase, clause, sentence, or provision is deemed unenforceable, the remaining provisions of the compact shall be enforceable. (b) The provisions of this compact shall be liberally construed to effectuate its purposes. (Added 2005, No. 70,  2.)
 8516. Other laws
(a) Nothing in this chapter prevents the enforcement of any other law of a compacting state, except as provided in subsection (b) of this section. (b) For any product approved or certified to the Commission, the rules, uniform standards, and any other requirements of the Commission shall constitute the exclusive provisions applicable to the content, approval, and certification of such products. For advertisement that is subject to the Commissions authority, any rule, uniform standard, or other requirement of the Commission that governs the content of the advertisement shall constitute the exclusive provision that a Commissioner may apply to the content of the advertisement. Notwithstanding the foregoing, no action taken by the Commission shall abrogate or restrict: (1) the access of any person to state courts;(2) remedies available under state law related to breach of contract, tort, or other laws not specifically directed to the content of the product; (3) state law relating to the construction of insurance contracts; or(4) the authority of the Attorney General of the state, including maintaining any actions or proceedings, as authorized by law. (c) All insurance products filed with individual states shall be subject to the laws of those states. (Added 2005, No. 70,  2; amended 2021, No. 105 (Adj. Sess.),  277, eff. July 1, 2022.) 
 8517. Binding effect of this compact
(a) All lawful actions of the Commission, including all rules and operating procedures adopted by the Commission, are binding upon the compacting states. (b) All agreements between the Commission and the compacting states are binding in accordance with their terms. (c) Upon the request of a party to a conflict over the meaning or interpretation of Commission actions, and upon a majority vote of the compacting states, the Commission may issue advisory opinions regarding the meaning or interpretation in dispute. (d) In the event any provision of this compact exceeds the constitutional limits imposed on the legislature of any compacting state, the obligations, duties, powers, or jurisdiction sought to be conferred by that provision upon the Commission shall be ineffective as to that compacting state, and those obligations, duties, powers, or jurisdiction shall remain in the compacting state and shall be exercised by the agency thereof to which those obligations, duties, powers, or jurisdiction is delegated by law in effect at the time this compact becomes effective. (Added 2005, No. 70,  2.) 
 10101. Application of consumer protection chapter
Except as otherwise provided in this chapter, the provisions of this chapter shall apply to all financial institutions, as defined in subdivision 11101(32) of this title, licensed lenders, mortgage brokers, mortgage loan originators, sales finance companies, independent trust companies, money service providers, debt adjusters, loan servicers, credit unions, and any other person doing or soliciting business in this State as described in Part 2, 4, or 5 of this title, in addition to any other applicable consumer protection or remedy section not contained in this chapter, unless such consumer protection or remedy section is expressly made exclusive. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2011, No. 78 (Adj. Sess.),  24, eff. April 2, 2012; 2015, No. 128 (Adj. Sess.),  F.1, eff. May 24, 2016.) 
 10102. Penalties
The provisions of subchapter 6 of chapter 201 of this title shall apply to any violation of this chapter, unless the section or subchapter that is the subject of the violation contains its own penalty. The procedures in subchapter 6 of chapter 201 of this title shall apply to any penalty imposed for a violation of this chapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10201. Statement of policy on financial privacy
It is the policy of this state to protect the privacy of customers of financial institutions without unduly inhibiting the free flow of commerce or legitimate law enforcement activities. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10202. Definitions
As used in this subchapter:(1) Account verification service means any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of: (A) assembling information on the frequency and location of depository account openings or attempted openings by a consumer, or forced closings by a depository institution of accounts of a consumer; or (B) authenticating or validating Social Security numbers or addresses for the purpose of reporting to third parties for use in fraud prevention. Mailing such information to a customer to the address provided by such customer shall not be prohibited by this subchapter. (2) Credit reporting agency means any person who, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of reporting to third parties on the credit rating or creditworthiness of any consumer. (3) Customer means, for purposes of this subchapter, any person who deposits, borrows, or invests with a financial institution, including a surety or a guarantor on a loan. (4) Financial information means an original or copy of, or information derived from:(A) a document that grants signature authority over a deposit or share account;(B) a statement, ledger card, or other record of a deposit or share account that shows transactions in or with respect to that deposit or account; (C) a check, clear draft, or money order that is drawn on a financial institution or issued and payable by or through a financial institution; (D) any item, other than an institutional or periodic charge, that is made under an agreement between a financial institution and another persons deposit or share account; (E) any information that relates to a loan account or an application for a loan; or(F) evidence of a transaction conducted by electronic or telephonic means.(5) Financial institution means a financial institution as defined in subdivision 11101(32) of this title, and a credit union, financial institution subsidiary, licensed lender, mortgage broker, or sales finance company organized or regulated under the laws of this State, the United States or any other state or territory. (6) Mercantile agency means any person, which for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating business credit information or other information on businesses for the purpose of reporting to third parties on the credit rating or creditworthiness of any business. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10203. Disclosure of financial records prohibited
Except as otherwise expressly provided in this subchapter, a financial institution, its officers, employees, agents, and directors shall not disclose to any person any financial information relating to a customer. Financial institutions shall adopt reasonable procedures to ensure compliance with this subchapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  278, eff. July 1, 2022.) 
 10204. Exceptions
This subchapter does not prohibit any of the activities listed in this section. This section shall not be construed to require any financial institution to make any disclosure not otherwise required by law. This section shall not be construed to require or encourage any financial institution to alter any procedures or practices not inconsistent with this subchapter. This section shall not be construed to expand or create any authority in any person or entity other than a financial institution. (1) Disclosure of information to the customer after proper identification.(2) Disclosure authorized by the customer, provided the disclosure is limited to the scope and purpose that the customer authorizes. (3) Disclosure of information sought by the Office of Child Support Services pursuant to its authority and obligations under 33 V.S.A.  115 and 33 V.S.A. chapter 41, or by an agency of similar function of another state, pursuant to similar authority. (4) Disclosure of information sought by the Department for Children and Families pursuant to its authority and obligations under 33 V.S.A.  112. (5) Disclosure sought by the Vermont Student Assistance Corporation pursuant to its authority and obligations under 16 V.S.A. chapter 87. (6) The preparation, examination, handling, or maintenance of financial records by any officer, employee, or agent of a financial institution that has custody of the records. (7) The examination of financial records by a certified public accountant while engaged by the financial institution to perform an independent audit. (8) The disclosure of information to a collection agency, its employees or agents, or to any person engaged by the financial institution to assist in recovering an amount owed to the financial institution, if such disclosure is made in the furtherance of recovering such amount. (9) The examination of financial records by, or the disclosure of financial records to, any officer, employee, or agent of a regulatory agency for use only in the exercise of that persons duties as an officer, employee, or agent. (10) The publication of information derived from financial records if the information cannot be identified to any particular customer, deposit, or account. (11) The making of reports, disclosures, or returns required by federal or state law.(12) The disclosure of any information permitted to be disclosed under the laws governing dishonor of negotiable instruments. (13) The exchange, in the regular course of business, of credit information between a financial institution and a credit reporting agency, provided such exchange is in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C.  1681 et seq. (14) The exchange, in the regular course of business, of information between a financial institution and an account verification service, provided such exchange is in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C.  1681 et seq. (15) The exchange, in the regular course of business, of information between a financial institution and a mercantile agency, provided such exchange is solely for the purpose of reporting to third parties on the credit rating or creditworthiness of any business, and is in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C.  1681 et seq. (16) The exchange of loan information that specifically affects a sale, foreclosure, or loan closing, provided such exchange is for the purpose of accomplishing such sale, foreclosure, or loan closing. (17) The disclosure to civil or criminal law enforcement authorities for use in the exercise of such authoritys duties, or the sharing of information, within an industry network, of suspected criminal activities. (18) Disclosures requested pursuant to a summons for trustee process under Rule 4.2 of the Vermont Rules of Civil Procedure. (19) Disclosure requested pursuant to subpoena, provided that no disclosure shall be made until 14 days after the financial institution has notified the customer that financial information has been requested by subpoena. Such notice shall be served by first class mail to the customer at the most recent address known to the financial institution. The provisions of this subdivision shall not apply where the subpoena is issued by or on behalf of a regulatory, criminal, or civil law enforcement agency. (20) Disclosure required by order of court.(21) Disclosure of customer financial information among directors, officers, employees, or agents of affiliated financial institutions, provided that such disclosure is limited to information necessary or appropriate to the fulfillment of any such persons duties and responsibilities to the financial institution or institutions, and provided further that such disclosure is made in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C.  1681 et seq. (22) Disclosure of customer financial information of one financial institution to another financial institution in connection with a proposed merger, consolidation, acquisition, or other reorganization transaction involving such institution, provided that no further disclosure is made except in compliance with this subchapter, and provided further that such disclosure is made in compliance with the Vermont Fair Credit Reporting Act, 9 V.S.A. chapter 63, subchapter 3, and the federal Fair Credit Reporting Act, 15 U.S.C.  1681 et seq. (23) Disclosure in accordance with rules adopted by the Commissioner, provided that the Commissioner may permit disclosure by temporary order, until such time as rules under this subdivision are adopted. (24) Disclosure sought by the Department of Taxes of this State pursuant to its authority and obligations under Title 32. (25) Reports or disclosure of financial or other information to the Department of Disabilities, Aging, and Independent Living, pursuant to 33 V.S.A.  6903(b), 6904, and 6915. (26) Disclosure of information sought by the Department of Vermont Health Access or its agents pursuant to the Departments authority and obligations under 33 V.S.A.  403. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2001, No. 115 (Adj. Sess.),  3, eff. May 28, 2002; 2005, No. 174 (Adj. Sess.),  12; 2015, No. 91 (Adj. Sess.),  3, eff. May 16, 2016; 2017, No. 11,  6; 2017, No. 210 (Adj. Sess.),  10, eff. June 1, 2018.) 
 10205. Penalties
In addition to the authority provided under sections 11601, 11602 and 11603 of this title, the Commissioner may impose an administrative penalty of not more than $1,000.00 for each violation of this subchapter resulting from willful conduct, or from a failure by a financial institution to provide reasonable supervision of its employees to prevent violations of this subchapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10206. Lead solicitations
(a) As used in this section, consumer means a natural person residing in this State.(b) A person shall not use the name, trade name, or trademark of any financial institution in any written or oral advertisement or solicitation to a specifically identified consumer, or which contains specific information on the account or loan of a specifically identified consumer, for products or services, without the express written consent of the financial institution. (c) A person shall not include a loan number, loan amount, or any other specific loan information that is publicly available and relative to a specifically identified consumer in any written or oral solicitation for products or services unless the solicitation clearly and conspicuously states on the front page of the correspondence in bold-face type and in a type size at least equal to the body of the correspondence: (1) that the person is not affiliated with or sponsored by the financial institution;(2) that the solicitation is not authorized by the financial institution;(3) that the financial institution has not supplied the person with any loan information or personal or financial information referenced in the solicitation; and (4) the name, address, and telephone number of the person who paid for the solicitation.(d) The statements required by subsection (c) of this section shall also be given at the time of any oral solicitation to a specifically identified consumer. (e) In addition to any other authority provided elsewhere, the Commissioner may enforce violations of this section against any person and may impose penalties as set forth in sections 2110 and 2115 of this title; may recover costs and attorneys fees, including court costs; may order any person to cease violating this section; and may take such other actions as the Commissioner deems necessary and appropriate. All administrative proceedings shall be conducted in accordance with 3 V.S.A. chapter 25 and any rules adopted by the Commissioner on hearing procedures. (f) A financial institution that has had its name, trade name, or trademark misrepresented in a solicitation in violation of this section may, in addition to any other remedy provided by law, bring an action in Superior Court in the county of its primary place of business, or if its primary place of business is located outside Vermont, in Washington Superior Court. The court shall award damages for each violation in the amount of actual damages demonstrated by the financial institution or $5,000.00, whichever is greater. In any successful action for injunctive relief or for damages, the court shall award the financial institution reasonable attorneys fees and costs, including court costs. (g) A persons failure to comply with the requirements of this section shall constitute an unfair and deceptive act in commerce enforceable under 9 V.S.A. chapter 63. (h) For purposes of this section, each solicitation sent to each consumer constitutes a separate violation. (Added 2009, No. 100 (Adj. Sess.),  1; amended 2019, No. 20,  100.) 
 10301. Community reinvestment reports
Every financial institution subject to the Federal Community Reinvestment Act of 1977 (12 U.S.C.  2901) as amended shall provide to the Commissioner a copy of any report issued with respect to such financial institution under that act. If the financial institution is not a Vermont financial institution, then the requirements of this section shall only apply to reports that relate to its business in this State. The Commissioner shall make such reports available for public inspection and copying. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10302. Automated teller machines
(a) The owner of an automated teller machine or other remote service unit, including a cash dispensing machine, located or employed in this State shall prominently and conspicuously disclose on or at the location of each such machine or on the first screen of each such machine the identity, address, and telephone number of the owner and the availability of consumer assistance. The owner shall also disclose on the screen of such machine or on a paper notice issued from the machine the amount of the fees or charges that the owner will assess to the consumer for the use of that machine. The amount of the fees or charges shall be disclosed before the consumer is irrevocably committed to completing the transaction. The Commissioner shall approve the form, content, timing, and location of such disclosures and any amendments prior to use. The Commissioner shall act on any submission made under this section within 30 days after receipt. If the Commissioner determines that any disclosures do not provide adequate consumer protection, the Commissioner may by order or by rule specify minimum disclosure standards, including the form, content, timing, and location of such disclosures. The Commissioner may impose on the owner of an automated teller machine or other remote service unit an administrative penalty of not more than $1,000.00 for each days failure of the owner to apply to the Commissioner for approval of disclosures required under this section, for each days failure of the owner to use disclosures approved by the Commissioner, or for each days continuing violation of an order of the Commissioner relating to the disclosures required by this section. (b) The owner of an automated teller machine or other remote service unit, including a cash dispensing machine, located or employed in this State shall notify the Commissioner of the location of each terminal at least 30 days prior to the activation of such terminal. The owner shall notify the Commissioner of the deactivation of any terminal within 30 days after the deactivation of such terminal. (c) In addition to an automated teller machine or other remote service unit owned by a financial institution or credit union, the provisions of this section shall apply to any automated teller machine or other remote service unit not owned by a financial institution or credit union, except it shall not include a point-of-sale terminal owned or operated by a merchant who does not charge a fee for the use of the point-of-sale terminal. The activities of an automated teller machine or other remote service unit whose owner is not a financial institution shall be limited to cash dispensing or the offer or sale of nonbanking services and products. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2013, No. 29,  16, eff. May 13, 2013; 2019, No. 20,  101; 2021, No. 105 (Adj. Sess.),  279, eff. July 1, 2022.) 
 10402. Lending reports, disclosures and standards
An entity subject to this chapter shall be subject to and comply with the provisions of 9 V.S.A. chapter 4. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10403. Prohibition on discrimination based on sex, marital status, race, color, religion, national origin, age, sexual orientation, gender identity, or disability
(a) Discrimination prohibited. No financial institution shall discriminate against any applicant for credit services on the basis of the sex, marital status, race, color, religion, national origin, age, sexual orientation, gender identity, or disability of the applicant, provided the applicant has the legal capacity to contract. (b) Rulemaking. The Department of Financial Regulation shall adopt rules necessary to carry out the provisions of this section. (c) Definitions. As used in this section:(1) Adverse action means denial, revocation, or termination of credit services. The term does not include a change in the terms of an account expressly agreed to by an applicant, nor any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account. (2) Applicant means any person who applies to a financial institution directly for an extension, renewal, or continuation of credit, or applies to a financial institution indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit. (3) Application means an oral or written request for an extension of credit that is made in accordance with procedures established by a financial institution for the type of credit requested. The term does not include the use of an account or line of credit to obtain an amount of credit that is within a previously established credit limit. A completed application means an application in connection with which a financial institution has received all the information that the financial institution regularly obtains and considers in evaluating applications for the amount and type of credit requested, including credit reports, any additional information requested from the applicant, and any approvals or reports by governmental agencies or other persons that are necessary to guarantee, insure, or provide security for the credit or collateral. The financial institution shall exercise reasonable diligence in obtaining such information. (4) Credit services means credit cards, personal loans, mortgage loans, and commercial loans. (5) Financial institutions means Vermont financial institutions, credit unions, and licensed lenders. (6) Disability applied to an applicant means a person with a disability as defined in 21 V.S.A.  495d(5). As used in this section, an applicant with a disability does not include an alcoholic or drug abuser who, by reason of current alcohol or drug use, constitutes an unacceptable credit risk. (7) Person means a natural person, a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, association, or other entity. (d) Notification requirements. (1) Within 30 days of reaching a decision on a completed application, a financial institution shall notify the applicant of its decision on the application. (2) Each applicant against whom adverse action is taken shall receive a written statement of reasons for such action from the financial institution. (3) For commercial credit only, a statement of reasons meets the requirements of this section only if it contains the specific reasons for the adverse action taken and cites the specific documentation or business judgment that supports the adverse decision on the application. Consumer credit shall be governed by the Equal Credit Opportunity Act (15 U.S.C.  1691 et seq.) and regulations adopted pursuant to the Act. (4) Financial institutions shall be required to maintain a copy of all statements of reasons and the documentation upon which the decision was based for 24 months after the date of issuance. (e) Civil enforcement. A financial institution that discriminates against an applicant in violation of this section shall be liable to the applicant for punitive damages, for actual damages sustained by the applicant as a result of the discrimination, and for costs and reasonable attorneys fees as determined by the court. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2007, No. 41,  10; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2013, No. 96 (Adj. Sess.),  24; 2019, No. 131 (Adj. Sess.),  8; 2021, No. 105 (Adj. Sess.),  280, eff. July 1, 2022.) 
 10404. Home loan escrow accounts
(a) As used in this section:(1) Borrower means one or more natural persons who are obligated to make escrow account payments under the terms of a loan agreement secured by residential real estate occupied by the borrower. (2) Escrow account means an account into which a borrower is required under the terms of a residential real estate loan agreement to make periodic payments of property taxes, insurance premiums, or other similar charges. (3) Lender means a person who services or holds the beneficial interest in a loan secured by residential real estate located in this State and who requires periodic payments by a borrower into an escrow account in accordance with the provisions of a residential real estate loan agreement. (b) A lender shall pay into an escrow account for the benefit of the borrower interest on funds deposited into the account under the same conditions as the lenders regular savings account, if offered, and otherwise at a rate not less than the prevailing market rate of interest for regular savings accounts offered by local financial institutions, calculated on the basis of the average monthly balance in the account and credited on the first day of each quarter. This subsection shall not apply when a lender requires payment into an escrow account because a borrower has failed, within the past year, to make timely payments for property taxes and insurance in accordance with the provisions of the loan agreement. (c) A lender shall not require a borrower to deposit into an escrow account any greater sum than is sufficient to pay taxes, insurance premiums, and other charges with respect to the residential real estate, subject to the following additional charges: (1) a lender may require aggregate annual deposits no greater than the reasonably estimated total annual charges plus one-sixth of such total; and (2) a lender may require monthly deposits no greater than one-twelfth of the reasonably estimated total annual charges plus an amount needed to maintain an additional account balance no greater than one-sixth of such total. (d) A lender shall make timely payments of all charges with respect to the residential real estate payable from the escrow account. (e) The lender shall maintain escrow account funds in a federally insured depository institution.(f) With respect to borrowers who have maintained escrow accounts in accordance with the provisions of the loan agreement, the lender shall be primarily obligated for the payment of any municipal or county taxes, insurance premiums, or other similar charges with respect to the residential real estate, and any penalties attributable to the lenders late payment of such charges. (g)(1) At least annually, at the completion of the escrow account computation year, a lender shall conduct an escrow account analysis to determine the borrowers monthly escrow account payments for the next computation year based on the borrowers current tax liability, if made available to the lender either by the borrower or the municipality, after any applicable adjustment for a State credit on property taxes. (2) Upon receipt of a revised property tax bill, the lender shall review the property tax bill and, upon verifying that it has been reduced since the date of the last escrow account analysis, the lender shall, within 30 days of receiving the bill, conduct a new escrow account analysis, recalculate the borrowers monthly escrow payment, and notify the borrower of any change. (3) At least annually, and whenever an escrow account analysis is conducted or upon request of the borrower, the lender shall provide to the borrower financial statements relating to the borrowers escrow account in a manner and on a form consistent with the federal Real Estate Settlement Procedures Act. The lender shall not charge the borrower for the preparation and transmittal of such statements. (h) A borrower aggrieved by a violation of the provisions of this section, or a rule adopted by the Commissioner in connection with this section, may bring an action for injunctive relief, three times the amount of any interest unpaid in violation of this section, other damages, costs, and reasonable attorneys fees. The Commissioner may bring an action in the Superior Court of Washington County for injunctive relief, restitution, and any administrative costs and attorneys fees incurred as a result of a violation of this section. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2017, No. 70,  2.) 
 10405. Debt protection agreements
(a) Debt protection agreements that meet the requirements of this section, including requirements related to necessary disclosures, prohibited activities, and to the sale, transfer, and assignment of such agreements, are not insurance as defined by section 3301a of this title and are not governed by the insurance laws of the State of Vermont. (b) As used in this section:(1) Debt protection agreement means a loan term or contractual arrangement that may be part of, or separate from, the loan agreement or retail or motor vehicle installment contract that modifies the loan or retail or motor vehicle installment contract terms governing the extension of credit under the loan agreement, or retail or motor vehicle installment contract, and under which the creditor agrees to provide one or more of the following protections: (A) debt cancellation, which is an agreement to cancel all or part of a borrowers obligation to repay an extension of credit from that creditor upon the occurrence of a specified event and shall include a guaranteed asset protection waiver agreement in which the creditor agrees to cancel all or part of a borrowers obligation to repay an extension of credit to the extent that there is an outstanding balance on the loan or retail or motor vehicle installment contract after application of property insurance proceeds in the event of total physical damage or theft of the property; or (B) debt suspension, which is an agreement to suspend all or part of a borrowers obligation upon the occurrence of a specified event. (2) The term creditor shall include:(A) the lender in a credit transaction;(B) any retail seller or seller of motor vehicles or of other goods and services that provides credit to retail buyers or buyers of such motor vehicles or goods and services as those terms are all defined in 9 V.S.A.  2351 and 2401, respectively, provided that such entities comply with the provisions of this section, including the provisions of subdivisions (c)(1) and (2) of this section; and (C) the assignees of any of the foregoing to whom the credit obligation is payable.(3) The term borrower shall include a debtor, retail buyer of a motor vehicle or other good or service, or other person who obtains an extension of credit from a creditor. (4) The term actuarial method shall mean the method of allocating payments made on a debt between the amount financed and the finance charge pursuant to which a payment is applied first to the accumulated finance charge and any remainder is subtracted from or any deficiency is added to the unpaid balance of the amount financed. (c)(1) Requirements. In the case of credit granted by a seller or retail seller of motor vehicles or of other goods and services that is not required to be licensed under chapter 73 of this title, such retail seller or seller of motor vehicles or of other goods and services shall, within 15 business days, sell, assign, or otherwise transfer the loan agreement, motor vehicle installment contract, or retail sales installment contract, together with the related debt protection agreement in accordance with the provisions of subdivision (2) of this subsection. (2) All assignments, sales, or transfers of a loan agreement or motor vehicle or retail installment contract to which a debt protection agreement relates and the related debt protection agreement shall be to a financial institution as defined in subdivision 11101(32) of this title, a credit union, or an entity licensed under subdivision 2201(a)(1) or (4) of this title to engage in lending or sales financing. (3) In the event that a retail seller or seller of motor vehicles or of other goods or services cannot within 15 business days sell, assign, or otherwise transfer the loan agreement or motor vehicle or retail sales installment contract and the related debt protection agreement as required by subdivision (1) of this subsection, or in the event that an assignment is made contrary to subdivision (2) of this subsection, the provisions of subsection (a) of this section shall not apply and the product shall be considered to be insurance governed by the insurance laws of the State of Vermont. (4) The debt protection agreement forms a part of the loan agreement or sales contract and must be assigned, sold, or transferred together with any assignment, sale, or transfer of the loan agreement or retail or motor vehicle installment contract to which it was originally related. (5) A creditor shall disclose in writing, such disclosures shall be conspicuous, readily understandable, and designed to call attention to the nature and significance of the information provided: (A) that neither the extension of credit, the terms of the credit, nor the terms of the related sale in the case of a motor vehicle or other good or service are to be conditioned upon the purchase of a debt protection agreement; (B) the charge for the debt protection agreement; and(C) the terms and conditions of coverage, including the eligibility requirements for coverage, conditions, or exclusions associated with the contract, a clear representation of the parties to the agreement, procedures for making a claim under the agreement, and the length of term of coverage. (6) The buyer signs or initials an affirmative written request to purchase a debt protection agreement after receiving the disclosures specified in this subsection. Any buyer in the transaction may sign or initial the request. (7) Neither the extension of credit, the terms of the credit, nor the terms of the related sale in the case of a motor vehicle or other good or service are to be conditioned upon the purchase of a debt protection agreement. (8) The fees charged for debt protection agreements shall not vary as between individual borrowers except in relation to the amount and maturity date of the underlying loan or extension of credit. (9) Creditors may not offer debt protection agreements where the products contain terms that allow the creditor to modify unilaterally the contract, unless the modification is favorable to the borrower and is made without additional charge to the borrower, or the borrower is notified of the proposed change and can cancel the debt protection agreement without penalty. (10) Creditors cannot offer debt protection agreements where the terms require a lump sum, single payment, for the contract payable at the outset and the product is for a residential mortgage loan, including primary or secondary residences and including first or subordinate liens. Periodic payments made in relation to a residential home loan must be evenly distributed over the same term as the term of the residential home loan. (11) The borrower may cancel the debt protection agreement at any time and for any reason. In the event of termination or cancellation of the contract, the creditor must refund any unearned fee according to a formula fully disclosed to the borrower at the time of entering into the debt protection agreement, unless the contract provides otherwise. A debt protection agreement that does not provide for a refund may only be offered if an offer is also made of a bona fide option to purchase a comparable contract that provides for a refund. The refund must be fair and reasonable, and the method of calculating the refund must be at least as favorable to the borrower as the actuarial method; provided, however, that if such method produces a result of less than $5.00, no refund shall be required. Notwithstanding the foregoing, if cancellation by the borrower occurs within 30 days of entering into the debt protection agreement, the borrower shall receive a full refund. (12) The creditor must manage the risks associated with debt protection agreements in accordance with safe and sound financial principles. The creditor must establish and maintain effective risk management and control processes over its debt protection agreements. Such processes include appropriate recognition and financial reporting of income, expenses, assets, and liabilities, and appropriate treatment of all expected and unexpected losses associated with the products. The creditor also should assess the adequacy of its internal control and risk mitigation activities in view of the nature and scope of its debt protection agreement programs. (13) Debt protection agreements, as defined in this section, shall not state that the borrower does not have a right to bring an action to enforce the terms of the debt protection agreement or otherwise challenge the denial of a claim, or that any civil action brought in connection with a debt protection agreement must be brought in the courts of a jurisdiction other than Vermont. (14) Any other requirements prescribed by the Commissioner, in order to further the purposes of this section, by rules adopted pursuant to this section. (d) The Commissioner may conduct an examination of any creditor, as defined under this section, for the purpose of determining compliance with this section and may make such investigation, as the Commissioner deems necessary. To the extent necessary for such examination or investigation, the Commissioner may, without limiting the foregoing, compel the production of all relevant books, records, documents, other evidence, or the attendance of witnesses, and may issue subpoenas with respect to the foregoing. The expense of any such investigation or examination shall be paid by the entity being examined or investigated. Nothing contained in this subsection shall limit any other examination or investigation authority of the Commissioner contained in Title 9 or this title. (e) The Commissioner may take any action reasonable, necessary, or desirable for the enforcement of this section, or any rule adopted pursuant to this section, or the enforcement of any order issued under this subsection and may: (1) Order the creditor to cease and desist from offering debt protection agreements.(2) Revoke or suspend the license or authority under this title of any person, including creditors offering debt protection agreements. (3) Impose a penalty of not more than $1,000.00 for each violation that the Commissioner finds to exist. (4) Order the creditor to make restitution to the borrower.(f) The powers vested in the Commissioner under this section are in addition to any other powers of the Commissioner to enforce penalties, fines, or forfeitures authorized by law with respect to a violation of any other law under Title 9 or this title. (Added 2005, No. 70,  4; amended 2021, No. 105 (Adj. Sess.),  281, eff. July 1, 2022; 2021, No. 139 (Adj. Sess.),  6, eff. May 27, 2022.) 
 10501. Basic banking
It is the public policy of this State to promote the economic viability and prosperity of its residents and to promote, attract, and encourage savings. The General Assembly finds and declares that access to basic banking services for basic depository transactions is necessary for the payment of monthly expenses and for the encouragement of thrift by Vermont consumers. The General Assembly further finds and declares that reasonable cost basic banking services promote savings on the part of consumers who are young, old, or have low income, and provide, through means of payment by check, draft, negotiable order of withdrawal, or similar instrument, a viable alternative for cash transactions which is essential to all Vermont consumers. Therefore, it is the purpose of this chapter to ensure that basic banking services remain available to all Vermont consumers. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2013, No. 96 (Adj. Sess.),  25.) 
 10502. Definitions relating to basic banking
As used in sections 10501 through 10504 of this title, the following terms shall have the following meanings: (1) Basic checking account means a deposit account on which the consumer is permitted to make payments or transfers by check, money order, or other negotiable instruments and which is maintained by such person for personal, family, or household purposes. (2) Basic savings account means a savings account or statement savings which is maintained by such person for personal, family, or household purposes. (3) Consumer means a natural person. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.)
 10504. Basic banking rules
The Commissioner may adopt rules to require financial institutions with their principal place of business in this State to offer basic checking and savings accounts if the Commissioner finds a material deterioration in the availability and cost of basic checking and savings account services in the results of any two consecutive surveys. The rule adopted by the Commissioner under this section shall ensure that any required basic banking will not impair the safety and soundness of any affected financial institution and that any such rules shall not adversely affect other consumers of banking services. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  282, eff. July 1, 2022.) 
 10505. Returned check charges
No depository institution or credit union shall assess a returned check charge or similar charge against a depositor for the costs of processing a check received by that depositor and returned for nonsufficient funds by the institution upon which it was drawn. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.),  1, eff. Feb. 2, 2002.) 
 10506. Unsolicited distribution of cash advance contracts and notes
No person shall distribute by mail, or in any other manner, to a Vermont resident, an unsolicited cash advance contract or note in furtherance of that contract. A person who violates this section shall also be subject to the provisions of subchapter 6 of chapter 201 of this title. This section does not apply to: (1) any communication by a lender with a borrower pursuant to a preexisting credit relationship, including the furnishing on an unsolicited basis of any check, card, plate or other means of accessing a preexisting loan or line of credit; or (2) any unsolicited firm offer of credit made in compliance with the rules of the Federal Trade Commission relating to prescreening, as in effect from time to time. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 10601. Application
This subchapter shall apply to all persons licensed, authorized, or registered, or required to be licensed, authorized, or registered under Parts 2, 4, and 5 of this title. (Added 2005, No. 18,  1; amended 2015, No. 128 (Adj. Sess.),  F.2, eff. May 24, 2016.) 
 10602. Compliance with federal laws and regulations
(a) All persons subject to this subchapter shall comply with all applicable requirements of the Truth in Lending Act of 1968, Pub. L. No. 90-321, Title I and Regulation Z, 12 C.F.R. Part 1026; the Real Estate Settlement Procedures Act of 1974, Pub. L. No. 93-533 and Regulation X, 12 C.F.R. Part 1024; and the Bank Secrecy Act of 1970, Pub. L. No. 91-508 and 31 C.F.R. Chapter X, as now or hereafter amended. (b) The Commissioner may make such investigations and examinations to enforce the provisions of this subchapter as the Commissioner deems necessary or appropriate and may take any appropriate actions against any person whom the Commissioner has reason to believe has violated or is in violation of this subchapter. (Added 2005, No. 18,  1; amended 2011, No. 21,  2, eff. May 11, 2011; 2019, No. 20,  103.) 
 10603. Penalty
The Commissioner, in addition to using any other power exercisable by the Commissioner under this title, may: (1) impose an administrative penalty of not more than $1,000.00 for each violation upon any person who violates or participates in a violation of any law or regulation described in this subchapter; (2) impose an administrative penalty in an amount greater than the amount prescribed in subdivision (1) of this section if a greater amount is prescribed in the federal law or regulation violated; (3) order any person to make restitution to any person injured as a result of any violation of this subchapter; and (4) order any person to cease violating this subchapter. (Added 2005, No. 18,  1.)
 10701. Definitions
As used in this subchapter:(1) Financial institution. Financial institution means a financial institution as defined in subdivision 10202(5) of this chapter. (2) Reverse mortgage loan. Reverse mortgage loan means a loan that:(A) is a loan in which the committed principal amount is secured by a mortgage on residential property owned by the borrower; (B) is due upon sale of the property securing the loan or upon the death of the last surviving borrower or upon the borrower terminating use of the real property as a principal residence or upon the borrowers default; (C) provides cash advances to the borrower based upon the equity or the value in the borrowers owner-occupied principal residence; and (D) requires no payment of principal or interest until the entire loan becomes due and payable. (Added 2009, No. 53,  4; amended 2021, No. 105 (Adj. Sess.),  283, eff. July 1, 2022.) 
 10702. Counseling
Prior to accepting an application for a reverse mortgage loan, a financial institution shall refer every borrower to counseling from an organization that is a housing counseling agency approved by the U.S. Department of Housing and Urban Development, and shall receive certification from the counselor that the borrower has received in-person, face-to-face counseling. However, if the borrower cannot or chooses not to travel to a counselor and cannot be visited by a counselor in their home, telephone counseling shall be provided by counseling agencies that are authorized by the Department of Financial Regulation. The certificate shall be signed by the borrower and the counselor and include the date of counseling; the name, address, and telephone number of both the borrower and the organization providing counseling; and shall be maintained by the holder of the reverse mortgage throughout the term of the reverse mortgage loan. (Added 2009, No. 53,  4; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  284, eff. July 1, 2022.) 
 10703. Annuities
A financial institution shall not require an applicant for a reverse mortgage to purchase an annuity as a condition of obtaining a reverse mortgage loan. A financial institution or a broker arranging a reverse mortgage loan shall not: (1) offer an annuity to the borrower prior to the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement; (2) refer the borrower to anyone for the purchase of an annuity prior to the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement. (Added 2009, No. 53,  4.) 
 10704. Limitation on reverse mortgage loan programs
No financial institution shall issue a reverse mortgage loan unless it is a lender approved by the federal Department of Housing and Urban Development (HUD) to enter into a loan insured by the federal government and the reverse mortgage loan complies with all requirements for participation in the HUD Home Equity Conversion Mortgage Program (or other similar federal reverse mortgage loan program from time to time created) and is insured by the Federal Housing Administration or other similar federal agency or is a government sponsored enterprise reverse mortgage loan. (Added 2009, No. 53,  4.) 
 11101. Definitions
Except as otherwise specifically provided elsewhere in this title, and subject to such definitions as the Commissioner adopts by rule, the following terms have the following meanings for purposes of Parts 1, 2, and 5 of this title, unless the context clearly indicates otherwise: (1) Affiliate means any company or person that, directly or indirectly, controls, is controlled by, or is under common control with another company. (2) Automated teller machine or ATM means an electronic device at which a natural person may make deposits to an account by cash or check and perform other account transactions. Point-of-sale terminals, machines that only dispense cash, night depositories, and lobby deposit boxes are not automated teller machines. (3) Bank or bank and trust company means any financial institution organized under the prior laws of this State that is authorized to exercise the powers and subject to the conditions and limitations on the exercise of those powers as set forth in chapter 204 of this title. (4) Bank credit card means a card, plate, or other credit device issued by a bank or financial institution to a cardholder for the purpose of obtaining money, property, labor, or services on credit. The term bank credit card shall not be deemed to include a debit card; provided, however, that a credit card may include features of a debit card. (5) Bank holding company shall have the same meaning as in 12 U.S.C.  1841(a) and shall include a financial holding company as defined in 12 U.S.C.  1841(p).(6) Banking day shall mean each day that a financial institution is open to the public for the transaction of substantially all of its banking functions and shall be deemed a banking day for the purposes of all transactions with the financial institution under this title, Title 9A as it applies to financial institutions, and all other provisions of law applicable to financial institutions and the business of banking in this state. (7) Billing date means the cycle date on the financial institution books and statements, which statements shall be mailed four days after the closing of the cycle. (8) Billing period means the time interval between periodic statement dates. A billing period shall be considered a month or monthly if the last day of each billing period is on the same day of each month or does not vary by more than four days each month. (9) Borrower means any person who is named as a borrower or debtor in a loan or extension of credit, including a drawer, endorser, or guarantor who is deemed a borrower under subsection 14301(d) of this title. (10) Branch means any office of a financial institution at which deposits are received, checks paid, or money lent. A branch may include a messenger service, mobile branch, temporary facility, night depository (drop box), drive-in facility, or a seasonal agency. A branch does not include: (A) a remote service unit;(B) an office that does not permit members of the public to have physical access for purposes of making deposits, paying checks, or borrowing money; (C) an office that is located at the site of, or is an extension of, an approved main or branch office; (D) a loan production office; or(E) deposit production office.(11) Business of banking, business of financial institutions, or banking business means soliciting, receiving, or accepting money or its equivalent on deposit and the loaning of money as a regular business by any person. (12)(A) Capital, for purposes of determining statutory limits that are based on the amount of a banks or financial institutions capital or surplus: (i) means the sum of the amount of common stock outstanding and unimpaired, the amount of perpetual preferred stock outstanding and unimpaired, and the amount of capital surplus, and undivided profits, for financial institutions organized as corporations; (ii) means the sum of members or partners contributions and undistributed earnings of the company or partnership, for financial institutions organized as limited liability companies, limited partnerships, or limited liability partnerships; or (iii) means the sum of capital deposits, surplus, and undivided earnings for all other financial institutions. (B) For purposes of evaluating a Vermont depository institutions financial condition and safety and soundness, capital shall be determined in accordance with applicable federal regulations and interagency guidelines issued jointly by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision. (13) Charter means the grant of authority to a financial institution under state or federal law to operate as a financial institution. (14) Closely related activities mean those activities that are part of the business of banking, are closely related to the business of banking, are convenient and useful to the business of banking, are reasonably related to the operation of a financial institution, or are financial in nature or incidental to such financial activity. Closely related activities include business and professional services, data processing, courier and messenger services, credit-related activities, consumer services, real estate-related services, insurance and related services, securities brokerage, investment advice, securities underwriting, mutual fund activities, financial consulting, tax planning and preparation, community development and charitable activities, and any activities reasonably related or incidental to these activities. A closely related activity shall include: (A) any activity that may be authorized from time to time for financial institutions or their service corporations or subsidiaries, including financial subsidiaries as defined in Subdivision 5136A(g)(3) of Chapter One of Title XLII of the Revised Statutes of the United States, to engage in pursuant to statutes administered by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, or the Office of Thrift Supervision; and (B) any additional activities that the Commissioner by rule or order determines to be a closely related activity. (15) Commercial bank means a bank or bank and trust company organized under prior law of this State or the laws of the United States, another country, or state, but does not include a special purpose financial institution or similar entity. (16) Commissioner means the Commissioner of Financial Regulation.(17) Control means that a person, directly or indirectly or acting through one or more other persons or through one or more subsidiaries, owns, controls, or has power to vote 25 percent or more of any class of equity interest of a financial institution; the person controls in any manner the election of a majority of the directors of the financial institution; or that the person directly or indirectly exercises a controlling influence over the management or policies of the financial institution. For depository institutions, control determinations may be made under the federal Bank Holding Company Act of 1956, 12 U.S.C.  1841 et seq., or the federal Change in Bank Control Act, 12 U.S.C. 1817(j), or the Home Owners Loan Act, 12 U.S.C.  1467a, as applicable in the circumstances. For institutions that are not depository institutions, control may be determined by the Commissioner. (18) Cooperative financial institution means any financial institution organized pursuant to chapter 203 in which the earnings and net worth of the institution inure to the ultimate benefit of the members. (19) Day means a calendar day unless otherwise expressly provided.(20) Debit card means a card, plate, or other device issued by a bank or financial institution to a depositor for the purpose of drawing funds from a deposit account and that does not include any credit features other than (i) provisions to maintain a minimum deposit account balance, or (ii) protection against deposit account overdrafts. (21) Department means the Vermont Department of Financial Regulation.(22) Deposit production office means any place of business of a financial institution at which information is distributed or assistance provided in connection with the opening of new deposit accounts, provided that any initial deposit of funds is made at the main office or an authorized branch of the financial institution and not at such office. (23) Depositors of a financial institution, solely for the purposes of chapter 210 of this title, include the holders of its regular savings accounts, other savings accounts, NOW accounts, certificates of deposit and other deposits having a fixed maturity, and all other accounts except noninterest bearing demand deposits. (24) Depository institution shall mean an insured depository institution within the meaning of 12 U.S.C.  1813(c)(2). (25) Director means a member of the governing body of a financial institution.(26) Electronic banking means conducting the business of banking and any closely related activity electronically. (27) Equity interest means common stock, preferred stock, members or partners interests, or any other type of capital instrument that entitles the holder to vote pursuant to the financial institutions organizational documents; provided, however, that this definition shall not be deemed to prohibit or impair the creation of nonvoting classes of stock or other ownership interests in a financial institution. (28) Executive officer shall have the same meaning as in Regulation O of the Federal Reserve Board, 12 C.F.R. Part 215. (29) Federal association means a savings and loan association, savings bank, or other financial institution organized pursuant to the Act of Congress entitled Home Owners Loan Act of 1933, as amended. (30) Federal Deposit Insurance Corporation or FDIC shall have the same meaning as in 12 U.S.C.  1811. (31) Fiduciary capacity means every capacity specified in section 14401 of this title and every other capacity in which a financial institution acts or may act through its trust department pursuant to chapter 204, subchapter 4 of this title, including trusteeship with respect to collective investment funds. (32) Financial institution means any Vermont financial institution, state financial institution, and national financial institution. (33) Financial institution holding company means any company which has control over any financial institution or has control over any company that controls any financial institution and shall include bank holding companies as defined in subdivision (5) of this section and savings and loan holding companies as defined in 12 U.S.C.  1467a. (34) Foreign bank means any company organized under the laws of a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa or the Virgin Islands that engages directly in the banking business. Foreign bank includes foreign commercial banks, foreign merchant banks, and other foreign institutions that engage in usual banking activities in connection with the banking business in the countries where the foreign institutions are organized or operating. (35) Governing body means the body that oversees the affairs of a financial institution. The governing body may also be referred to as the board of directors, board of trustees, board of managers, partners committee, or managing partners committee, depending upon the ownership structure of the financial institution. (36) Home state means, for a national financial institution, the state in which the main office of the national financial institution is deemed to be located; for a state financial institution, the state by which the financial institution is chartered; and for a foreign bank, the state of the United States that the foreign bank has designated as its home state as determined in accordance with 12 U.S.C.  3103(c). (37) Host state means a state, other than the home state of a bank or financial institution, in which the bank or financial institution maintains or seeks to establish and maintain a branch. (38) Investor means any person who has an equity interest in a financial institution and is entitled to vote under the institutions organizational documents; provided, however, that this definition shall not be deemed to prohibit or impair the ownership rights of the holders of nonvoting classes of stock or other ownership interests in a financial institution. (39) Investor-owned institution means a financial institution organized under chapter 202 of this title. (40) Loan production means the business of a financial institution in which loans or loan contracts are originated, but not approved, in this State. (41) Mutual financial institution or mutual institution means any financial institution organized pursuant to chapter 203 of this title, in which the earnings and net worth of the institution inure to the ultimate benefit of the depositors. (42) Mutual holding company means, solely for the purposes of chapter 210 of this title, the corporation that continues in the mutual form as the corporate parent of a stock financial institution resulting from the reorganization of a mutual financial institution pursuant to chapter 210 of this title. (43) Mutual holding company subsidiary financial institution means, for purposes of chapter 210 of this title, an investor-owned financial institution organized under chapter 202 of this title to receive the assets and liabilities of a reorganizing mutual financial institution in accordance with the provisions of chapter 210 of this title, and which will be a subsidiary of the mutual holding company upon consummation of a reorganization under chapter 210 of this title. (44) Mutual voter means a corporator of a mutual financial institution or member of a cooperative financial institution. (45) National bank means a commercial banking association or limited purpose banking association organized pursuant to the Act of Congress entitled The National Bank Act, as amended, or any subsequent Act of Congress relating to the same subject. (46) National financial institution means a national bank as defined in subdivision (45) of this section or a federal association as defined in subdivision (29). (47) National trust company means a national bank with powers generally limited to trust or fiduciary matters. (48) Nondepository trust company means any Vermont financial institution with powers generally limited to trust or fiduciary matters or any national trust company, organized for the purpose of consolidation or reorganization of trust operations pursuant to section 12602 of this title or organized as a trust company under prior law. (49) Officer means a person who has been given managerial or other high-level duties by the governing body or organizational documents of the financial institution. Depending upon the ownership structure of the institution, an officer may include a person with the title of chair, president, secretary, vice president, treasurer, manager, managing partner, or partner. For organizations that are not corporate in nature, the term secretary shall refer to the person to whom the governing body has delegated responsibility for the custody of the minutes of the meetings of the governing body and the equity interest holders, and for authenticating records of the organization. (50) Operating subsidiary means an entity that is owned in whole or in part by a Vermont financial institution and whose activities are limited to the business of banking and closely related activities and in which a financial institution or financial institution holding company directly or indirectly holds more than 50 percent of the equity interests, but not including any equity interest: (A) taken in satisfaction of a debt previously contracted; or(B) held in a fiduciary capacity.(51) Organizational document means the charter, certificate of organization, articles of incorporation, articles of association, articles of organization, certificate of limited liability partnership, bylaws, or other internal governance documents, operating agreement, partnership agreement, or any other similar document required to be filed with and approved by the Commissioner pursuant to section 12101 or 13101 of this title. (52) Principal means, with respect to a trust account, the individual or entity to whom the financial institution ordinarily furnishes statements of account and other customer communications regarding such trust account. (53) Proprietary interests of the depositors of a mutual or cooperative financial institution refer to the proportionate inchoate interests that such depositors have in the net worth of such financial institution, such interests maturing and being realized upon the financial institutions liquidation and after the claims of all creditors, including those of depositors as creditors, have been satisfied. Proprietary interests of the depositors of a subsidiary financial institution refer to the proportionate inchoate interests that such depositors have in the net worth of the mutual holding company of which such financial institution is a subsidiary, such interests maturing and being realized upon the mutual holding companys liquidation and after the claims of all creditors have been satisfied. (54) Real estate-related services means real estate investment and development, including maintenance and management of improved real estate; real estate appraising; real estate settlement services; real estate brokerage activities with respect to properties owned by a financial institution authorized to do business in this State, a bank holding company, or subsidiaries thereof, regardless of how the property is acquired or for what purpose; or any real estate-related service authorized by this title or by rule or order of the Commissioner or any real estate-related service authorized for any financial institution chartered by or otherwise subject to the jurisdiction of the federal government. (55) Remote Service Unit or RSU means an automated, unstaffed banking facility, such as an automated teller machine, cash dispensing machine, point-of-sale terminal, or other remote electronic facility, at which deposits are received, cash disbursed, or money lent. (56) Savings and loan association, association, cooperative savings and loan association, or foreign building and loan association means a financial institution organized under the prior laws of this State that is authorized to exercise the powers and subject to the conditions and limitations on those powers set forth in chapter 204 of this title. (57) Savings bank means a financial institution organized under the prior laws of this State that is authorized to exercise the powers and subject to the conditions and limitations on those powers set forth in chapter 204 of this title. (58) Service corporation means a corporation substantially all the activities of which consist of originating, purchasing, selling, and servicing loans and participation interests in loan activities; or clerical, bookkeeping, accounting, and statistical or similar functions related to a financial institution or real estate activities; or management, personnel, marketing, or investment counseling related to a financial institution or real estate activities; or any activity authorized by the Commissioner by rule or order that has not been prohibited by federal law for service corporations. (59) Special purpose financial institution means an institution authorized and operating pursuant to chapter 202, subchapter 6 of this title or other entity with the same or similar functions by whatever name that was established prior to the effective date of this section. (60) State financial institution means a bank, bank and trust company, commercial bank, industrial loan corporation that is a depository institution with insurance by the Federal Deposit Insurance Corporation, limited or special purpose bank, special purpose financial institution, savings and loan association, savings bank, trust company, nondepository trust company, and universal financial institution, or other entity with the same or similar functions by whatever name that is organized under the laws of a state other than Vermont or by special act of the legislature of a state other than Vermont and is regulated by its home state in an equivalent manner to a Vermont financial institution; however, trust company as used in this subdivision shall not include an entity that is regulated by its home state in an equivalent manner to an independent trust company as defined in chapter 77 of this title. Nothing in this definition shall be deemed to be a grant of authority to any person to operate as a financial institution unless otherwise authorized under law. (61) State trust company means a special purpose financial institution that is organized under the laws of a state other than Vermont and whose business is limited to trust or fiduciary powers as those powers are set forth in chapter 204, subchapter 4 of this title. (62) Subsidiary means an organization owned or controlled by a financial institution or financial institution holding company. (63) Supervisory agency means:(A) the banking department or equivalent agency of a state;(B) the Federal Deposit Insurance Corporation;(C) the National Credit Union Administration;(D) the Federal Reserve Board;(E) the Office of Thrift Supervision;(F) the Office of the Comptroller of the Currency;(G) any successor agency to any of the agencies enumerated in this section.(64) Universal financial institution means an investor-owned institution or a mutual or cooperative financial institution authorized by its organizational documents to exercise all the powers granted in chapter 204 of this title and includes any bank, bank and trust company, commercial bank, savings bank, and savings and loan association established prior to the effective date of this section, pursuant to this title, or by special act of the General Assembly. (65) Vermont financial institution means a special purpose institution or universal financial institution organized under the laws of the State of Vermont. (66) Derivative transaction means any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of any interest in or any quantitative measure or the occurrence of any event relating to one or more commodities, securities, currencies, interest, or other rates, indices, or other assets. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.),  2, eff. Feb. 2, 2002; 2011, No. 78 (Adj. Sess.),  2, 25, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  285, eff. July 1, 2022.) 
 11201. Business days
(a)(1) For purposes of this title, unless otherwise provided under other state or federal law applicable to a Vermont or state financial institution that is a depository institution, a business day is a calendar day other than the following: (A) Saturday and Sunday;(B) New Years Day, January 1;(C) Martin Luther King, Jr.s Birthday, the third Monday in January;(D) Presidents Day, the third Monday in February;(E) Town Meeting Day, the first Tuesday in March;(F) Memorial Day, the last Monday in May;(G) Independence Day, July 4;(H) Bennington Battle Day, August 16;(I) Labor Day, the first Monday in September;(J) Indigenous Peoples Day, the second Monday in October;(K) Veterans Day, November 11;(L) Thanksgiving Day, the fourth Thursday in November;(M) Christmas Day, December 25.(2) A legal holiday that falls on a Saturday may be observed on the preceding Friday, and a legal holiday that falls on a Sunday may be observed on the following Monday. (b) A Vermont financial institution may choose to remain open or to close any of its banking offices on any of the days enumerated in subsection (a) of this section. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2019, No. 14,  11, eff. April 30, 2019; 2019, No. 18,  3.) 
 11202. Banking day
(a) Each Vermont and state depository institution shall be open not less than five banking days each week, except for the days enumerated in subsection 11201(a) of this title, or except as otherwise provided in this chapter. (b) In addition to the hours of each banking day established by an institution under subsection (a) of this section, a Vermont or state depository institution may, at its discretion, establish days and hours for its offices, including opening offices for business on days that are not defined as business days in section 11201 of this title. The financial institutions governing body is responsible for determining the scope of operations of each branch, including the services to be provided and the days and hours of operation. (c) A Vermont or state depository institution shall post the days and hours of operation at or near the public entrances to its banking offices and shall provide customers with reasonable advance notice of reduction in services or hours of operation. (d) Any act authorized, required, or permitted to be performed at, by, or with respect to any Vermont or state depository institution on a day not defined as a business day or on a day the institution is closed pursuant to section 11204 or 11205 of this title, may be performed on the next succeeding business day and liability or loss of rights of any kind to such financial institution shall not result from this delay. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11203. Special hours
In addition to the hours of each banking day under subsection 11202(a) of this title, a Vermont or state depository institution may have special hours on banking or other than banking days when it is open in a limited capacity for certain definite and stated transactions or purposes only, constituting substantially less than all of its banking functions. A copy of such schedule of special hours shall be filed with the commissioner. The payment, certification, or acceptance of a check or other negotiable instrument, or any other transaction by such financial institution shall be valid, notwithstanding it was done or performed during such special hours on other than a banking day. A Vermont or State depository institution with special hours on other than a banking day shall not constitute such day a banking day, for the purpose of notice, presentment, protest, notice of protest, or the time requirements for any act or action or notice to perfect or preserve rights accorded under 9A V.S.A. article 4. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11204. Closing for cause
A Vermont or State depository institution may temporarily close any of its offices for reasons that include good cause, extreme weather conditions, and community events. If a Vermont or State depository institution temporarily closes any of its offices for all or any part of a banking day, the institution shall post a conspicuous notice of the closing at all points of public access to the closed offices. A closing may not become effective until such notice is posted at the office to be closed. Posting this notice relieves the institution from liability for failure to perform any of the business of the financial institution at the closed offices. The Commissioner may, by adopting rules, establish standards governing the form and content of the notice required under this section, and may require dissemination of the notice of closing by any other reasonable means. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11205. Emergency closing by financial institution
(a) If an emergency arises or is so imminent and immediate as to interfere with or threaten the conduct of normal banking transactions or the safety and welfare of a Vermont or State depository institutions plant, assets, or personnel, the financial institution officer or official in charge of any office open to the public may determine not to open the office so threatened or close the same, if open. The financial institution shall notify the Commissioner of the emergency closing, as soon as reasonably possible. In no case, however, shall the office or offices closed under this section remain closed for more than two consecutive business days commencing the day following closure, except as otherwise provided by law, unless the Governor or Commissioner shall expressly authorize and sanction the same. (b) An emergency closing pursuant to this section including the hours of any extension sanctioned by the Governor or Commissioner shall be lawful and the time of such closing, including any partial day before a closing, shall be considered a holiday and not a banking day. Nevertheless, the transaction of any banking business shall be valid and have the same effect as if performed during special hours on other than a banking day in accordance with section 11203 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11301. Preservation of records
(a) A Vermont financial institution, and a state financial institution with a branch in this State, shall keep those books, accounts, and records relating to all of its transactions that will enable the Commissioner to ensure full compliance with the laws of this State. Each such financial institution shall retain its business records for such periods as prescribed by the Commissioner by regulation. (b) Any such financial institution may dispose of any record which has been retained for the period prescribed by or in accordance with the regulation for retention of records of its class, and thereafter shall be under no duty to produce the record in any action or proceeding. (c) Records required to be preserved and retained by law or regulation may be maintained in paper, photograph, microprocess, magnetic, digital, mechanical, or electronic media, or in or by any other information storage device or process which forms a durable medium providing reasonable assurances against tampering and degradation of any reproduction of the original record, and which can be accurately transferred to paper in a legible written form within a reasonable time. Records maintained in a computer-based format shall be archival in nature only, so as to preclude the possibility of alteration of the content of the record by computer once the record has been transferred to that format. Any record reproduced from a record maintained in compliance with this subsection shall have the same force and effect as the original thereof and may be admitted in evidence equally with the original. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11401. Financial reports
(a) The Commissioner shall require each Vermont financial institution to submit at least quarterly in each calendar year a report of its condition in such manner and as of such dates as the Commissioner may fix. Only summary reports and examinations shall be required with respect to fiduciary activities which are subject to court accountings. The Commissioner may accept reports filed with other regulators for purposes of the requirements of this section. (b) The Commissioner may require special reports to include special information as the Commissioner may direct. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11402. Internal audits
(a) The governing body shall cause internal audits of the Vermont financial institution to be performed. The internal audit shall be reported in writing to the governing body at least once in six months if made by a committee of the governing body and at least once a year if made by a certified or registered public accountant. Any committee of the governing body shall consist of at least three persons. At the request of the Commissioner a copy of the report shall be made available to the Commissioner. (b) Prior to declaration of any dividend or other distribution, the governing body of a Vermont financial institution shall determine that the institution will continue to meet the capital requirements under section 14104 of this title as established by the Commissioner after payment of the proposed dividend or other distribution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11403. Periodic reports from state financial institutions with a branch, office, or activity in this State
(a) The Commissioner may require periodic reports from any state financial institution that has established and maintains a branch in this State pursuant to section 15202 of this title. (b) The Commissioner may require periodic reports from any state financial institution that has established and maintains an office or conducts an activity pursuant to section 15204 of this title. (c) Any reporting requirements prescribed by the Commissioner under this section shall be: (1) consistent with the reporting requirements applicable to financial institutions incorporated under the laws of this State; and (2) appropriate for the purpose of enabling the Commissioner to carry out his or her responsibilities under the laws relating to branching, offices, or activities. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11404. Reports required under consumer protection chapter
A financial institution shall file with the Commissioner reports as required by chapter 200 of this title on the following: (1) community reinvestment activities; and(2) basic banking. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2007, No. 178 (Adj. Sess.),  3.)
 11405. Exemption from annual report to Secretary of State
Vermont financial institutions shall not be required to make any annual report to the Secretary of State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11501. Examinations
(a) The Commissioner shall conduct a regular examination of the condition of each Vermont financial institution at least once every three years or more frequently as the Commissioner determines it to be prudent. (b) The Commissioner may at any time conduct a special examination or may expand the scope of any regular examination. An entity examined pursuant to this subsection shall be responsible for examination fees and expenses provided in section 18 of this title and collected as provided in subsections (c) and (e) of section 19 of this title. (c) The Commissioner shall be given access to all the files, books, accounts, securities, and assets of the financial institution and any person under contract with it to perform services for the financial institution that the Commissioner deems material to the financial condition of the financial institution and shall be afforded every reasonable facility for making an examination of the affairs of the financial institution and such person under contract. (d) Whenever the Commissioner deems it necessary, the Commissioner may examine any company, the majority of the stock of which is owned by a Vermont financial institution, or which is found by the Commissioner to be controlled by a Vermont financial institution. In addition, whenever the Commissioner deems it necessary in the conduct of the exercise of the Commissioners supervisory authority over a financial institution, the Commissioner may review the records of any person that controls a Vermont financial institution. In furtherance of the conduct of the exercise of the Commissioners supervisory authority over a Vermont financial institution, to the extent not prohibited by federal law, and upon the request of the Commissioner, a person that controls a financial institution shall furnish to the Commissioner copies of reports filed with the Federal Reserve Board or the Office of Thrift Supervision. Such person shall also consent to the request by the Commissioner to the Federal Reserve Board or the Office of Thrift Supervision for any other information pertaining to such person. The Commissioner shall not disclose any information obtained pursuant to this section which is treated as confidential by the Federal Reserve Board or the Office of Thrift Supervision. Nothing in this section shall be construed to grant any additional examination, supervisory, or regulatory authority over any person that controls a Vermont financial institution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11502. Confidentiality of investigation and examination reports
(a) Regardless of source, all records of investigations, including information pertaining to a complaint by or for a consumer, and all records and reports of examinations by the Commissioner, whether in the possession of a supervisory agency or another person, shall be confidential and privileged, shall not be made public, and shall not be subject to discovery or introduction into evidence in any private civil action. No person who participated on behalf of the Commissioner in an investigation or examination shall be permitted or required to testify in any such civil action as to any findings, recommendations, opinions, results or other actions relating to the investigation or examination. The Commissioner may, in his or her discretion, disclose or publish or authorize the disclosure or publication of any such record or report or any part thereof, to civil or criminal law enforcement authorities for use in the exercise of such authoritys duties, in such manner as the Commissioner may deem proper. (b) For the purposes of this section, records of investigations and records and reports of examinations shall include joint examinations by the Commissioner and any other supervisory agency. Records of investigations and reports of examinations shall also include, when such records are considered confidential by an agency or foreign government and the records are in the possession of the Commissioner, records of examinations and investigations conducted by: (1) any supervisory agency; and(2) the supervisory agency of any foreign government with jurisdiction over any financial institution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11503. Examinations by federal regulatory agencies; departmental participation
Where an examination is normally conducted by the Department jointly with a federal regulatory authority, the Commissioner, at such times as the Commissioner deems necessary or appropriate because of departmental fiscal restraints, may reduce or eliminate the Departments participation in such examination. Where the Commissioner determines such reductions are necessary or appropriate, the Commissioner is authorized to rely on the examination report of the federal regulatory authority as the basis for exercising his or her powers and discharging his or her responsibilities under this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11504. Examinations; cooperative agreements
(a) To the extent consistent with subsection 11505(a) of this title, the Commissioner may make such examinations of any branch established and maintained in this state pursuant to chapter 205 of this title by a state financial institution as the Commissioner may deem necessary to determine whether the branch is being operated in compliance with the laws of this State and in accordance with safe and sound banking practices. The provisions of sections 18, 19, 11501, 11502, and 11503 of this title shall apply to such examinations. (b) The Commissioner may enter into contracts with any financial institution supervisory agency that has concurrent jurisdiction over a Vermont financial institution or a state financial institution maintaining a branch, agency, office, or location in this State to engage the services of such supervisory agencys examiners, or to provide the services of the Commissioners examiners to such supervisory agency. (c) The Commissioner may enter into joint examinations or joint enforcement actions with other supervisory agencies having concurrent jurisdiction over any branch, agency, office, or location established and maintained in this State by a state financial institution or any branch, agency, office, or location located in any host state that is established and maintained by a Vermont financial institution; provided, that the Commissioner may at any time take such actions independently if the Commissioner deems such actions to be necessary or appropriate to carry out his or her responsibilities under this title or to ensure compliance with the laws of this State; but provided further, that, in the case of a financial institution that has its principal place of business in a state other than this State, the Commissioner shall recognize the exclusive authority of the home state regulator over organizational governance matters and the primary responsibility of the home state regulator with respect to safety and soundness matters. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11505. Cooperative and other agreements
(a) The Commissioner may enter into cooperative, coordinating, and information-sharing agreements with any other governmental agency, the Federal Home Loan Bank, or any organization affiliated with or representing one or more governmental agencies with respect to the periodic examination or other supervision of any activity, branch, agency, office, or location in this State of a state financial institution, or any activity or branch of a Vermont financial institution located in any host state. Such agreements may be used to resolve conflicts arising from inconsistent regulatory requirements and to specify the manner in which any application process under section 15201 or 15202 of this title shall be coordinated. (b) Agreements under this section may also be entered with nonbank regulatory agencies on matters affecting financial institutions organized or doing business in this State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2017, No. 1,  2, eff. Feb. 23, 2017.) 
 11601. Enforcement powers of Commissioner
(a) The Commissioner may:(1) Restrict the withdrawal of deposits from a Vermont financial institution, a state financial institution, or a branch of a foreign bank licensed under this title when the Commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of depositors in the affected institution. (2) Order the holders of equity interests in a Vermont financial institution or financial institution regulated under this title to refrain from voting on any matter if the Commissioner finds that the order is necessary to protect the institution against reckless, incompetent, or careless management, safeguard the funds of depositors, or prevent the willful violation of this chapter or of any lawful order issued under it, and in such a case the equity interests of such a holder shall not be counted in determining the existence of a quorum or a percentage of the outstanding interests necessary to take any action by the financial institution. (3) Order any person to cease violating this title, a lawful regulation or order of the Commissioner issued under it or to cease engaging in any unsafe or unsound practice. (4) Except as provided in subdivision (5) of this subsection, impose an administrative penalty of not more than $15,000.00 for each violation of this title, a lawful regulation or order of the Commissioner issued under it, upon any person: (A) who knowingly violates this title or a lawful regulation or order issued under it;(B) who has knowingly engaged or participated in any materially unsafe or unsound practice in connection with a financial institution; or (C) who has knowingly committed or engaged in any act, omission, or practice that constitutes a breach of fiduciary duty to the financial institution, including violations of section 14110 of this title. (5) Impose an administrative penalty of not more than $1,000.00 per day on any person who fails without good cause to file any report or other filing under chapters 73, 77, and 200 through 210 of this title when due. (6) Remove from a Vermont financial institution or state financial institution regulated under this title any person: (A) who knowingly violates this title or a lawful regulation or order issued under it;(B) who is convicted of a crime involving dishonesty;(C) who has knowingly engaged or participated in any materially unsafe or unsound practice in connection with the financial institution; or (D) who has knowingly committed or engaged in any act, omission, or practice that constitutes a breach of fiduciary duty to the financial institution. (7) Revoke the charter of a Vermont financial institution that ceases to exist or ceases to be eligible for a charter. (b) In determining the amount of any administrative penalty assessed pursuant to this section, the Commissioner shall consider the following factors: (1) the appropriateness of the administrative penalty with respect to the financial resources and good faith of the person or financial institution charged; (2) the gravity of the violation or practice;(3) the history of previous violations or practices of a similar nature;(4) the economic benefit, if any, derived by any person from the violation or practice;(5) whether the financial institution has suffered or probably will suffer financial loss or other damage; (6) whether the interest of depositors could be seriously prejudiced by such violation, practice, or breach of fiduciary duty; or (7) other factors as justice may require.(c)(1) Except as provided in subdivision (2) of this subsection, the Commissioner shall provide notice of any enforcement order proposed pursuant to this section and the grounds for the order by mail to the financial institution and to any affected person. The financial institution or any person so served may, within 30 days after service on the financial institution, request that a hearing be held by the Commissioner. If no hearing is requested, the proposed order shall become final 30 days after service on the financial institution. The provisions of 3 V.S.A. chapter 25 shall govern any hearing held by the Commissioner under this section. An appeal under this section shall be filed within 30 days after the date of the Commissioners decision and shall be to the Washington Superior Court. (2) Notwithstanding subdivision (1) of this subsection, the Commissioner may, ex parte without notice, issue any enforcement order under this section in any case in which the Commissioner determines such action is necessary to: (A) conserve the assets of any financial institution; or(B) protect the interests of the depositors.(d) The hearing on a removal order shall be private unless the Commissioner determines that a public hearing is necessary to protect the public interest. If it is deemed necessary to ensure the continued safety and soundness of the financial institution, the Commissioner may order an immediate suspension of any person pending completion of further administrative proceedings on his or her removal. (e) An executive officer, director, or holder of principal equity interests who fails to comply with a standard established by subsection 14110(a) of this title shall be subject to the civil penalties established by 12 U.S.C. sections 504, 505, and 506, as amended, as if he or she had violated Regulation O directly. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2013, No. 29,  17, eff. May 13, 2013; 2021, No. 105 (Adj. Sess.),  286, eff. July 1, 2022; 2021, No. 139 (Adj. Sess.),  4, eff. May 27, 2022.) 
 11602. Power of Commissioner to impose corrective action
(a) The Commissioner may, in addition to any other power exercisable by the Commissioner under the provisions in this title, require a Vermont financial institution or state financial institution with a branch in this State to: (1) maintain its accounts in accordance with such rules as he or she may prescribe having regard to the size of the organization; (2) observe methods and standards that he or she may prescribe for determining the value of various types of assets; (3) charge off or sell the whole or part of an asset that was acquired in violation of the financial institutions investment policy or an order of the Commissioner; (4) write down an asset to its market value;(5) record liens and other interests in property;(6) obtain a financial statement from a borrower to the extent that the financial institution can do so; (7) obtain insurance against damage to real estate taken as security;(8) search, or obtain insurance of, the title to real estate taken as security; and(9) maintain adequate insurance against such other risks as the Commissioner may deem necessary and appropriate for the protection of depositors and the public. (b) Any order of the Commissioner issued under this section shall be subject to subsection 11601(c) of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  287, eff. July 1, 2022.) 
 11603. Criminal penalties
(a) It shall be a criminal offense, punishable by a fine of not more than $1,000.00 or imprisonment of not more than one year, or both, for any person to violate any existing order of the Commissioner, or, after receipt of a removal order, or an order assessing a penalty, to perform any duty or exercise any power of or on behalf of any financial institution until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the Commissioner or by a court of competent jurisdiction. (b) It shall be a criminal offense, punishable by a fine of not more than $10,000.00 or imprisonment of not more than one year, or both, for any person to willfully violate any existing order of the Commissioner, or, after receipt of a removal order, or an order assessing a penalty, to willfully perform any duty or exercise any power of or on behalf of any financial institution until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the Commissioner or by a court of competent jurisdiction. (c) An executive officer, director, or holder of a principal equity interest of a financial institution subject to the laws of this state under this title who, in violation of a standard established by section 14110 of this title, willfully misapplies any of the moneys, funds, or credits of such financial institution, or any of the moneys, funds, assets, or securities entrusted to the care or custody of such financial institution, or to the care or custody of such executive officer, director, or holder of a principal equity interest, shall be fined not more than $100,000.00 or imprisoned not more than five years, or both. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11604. Indemnification
A financial institution shall not indemnify any person for any penalty or fine imposed under this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11605. Commissioners coordination of enforcement and corrective action with home state
The Commissioner shall promptly give notice to the home state supervisory agency of each enforcement or corrective action proposed to be undertaken against a state financial institution and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving such enforcement action. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11701. Application of subchapter
(a) An application required to be filed under chapters 202, 203, 206, 207, or 210 of this title for the approval of the Commissioner, including an application for a charter, merger, acquisition, conversion, or other similar request, shall be submitted to and considered by the Commissioner in accordance with the provisions of this subchapter. (b) An application required to be filed under chapter 204 or 205 of this title for the approval of the Commissioner shall be filed on a form prescribed by the Commissioner and considered in accordance with the standards in section 11703 of this title. If the Commissioner finds that the application promotes the general good, a certificate of general good may be issued in summary fashion. No further approval shall be required. (c) Nothing in this subchapter shall prevent the Commissioner from issuing a certificate of approval for any application that the Commissioner finds may be approved as filed without further process. (d) Notwithstanding the provisions of subsections (a), (b), and (c) of this section, a financial institution shall notify the Commissioner of its intention to amend its organizational documents and may proceed as provided in the notice unless the Commissioner objects in writing within 30 days; provided, however, no advance notice for a bylaw amendment is required. If the Commissioner objects, the financial institution shall file an application in accordance with this subchapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11702. Applications
(a) Upon receipt of an application subject to this section in the form prescribed by the Commissioner, the Commissioner shall determine whether the application is complete. The Commissioner shall have the power to request modifications in, and additional information relating to, any application prior to certifying its completeness. (b) As soon as the application is deemed substantially complete, the Commissioner may order the applicant to provide notice of the application in the manner and form as he or she may prescribe. (c) Any person may submit written comments on the proposed application to the Commissioner. If the Commissioner orders publication or other notice to be given, he or she shall establish a deadline for receipt of written comments on the application which shall be no less than five business days following the completion of publication or other notice. The Commissioner may, but shall not be compelled to, consider written comments filed after the close of the written comment period. All comments shall be maintained in the public files of the Department. (d) Applications accepted by the Commissioner shall be placed on public file at the office of the Department, and shall be made available for public inspection or copying, at cost; provided that any information that is exempt from public inspection under 1 V.S.A. chapter 5 shall be removed before public inspection of the file is permitted. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 11703. Hearings on applications; decisions; general good standard
(a) The Commissioner may conduct public hearings on any application subject to this subchapter in his or her discretion. (b) After consideration of all relevant matters presented in the application, in any written comments, in a Department investigation and at any hearing, the Commissioner shall issue a decision approving or disapproving the application. (c) If the Commissioners decision is favorable, a certificate of general good, if required and one has not already been issued, and a certificate of approval shall issue with the decision. If the Commissioners decision is not favorable, the Commissioner shall provide the reasons for the disapproval. (d) No financial institution shall commence operations, open a branch, or effectuate a merger, share exchange, acquisition, conversion, reorganization, dissolution, or other similar request without first securing a certificate of approval. (e) The Commissioner shall approve an application if he or she determines that the proposed transaction promotes the general good of the State of Vermont. (f) Bases for meeting general good standards. In determining whether the proposed transaction promotes the general good of the State of Vermont, the Commissioner may consider the following factors: (1) the character, ability, and overall sufficiency of the management, including directors, or organizers, corporators, and incorporators of a new financial institution; (2) the adequacy of capital and financial resources of the institution or institutions concerned; (3) the competitive abilities and future prospects of the institution or institutions concerned; (4) the convenience and needs of the market area or areas to be served;(5) the competitive effect of the proposed transaction on the price, availability, and quality of services in the market area or areas to be served; (6) the effect on the applicants customers;(7) if an existing financial institution, whether the proposed transaction contributes to the financial strength and success of the financial institution or institutions concerned; (8) the fairness and equities involved in any conversion, merger, consolidation, or acquisition; and (9) such other aspects of the proposed transaction as the Commissioner deems advisable. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.)
 12101. Application
(a) Application. A corporation, limited liability company, limited partnership, limited liability partnership, or the organizers of the entity shall file with the Commissioner an application for permission to conduct business as an investor-owned financial institution. The application shall contain the following information: (1) The name by which the financial institution is to be known;(2) The purpose for which it is to be formed, including whether a certificate of general good is sought to conduct business as a universal financial institution or special purpose financial institution; (3) The city or town within this state where the institutions principal office is to be located; (4) The proposed amount of its initial capital;(5) The names, addresses, and occupations of the organizers of the institution, together with a statement as to the character, reputation, and financial responsibility and competence of such persons; (6) Documents which set forth the proposed institutions organizational structure and business plan, including: (A) A copy of the organizational documents of the applicant.(B) The names, addresses, and occupations of the organizers of the institution and the names, addresses, and occupations of the directors who will be voted on at the initial meeting, together with a statement as to the character, reputation, and financial responsibility of each. A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the governing body, any committees and the executive officers; a statement as to the character, reputation, financial responsibility, and competence and experience in banking and business of such persons and such disclosure and conflict of interest statements as required. (C) A financial plan which includes a three-year projection of the initial operating results anticipated and a description of the proposed method of marketing the plan, and a statement as to the sources of initial capital as well as any other sources of funding. (7) The reasons that an institution of the type specified in subdivision (2) of this subsection is needed in the proposed location. (8) Copies of any application filed with any other supervisory agency.(9) Any additional information the Commissioner may require. The Commissioner may waive any requirements that do not apply. (b) Publication of Notice. After determining that the application required by subsection (a) of this section is complete, the Commissioner shall advise the organization or the organizers of the entity to publish or give any notice that will be required by the Commissioner under section 11702 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12102. Issuance of certificate of general good; refusal to issue certificate of general good
(a) Certificate of general good. The Commissioner shall determine whether or not a certificate of general good shall be granted to organize a financial institution under this chapter and shall make the decision in accordance with the requirements of chapter 201, subchapter 7 of this chapter. (b) Conditions. A grant of a certificate of general good may be made subject to such terms and conditions as the Commissioner determines necessary. The certificate of general good shall be submitted to the Secretary of State with the organizational documents that are required to be filed with the Secretary of State. The conditions may include, but are not limited to, conditions regarding the organizational form of the financial institution under this chapter. (c) Effect of refusal to issue certificate of general good. If the Commissioner refuses to issue a certificate of general good, a new application may be filed by the applicant after one year from the date of the refusal. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12103. Requirements to commence business; paid-in minimum capital; examination; certificate of authority
(a) At the time the certificate of general good is issued, the Commissioner shall issue an order granting permission to organize that shall set forth the minimum amount of paid-in capital that the financial institution will be required to have to begin business, which in no event shall be less than $250,000.00. (b) The Commissioner may set different minimum paid-in capital requirements for different types of financial institutions and in determining such amounts may consider such factors as the population of the area where the proposed financial institution is to be located, competition among financial institutions in that locale, the projected volume and type of business to be conducted, the inherent risks in the business to be conducted, and the need to protect depositors and other creditors of the institution. (c) All capital contributions shall be in the form of cash, unless otherwise approved by the Commissioner. (d) An organization that has received a certificate of general good to conduct business as a financial institution may not commence business until the Commissioner certifies in writing that the required minimum capital has actually been paid in and that all other terms and conditions contained in the certificate of general good have been satisfied. (e) When the entire paid-in capital of a financial institution has been received by the financial institution, a complete list of the investors with the name and post office address of each and the portion of ownership interest held by each shall be filed with the Commissioner, who shall cause an examination to be made. If, after the examination, it appears to the Commissioner that the required capital has been paid in, the Commissioner shall issue a certificate under seal authorizing the financial institution to commence business, and this certificate shall be filed with the Secretary of State. A financial institution shall not commence business until that certificate is issued and filed. In the case of a violation of this provision, the officers and directors assenting to the activity shall be personally liable for all debts incurred before the certificate is issued and filed. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  288, eff. July 1, 2022.) 
 12104. Failure to commence business
(a) If a financial institution authorized to commence business under this chapter does not commence business within two years from the filing of its organizational documents in the Office of the Secretary of State, its right to do business shall lapse. (b) Notwithstanding the time limitation in subsection (a) of this section, the Commissioner may extend the period in which business shall be commenced for a period not to exceed six months upon written application by the institution setting forth the reasons for the extension filed before the expiration of the time period established in subsection (a) of this section. If an extension is granted by the Commissioner, the Commissioner shall notify the Secretary of State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12105. Continuance of organization
The organizational documents shall provide for continuance of a financial institution despite the death, dissolution, departure, or incapacity of any investor. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12201. Meetings
(a) The governing body of a Vermont financial institution shall meet at least monthly, except as otherwise provided in this section. A governing body that has appointed an executive committee which meets during the months in which the governing body does not meet, shall meet at least six times a year, including once each quarter. Minutes of executive committee meetings shall be ratified by the governing body. (b) At least once each month and at each regular meeting, the treasurer shall prepare a financial statement showing the condition of the financial institution, which shall be recorded in a book kept for that purpose, and at all times shall be open to the inspection by the governing body and the Commissioner. A record shall be made at each meeting of the transactions of the governing body and the names of the directors present. (c) Conveyances, leases, assignments, releases, transfers of stock certificates and registered bonds, and all other written instruments authorized or required by law or vote of the directors, may be executed by an executive officer or other official authorized and empowered by the internal governance documents of the institution or by a vote of the governing body which is duly recorded in the minutes of the institution. (d) Within 30 days after the annual meeting of the governing body for election of officers, the Secretary shall file a copy of a list of officers and directors with the Commissioner, which list shall be kept on file in the Commissioners office for public inspection. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.),  3, eff. Feb. 2, 2002.) 
 12301. Bonds and insurance
(a) The governing body of a Vermont financial institution shall direct and require good and sufficient fidelity bonds on all active officers, employees, and agents, whether or not they draw salary or compensation, which bonds shall provide for indemnity to the financial institution on account of any losses sustained by it as the result of any dishonest or fraudulent act committed or any omission by them acting independently or in collusion or combination with any person or persons. The bonds may be in individual, schedule, or blanket form, and the premiums shall be paid by the financial institution. (b) The governing body shall also direct and require suitable insurance protection to the financial institution against burglary, robbery, theft, and other similar insurable hazards to which the financial institution may be exposed in the operation of its business on the premises or elsewhere. (c) The governing body shall be responsible for prescribing at least once in each year the amount or penal sum of those bonds or policies and the sureties or underwriters thereon, after giving due and careful consideration to all known elements and factors constituting the risk or hazards. That action shall be recorded in the minutes of the governing body. The Commissioner may require a financial institution to furnish an attested duplicate of the bonds and policies required by this section. (d) The Commissioner may require a Vermont financial institution to secure additional bonds or insurance. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  289, eff. July 1, 2022.) 
 12401. Limitation; form
(a) A Vermont financial institution may not authorize dividends, distributions, or withdrawals that reduce capital below the higher of the amount required under the certificate of general good or section 14104 of this title without the prior approval of the Commissioner. (b) Dividends, distributions, and withdrawals shall be in cash or as otherwise authorized by the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12501. Voluntary dissolution; procedure; criteria
(a) An investor-owned Vermont financial institution shall submit to the Commissioner for approval a plan of dissolution or wind-up prior to filing its articles of dissolution under Title 11A or winding up its business under Title 11. The plan shall contain the following items: (1) pro forma financial statements that demonstrate that the financial institution will, upon dissolution or during its wind-up, discharge or make provision for discharging its liabilities; (2) a method to distribute all remaining assets among its investors according to their interests; (3) the process of and resources dedicated to the oversight of the dissolution or winding up of the financial institution; (4) the plan to transfer to any of its affiliates or any other financial institution its deposit, loan, and trust accounts, including escheat of all remaining deposit accounts to the State of Vermont; (5) the procurement or continuation of insurance or the provision of other security as the Commissioner deems necessary; (6) an acknowledgment that, before the articles of dissolution are filed or the wind-up begins, there will be no distributions or equity interest repurchases without the Commissioners prior written approval; and (7) such other information or assurances as the Commissioner may require.(b) Upon approval of the plan, the financial institution may file its articles of dissolution under Title 11A and proceed with its dissolution or may proceed with the wind-up and dissolution under Title 11, as provided by law. (c) During its wind-up, a dissolved or dissolving entity shall not transact any further banking business after its deposit insurance has terminated. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12601. Certain special purpose financial institutions authorized
(a) In addition to universal financial institutions authorized under subchapters 1-5 of this chapter and under chapter 203 of this title, special purpose financial institutions may be established in this state, subject to the conditions and limitations imposed under this subchapter. (b) Any person who, directly or indirectly, controls a special purpose financial institution established under this subchapter shall be subject to the supervision of the Commissioner, unless that person is a bank holding company regulated by the Federal Reserve Board or savings and loan holding company regulated by the director of the Office of Thrift Supervision. In exercising the supervisory powers under this subchapter, the Commissioner may require such examination and reports, including copies of reports filed with federal regulatory agencies, of the special purpose financial institution and any person that controls it as the Commissioner deems necessary to protect the interests of depositors, borrowers, or other parties in interest. (c) Any material change in a business plan by a special purpose financial institution authorized to do business under this subchapter shall be submitted to the Commissioner for prior approval, unless the provisions of this title require the financial institution to file an application with the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 12602. Nondepository trust companies
(a) A nondepository trust company has all the powers, duties, and obligations of a financial institution under this title, except as provided in this section. In the exercise of its powers and the conduct of its business, the nondepository trust company shall be subject to all the same fiduciary duties and obligations as a financial institution operating a trust department under subchapter 4 of chapter 204 of this title. (b) A nondepository trust company shall not have the power to solicit, receive, or accept money or its equivalent on deposit as a regular business within the meaning of subdivision 11101(11) of this title; shall not be required to obtain federal deposit insurance; shall not have the power to lend money, except in transactions reasonably related to and deriving from its service as fiduciary or its conduct of trust business; and shall not conduct any other business except that which is incidental to its trust business and which is otherwise consistent with the exercise of its fiduciary duties. (c) No nondepository trust company, other than a national trust company authorized to engage in a trust business in this State, shall engage in a trust business in this State without first obtaining a certificate of authority from the Commissioner pursuant to this section and sections 11703, 12103, and 14403 of this title. (d) Notwithstanding section 15101 of this title, without the prior approval of the Commissioner, a nondepository trust company that is authorized to do business in this State may open and occupy a trust office at any one or more locations in this State at which its financial institution holding company parent or any affiliate financial institution has an office, whether a main office or a branch office. (e) Any other trust office of a nondepository trust company organized as a Vermont financial institution shall be established in this State only with the prior approval of the Commissioner as provided in subsection 11701(c) of this title. (f) The establishment of trust offices by a nondepository trust company organized as a national trust company shall be governed by applicable federal law. (g) The organizational documents of a nondepository trust company organized as a Vermont financial institution that are filed with the Secretary of State shall contain the following statement: This organization is subject to the Vermont law on nondepository trust companies, section 12602 of this title, and does not have the power to solicit, receive, or accept money or its equivalent on deposit or to lend money except for lending reasonably related to and deriving from its service as fiduciary or its conduct of trust business. This statement in the organizational documents of a nondepository trust company may not be amended. (h) All of the outstanding equity interests of a nondepository trust company shall be owned directly, or indirectly through one or more subsidiaries, by a financial institution holding company. (i) A nondepository trust company organized as a Vermont financial institution shall maintain minimum capital in accordance with this chapter and section 14104 of this title, except the Commissioner may by order or rule apply standards for the minimum capital required for a nondepository trust company that are different from those requirements for a universal financial institution organized under this title, based on the nature of the business. (j) Funds received or held by a nondepository trust company organized as a Vermont financial institution while awaiting investment or distribution shall not be used by the nondepository trust company or any affiliate financial institution in the conduct of its business or deposited in such financial institution, except to the same extent, and subject to the same conditions and limitations, as would be otherwise permitted under this title if the nondepository trust company and affiliated financial institution were one and the same corporate entity. The account shall be held either in the name of the trust to which the cash belongs or in the name of the nondepository trust company and shall be composed entirely of cash belonging to trust accounts, the respective contributions of which are reflected in the books and records of the nondepository trust company. (k) A nondepository trust company organized as a Vermont financial institution shall include as a part of its name the word trust unless otherwise approved by the Commissioner for good cause shown. (l) A nondepository trust company organized as a Vermont financial institution shall be subject to regular examination and supervision by the Commissioner to the same extent as any other financial institution chartered under Vermont law. (m) A nondepository trust company organized as a Vermont financial institution may convert to any other type of investor-owned financial institution pursuant to chapter 206 of this title. (n)(1) At any time or times following the grant to a nondepository trust company of permission to engage in the trust business by the Commissioner, or in the case of a national trust company by its federal supervisory agency, the nondepository trust company may file a petition in the Probate Division of the Superior Court of the Probate District in which its main office is located requesting that it be substituted, except as may be specifically excluded in such petition, in every fiduciary capacity for any one or more of its affiliate financial institutions specified in the petition. The petition may be made ex parte and need not list the fiduciary capacities in which substitution is made. A copy of the petition shall be furnished to the Commissioner prior to filing with the Probate Division of the Superior Court and the Commissioner shall have standing to appear and object to the petition. Upon a finding that (A) the nondepository trust company has been granted permission to engage in the trust business by the Commissioner, or the federal supervisory agency if the nondepository trust company is a national trust company, and (B) each of the affiliate financial institutions for which the nondepository trust company seeks to be substituted as fiduciary has complied with the notification requirements in subdivision (2) of this subsection, the Court shall enter an order substituting the nondepository trust company in every fiduciary capacity for each of its specified affiliate financial institutions, except as otherwise specified in the nondepository trust companys petition. If the Court determines that the Commissioners objection has merit, the Court shall issue an appropriate order to address the Commissioners objection. The petition made pursuant to this section shall be considered in a summary fashion by the Court, and the Court shall act on the petition within 30 days of filing. Upon entry of the Courts substitution order, the nondepository trust company shall, without further act, be deemed substituted by operation of law in every such fiduciary capacity, except as may be specifically excluded in such petition. The substitution shall be evidenced by filing a copy of the order with the Clerk of the Vermont Probate Division of the Superior Court in each Probate District in which the affiliate financial institutions served in a fiduciary capacity prior to the entry of the order. The order shall be accompanied by written notification to the Court of each fiduciary appointment previously made by the Court that is affected by the substitution order, and evidence of compliance with subdivision (5) of this subsection. The order of substitution shall be indexed in the records of the Courts in the manner in which substitutions of fiduciaries are indexed. (2) At least 30 days before the filing of the petition referred to in subdivision (1) of this subsection, but after regulatory approval under subsection (c) of this section has been granted, each of the affiliate financial institutions for which the nondepository trust company seeks to be substituted shall mail written notice of the proposed substitution to the principals of each trust account affected. The form of notice required by this subdivision shall be approved by the Commissioner and shall include a statement that the nondepository trust company is affiliated with its affiliate financial institutions, but is not a part of them, and shall include the name, mailing address, and telephone number of one or more officers, employees, or agents of the affiliate financial institution available during regular business hours to answer customer questions regarding the proposed substitution. The affiliate financial institution shall furnish an affidavit of the mailing of the notice to the Probate Division of the Superior Court in conjunction with the filing of the nondepository trust companys petition referred to in subdivision (1) of this subsection, and the affidavit shall constitute the affiliate financial institutions compliance with this subdivision. Following the mailing of the notice and prior to the effective date of the substitution order, each of the affiliate financial institutions shall furnish a copy of the notice to each prospective trust customer of the financial institution before the customer and the financial institution enter into a trust account relationship. (3) Within 30 days after the entry of the substitution order referred to in subdivision (1) of this subsection, the nondepository trust company shall mail written notice of the substitution to the principals of each trust account affected. The notice shall specify that the nondepository trust company is affiliated with its affiliate financial institutions, but is not a part of them, and shall include the name, mailing address, and telephone number of one or more officers or employees of the nondepository trust company available during regular business hours to answer customer questions regarding the substitution. (4) Each designation in a will, trust, or other instrument executed before or after the entry of an order of substitution, naming an affiliate financial institution as fiduciary, shall be deemed by operation of law to be a designation of the nondepository trust company, substituted pursuant to this section, without further act or amendment of the will, trust, or other instrument, unless the will, trust, or other instrument is executed after the date of entry of the order of substitution and specifically negates application of this section. (5) If any affiliate financial institution for which the nondepository trust company has been substituted pursuant to this section has given bond in any fiduciary capacity, the nondepository trust company shall be required to furnish to the Court or authority making the appointment a substitute bond in like amount and terms before the affiliate financial institution shall be released from liability on its bond. (6) Any affiliate financial institution for which the nondepository trust company has been substituted pursuant to this section shall account jointly with the nondepository trust company for the accounting period during which the effective date of the substitution occurs. Upon substitution pursuant to this section, the affiliate financial institution shall deliver to the nondepository trust company all assets addressed in the substitution order held by the affiliate financial institution as fiduciary and upon the substitution all the assets shall become the property of the nondepository trust company as fiduciary without the necessity of any instrument of transfer or conveyance. (7) Upon substitution of the nondepository trust company pursuant to subdivision (1) of this subsection, the nondepository trust company shall pay fair consideration to each affiliate financial institution for which it has been substituted as fiduciary for the trust business it has acquired from the affiliate as a result of the substitution. (o) To the extent not inconsistent with this section or with the limited scope of the banking powers of a nondepository trust company as contemplated in subsection (b) of this section, a nondepository trust company organized as a Vermont financial institution shall be subject to the laws of this State generally applicable to investor-owned financial institutions organized pursuant to chapter 202 of this title; provided, however, that the provisions of this chapter governing substitution of the nondepository trust company as fiduciary shall be exclusive and chapters 206, 207, and 208 of this title shall not apply to the substitution. (p) A depository institution organized either as a Vermont financial institution or a national financial institution if authorized by its supervisory agency to exercise trust powers may be substituted as a fiduciary for any of its affiliate financial institutions under the same procedures, and the substitution shall be subject to the same conditions specified in this section, other than the prohibition against deposit-taking and the provisions of subsection (k) of this section, with respect to the substitution as fiduciary of a nondepository trust company for any of its affiliate financial institutions. The substitution procedures shall be exclusive and chapters 206, 207, and 208 of this title shall not apply to the substitution. (q) Notwithstanding subsection 12201(a) of this title, the governing body of a nondepository trust company shall meet at least four times a year, including once quarterly. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.),  4, eff. Feb. 2, 2002; 2009, No. 154 (Adj. Sess.),  238a, eff. Feb. 1, 2011; 2017, No. 134 (Adj. Sess.),  8.) 
 12603. Merchant banks
(a) A merchant bank is a financial institution organized under the provisions of this title whose activities are generally limited to lending and investing. Deposit activity is prohibited. Unless otherwise indicated in this chapter, a merchant bank has all the powers, duties, and obligations of a financial institution under this title. As one of the purposes of merchant banks is to provide needed capital or investments to businesses that may be impermissible or imprudent for depository financial institutions, its lending and investment activities are less restricted. Except as provided in this section, a merchant bank has all the powers of and is entitled to engage in the business of a financial institution, including powers with respect to investments, loans, and transactions. (b) A merchant bank may not solicit, receive, or accept money or its equivalent on deposit as a regular business within the meaning of subdivision 11101(11) of this title or engage in deposit-like activities as determined by the Commissioner. A merchant bank may deposit cash, whether constituting principal or income, in any financial institution, whether within or outside this State, if the account is held either in the name of the customer to which the cash belongs or in the name of the merchant bank and is composed entirely of cash belonging to the customer, the respective contributions of which are reflected in the books and records of the merchant bank. (c) A merchant bank may issue drafts drawn on itself in the form of treasurers or cashiers checks. (d) No merchant bank shall engage in business as a merchant bank in this State without first obtaining a certificate of authority from the Commissioner pursuant to this section and sections 11703 and 12103 of this title. (e) The organizational documents of a merchant bank that are filed with the Secretary of State shall contain the following statement: This organization is subject to the Vermont law on merchant banks, 8 V.S.A.  12603, and does not have the power to solicit, receive, or accept money or its equivalent on deposit. This statement in the organizational documents of a merchant bank may not be amended. (f) The minimum amount of initial capital for a merchant bank is $1,000,000.00, all of which shall be common stock or equity interest in the merchant bank. A merchant bank may use qualified subordinated debt or senior debt as part of its capital structure above $1,000,000.00, provided that the amount of subordinated debt or senior debt used as capital above $1,000,000.00 is not greater than the amount of common stock or equity interest used as capital above $1,000,000.00. The Commissioner, in his or her discretion, may increase the minimum capital required for a merchant bank. (g) A merchant bank shall maintain minimum capital in accordance with section 14104 of this title. The Commissioner may establish different standards for merchant banks than for other financial institutions organized under this title. The minimum capital standards for a merchant bank may not be less than a level equal to 150 percent of the tier 1 risk-based capital and 150 percent of total risk-based capital established from time to time by the Board of Governors of the Federal Reserve System for a well-capitalized bank. (h) A merchant bank may convert to any other type of investor-owned financial institution pursuant to chapter 206 of this title. (i) Notwithstanding section 14103 of this title, a merchant bank may use as a part of its name the word or words bank, banker, or banking, or the plural of or any abbreviations of those words. (j) At least 30 days prior to the establishment of any office for the transaction of its business, a merchant bank shall notify the Commissioner. (k) The following provisions of this title are inapplicable to merchant banks: sections 12201, 14110, 14301(d), and chapters 203 and 205, and chapter 204, subchapter 2. (l) Prior to making a loan, the terms of any loans by a merchant bank to or investments by a merchant bank shall be disclosed to the governing body of the merchant bank when the loan is to any of the following: (1) a person who owns 25 percent or more of the merchant banks common stock or similar equity capital; (2) a member of the governing body of the merchant bank;(3) an executive officer or manager of the merchant bank; or(4) a company, 25 percent of the voting shares or other similar voting equity of which is owned by a person or entity listed in subdivisions (1) through (3) of this subsection. (m) Any acquisition or change in control of 10 percent or more of the common stock or equity interests in a merchant bank shall be subject to the prior approval by the Commissioner. The acquiring person shall file an application with the Commissioner for approval. The application shall be subject to the provisions of chapter 201, subchapter 7 of this title. (n) The Commissioner shall examine the merchant bank and any person who controls it to the extent necessary to determine the soundness and viability of the merchant bank in the same manner as required by chapter 201, subchapter 5 of this title. (o) A merchant bank shall include on all its advertising a prominent disclosure that deposits are not accepted by a merchant bank. (p) For purposes of this section, control means that a person:(1) directly, indirectly, or acting through another person owns, controls, or has power to vote 10 percent or more of any class of equity interest of the merchant bank; (2) controls in any manner the election of a majority of the directors of the merchant bank; or (3) directly or indirectly exercises a controlling influence over the management or policies of the merchant bank. (q) A merchant bank formed and authorized under this chapter shall:(1) maintain its principal place of business in this State;(2) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the Vermont registered office of the merchant bank, the Secretary of State shall be an agent of such merchant bank upon whom any process, notice, or demand may be served; (3) hold at least one meeting of its governing body in this State each year; and(4) have at least one Vermont resident as a member of its governing body. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2011, No. 21,  11a; 2011, No. 78 (Adj. Sess.),  12, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  290, eff. July 1, 2022.)
 12604. Uninsured banks
(a) An uninsured bank is a financial institution that only accepts deposits for which insurance of deposits by the FDIC is not required. For purposes of this section, uninsured banks may accept deposits from a depositor which, when added to the deposits already held for the depositor, if any, exceed the maximum insured amount then permitted to be insured by the Federal Deposit Insurance Corporation for insured deposits. An uninsured bank may be organized pursuant to this section and subchapters 1 through 5 of this chapter. Unless otherwise indicated in this chapter, an uninsured bank has all the powers, rights, duties, and obligations as a financial institution under this title. An uninsured bank is not a nondepository trust company nor is it a merchant bank. (b) No uninsured bank shall engage in business as an uninsured bank in this State without first obtaining a certificate of authority from the Commissioner pursuant to sections 11703 and 12103 and this section. (c) The organizational documents of an uninsured bank that are filed with the Secretary of State shall contain the following statement: This organization is subject to the Vermont law on uninsured banks, 8 V.S.A.  12604, and does not have the power to solicit, receive, or accept retail deposits. This statement in the organizational documents of an uninsured bank may not be amended. (d) An uninsured bank shall maintain capital in accordance with section 14104 of this title, except that the Commissioner may establish different capital requirements for uninsured banks from those required for insured financial institutions. (e) An uninsured bank may convert to any other type of investor-owned financial institution pursuant to chapter 206 of this title. (f) The Commissioner may establish by rule or order reserve requirements for uninsured banks. (g) An uninsured banks lending limit is governed by subsection 14301(d) of this title, except that loans or extensions of credit to a person are limited to 15 percent of total capital. (h) An uninsured bank shall display conspicuously at each window or place where deposits are usually accepted a sign stating that deposits are not insured by the FDIC. (i) An uninsured bank shall either include in boldface conspicuous type on each signature card, or instrument evidencing a deposit the following statement: This deposit is not insured by the FDIC or require each depositor to execute a statement that acknowledges that the initial deposit and all future deposits at the bank are not insured by the FDIC. The bank shall retain this acknowledgment as long as the depositor maintains any deposit with the bank. (j) An uninsured bank shall include on all its deposit-related advertising a prominent disclosure that deposits are not insured by the FDIC. (k) An uninsured bank formed and authorized under this chapter shall:(1) maintain its principal place of business in this State;(2) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the Vermont registered office of the uninsured bank, the Secretary of State shall be an agent of such uninsured bank upon whom any process, notice, or demand may be served; (3) hold at least one meeting of its governing body in this State each year; and(4) have at least one Vermont resident as a member of its governing body. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2011, No. 78 (Adj. Sess.),  13, eff. April 2, 2012.)
 13101. Application to organize
(a) Application. Two or more persons all of whom shall reside in or reside proximate to the geographic area to be served by the institution, may agree in writing to associate themselves for the purpose of forming a mutual or cooperative financial institution pursuant to this chapter, and those persons shall be considered as the organizers of the applicant. The organizers shall file with the Commissioner an application for permission to organize a mutual or cooperative financial institution. The application shall contain the following: (1) The name by which the financial institution will be known.(2) The purpose for which it is to be formed, including whether a certificate of general good is sought to conduct business as a mutual financial institution or a cooperative financial institution. (3) The city or town within this State where the financial institutions principal office is to be located. (4) The proposed minimum amount of initial capital contributions to be deposited and a statement by each organizer setting forth his or her name, address, and occupation, together with the amount of initial capital that such organizer shall deposit, which statement shall be subscribed by the organizer. (5) The names, addresses, and occupations of the organizers of the institution, together with a statement as to the character, reputation, and financial responsibility and competence of such persons. (6) Documents which set forth the proposed institutions organizational structure and business plan, including: (A) A copy of the organizational documents.(B) The names of the organizers of the institution who are to serve until the initial meeting of the members or corporators or until their successors are elected and qualified, and the names, addresses, and occupations of the directors who will be voted on by the members or corporators at the initial meeting, together with a statement as to the character, reputation, and financial responsibility of each. A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the governing body, any committees and the executive officers; a statement as to the character, reputation, financial responsibility, and competence and experience in banking and business of such persons, and such disclosure and conflict of interest statements as required. (C) A financial plan which includes a three-year projection of the initial operating results anticipated and a description of the proposed method of marketing the plan, and a statement as to the sources of initial capital as well as any other sources of funding. (7) The reasons that an institution of the type specified in subdivision (2) of this subsection is needed in the proposed location. (8) Copies of any application filed with any other supervisory agency.(9) Any additional information as the Commissioner may require.(b) Publication of notice. After determining that the application required by this section is complete, the Commissioner shall advise the organization or the organizers of the entity to publish any notice that will be required by the Commissioner under subsection 11702(c) of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13102. Issuance of certificate of general good; refusal to issue certificate of general good
(a) Certificate of general good. The Commissioner shall determine whether or not a certificate of general good shall be granted to organize a financial institution and shall make the decision in accordance with the requirements of subchapter 7 of chapter 201 of this title. (b) Conditions. A grant of a certificate of general good may include such terms and conditions as the Commissioner determines necessary. These may include conditions regarding the organizational form of the financial institution under this chapter. (c) Effect of refusal to issue certificate of general good. If the Commissioner refuses to issue a certificate of general good, a new application may be filed by the organizers after one year from the date of the refusal. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13103. Requirements to commence business; minimum initial capital contribution deposits; examination; certificate of authority
(a) At the time the certificate of general good is issued, the Commissioner shall issue an order granting permission to organize which shall set forth the minimum amount of capital deposits that the mutual or cooperative financial institution will be required to have to commence business, which in no event shall be less than $250,000.00. (b) The Commissioner may set different minimum capital deposit requirements for different types of financial institutions, and in determining the minimum amount of capital deposits for a financial institution, may consider such factors as the population of the area where the proposed institution is to be located, competition among financial institutions in that locale, the projected volume and type of business to be conducted, the inherent risks in the business to be conducted, and the need to protect depositors and other creditors of the institution. (c) All capital deposits shall be in the form of cash, unless otherwise approved by the Commissioner. (d) Upon receipt of a certificate of general good pursuant to section 13102 of this title, the organizers set forth in the application for permission to organize shall hold the institutions franchise until such time as the requirements of this subchapter are met or the Commissioner determines that said requirements have not been met. (e)(1) Within 30 days of receipt of a certificate of general good pursuant to section 13102 of this title, the first meeting of the organizers of the financial institution shall be called by a notice signed by that organizer who was designated in the application for that purpose, or by a majority of the organizers. Such notice shall state the time, place, and purposes of the meeting. A copy of the notice shall be given to each organizer at least three days before the date appointed for the meeting, or left at each organizers residence or usual place of business, or deposited in the post office and addressed to such an organizer at that organizers residence or usual place of business, and another copy thereof, together with an affidavit of one of the organizers that the notice has been duly served, shall be recorded with the records of the institution. If all the organizers, in writing indorsed upon the application to organize, waive such notice and fix the time, place, and purposes of the meeting, no notice is required. (2) At the first meeting and thereafter, the organizers of a mutual financial institution shall be known as the corporators and the organizers of a cooperative financial institution shall be known as the incorporators. (3) At such meeting or at any adjournment thereof, the corporators or incorporators shall by ballot select a temporary secretary, adopt the organizational documents of the institution and, in such manner as the internal governance document or the law provides, elect directors and officers. All persons so elected shall qualify for their offices as provided in subchapters 4 and 5 of this chapter. (4) The temporary secretary shall make and attest a record of the proceedings until the secretary has been chosen and sworn, including a record of such choice and qualification. (5) The secretary shall file copies of the organizational documents with the Commissioner within 10 days of their adoption. Within 15 business days of receipt, the Commissioner shall, after examining such organizational documents for conformance with the requirements of this title and other applicable law, approve or disapprove of the filed documents. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13104. Submission to Secretary of State
Following the meeting required under subdivision 13103(e)(1) of this title and approval by the Commissioner under subdivision 13103(e)(5) of this title, the directors so elected shall submit to the Secretary of State an attested copy of each of the institutions organizational documents required by Title 11 or 11A, as the case may be. The Secretary of State shall determine whether such organizational documents satisfy the requirements of Title 11 or 11A. If such requirements are met, the Secretary of State shall file the organizational documents according to the provisions of law. The filing of the organizational documents by the Secretary of State shall not authorize the transaction of business by the financial institution until all conditions of this subchapter are satisfied. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13105. Payment of capital deposits
(a) A financial institution organized under this chapter shall not commence business until the minimum capital deposits required in its permission to organize have been deposited to the credit of the financial institution in a depository designated by the governing body. (b) At such time as the institution has received to its credit the minimum capital deposits required in section 13103 of this title, a complete list of the capital depositors, with the name, address, occupation, and the amount of capital deposited by each shall be filed with the Commissioner, which list shall be verified by an officer and the secretary of the institution. Such deposits shall be handled by the institution in accordance with subchapter 2 of this chapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13106. Certificate to commence business
(a) Upon receipt of the statement required in section 13105 of this title, the Commissioner shall cause an examination to be made to determine if the minimum capital deposits have been credited to the account of the institution and that all requirements of this section and other provisions of law have been met. (b) Upon completion of the examination, and if it appears to the Commissioner that the whole of the required capital deposits has been paid in, the Commissioner shall issue a certificate under seal authorizing the financial institution to commence business, and this certificate shall be filed with the Secretary of State. In the case of a violation of this provision, the officers and directors assenting to the activity shall be personally liable for all debts incurred before the certificate is issued and filed. Such certificate shall be conclusive of the facts stated in the certificate and it shall be unlawful for any such mutual or cooperative financial institution to begin transacting business until such a certificate has been granted. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  291, eff. July 1, 2022.) 
 13107. Failure to commence business
(a) As to any mutual or cooperative financial institution that fails to commence business as a financial institution within two years after receiving a certificate of general good under section 13102 of this title, its certificate of general good and its right to do business shall lapse. (b) Notwithstanding the time limitation in subsection (a) of this section, the Commissioner may extend the period in which business shall be commenced for a period not to exceed six months upon written application by the institution setting forth the reasons for the extension, filed before the expiration of the time period established by subsection (a) of this section. If an extension is granted by the Commissioner, the Commissioner shall notify the Secretary of State. (c) Upon the expiration of the time periods set forth in subsections (a) and (b) of this section, the contributors of initial capital deposits of such institution shall be entitled to the return of any amounts which they have paid to the institution and all expenses incurred in the organization shall be borne by the original organizers who were named in the application for permission to organize. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13201. Initial capital deposits; capital reserves
(a) The initial capital deposits required under section 13105 of this title for commencing business shall be paid into an account of the institution known as the capital reserve account. (b) The institution shall record on its books the amount which each capital depositor has contributed to such capital reserve and such amounts shall be evidenced by a certificate issued to the contributor thereof. (c) Dividends or interest may be paid upon the amounts standing to the credit of each owner of a proportionate interest in the capital reserve, in accordance with the terms of the deposit agreement, but in no event shall such dividends or interest be in excess of the maximum rate paid on shares or accounts of the institution for the same period. (d) The capital reserve established pursuant to this section shall be used as a guarantee against losses, contingencies, and impairments of capital, and all losses and expenses not otherwise absorbed shall be charged against it until such time as the conditions in section 13202 of this title are met; provided that the amount credited to each contributor shall be reduced only by the contributors proportionate share of such losses or expenses. (e) The capital reserve shall be subordinate to all other deposits or share accounts of the institution. (f) The capital contribution standing to the credit of each capital depositor in the capital reserve of the institution shall be transferable, together with any interest or dividends credited thereon, subject to the conditions and restrictions of this subchapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13202. Return of initial capital deposit
The initial capital deposits, together with any dividends or interest credited thereon, may be returned, pro rata, to the contributors, or their heirs, executors, administrators, or assigns, subject to the following conditions and limitations: (1) Prior to return of all or part of the initial capital reserve, the institution shall obtain the Commissioners approval for such return. (2) A return of all or part of the capital reserve may not reduce the institutions capital below the greater of the total initial capital contributions or the minimum amount prescribed by the Commissioner in accordance with section 14104 of this title. (3) Upon release and return, the contributors proportionate share of the amount to be returned shall be credited in his or her name to a share account or deposit in such institution, and the contributor shall then be entitled to all rights and privileges, and shall be subject to all duties and liabilities, connected with such share account or deposit. (4) In the event of the liquidation of an institution before such contributions have been repaid in full, any portion of such contributions not required for the repayment of the expenses and the payment of creditors and other depositors in full, pursuant to subchapter 3 of chapter 209 of this title, may be repaid pro rata to the capital depositors. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13203. Capital notes or debentures as capital reserve
Subject to prior approval of the Commissioner, a financial institution may issue capital notes or debentures, the proceeds from the sale of which may be used in lieu of capital deposits to establish part of the capital reserve required in section 13201 of this title, provided that: (1) such capital notes or debentures are issued pursuant to the organizations borrowing powers; (2) such notes or debentures are subject to conditions governing the repayment of principal and interest which are comparable to the requirements governing return of initial capital deposits as set forth in section 13202 of this title; and (3) repayment of the principal amount of such capital notes or debentures issued pursuant to this section shall have priority over the return of any capital deposits in the capital reserve. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13301. Corporators of mutual financial institutions
(a) Persons named in the organizational documents constitute the original board of corporators of a mutual financial institution. Membership on this board continues until terminated by death, resignation, or disqualification as provided in this section. (b) All corporators shall be residents of the geographic area that the financial institution serves or an area proximate to this geographic area. A person may not continue as a corporator after ceasing to be a resident of the financial institutions geographic area or an area proximate to this geographic area. (c) Any corporator failing to attend the annual meeting of the board of corporators for two successive years ceases to be a member of the board unless reelected by a vote of the remaining corporators. (d) The number of corporators may be fixed or altered by the internal governance documents of the financial institution, and vacancies may be filled by election at any annual meeting. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13302. Members of a cooperative financial institution; qualifications and voting rights
(a) The members of a cooperative financial institution organized pursuant to this chapter shall be those in whose names accounts are established and persons borrowing from or assuming or obligated upon a loan held by such institution or purchasing property and assuming the secured loan held by such institution. (b) A single membership in a cooperative financial institution may be held by two or more persons, and a joint and survivorship relationship and successor relationship, whether investors or borrowers, constitutes a single membership. (c) Each member 18 years of age or over is entitled to one vote at any meeting of the cooperative financial institution, regardless of the number of accounts standing in that members name, provided that only one vote is allowed on an account held by two or more persons. The internal governance documents may prohibit voting by persons who have become members within six months of the date when the vote is cast. When accounts or shares are pledged, the pledgor may vote the accounts or shares so pledged. (d) Profits and losses shall be distributed at least annually among the members. On each annual closing day after payment or provision for all expenses and appropriate transfers to reserves, the remainder of net earnings for the annual period shall be credited to an undivided profits account. At each annual period, the governing body shall declare a distribution of earnings. Dividends may also be declared monthly or quarterly. Interim dividends may be paid at the rate most recently declared by the governing body. Payments of net earnings to members may be referred to as dividends or interest. (e) Membership terminates when the amount of a members accounts has been paid in full to that member, or when the transfer of membership to other persons has been recorded on the books of the financial institution, or when that members status as a borrower from the institution terminates. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13303. Powers and duties of corporators and members
(a) Corporators or members shall hold regular annual meetings, at a time fixed in the internal governance documents of the institution, for the purpose of electing directors of the institution and for the transaction of any other business which may properly be brought before such meeting. (b) Special meetings of the corporators or members may be called at any time by an executive officer of the institution, or in any other manner provided for in the internal governance documents. (c) Notice of the annual meeting or any special meeting shall be given by public advertisement in a newspaper or newspapers of general circulation in the county or counties where each office of the institution is located, or in such other newspapers as the Commissioner may designate; provided that corporators shall also be sent notice by mail at their last known address. The notice shall be published on at least two different days and in such manner as to be reasonably conspicuous. The last publication of notice shall be at least seven days prior to such annual or special meeting. Notice of any special meeting shall state the purpose for which such meeting is called. (d) The internal governance documents shall prescribe the number of corporators or members that constitute a quorum at any annual or special meeting. The internal governance documents may also provide for voting by proxy. (e) Meetings of the corporators or members shall be held at the institutions principal office, or at such other place in the area of this State served by the institution as the notice shall designate. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13401. Directors: number, election, qualifications, and term
(a) The number of directors on the governing body of a mutual or cooperative financial institution may not be less than five, all of whom shall be residents of the financial institutions geographic area or an area proximate to that geographic area. (b) The initial governing body shall be elected at the first meeting of the corporators or the organizers as provided for in section 13103 of this title, and the governing body shall be elected by a vote of the corporators or members at each annual meeting thereafter; provided that the organizational documents or internal governance documents may provide for classification of directors in accordance with Title 11 or 11A, depending on the form of organization. (c) Vacancies on the governing body occurring during the year may be filled by the governing body until the next annual meeting of the corporators or members. A director so elected shall fill such position for the remainder of the term. Any vacancy which causes the number of directors to fall below the minimum required in subsection (a) of this section or in the institutions internal governance documents shall be filled promptly. (d) The compensation of directors, which may include provision for payment of medical, surgical, and hospital expenses due to accident or illness in the same manner as provided for officers and employees, may be fixed by the corporators or members at any legal meeting thereof, or, subject to the written approval of the Commissioner, such may be fixed by the governing body. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13402. Meetings of the governing body
(a) The governing body shall hold at least six meetings each year at a time fixed in the internal governance documents, which shall be held at least once each quarter. In any month in which the governing body does not meet, the executive committee permitted under subsection 13403(c) of this title shall meet and a record of the meeting of the executive committee shall be ratified at the next meeting of the governing body. (b) A quorum at any meeting shall consist of not less than a majority of the governing body, but less than a quorum shall have power to adjourn from time to time until the next duly called meeting. (c) At least once each month and at each regular meeting, the treasurer shall prepare a financial statement, showing the condition of the financial institution, which shall be recorded in a book kept for that purpose, and at all times shall be open to the inspection of the governing body and the Commissioner. A record shall be made at each meeting of the transactions of the governing body and the names of the directors present. (d) Full and complete records of all meetings of the governing body shall be kept and maintained. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13403. Powers and duties of the governing body
(a) The governing body may exercise any and all powers of an institution not expressly reserved to the corporators or members by this title or by the institutions organizational documents or internal governance documents. (b) The governing body shall see that all funds of the institution are invested only in accordance with section 14107 of this title. (c) The governing body may, in its discretion and so far as is consistent with its duties, appoint an executive committee from its members, such committee to conduct the business of the institution between meetings of the governing body; provided that all transactions of such executive committee shall be reported to the governing body at its next meeting and incorporated into the records of such meetings. (d) The governing body shall require security for the fidelity and faithful performance of duties by the officers, employees, and agents of the financial institution, in such amount as the governing body shall deem necessary or as the Commissioner may require. Such security shall consist of a bond executed by one or more surety companies authorized to transact business in this State. The Commissioner may increase such amount from time to time as circumstances may require. The expense of such bond shall be assumed by the institution. (e) The governing body shall also direct and require suitable insurance protection to the financial institution against burglary, robbery, theft, and other similar insurable hazards to which the financial institution may be exposed in the operation of its business on the premises or elsewhere. (f) The governing body shall be responsible for prescribing at least once in each year the amount or penal sum of those bonds or policies and the sureties or underwriters thereon, after giving due and careful consideration to all known elements and factors constituting the risk or hazards. That action shall be recorded in the minutes of the governing body. The Commissioner may require a financial institution to furnish an attested duplicate of the bonds and policies required by this section. (g) The Commissioner may require a Vermont financial institution to secure additional bonds or insurance. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 13501. Officers
(a) Election. Unless another manner for election is provided in the internal governance documents, the governing body shall elect annually from its members a chair, and from its members or otherwise, an executive officer, a secretary, a treasurer, and such other officers as it may consider advisable. The terms of officers so elected shall be for not more than one year, but such officers may be reelected and shall continue in office until their successors are elected and qualified. If any office becomes vacant during the year, the governing body may immediately fill the same for the period remaining until the next annual meeting for election of officers. (b) Compensation. The compensation of officers shall be fixed by the governing body.(c) Powers of Officers. Each officer shall have such powers as the internal governance documents may provide or as may be delegated by the governing body. In addition, an officer may exercise the powers set forth in this subsection. (1) The chair of the governing body shall preside at all meetings of the corporators or members and the governing body, unless otherwise provided in the internal governance documents. (2) An executive officer shall preside, in the absence of a chair of the governing body, at all meetings of the corporators or members and the governing body unless otherwise provided in the internal governance documents. (3) The secretary shall exercise the following powers.(A) The secretary shall record or cause to be recorded the proceedings and actions of all meetings of the corporators, members or governing body, and give or cause to be given all notices required by law or action of the governing body for which no other provision is made. If no person is elected to this office, the treasurer, or in his or her absence another officer of the institution designated by the directors, shall be ex officio secretary of the institution and of the directors. (B) Within 30 days after the annual meeting of the governing body for election of officers, the secretary shall file a copy of a list of officers and directors with the Commissioner, which list shall be kept on file in the Commissioners office for public inspection. (C) The secretary, in the absence of a provision in the internal governance documents to the contrary, shall perform the functions of secretary in accordance with Title 11 or 11A. (4) Conveyances, leases, assignments, releases, transfers of stock certificates and registered bonds, and all other written instruments authorized or required by law or vote of the directors, may be executed by an executive officer or other official authorized and empowered by the internal governance documents of the institution or by a vote of the governing body which is duly recorded in the minutes of the institution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. May 24, 2000.) 
 13601. Voluntary dissolution; procedure; criteria
(a) A mutual or cooperative financial institution shall submit to the Commissioner for approval a plan of dissolution prior to filing its articles of dissolution under Title 11A. The plan shall contain the following items: (1) pro forma financial statements that demonstrate that the financial institution will, upon dissolution, discharge, or make provision for discharging its liabilities; (2) a method to distribute all remaining assets among its depositors or members according to their interests; (3) the process of and resources dedicated to the oversight of the dissolution of the financial institution; (4) the plan to transfer to any other financial institution its deposit, loan, and trust accounts, including escheat of all remaining deposit accounts to the State of Vermont; (5) the procurement or continuation of insurance or the provision of other security as the Commissioner deems necessary; (6) an acknowledgment that, before the articles of dissolution are filed, there will be no distributions to depositors or members, without first providing for the obligations of the dissolving entity; and (7) such other information or assurances as the Commissioner may require.(b) Upon approval of the plan, the financial institution may file its articles of dissolution with the Secretary of State under Title 11A and proceed with the dissolution as provided by law. (c) During its wind-up, a dissolved entity shall not transact any further banking business after its deposit insurance has terminated. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14101. Applicability of chapter
The provisions of this chapter set forth the powers granted to all financial institutions organized pursuant to chapters 202 and 203 of this title and branches of any state or foreign financial institution authorized under section 15202 or 15203 of this title. The powers, privileges, duties, and restrictions conferred and imposed in the organizational documents or act of incorporation of any commercial bank, savings bank, savings and loan association, bank and trust company, or trust subsidiaries, organized under the prior laws of this State are abridged, enlarged, or modified so that each such charter or act of incorporation conforms to this title. Notwithstanding anything in a charter or act of incorporation of such an institution, every such institution possesses the powers, rights, and privileges and is subject to the duties, restrictions, and liabilities conferred and imposed by this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14102. General organizational powers
(a) A Vermont financial institution shall have all of the powers enumerated in Title 11 or 11A, depending on the organizational form of the institution. (b) Unless otherwise prohibited or limited by part 1, 2, or 5 of this title, a Vermont financial institution has and may exercise all powers necessary or convenient to effect the purposes for which the financial institution is organized or to further the businesses in which the financial institution is or may be lawfully engaged. Such powers shall include: (1) establishing, acquiring, investing, or participating in or utilizing a service corporation;(2) engaging, directly or indirectly through an operating subsidiary, in closely related activities as defined in subdivision 11101(14) of this title; and (3) investing or participating in an entity that engages in closely related activities but is not an operating subsidiary, with the Commissioners approval; provided, however, the Commissioner may require that closely related activities be conducted through a subsidiary whenever the Commissioner determines that a limitation on the Vermont financial institutions direct financial risk is prudent. A Vermont financial institution shall keep such records as may be required by the Commissioner relative to the activities permitted by this subsection. Service corporations and operating subsidiaries shall be subject to regulation and supervision under this title. (c) A Vermont financial institution may engage in electronic banking.(d) Any Vermont financial institution may amend its organizational documents to provide for the separation of its corporate franchises into separate departments according to the nature of its business. In that event, it shall equitably apportion its assets between those departments in such manner as the Commissioner shall approve and thereafter shall maintain a segregation of the assets and obligations of those departments. Depositors shall be notified of the segregation and of the department to which their deposits are assigned. In case of liquidation or the imposition of restrictions upon the payment of deposits, at any time more than six months after such notice, the depositors of each of the departments shall be entitled to receive payment of deposits out of the assets of the department to which their deposits have been assigned in priority to all depositors in the other department, and to creditors who become such after the segregation, except as those obligations to creditors are properly allocated to a department at the time the obligations are created. The assets of the trust department shall be devoted first to meeting the obligations of the financial institution to the beneficiaries of its trusts according to their respective rights. (e) A Vermont financial institution shall have the power to join the Federal Reserve System or any cooperative league or other entity organized for the purpose of protecting and promoting the welfare of financial institutions and their depositors, and to comply with all conditions of membership. A Vermont financial institution that is a member of the Federal Reserve Bank is by this subsection vested with all powers conferred upon member banks of the federal reserve system by the terms of the Federal Reserve Act as fully and completely as if those powers were specifically enumerated and described in this subsection, and all those powers shall be exercised subject to all restrictions and limitations imposed by the Federal Reserve Act or by regulations of the Federal Reserve Board made pursuant to the Act. A member financial institution under this subsection shall continue to be subject to the supervision and examinations required by the laws of this State, except that the Federal Reserve Board and the Federal Deposit Insurance Corporation shall have the right, if deemed necessary, to make examinations. The authorities of this State having supervision over the financial institution may disclose to the Federal Reserve Board or to the Federal Deposit Insurance Corporation or to their duly appointed examiners, all information in reference to the affairs of any financial institution that has become or desires to become a member. (f) Subject to the approval of the Commissioner, a Vermont financial institution may contract with another financial institution or financial institutions for branch or agency services or to provide those services to the customers of that financial institution or financial institutions. Notwithstanding the foregoing sentence, any Vermont financial institution subsidiary of a bank holding company may receive deposits, renew time deposits, close loans, service loans, and receive payments on loans and other obligations as an agent for an affiliate depository institution or contract to receive such services without such approval. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  292, eff. July 1, 2022.) 
 14103. Advertising; doing business or using name unlawfully
No person shall advertise or put forth any sign as a bank, banking association, or trust company, or in any way solicit or receive deposits or transact business as a bank, banking association, financial institution or trust company, or use the words bank, banking association, or trust company or other similar sounding word or name unless it is a financial institution reporting to and under the supervision of the Commissioner or is authorized to conduct such business in this state under federal law, or unless the Commissioner approves the activity or word or name used in writing after giving due consideration for whether the activity, word, or name will confuse or mislead the public as to the nature of the business of the entity. However, this section shall not prevent an individual, as such, from acting in a trust capacity. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14104. Capital or surplus requirements
(a) Every Vermont financial institution shall establish and maintain adequate levels of capital or surplus pursuant to standards established by the Commissioner. (b) Any issuance considered as capital under subsection (a) of this section shall be submitted to the Commissioner for review and approval at least 10 days prior to issuance and include such documentation as the Commissioner deems necessary. (c) Notwithstanding the provisions of subsections (a) and (b) of this section, the Commissioner may permit the formation of a Vermont financial institution without capital or surplus to be merged with or into or consolidated with an existing financial institution for the purpose of facilitating a reorganization or acquisition transaction, including a triangular merger transaction, involving such existing financial institution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14105. Participation in public agencies
A financial institution has the power to participate in a public agency created under the laws of this State or of the United States, the purpose of which is to afford advantages or safeguards to financial institutions, depositors, or investors and to comply with all requirements and conditions imposed upon such participants except to the extent limited by rule or order of the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14106. Expanded powers of Vermont financial institutions
In addition to all other powers permitted under these statutes, any Vermont financial institution shall have the powers conferred under federal law administered by the Federal Reserve Board, the Office of the Comptroller of the Currency, the FDIC, the Consumer Financial Protection Bureau, or other federal banking regulator upon national financial institutions or their subsidiaries. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 139 (Adj. Sess.),  5, eff. May 27, 2022.) 
 14107. Investments
(a) A Vermont financial institution may invest its assets prudently in accordance with the best judgment of its governing body in a manner consistent with this section. (b) A Vermont financial institution may not acquire more than five percent of the equity interest of any Vermont financial institution or of a Vermont bank holding company without the prior approval of the Commissioner. (c) Notwithstanding any other provision of law to the contrary, a financial institution may invest its funds, operate a business, manage or deal in property, or take any other action over whatever period of time may reasonably be necessary to avoid loss on an investment or loan previously made or an obligation created in good faith. (d) A Vermont financial institutions governing body shall establish a written investment policy, which it shall review and ratify at least annually, that addresses, at a minimum, the following: (1) investment quality parameters;(2) investment mix and diversification;(3) investment maturities; and(4) delegation of authority to officers and committees responsible for administering the portfolio. (e) A Vermont financial institution shall not acquire a lien on its equity interests as collateral for any extension of credit or other obligation nor acquire title to such collateral except to prevent loss upon a loan or investment previously made or an obligation created in good faith. If a Vermont financial institution acquires such a lien upon its equity interest or acquires title to such equity interest under the exception in this subsection, it shall not permit the lien to continue for more than two years, nor shall it hold title to the equity interest for more than one year, without the consent of the Commissioner. (f) Except as otherwise provided in subsection (e) of this section, and subject to subchapter 4 of chapter 202 and subchapter 2 of chapter 203 of this title, a Vermont financial institution may repurchase or redeem its own equity interests. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14108. Prohibited mergers and acquisitions
(a) No depository institution may by merger, consolidation, or other form of acquisition come to hold in excess of 30 percent of the total time and demand deposits held in Vermont by depository institutions. For the purposes of this section, the total deposits of a depository institution shall consist of all time and demand deposits held in Vermont by such depository institution and all of its affiliates. (b) Notwithstanding subsection (a) of this section, the Commissioner may waive the deposit concentration limit set forth in subsection (a) of this section if the Commissioner determines that any financial institution to be merged, consolidated, or acquired is not adequately capitalized, or is subject to a conservation, receivership, or dissolution order under this title or applicable federal law, and the waiver is otherwise in the best interests of depositors. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  293, eff. July 1, 2022.) 
 14109. Prohibited management interlocks
A director or officer of a Vermont financial institution shall not at the same time be a director or officer of another financial institution engaged in the business of banking in the State of Vermont or a state contiguous to Vermont. The terms of this section shall not apply to: (1) a financial institution which is in liquidation, receivership, conservatorship or similar proceedings; (2) the Federal Reserve Bank of Boston;(3) a financial institution affiliated by reason of common ownership or control of at least 25 percent of the voting interests of such affiliated financial institutions; or (4) any other relationship otherwise permitted under interagency guidelines or regulations of federal supervisory authorities adopted from time to time, relating to management interlocks. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14110. Duties of executive officers, directors, and persons who control principal equity interests in financial institutions; officers may not receive fees
(a) All executive officers, directors, and holders of principal equity interest of a Vermont or state financial institution subject to the laws of this State under this title, shall comply with the standards for member banks established by Regulation O of the Federal Reserve Board, 12 C.F.R., Part 215, as amended. (b) An officer, director, or employee of a Vermont or state financial institution shall not corruptly solicit or demand for the benefit of any person, or corruptly accept or agree to accept (i) any fee, present, benefit, or commission, directly or indirectly, from a borrower or applicant for a loan or from anyone negotiating securities at the financial institution of which he or she is an officer, director, or employee; (ii) any fee, present, benefit, or commission, directly or indirectly, for signing with another as accommodation maker, surety or endorser, or for a loan made or securities bought or sold by the financial institution, except for the benefit or profit he or she may derive in common with other depositors or stockbrokers, and the compensation allowed by the financial institution, for services and expenses. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14201. Deposit powers
(a) Applicability. This subchapter governs deposits or accounts in financial institutions.(b) General deposit powers. (1) A financial institution may receive money on deposit and may establish the terms and conditions of each deposit contract. A financial institution may receive demand deposits subject to withdrawal or to payment upon the depositors check, order, or other authorization. (2) At the time of opening a deposit account, a financial institution shall provide the depositor a statement containing the existing terms and conditions of the deposit contract. The statement may be set forth on the depositors signature card. Depositors and any other owners of interests in a deposit account shall be bound by changes made by the financial institution in their deposit contracts. Financial institutions shall provide advance notice of changes in accordance with 12 U.S.C.  4301 et seq. (3) A financial institution, in its sole discretion, may refuse deposits and at any time may return all or part of a deposit. (4) For any period during which funds are on deposit, a financial institution may pay interest. (c) Insurance of deposits or accounts. Except as permitted by subchapter 6 of chapter 202 of this title, a Vermont financial institution that accepts deposits or a branch of a state financial institution authorized to do business in this State shall not accept deposits in this State unless the financial institution is insured by the Federal Deposit Insurance Corporation. (d) Cash reserve on deposits and accounts. A financial institution shall maintain reserves on deposits or accounts as required from time to time by the Federal Reserve Act, as amended, and any regulations promulgated under it. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14202. Payment of deposits to administrators from another state or country
(a) When a deposit is made in a financial institution by a person residing in another state or country, the deposit, or any part thereof, with the interest thereon, may be paid to the administrator or executor appointed in the state or country where the depositor resided at the time of death, provided an administrator or executor has not been appointed in this State at the time of such payment. (b) An action shall not be maintained against a financial institution for the recovery of a deposit or any part thereof, with the dividend or interest thereon, made by a person residing in another state or country who has died, payment of which has been made to the executor or administrator appointed in the state or country where the depositor resided at the time of death, before the appointment of an executor or administrator in this State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14203. Trust deposits; payment on death of trustee
When a deposit is made in a financial institution by one or more persons in trust for another, the name and residence of the person for whom the deposit is made shall be disclosed, and the deposit shall be credited to the depositor or depositors as trustee for such person. When other notice of the existence and terms of a legal trust is not given in writing to the financial institution, at the death of the trustee, or if there is more than one trustee, at the death of the surviving trustee, the deposit or any part thereof, with the interest thereon, may be paid to the person for whom the deposit was made or to his or her estate. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14204. Joint deposits
(a) Payment. When a deposit has been made in a financial institution in the names of two or more persons, payable to any one of them, or payable to the survivors or any one of the survivors, such deposit or any part thereof, or any interest or dividend thereon may be paid to any one of such persons, whether the others are living or not, and the receipt or acquittance of the person so paid shall be a valid and sufficient release and discharge of the financial institution for any payment so made. (b) Evidence of joint deposit. The recital of the words payable to either or to the survivor or words of like effect in the order creating such account and signed by the person or persons who furnish the funds for such deposit shall be conclusive evidence, as between the payees and their legal representatives, of the creation of an absolute joint account. However, nothing in this section shall prevent the proof of fraud, undue influence, or incapacity to defeat such joint interests. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  294, eff. July 1, 2022.) 
 14205. Payable on death accounts
(a) A payable-on-death account is created by a deposit in a financial institution in the name of an account holder or several joint account holders with a designation that the account is payable on death to one or more payees, known as P.O.D. payees. On the death of the sole account holder or the last surviving joint account holder, any remaining balance in a payable-on-death account, including interests or dividends, shall vest solely in the surviving P.O.D. payee or equally and severally in the then surviving P.O.D. payees. Ninety days later, unless prevented as provided in subsection (c) of this section, the financial institution may pay the remaining balance to the new owner or owners or their legal representatives without further liability for the amount or amounts paid. If no P.O.D. payee is surviving 90 days after the last surviving account holder dies, the balance of the account shall be payable to the personal representative of that account holder. (b) Recital of the words payable-on-death, the abbreviation P.O.D., or words of like effect in the order creating the account, signed by the person or persons furnishing the funds for the deposit, shall be conclusive evidence, as between the legal representatives of account holders and the payable-on-death payees or their legal representatives, of the creation of an absolute payable-on-death account, except as provided in subsection (c) of this section. However, nothing in this section shall prevent proof of fraud, undue influence, or incapacity to defeat a payable-on-death interest. (c) If other assets of the probate estate of the last surviving account holder are insufficient to pay debts and expenses, including statutory allowances and assignments to the surviving spouse, a payable-on-death account shall not transfer to P.O.D. payees sums needed for that purpose. A P.O.D. payee who receives payment from a payable-on-death account after the death of the last surviving account holder shall be liable to the account holders personal representative for the amount of payment to the extent necessary to discharge debts and expenses remaining unpaid after application of the decedents estate. No proceeding shall be commenced later than two years after the death of the decedent. Sums recovered by the personal representative shall be administered as part of the decedents estate. This section shall not affect the right of a financial institution to make payment from a payable-on-death account to a P.O.D. payee 90 days after the death of the last surviving account holder or make a financial institution liable to the personal representative of the estate of a deceased account holder unless before making payment the financial institution is served with process in a proceeding brought by the personal representative or with an order from the Probate Division of the Superior Court prohibiting payment. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2009, No. 154 (Adj. Sess.),  238a, eff. Feb. 1, 2011.) 
 14206. Deposits of minors; exemption from trustee process
(a) Payment. The governing body of a financial institution, in its discretion, may accept deposits from a minor and may pay to a minor such sum as is deposited to the credit of such person, and is due, as if such minor were of age. The check and receipt or acquittance of such minor shall be a full discharge for the amount for which it is given. (b) Minors deposits exempt from trustee process. A financial institution shall not be chargeable as trustee on account of funds deposited to the credit of a minor, provided such funds are earned by or belong to such minor. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14207. Provisions when title to deposit is litigated
(a) Multiple claims. In actions against a financial institution by one spouse to recover for moneys deposited by the other spouse in the latters own name, the depositing spouse may be a witness. In actions against such financial institution to recover for money on deposit, if there is a person, whether married or not, claiming the same fund, who is not a party to the action, the court, on the petition of such financial institution and on such notice as it considers proper to the plaintiff and such claimant, may order the proceedings to be amended by making such claimant a party defendant. The court shall thereupon hear and determine the rights and interests of the parties to such action in and to such fund. (b) Litigated deposits; payment into court; costs. The deposits that are the subject of such action may remain with such financial institution upon the same interest as other deposits of like amount, until final judgment in the action, and the same shall be paid by such financial institution in accordance with the order of the court, or the deposits may be paid into court to await the final determination of the action. When so paid into court, the financial institution shall no longer be a party to such action, and its liability for such deposit shall cease. The costs in such action shall be in the discretion of the court and may be charged upon the fund affected by the action. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  295, eff. July 1, 2022.) 
 14208. Security for deposits
No Vermont or state financial institution may pledge, hypothecate, or deliver any of its assets of any description whatsoever as security for a deposit of private funds, or for the purpose of indemnifying any person, as surety for the financial institution, or as surety for any other person. However, a Vermont financial institution or state financial institution may so secure a deposit to the credit of the United States, of the State of Vermont, or of any political subdivisions of the State, either directly or indirectly. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14209. Examination of accounts
Each Vermont financial institution shall annually cause a sampling of its loans and deposit accounts to be verified by the account holder. The verification shall be under the direction of an outside auditor or the internal auditor of the Vermont financial institution. The auditor shall report the results directly to the governing body. The verification methodology and results shall be available to the commissioner upon request. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14210. Real estate trust and escrow
(a) In accordance with its schedule for similar remittances, any financial institution in which a pooled real estate trust or escrow account has been established under 26 V.S.A.  2214(c) shall remit the interest accumulated on the account to the Vermont Housing Finance Agency established under 10 V.S.A. chapter 25 to be used in the agencys single family home mortgage programs. (b) A financial institution may deduct a reasonable remittance fee for transferring funds to the Housing Finance Agency under this section. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14211. Claims not clearly consistent
If any claim not clearly consistent with the terms of any applicable authority on file with a financial institution is made to any deposit, safe deposit box, property held in safekeeping, security, obligation, or other property in the financial institutions possession or control, in whole or in part, by any person, including any depositor, individual, or group of individuals, whether or not authorized to draw on or exercise any right or control with respect to the property, the financial institution is not required to recognize the claim without one of the following: (1) a court order, issued by a court of competent jurisdiction and served on the financial institution, enjoining or restraining the financial institution from taking any action with respect to the property or instructing the financial institution to pay the balance of the account, provide access to the safe deposit box, or deliver the property as provided in the order; or (2) a bond in the form and amount and with sureties satisfactory to the financial institution, indemnifying the financial institution against any liabilities, loss, and expenses it might incur because of its recognition of the claim or because of its refusal, due to the claim, to honor or recognize any right with respect to the property. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14212. Joint fiduciary accounts
(a) Statement of purpose. The purpose of this section is to create a new form of joint financial account for which the account owner designates a fiduciary with authority to use monies in the account for the benefit and under the direction of the account owner, and to enable the account owner as well as law enforcement to enforce the terms of the declaration of intent. (b) A joint fiduciary account is created by a deposit in a financial institution in the name of an owner naming a fiduciary or several fiduciaries when the owner has received a disclosure statement and executed a declaration of intent as provided in this section. An owner may be one or more joint owners of the account. Only the owner may designate a fiduciary at the time an account is opened, or may substitute or remove a fiduciary. A fiduciary shall act only in accordance with the declaration of intent and shall have authority to take all actions permitted by the terms and conditions of the account that are consistent with the declaration of intent. (c) The declaration of intent shall include: date of execution; name and signature of owner; name and signature of fiduciary; any limitations on the power of the fiduciary to distribute or expend the funds; whether the fiduciary is to be paid and, if so, how much and on what basis; name and signature of two or more witnesses, neither of whom shall, at the time of execution, be the fiduciary and who attest to the sound mind and lack of duress on the owner; acknowledgment of receipt by the fiduciary of a copy of the declaration; and notice to the fiduciary that a withdrawal or expenditure of the funds in the joint fiduciary account which is not in accordance with the declaration of intent may result in criminal or civil liability. The financial institution that is to hold the joint fiduciary account shall provide its name and address and the number of the account. (d) A disclosure statement must accompany a declaration of intent. The disclosure statement and declaration of intent shall be in not less than 10- point type and in substantially the following form: (1) Disclosure Statement: INFORMATION CONCERNING JOINT FIDUCIARY ACCOUNTSA joint fiduciary account allows you to give direction on how you would like your money to be spent, at the same time as it allows you to give another person (or persons) authority to withdraw money or write checks on your account. If you open a joint fiduciary account, you are considered the owner of the account. The person or persons you authorize to access the account are called a fiduciary. The fiduciary shall handle your money in a way that is beneficial to you and to act according to your instructions. You, as the owner, always have the right to withdraw money from or to write checks on the account. One way to understand the advantages of a joint fiduciary account is to compare it to alternative forms of accounts. A regular joint account is an account in two or more names. Both people have the same authority to take and use the money. Thus, even if the money really belongs to one of the account holders, and the intent was that it would be used for that person, nothing can be done to stop the other account holder from taking and using all the money for other purposes. A sole account with multiple authorized signatures provides a little more protection than a regular joint account. At least it is clear with this account that the money really belongs to the person whose name is on the account, and does not belong to those who are only authorized to sign. (There are often tax reasons for a person to have a sole account with multiple authorized signatures rather than a joint account.) Nevertheless, nothing can be done to stop a person who is authorized to sign on the account from taking and using all the money for some purpose other than for the person whose money it is. A joint fiduciary account provides more protection for the owner than either of the other accounts because the owner makes a clear statement about how the money can be used, and the fiduciary has to follow those instructions or be subject to civil or criminal liability, or both. The fiduciary is also legally required to keep track of how the money is spent so the owner or another authorized person can verify that the money was used according to the instructions. How do you want your money to be spent?If you open a joint fiduciary account, you decide how you want your money to be spent. This statement should be broad enough to include everything you need and want, but not so broad as to go too far beyond that. Thus, you might want to instruct the fiduciary to spend your money on all my basic living expenses and, if any money is left over, on gifts to my children and grandchildren, but not to exceed five percent of deposits per year. What is included in the instructions to the fiduciary is completely up to you. If you want to pay your fiduciary for the services provided, or if you want your fiduciary to be able to make gifts to himself or herself or others, you must explicitly indicate that in your declaration of intent. Do you want special instructions on accountings?If you give no special instructions on accountings, the fiduciary must just keep track of how the money is spent and provide that information to you, your legal representative, a state agency or a court, but only if asked to do so. You might want to instruct your fiduciary to give a periodic accounting to you or to someone else. Thus, your instructions could include: Give a copy of an accounting of your use of this account to me and to my attorney [or my daughter] every January. If you want more than one fiduciary, what do you want their relationship to be?For some account owners, it is useful to name more than one fiduciary. For example, you might want your daughter to be the primary fiduciary, but your nephew to be the fiduciary when she goes to Florida every winter. You can name more than one fiduciary, but it is useful for you to give them instructions on when you want each to act. Those instructions dictate how they should act. However, the financial institution holding the account is under no obligation to make sure the fiduciaries act in accordance with your instructions; it will still accept either signature as valid for taking money out of the account. Are you trying to make sure your fiduciary takes certain actions, or just trying to give your fiduciary authority to act? Sometimes an account owner wants to use the account to make sure the fiduciary takes certain actions, such as paying the utility bills or paying the mortgage. The joint fiduciary account cannot guarantee for you that the fiduciary will act as you hope. The account simply authorizes the fiduciary to act, but does not oblige the fiduciary to act. The same is true for a regular joint account, as well as a sole account with multiple authorized signatures. For any of these accounts, if you want to make sure certain bills are paid, you and your creditor may agree to have the creditor automatically debit your account on a specific day of the month for the amount of your bill. Have you already given or do you want to give someone authority to make decisions for you beyond using the money in an account? Creating a joint fiduciary account will only give the fiduciary authority to act on your behalf with regard to the monies held in the account. It can be combined with a power of attorney or a durable power of attorney (one that lasts even if you are no longer able to make decisions for yourself). You can name the same person to be your fiduciary on a joint fiduciary account and your agent under a power of attorney, or you can name different people for each. In either event, it is useful to think through who should be named in each document and the relationship between them if you are going to name different people. If you have an attorney preparing a power of attorney, consider consulting with the attorney when opening a joint fiduciary account. THE JOINT FIDUCIARY ACCOUNT WILL NOT BE VALID UNLESS A DECLARATION OF INTENT IS SIGNED BY YOU IN THE PRESENCE OF TWO OR MORE WITNESSES WHO ARE NOT A NAMED FIDUCIARY, AND IS ALSO SIGNED BY THE FIDUCIARY. (2) Declaration of Intent:Following are my instructions to the fiduciary for how monies that are deposited into this joint fiduciary account shall be used:  Dated at _______ , this ___ day of ____ , 20__ . Dated at _______ , this ___ day of ____ , 20__ .WITNESSESI declare that the owner(s) appear(s) to be of sound mind and free from duress at the time of signing this Declaration of Intent for a joint fiduciary account, and that the owner(s) affirmed that he and/or she is (are) aware of the nature of the document and is (are) signing it freely and voluntarily. I further declare that I am not a person named as a fiduciary. I declare that I am willing to act as the fiduciary on the Joint Fiduciary Account of __________ (owner(s)). I have read the Declaration of Intent and agree to use the money in the account only for the purposes stated in the Declaration. I further agree to maintain accurate records of my use of any monies in the account and to produce them upon request by the owner, by a legal representative of the owner, by a state agency, or by a court. I understand that my authority to act ceases when an owner changes the fiduciary, closes the account, or the last owner has died. I further acknowledge that I may be sued civilly if I intentionally or negligently fail to abide by the terms of the Declaration of Intent, or may be charged criminally if I intentionally fail to abide by its terms, or both. I acknowledge that I have received a copy of the Declaration of Intent. (3) The Commissioner shall have the authority to adopt rules amending the disclosure statement and declaration of intent to reflect changes necessitated by a change in law or to make minor changes to the forms in this subsection. (e) The fiduciary shall maintain accurate records to permit an accounting of the acts of the fiduciary, and shall provide such records and accounting if requested to do so by the owner, by a legal representative of the owner, by the Attorney General, a States Attorney, or the Department of Disabilities, Aging, and Independent Living if any has reason to believe the fiduciary is in violation of this section, or by a court of competent jurisdiction. (f) All rights, title, interest, and claim to a joint fiduciary account, and any additions or accumulations to the account, shall be the property of the owner of the account. An owner shall have authority to take all actions permitted by the terms and conditions of the account. The designation of a fiduciary shall not affect the title to funds in the account, and the owner shall not be considered to have made a gift to the fiduciary of all or any portion of the funds in the joint fiduciary account, or to any additions or accumulations to the account. The fiduciary shall have no right of survivorship in the account unless such right is specifically provided for in the account title. (g) The financial institution holding a joint fiduciary account shall retain a signed copy of the declaration of intent according to the financial institutions records retention policy. Notwithstanding any provision of law to the contrary, no financial institution shall be responsible for monitoring transactions to or from any joint fiduciary account. A financial institution shall not be liable for withdrawals and payments made by the fiduciary unless an owner has notified the financial institution, in accordance with the terms and conditions of the account, to change the fiduciary, or has closed the account, or the financial institution has been notified that the last owner is deceased. (h) Any owner who sustains damages or injury as a result of a fiduciarys action or inaction in violation of this section or the declaration of intent may sue the fiduciary for appropriate equitable relief, and may sue and recover from the fiduciary the amount of his or her damages, reasonable attorneys fees, and exemplary damages not exceeding three times the owners damages. Nothing in this section shall be construed to abrogate any other causes of action or relief at law or equity to which the owner is entitled under other laws or at common law. (i) Whenever the Attorney General or a States Attorney has reason to believe that a fiduciary has used or is about to use the proceeds in a joint fiduciary account in violation of the declaration of intent, the Attorney General or a States Attorney may bring an action in the name of the State against such person to restrain by temporary or permanent injunction the use of funds from the account. The action may be brought in the Superior Court of the county in which the joint fiduciary account is located, where the owner resides, or where the fiduciary resides, has a place of business, or is doing business. In addition to the foregoing, the Attorney General or a States Attorney may request, and the Court is authorized to render, any other temporary or permanent relief, or both, as may be in the public interest, including, closing the account, replacing the fiduciary, ordering restitution of cash to the account, imposing of a civil penalty of not more than $10,000.00 for each violation, and ordering reimbursement to the State of Vermont for the reasonable value of its services and expenses in investigating and prosecuting the action. In addition to the foregoing, the Attorney General or a States Attorney may seek relief under 33 V.S.A. chapter 69, subchapter 2 or may charge the fiduciary pursuant to 13 V.SA.  2028. (Added 2001, No. 115 (Adj. Sess.),  1; amended 2005, No. 174 (Adj. Sess.),  13; 2021, No. 105 (Adj. Sess.),  296, eff. July 1, 2022.) 
 14301. Loan authority
(a) General loan authority. Unless otherwise prohibited by State law, a Vermont financial institution may make, sell, purchase, arrange, participate in, invest in, or otherwise deal in loans, derivative transactions, or extensions of credit for any lawful purpose. (b) Written loan policy. (1) A financial institutions governing body shall establish a written loan, credit, and derivative transaction policy, as applicable to the activities of the financial institution, which shall be reviewed and ratified at least annually, that addresses at a minimum, the following: (A) Loan portfolio mix and diversification standards, and, if applicable, derivative transaction portfolio mix and diversification standards; (B) Prudent underwriting standards, including loan-to-value limits that are clear and measurable; (C) Loan administration procedures, including delegation and individual lending officer authority; and (D) Documentation and approval requirements to monitor compliance with lending policies.(2) The policies adopted pursuant to this section shall be consistent with safe and sound banking practices and appropriate to the size of the institution and nature and scope of its operations. (c) Interest on loans. Financial institutions may demand and receive interest and charges on their loans in accordance with 9 V.S.A. chapter 4 or as otherwise provided by law. (d) Limitations. A Vermont financial institution may not make loans, derivative transactions, or extensions of credit outstanding at one time to a borrower in excess of 20 percent of its capital. Total loans, derivative transactions, or other extensions of credit in excess of 10 percent of capital shall be approved by a majority of the governing body or the executive committee of that institution or organization. (1) Loans, derivative transactions, or extensions of credit to one person will be attributed to another person and each person shall be deemed a borrower as follows: (A) In the case of obligations of one person, the proceeds will be deemed to be used for the direct benefit of another person and will be attributed to the other person when the proceeds, or assets purchased with the proceeds, are transferred to another person, other than a bona fide arms length transaction where the proceeds are used to acquire property, goods, or services. (B) In the case of obligations of a partnership or association, the obligations of each general partner and of each member of the association. (C) In the case of obligations of a general partner or a member of an association, the obligations of the partnership or association. (D) In the case of obligations of a corporation, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest. (E) In the case of obligations of a limited liability company, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest. (F) In the case of obligations of a corporation or limited liability company, the amount of a loan made to any other person to the extent that the proceeds of the loan directly or indirectly are to be: (i) loaned to the corporation or limited liability company;(ii) used for the acquisition from the corporation or limited liability company of any equity interest in the corporation or company; and (iii) transferred to the corporation or limited liability company without fair and adequate consideration; provided, however, that the discharge of an equivalent amount of debt previously incurred in good faith for value shall be deemed fair and adequate consideration. (2) The following shall not be counted as indebtedness subject to the limitation of this subsection: (A) Indebtedness evidenced by bills of exchange or drafts drawn against existing values and secured by a lien upon goods in transit with shippers order, bills of lading, or comparable instruments attached. (B) Indebtedness evidenced by notes or other paper secured by readily marketable corporate stock having a fair market value of not less than 125 percent of the indebtedness. (C) Indebtedness evidenced by notes or other paper secured by an assignment of accounts receivable or of amounts due to become due on open account or on a contract to the extent of not less than 125 percent of the indebtedness. (D) Indebtedness evidenced by notes or other paper secured by liens upon agricultural products, manufactured goods, or other chattels in storage in warehouses or elevators with warehouse or elevator receipts attached, or goods released on trust receipts, when the value of the security is not less than 125 percent of the indebtedness and the financial institutions interest is insured against loss by insurance policies or certificates of insurance attached. (E) Indebtedness arising out of the daily transaction of the business of any clearing house association. (F) Indebtedness secured to the extent thereof by the cash surrender value of life insurance evidenced by policies of insurance validity issued and assigned. (G) Indebtedness secured to the extent thereof by savings deposits or certificates of deposit of solvent financial institutions up to the amount insured by the Federal Deposit Insurance Corporation, and duly assigned. (H) Any portion of any indebtedness that the U.S. government, or an agency or instrumentality of the United States unconditionally agreed to purchase or has unconditionally guaranteed as to payment of both principal and interest, including loans insured or guaranteed under the National Housing Act or the Servicemens Readjustment Act of 1944, as amended. (I) Additional funds advanced for the benefit of a borrower by a financial institution for payment of taxes, insurance, utilities, security, and maintenance and operating expenses necessary to preserve the value of real property securing the loan. (J) Amounts paid against uncollected funds in the normal process of collection.(K) That portion of a loan or extension of credit sold as a participation by a financial institution on a nonrecourse basis, provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2011, No. 78 (Adj. Sess.),  26, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.),  297, eff. July 1, 2022.) 
 14302. Real estate loans
(a) Clear title. All loans secured by mortgages on real estate shall be supported by written evidence satisfactory to the financial institution that title to the security is marketable and the lien is valid and enforceable. A mortgage on lands subject to lease under which rents are reserved to the owner, with all of the owners rights and options under the lease collaterally assigned to the financial institution as security or a mortgage upon lands impressed with a public use, sometimes known as lease, society, or glebe lands, but held under a durable lease, shall not be deemed to be subordinate to such lease or public use. (b) Appraised value. The appraisal of real estate securing a federally related transaction entered into by a financial institution shall comply with the regulations of the Federal Deposit Insurance Corporation, as amended and codified at 12 C.F.R. Part 323. The appraisal of real estate securing a nonfederally related transaction entered into by a financial institution shall comply with the federal supervisory agencies interagency guidelines, as amended. (c) Servicing of loans. A financial institution may contract with another financial institution, corporation, or association whose transactions are in whole or in part the handling and servicing of mortgage loans, to handle and service loans in its behalf. Whenever such a contract is made, the financial institution shall not lose or suffer any impairment of any right of deduction or offset it might have against any one liable for the mortgage debt. (d) Home loan escrow accounts. Any financial institution which requires a home loan escrow account to be established and maintained by a borrower shall follow the provisions of section 10404 of this title. (e) Loans insured or guaranteed by federal law. Any mortgage on real estate given to secure a loan insured or guaranteed by the federal housing commissioner, the administrator of Veterans Affairs or the administrator of the Small Business Administration, under the National Housing Act, the Servicemens Readjustment Act of 1944 or the Small Business Act, respectively, as amended, shall not be subject to the provisions of any law of this State prescribing the nature, amount, or form of security, or manner of repayment, or requiring security upon which loans or advances of credit may be made, or prescribing or limiting the period or principal amount of which loans may be made, or prescribing or limiting the interest which may be charged or other charges which may be made or taken upon any loan or advance of credit. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14303. Bank credit cards
(a) General authority. Any financial institution which is authorized to do a lending business in this State may issue bank credit cards. (b) No discrimination. No financial institution shall discriminate against any applicant for a bank credit card on the bases set forth in section 10403 of this title. Nothing in this section shall be taken to prohibit the establishment of separate credit card accounts for persons who are married. (c) Statements of account. Issuers of bank credit cards shall promptly furnish a statement of each cardholders account as of the end of each monthly period, which need not be a calendar month, in which there is any unpaid balance on the account, which statement shall include the following information, not necessarily in the order stated: (1) the unpaid balance of the account at the beginning of the period;(2) the amount of cash advances, if any, during the period;(3) unless furnished by the seller or tax department to the cardholder by sales slip, memorandum, or otherwise, information in the statement of account sufficient to allow the cardholder reasonably to identify the transaction or delinquent taxes paid as permitted by 32 V.S.A.  3109(c) during the period, the cash price and the date of each purchase or tax payment; (4) the payments and other credits applied to the cardholders account during the period;(5) the balance at the billing date for cash advances, property, and services subject to finance charge; (6) the amount and rate of the finance charge imposed;(7) the balance at the billing date for property, labor, or services purchased or delinquent taxes paid during the billing period, if any, and the date by which it may be paid to avoid any finance charge. (d) Finance charges; annual fees; ATM fee. (1) As to that part of an account balance that shall result from cash advances, if any, the finance charge shall be applied to the average daily balance of the cash advances in the account for the billing period. An issuer of a bank credit card account may provide for an annual fee. Except for cash advances, no finance charge shall be imposed on items in the account for property, labor, and services purchased during the billing period to the extent that they are paid for not later than 25 days from the financial institutions billing date for the item. No change in the terms of a bank credit card agreement which might require such credit cardholder to pay an annual fee shall take effect unless: (A) at least 60 days prior to the effective date of the change, a written notice has been mailed or delivered to the cardholder that clearly and conspicuously describes the annual fee, and contains a return stamped response addressed to the issuer with instructions to the cardholder to return the response to the issuer within 30 days, signed by the cardholder and indicating a preference, expressed in the response, for either of the following options: I accept the change as notified.I do not accept, and hereby cancel my card.The notice shall further state that the incurrence by the cardholder or another authorized person of any further indebtedness under the plan to which the agreement relates on or after the effective date of such change specified in the notice shall constitute acceptance of such annual fee; and (B) either the credit cardholder agrees in writing to such annual fee or the credit cardholder or another authorized person incurs such further indebtedness on or after the effective date of the change stated in such notice. (2) A credit transaction effected by the use of an automated teller machine (ATM) may be subject to a transaction fee in addition to any finance charges permitted by this section. (e) Payments. (1) 9 V.S.A.  45 and 47 shall apply with respect to prepayment and application of payments to cardholder accounts. With respect to transactions in Vermont charged to a bank credit card account established by a Vermont financial institution, the defenses preserved by 9 V.S.A.  2455, shall be available to the cardholder as against the financial institution in any action or proceeding to enforce collection of said account by a financial institution. (2) In the case of a bank credit card account, except for a loan or extension of credit secured by a lien against real estate, the periodic billing shall be no less than 1/48th of the balance as of the last advance. (f) Quarterly Reports. Any financial institution which is authorized to do business in this State, may issue bank credit cards only if it reports quarterly to the Commissioner pursuant to subsection 10401(b) of this title on its rates and charges on its bank credit card products. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  298, eff. July 1, 2022.) 
 14304. Card holder represented by legal counsel
(a) A credit card company or its creditor or collection agency shall not contact a card holder regarding a debt, late fee, or other charge once informed that the card holder is disputing the debt, late fee, or other charge; is represented by legal counsel in the dispute; and the card holder has provided the credit card company or its creditor or collection agency with the name, address, and telephone number of the legal counsel. (b) A credit card company or its creditor or collection agency that violates subsection (a) of this section shall be fined not more than $10,000.00. (c) Each violation of subsection (a) of this section shall be considered a separate offense. (Added 2009, No. 55,  11.)
 14401. Types of trust functions
(a) With the prior approval of its governing board, a financial institution may act alone or with others as: (1) fiduciary;(2) custodian of property;(3) agent or attorney in fact;(4) registrar or transfer agent of securities;(5) trustees under corporate mortgages, trust deeds or similar indentures; or(6) fiscal agent of the United States, a political subdivision thereof, a body politic, a corporation, or an individual. (b) With that approval, a financial institution may also be appointed and act as executor or coexecutor of a will, codicil, or writing testamentary, as administrator or co-administrator with the will annexed, as administrator or co-administrator of a person deceased, as receiver, assignee, trustee, alone or with others, or as guardian or co-guardian of a person subject to guardianship, and with that approval may relinquish the fiduciary office, under the same circumstances, in the same manner and subject to the same control by a court having jurisdiction, as a natural person legally qualified. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14402. National financial institutions; state financial institutions
(a) To the same extent that the laws of the United States permit, a national financial institution located and doing business in this State may act, alone or with others, as specified in section 14401 this title. (b) Subject to the provisions of 11A V.S.A. chapter 15 and 11 V.S.A. chapter 21, subchapter 10, except that 11A V.S.A.  15.06 and 11 V.S.A.  3136 shall not apply to any financial institution, including a state trust company, a financial institution with trust powers with its principal place of business not in Vermont may act, alone or with others, as specified in section 14401 of this title, and may establish one or more places of business in this State for the conduct of such trust business, provided that: (1) it is a direct or indirect subsidiary of a bank holding company that has a direct or indirect financial institution subsidiary that has an office in this State at which deposits are accepted; or (2) the law of the state in which it is located or domiciled would allow either a Vermont financial institution or a national financial institution, with its principal place of business located in Vermont to establish one or more places of business in such state for the conduct of trust activities if authorized by its supervisory agency to exercise trust powers. (c) As a condition precedent to its right to act in the capacities specified in this section, it shall file a stipulation with the Commissioner of Taxes, in which it shall agree that any funds, securities, or property held by it under any appointment under this subchapter, shall be taxed in the same manner and to the same extent as funds of the same character held by a Vermont financial institution. (d) A state financial institution with trust powers, including a state trust company, shall obtain the Commissioners written approval before establishing a place of business in this State pursuant to subsection 11701(b) of this title. Before issuing such approval, the Commissioner must find that it is adequately staffed, equipped, and able to furnish trust services in this State. The Commissioner may examine its activities in this State at any time deemed necessary to ensure its continued safety and soundness, ability to furnish trust services, and compliance with the laws of this State. It shall make its books and records pertaining to its business in this State available to the Commissioner for such examination. Each state financial institution shall pay fees and assessments as prescribed by sections 18, 19, and 11501 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14403. Approval of Commissioner
No financial institution not otherwise expressly authorized by its respective supervisory agency under state or federal law may exercise the powers provided in this subchapter until it has applied for and obtained approval of the Commissioner to do so under subsection 11701(b) of this title. The Commissioner shall conduct inquiry into the affairs of the financial institution applying for those powers to determine if the financial institution is staffed, equipped, and able to furnish those services. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2005, No. 36,  5, eff. June 1, 2005.) 
 14404. Security
The capital of a financial institution exercising trust powers shall be held as security for the faithful discharge of the duties undertaken thereby as well as for the claims of other creditors. The financial institution shall furnish to the authority making the appointment a good and sufficient bond for a sum not less than 25 percent of the amount of the trust fund, conditioned for the faithful discharge of the duties undertaken by virtue of section 14401 of this title. However, when the bond would not exceed $2,000.00, a financial institution shall be relieved of furnishing it. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14405. Powers and duties of officers
In proceedings in the Probate Division of the Superior Court or elsewhere, connected with authority exercised as executor, administrator, receiver, assignee, trustee, or guardian, all accounts, returns, and other papers may be signed and sworn to in behalf of such a financial institution exercising trust powers by any officer thereof duly authorized by it. The answers and examinations of that officer, under oath, shall be received as the answers and examinations of the financial institution. The Court may order and compel any and all officers of the financial institution to answer and attend the examinations, in the same manner as if they, personally, were parties to the proceeding or inquiry. Such a financial institution shall not be required to receive or hold any property or money or to execute any trust contrary to its own desire. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2009, No. 154 (Adj. Sess.),  238a, eff. Feb. 1, 2011.) 
 14406. Segregation of trust funds; exception
All monies, property, or securities received or held by a financial institution in the capacity of executor, administrator, receiver, assignee, trustee, or guardian shall be kept separate and distinct from its general business and shall not be mingled with the investments of its assets or be liable for its debts or obligations. However, a financial institution exercising trust powers, in good faith, may deposit temporarily in its commercial or savings departments any money so held in trust awaiting distribution or investment and may also deposit in its savings department as an investment for any one trust an amount insurable and insured by the Federal Deposit Insurance Corporation. All such deposits in either department shall be in the name of the trust or in the name of the financial institution as trustee of the trust. If the security afforded by virtue of this section and section 14404 of this title is insufficient to satisfy in full any claim growing out of the holding or management of monies, property, and securities so received and held, the unsatisfied balance shall then be satisfied as are demands of the general creditors of the financial institution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14407. Collective investment funds
(a) A Vermont financial institution may invest assets that it holds as a fiduciary in the following collective investment funds: (1) a fund maintained by the financial institution, or by one or more affiliated financial institutions, exclusively for the collective investment and reinvestment of money contributed to the fund by the financial institution, or by one or more affiliated financial institutions, in its capacity as trustee, executor, administrator, guardian, or custodian under the Uniform Gift to Minors Act; (2) a fund consisting solely of assets of retirement, pension, profit sharing, stock bonus, or other trusts that are exempt from federal income taxation under the Internal Revenue Code; and (3) a fund consisting of any other assets held as a fiduciary, to the extent not prohibited by applicable law. (b) In addition to any other rules that the Commissioner finds necessary or desirable for the administration of this section, the Commissioner may adopt rules on the following: (1) the requirements for a written plan for the establishment, maintenance, and operation of collective investment funds; (2) the method and frequency of valuation of such funds assets;(3) the admission and withdrawal of accounts;(4) standards on self-dealing and conflicts of interest;(5) permissible management fees;(6) the requirements for audits and financial reports of collective investment funds; and (7) the requirements for the establishment, maintenance, and operation of other investments permitted by subdivision (a)(3) of this section, including the treatment of exemptions from the provisions of this section. (c) A Vermont financial institution administering a collective investment fund shall have exclusive management thereof, except as a prudent person might delegate responsibilities to others. (d) Each participating account in a collective investment fund shall have a proportionate interest in all the funds assets. (e) A Vermont financial institution administering a collective investment fund may charge reasonable expenses incurred in operating the fund, but not expenses associated with establishing or reorganizing a collective investment fund. (f) A Vermont financial institution may not advertise any collective investment fund except in connection with the advertisement of the general fiduciary services of the institution. (g) A Vermont financial institution shall not issue any certificate representing an interest in a collective investment fund, except to provide a withdrawing account with an interest in a segregated investment. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2015, No. 23,  87.) 
 14408. Registration and sale of securities
A Vermont or state financial institution owning or holding stocks or other securities in any fiduciary capacity may cause the same to be registered in the name of a nominee. The word nominee shall be construed to include one or more natural persons, a partnership, a corporation, or similar entity. Any such securities jointly held in a fiduciary capacity by a financial institution and another, individual or corporate, may be registered in the name of a nominee mutually satisfactory to the co-fiduciaries. Any fiduciary acting jointly with a financial institution may authorize and direct the financial institution in writing to register securities provided in this section. An individual or corporate fiduciary may deliver any such securities to a financial institution as custodian and may authorize and direct the financial institution in writing to register such securities in the name of a nominee. A financial institution having caused securities to be registered in the name of a nominee as provided in this section and wishing or being required by the terms of its fiduciary agreement to deliver them to one legally entitled thereto shall first cause them to be transferred into the name of the one to receive delivery. Sales of any such securities made by a financial institution under its fiduciary authority may be completed by delivery of the security, endorsed by the nominee without the necessity of transfer through a joint fiduciary, the trust-creator, or the beneficiary. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  299, eff. July 1, 2022.) 
 14409. Disposition of securities upon court order; liability for acts of nominee
Any fiduciary financial institution may dispose of any security under an order or decree of any court of competent jurisdiction by delivery of the security endorsed by the nominee as provided in section 14408 of this title in the case of sales. Any fiduciary financial institution shall be absolutely liable for any loss occasioned by the acts of the nominee or the financial institution with respect to any securities registered in the nominees name. Both legal and equitable ownership of all securities in the financial nominees possession or subject to the financial nominees control shall be fully revealed by the financial institutions records. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14410. Fiduciary investments
(a) In the absence of an express prohibition in the instrument, judgment, decree, power, order, or other writing creating a trust or other fiduciary relationship, a financial institution acting as fiduciary may invest and reinvest funds held by it in a fiduciary capacity in the securities of an open-end or closed-end investment company or investment trust registered under 15 U.S.C.  80a-1 to 80a-64 (Investment Company Act of 1940), as that act exists now or as amended in the future. (b) The investments authorized in subsection (a) of this section may be made even if the financial institution, or an affiliate thereof, is providing services to the investment company and is receiving reasonable compensation for such services as an advisor, manager, sponsor, administrator, broker, distributor, custodian, shareholder servicing agent, transfer agent, registrar, or any related services. At least annually, the financial institution shall disclose in a clear and conspicuous manner to the principal of each fiduciary account the fees it has charged or received from the investment company, or an affiliate thereof, for such services and the basis upon which compensation is calculated, expressed either in a specific amount or as a percentage of asset value. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 14501. Failure to pay rent; removal of contents
(a) If the amount due for the use of any safe or box in the vaults of a financial institution is not paid for one year, or such other period as may be fixed in the contract of renting of such safe or box, the financial institution, at the expiration thereof, may cause to be sent to the person in whose name the safe or box stands on its books, a notice in writing that if the amount then due for the use of the safe or box is not paid within 60 days from the date of the notice, the financial institution will then cause the safe or box to be opened in the presence of an officer duly authorized by the governing body and of a notary public not an officer or in the employ of the financial institution, and the contents thereof, if any, will be sealed up by the notary in a package upon which the notary will distinctly mark the name and address of the person in whose name such safe or box stands upon the books of the financial institution and the estimated value thereof. The package so sealed and addressed, when marked for identification by the notary, will be placed by the notary in one of the general safes or boxes of such financial institution. The notice shall be sent in a postage prepaid registered letter directed to that person at his or her post office address as recorded upon the books of the financial institution, and at his or her last known address. (b) The proceedings of the notary shall be fully set forth in the notarys own handwriting and official seal in a book to be kept by the financial institution for that purpose. After such contents have been so placed in general safes or boxes, the financial institution shall be required to use only the degree of care required of a bailee for the sole benefit of the bailor notwithstanding the contract of renting requires a higher degree of care during the period of renting. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 15101. Establishment of Vermont branches
A Vermont financial institution shall not establish or maintain any branch in this State for the general transaction of its business without the approval of the Commissioner. The Commissioner shall approve the application for a branch under this section if the Commissioner finds that, based on an application filed under subsection 11701(b) of this title, the application meets the general good of the State as determined under section 11703 of this title. A Vermont financial institution may establish and maintain offices or facilities that do not constitute a branch, without the approval of the Commissioner; provided, however, that establishment of a remote service unit by a Vermont financial institution shall be subject to payment of the fee provided in subdivision 19(a)(6) of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 15201. Establishment of branches outside Vermont
(a) A Vermont financial institution may establish a branch in any state other than this State by merger, consolidation, acquisition, or as otherwise permitted by and in accordance with the laws of such host state and applicable federal financial institution laws. (b) A merger or consolidation pursuant to this section shall be in accordance with and subject to the provisions of chapter 207 of this title. (c) Not later than the date on which the required application is filed with the responsible federal supervisory agency, the applicant in the establishment of a branch under this section shall file an application on a form prescribed by the Commissioner. If the Commissioner finds that the proposed transaction will not be detrimental to the safety or soundness of the applicant and the applicant has obtained and provided the Commissioner with copies of all other required approvals, the Commissioner shall approve the application and the operation of the branch outside this State. (d) A branch of a Vermont financial institution which is located in another state may conduct any activity that is permissible for a branch in that state of a financial institution incorporated under the laws of such state. In order to engage in trust activities in an out-of-state branch, a Vermont financial institution shall have previously obtained the Commissioners approval to engage in trust activities under section 14403 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 15202. Establishment of branches in Vermont by financial institutions
(a) A state financial institution, foreign bank, or national bank may establish a branch in this State pursuant to this section and in accordance with applicable state and federal financial institution laws. (b) The establishment of a branch in this State under this section shall be accomplished by: (1) a merger, or consolidation with, or the purchase of all or substantially all of the assets of, a financial institution or acquisition of a branch located in this State; or (2) establishment of a branch; provided, however, that the law of the home state of any state financial institution or national financial institution proposing to establish one or more de novo branches in this State must expressly authorize, under conditions no more restrictive than those imposed by the laws of this State as determined by the Commissioner, the financial institution whose home state is this State to engage in interstate branch establishment of de novo branches in that state. A financial institution that is not a Vermont financial institution and is establishing a branch in this State shall file a copy of the branch application, with any amendments to the application, with the Commissioner at the time the application is filed with any supervisory agency. (c) A merger or consolidation pursuant to this section involving a Vermont financial institution shall be in accordance with and subject to the provisions of chapter 207 of this title, except that the application requirement shall be treated as a notice requirement and the Commissioner may file an objection with the applicable supervisory agency with jurisdiction over the transaction if the transaction fails to comply with law. Approval of the Commissioner under chapter 207 of this title shall not be required. (d) Any merger, consolidation, or acquisition pursuant to this section shall be subject to the provisions of section 14108 of this title. (e) A state financial institution that establishes a branch in this State shall comply with the provisions of 11A V.S.A. chapter 15, 11 V.S.A. chapter 21, subchapter 10, except that 11A V.S.A.  15.06 and 11 V.S.A.  3136 shall not apply to any financial institution. Notwithstanding section 14103 of this title, a branch in this State of a state financial institution may engage in the activities permitted of a financial institution organized under the laws of this State, and may use the words bank, banking association, or trust company when engaged in such activities. The organizational name of such financial institution shall not be deceptively similar to any name in use by a person authorized to do business in this State. (f) A branch of a state financial institution located in this State shall comply with the laws of this State, including laws regarding community reinvestment, consumer protection, fair lending, and the establishment of intrastate branches, to the same extent as such laws apply to a branch in this State of a Vermont financial institution. A branch in this State of a state financial institution may conduct any activity that is permissible for a branch in this State of a Vermont financial institution, but may not conduct any activity that is not permissible for a branch in this State of a Vermont financial institution. If Vermont law requires a Vermont financial institution or any branch of such financial institution to obtain the Commissioners approval to engage in an activity, then a branch of a state financial institution shall obtain the Commissioners approval in the same manner as a Vermont financial institution. (g) A branch of a national financial institution located in this State shall comply with the laws of this State, including laws regarding community reinvestment, consumer protection, fair lending, and establishment of intrastate branches, to the same extent as such laws apply to a national financial institution whose principal place of business is in this State. (h) A national or state financial institution that maintains a branch in this State pursuant to this section may establish and operate one or more remote service units in this State, without the approval of the Commissioner. Any remote service unit established pursuant to this subsection shall be subject to the provisions of section 10302 of this title. Nothing in this section shall be deemed to authorize any other person or entity to establish or operate any remote service unit in this State that accepts deposits or that transfers funds between accounts. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  300, eff. July 1, 2022.) 
 15203. Foreign branches
(a) A foreign bank not licensed by federal authorities to establish a federal branch in this State may transact business in this State only at a branch which is licensed by the Commissioner. The Commissioner may, upon receipt of an application of the foreign bank to establish a branch, issue a license to a foreign bank to conduct such business in compliance with the laws of this State if the Commissioner finds that: (1) the foreign bank and its management are of good character and sound financial standing;(2) the management of the foreign bank and proposed management of the branch are adequate;(3) the convenience and needs of the persons to be served by the proposed branch will be promoted; and (4) the foreign bank satisfies such other standards as the Commissioner may establish.(b) The application required under this section shall be on a form approved by the Commissioner and shall contain a copy of all applicable federal approvals. Except as otherwise provided in this section, subsections 15202(b) and (d) of this title, the license, application, and operations of a branch licensed under this section shall be subject to the requirements imposed on the establishment and operation of branches of financial institutions organized under the laws of this State. Except as otherwise provided in federal law, this title or by rule or order of the Commissioner, the operations of a foreign bank at a branch in this State shall be conducted with the same rights, privileges, and powers as a financial institution incorporated under the laws of this State at the same location and shall be subject to all the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply under the laws of the state to a financial institution incorporated under the laws of this State. The Commissioner may impose conditions or restrictions on the operations of a branch of a foreign bank in this State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 15204. Other activities
(a) Subject to subsection (b) of this section, a financial institution having its principal office in a jurisdiction other than Vermont may maintain or conduct the following offices or activities in this State: (1) a temporary agency;(2) an office used solely for internal operations of the institution to which the public is not admitted for the conduct of financial institution business; (3) an automated teller machine owned by other than a Vermont financial institution; provided, however, that it does not accept deposits or transfer funds between accounts; (4) loan production;(5) foreign exchange services; or(6) any other financial institution related office or activity which the Commissioner determines may be maintained or conducted in this State. (b) A financial institution shall obtain the Commissioners written approval prior to maintaining any office or conducting any activity described in subsection (a) of this section. The Commissioner may condition approval on the existing availability of the activity in the State. (c) Nothing in this section shall be deemed to permit a financial institution to solicit or accept deposits, pay checks, or loan money within this State, unless it is otherwise authorized to engage in such activity in this State. (d) Notwithstanding section 14103 of this title, a financial institution authorized to engage in the activities permitted under this section may use the words bank, banking association, national association, financial institution, or trust company when engaged in the activities permitted under this section. A financial institution that is authorized to engage in loan production in this State, but not authorized to approve loans in this State, shall disclose in any printed material and advertising that it is engaged in loan production. The organizational name of such financial institution shall not be deceptively similar to any name in use by an authorized financial institution doing business in this State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2001, No. 73 (Adj. Sess.),  5, eff. Feb. 2, 2002.) 
 15205. Out-of-state activities by Vermont financial institutions
(a) Subject to subsection (b) of this section, a Vermont financial institution may maintain or conduct the following offices or activities in another state: (1) a temporary agency;(2) an office used solely for internal operations of the institution to which the public is not admitted for the conduct of financial institution business; (3) an automated teller machine owned by a Vermont financial institution; provided, however, that it does not accept deposits or transfer funds between accounts; (4) loan production;(5) foreign exchange services;(6) trust activities; or(7) any other financial institution-related activity that the host state determines may be maintained or conducted in such state. (b) The Vermont financial institution shall provide the Commissioner with written evidence that the host state approved, did not object to, or otherwise allows the Vermont financial institution to maintain the office or conduct in the host state the activity described in subsection (a) of this section. In order to engage in trust activities in the host state, a Vermont financial institution shall have previously obtained the Commissioners approval to engage in trust activities under section 14403 of this title. (c) Nothing in this section shall be deemed to permit a Vermont financial institution to solicit or accept deposits, pay checks, or lend money within the host state, unless it is otherwise authorized to engage in such activity in the host state. (Added 2005, No. 36,  6, eff. June 1, 2005.) 
 15301. Branch sales, closings, and change of control
(a) Sales. A Vermont financial institution that proposes to sell one or more of its branches shall file an application for a certificate of approval on a form prescribed by the Commissioner. Notwithstanding subsection 11701(b) and section 11703 of this title, the Commissioner shall approve the application upon finding that the proposed sale will not be detrimental to the safety and soundness of the applicant. (b) Closings. Any state financial institution which intends to close a branch located in this State shall provide the Commissioner with the same notice required to be provided to the appropriate federal financial institution supervisory agency pursuant to 12 U.S.C.  1831r-1. (c) Notice of subsequent change of control. Each state financial institution that has established and maintains a branch in this State pursuant to this chapter shall give at least 30 days prior written notice or, in the case of an emergency transaction, such shorter notice as is consistent with applicable state or federal law, to the Commissioner of any merger, consolidation or other transaction that would cause a change of control with respect to such state financial institution or any bank holding company that controls such financial institution, with the result that an application would be required to be filed pursuant to the federal Change in Financial Institution Control Act of 1978, as amended, 12 U.S.C.  1817(j), or the federal Bank Holding Company Act of 1956, as amended, 12 U.S.C.  1841 et seq., or the Home Owners Loan Act, 12 U.S.C.  1467a, or any successor statutes. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  301, eff. July 1, 2022.) 
 16101. Conversions
(a) General. The provisions of this chapter shall apply whenever a national financial institution seeks to convert to a Vermont financial institution or whenever a Vermont financial institution seeks to convert or amend its charter in order to change its chartering authority, the nature or scope of its organizational authority, or to a different form of ownership; provided, however, that conversion from a Vermont financial institution into a national financial institution shall be as permitted in federal law, shall not require the Commissioners approval, and federal law shall be controlling to the extent the laws of this State are inconsistent. (b) Types of conversions. The types of conversions permitted under this chapter are as follows:(1) conversion from a national financial institution to a Vermont financial institution;(2) conversion from a Vermont financial institution to a national financial institution;(3) conversion of a special purpose financial institution into a universal financial institution or into another form of special purpose financial institution; (4) conversion of a universal financial institution into a special purpose financial institution;(5) conversion of a mutual financial institution or a cooperative financial institution into an investor-owned financial institution or into a credit union under chapters 220-226 of this title; (6) conversion of a credit union under chapters 220-226 of this title into a mutual financial institution or a cooperative financial institution; or (7) conversion of an investor-owned financial institution into a mutual financial institution.(c) Manner of conversion. Any Vermont financial institution may convert under this chapter in the following manner: (1) the governing body of the financial institution shall approve the plan of conversion by at least a majority vote, unless a higher percentage is required by the institutions organizational documents; (2) the approved plan of conversion, together with a certified copy of the authorizing resolution adopted by the governing body of the financial institution, shall be submitted to the Commissioner for approval pursuant to the requirements and procedures of subchapter 7 of chapter 201 of this title, except as provided in subsection (a) of this section; (3) the plan of conversion, as approved by the Commissioner, shall be submitted to the investors or mutual voters of the institution, as the case may be, for their approval at an annual meeting or at a special meeting called for that purpose as provided in subsections (e), (f), and (g) of this section; and (4) the approved plan shall be finalized as provided in subsection (h) of this section.(d) Contents of plan of conversion. The plan of conversion shall include:(1) the name of the institution and its location;(2) the type of the institution that the resulting institution is to be;(3) a method and schedule for terminating any nonconforming activities that would result from such conversion; (4) a statement of the competitive impact resulting from such conversion, including the loss of particular financial services in the market area resulting from such conversion; (5) a statement that the conversion is subject to approval of the Commissioner, except for conversions from a Vermont financial institution to a national financial institution; (6) a statement that the conversion is subject to approval of the institutions investors or mutual voters, as the case may be; (7) in the case of a conversion involving a mutual or cooperative financial institution, the plan shall ensure that the interests of depositors and account holders in the net worth of the institution are treated equitably; and (8) such additional information as the Commissioner may require.(e) Notice to investors or mutual voters. Notice of the meeting shall be published at least once a week for three successive weeks in at least one newspaper of general circulation in the county where the institutions principal office is located or in other newspapers as the Commissioner may designate. The notice shall be mailed to each investor of record or mutual voter at the address on the books of the institution at least 30 days prior to the date of the meeting. (f) Voting requirements. A majority of each class of equity interest, or a majority of the mutual voters of the institution casting votes, unless a higher percentage is required by the institutions organizational documents, is necessary to approve the plan of conversion at the meeting. An affirmative vote constitutes approval of the adoption of any amendments to the organizational documents of the institution that are necessary to effectuate the transaction. (g) Rights of dissenting investors. For investor-owned institutions that are converting under this chapter, the rights of investors dissenting to the conversion are those specified in Title 11 or 11A, depending upon the organizational form of the institution; provided, however, the rights of dissenting investors in a national financial institution shall be governed by federal law. To the extent that dissenters rights are not addressed in Title 11 or 11A or the rights contained in those titles are less beneficial to the dissenting investors than those rights listed in the institutions organizational documents, the organizational documents shall govern. (h) Finalizing the plan of conversion. Except as provided in subsection (i) of this section, the financial institution shall effect its conversion as follows: (1) Upon approval by the investors or mutual voters of the institution, as the case may be, the institution shall submit the executed conversion plan to the Commissioner, together with all necessary amendments to the institutions organizational documents, each certified by an officer of the institution. (2) The Commissioner shall issue to the resulting institution a certificate specifying the name of the converting institution and the name and organizational structure of the resulting institution. The resulting institution shall file one copy of the certificate issued by the Commissioner with the Secretary of State for recording. The certificate shall be conclusive evidence of the conversion and the correctness of all proceedings relating to the conversion in all courts and places. The certificate may be filed in any land records office to evidence the new name in which property of the converting institution is to be held. (3) Unless a later date is specified in the conversion plan, the conversion becomes effective upon filing of the certificate as provided in subdivision (2) of this subsection and the former charter of the converting institution shall terminate automatically. The Commissioner may file or order any financial institution to file conforming documents with the Secretary of State. (i) Completion of conversion into national financial institution. Upon completion of a conversion into a national financial institution, the national financial institution shall certify in writing to the Commissioner and the Secretary of State that the conversion has been completed under applicable federal law. The charter of the converting financial institution shall terminate automatically upon issuance of the national financial institution charter. (j) If the Commissioner disapproves the conversion plan, the Commissioner shall state the reasons for the disapproval in writing and furnish them to the institution. The institution shall be given a reasonable opportunity to amend the plan to eliminate the reasons for disapproval. (k) Authority for expedited conversion. Notwithstanding any other section of law or any organizational document of the financial institution, the Commissioner may order that a charter conversion become effective immediately when the Commissioner finds it is necessary for the protection of depositors, investors, or the public. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2005, No. 16,  3, eff. July 1, 2005.) 
 17101. General provisions on mergers, share exchanges, consolidations, and acquisitions
(a) The provisions of this chapter and Titles 11 and 11A govern mergers, consolidations, acquisition of assets, or assumption of liabilities undertaken by financial institutions subject to the laws of this State. References in this chapter to mergers shall be deemed to include share exchanges, as applicable in the circumstances. (b) Commissioners approval. Following approval by a majority vote of the governing body of each participating institution, unless a higher percentage is required by either institutions organizational documents, the plan of merger, consolidation, acquisition, or assumption, together with certified copies of the authorizing resolutions adopted by the governing body of each participating institution, shall be forwarded to the Commissioner for approval pursuant to subchapter 7 of chapter 201 of this title; provided, however, the approval of the Commissioner shall not be required for any transaction in which the resulting institution will be a national financial institution. If the Commissioner disapproves the plan, the Commissioner shall state the reasons for the disapproval in writing and furnish them to the participating institutions. The institutions shall be given an opportunity to amend the plan to eliminate the reasons for disapproval. (c) Vote of investors or mutual voters. The plan of merger or consolidation, as approved by the Commissioner, shall be submitted to the investors or mutual voters of the participating institutions for their approval at an annual meeting or at a special meeting called for that purpose in the following manner: (1) Unless a greater percentage is required by the organizational documents of either financial institution, the plan of merger, consolidation, acquisition, or assumption must be approved by the investors or mutual voters by each voting group entitled to vote separately on the plan by a majority of all votes entitled to be cast on the plan by that voting group at the meeting called for this purpose. The vote constitutes the adoption of the organizational documents of the resulting institution, including amendments, contained in the merger, or consolidation agreement. (2) The rights of investors dissenting to the merger or consolidation are those specified in Title 11 or 11A, depending upon the organizational form of the institution. To the extent that dissenters rights are not addressed in Title 11 or 11A or these rights are less beneficial to the dissenting investors than those rights listed in the institutions organizational documents, the organizational documents govern. (3) The rights of dissenting investors in a national financial institution shall be governed by federal law. (d) Executed plan; certificate; effective date. The following provisions apply to the executed plan, certificate, and effective date.(1) Upon approval by the investors or mutual voters of the participating institutions, an executive officer and the secretary of each institution shall submit the executed plan of merger or consolidation to the Commissioner, together with the certified record of the vote of the investors or mutual voters approving it, each certified by these officers. (2) Upon receipt of the items in subdivision (1) of this subsection and evidence that the participating institutions have complied with all applicable federal law and regulations, the Commissioner shall issue to the resulting institution a certificate specifying the name of each participating institution and the name of the resulting institution. The resulting institution shall file a copy of the certificate with the Secretary of State for record. This certificate is conclusive evidence of the merger or consolidation and of the correctness of all proceedings relating to the merger or consolidation in all courts and places. The certificate may be filed in any land records office to evidence the new name in which property of the participating institutions is to be held. (3) Unless a later date is specified in the certificate, the merger or consolidation is effective upon filing of the certificate as provided in subdivision (2) of this subsection and the authority of all but the resulting institution shall terminate automatically upon filing. The Commissioner may file or order any financial institution to file conforming documents with the Secretary of State. (4) Any plan of merger or consolidation may contain a provision that, notwithstanding approval of the investors, mutual voters or the Commissioner, the plan may be abandoned at any time prior to the effective date of the merger or consolidation by the governing body of any participating institution either at the absolute discretion of the governing body or upon the occurrence of any stated condition. (e) Chapter 208 of this title applies to mergers, consolidations, and acquisitions made pursuant to this chapter. (f) Authority of expedited mergers and consolidations. Notwithstanding any other provision of law, or any organizational document of any participating institution, following approval of the plan of merger or consolidation by a majority vote of the governing body of each participating institution and receipt by the Commissioner of certified copies of the authorizing resolutions adopted by the governing body of each participating institution, the Commissioner may order that the merger of the consolidation become effective immediately if the Commissioner believes that the action is necessary for the protection of depositors or the public. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 17201. Mergers and consolidations; investor-owned institutions
(a) General. Any two or more investor-owned institutions may merge, or consolidate into one investor-owned Vermont financial institution in accordance with the procedures, and subject to the conditions and limitations, set forth in this subchapter. (b) Adoption of plan. The governing body of each participating institution shall adopt, by a majority vote or higher if required by its organizational documents, a plan of merger, or consolidation on such terms as mutually agreed upon. The plan shall include: (1) The names of the participating institutions and their locations.(2) With respect to the resulting institution: the name and location of its principal office, branch offices, and facilities; the name, address, and occupation of each director who is to serve until the next annual meeting of the investors; the name and address of each officer. (3) The amount of capital, the number and the par value of each class of equity interest, and provisions governing the manner and basis of converting the equity interests of the participating institutions into equity interests or other securities of the resulting institution and, if any equity interests of any of the participating institutions are not to be converted solely into equity interests or other securities of the resulting institution, provisions governing the amount of cash, property, rights, or securities of any other institution or corporation that is to be paid or delivered to the holders of the equity interests in exchange for or upon surrender of the equity interests. The cash, property, rights, or securities of any other institution or corporation may be in addition to or in lieu of the equity interests or securities of the resulting institution. (4) The amendments required to be made to the resulting institutions organizational documents.(5) A statement that the agreement is subject to approval of the Commissioner and of the investors of each participating institution. (6) Provisions, if applicable, governing the manner of disposing of equity interests of the resulting institution not taken by dissenting investors of the participating institutions. (7) The anticipated effective date of such merger or consolidation.(8) Such other provisions and details as may be necessary to perfect the merger or consolidation or as may be required by the Commissioner. (c) Commissioners approval. The Commissioner shall approve the plan of merger or consolidation in accordance with subsection 17101(b) of this title. (d) Vote of investors. The plan of merger or consolidation, as approved by the Commissioner, shall be submitted to the investors of the participating institutions for their approval at an annual meeting, or at a special meeting called for that purpose, in accordance with subsection 17101(c) of this title. Notice of the proposed transaction and of dissenters rights, if any, shall be given in accordance with applicable provisions of the charter and bylaws of the participating institutions and applicable provisions of Title 11 or 11A. (e) Executed plan; certificate; effective date. The executed plan certificate and effective date shall be in accordance with subsection 17101(d) of this title. (f) National financial institution as participant. If one of the parties to a merger or consolidation with a Vermont financial institution is an investor-owned national financial institution, the participants shall comply with all requirements imposed by federal law for such merger, share exchange, or consolidation in addition to the requirements contained in this title and shall provide evidence of such compliance to the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 17202. Merger of investor-owned institution with national financial institution
(a) Nothing contained in the law of this State restricts the right of a financial institution organized under chapter 202 of this title to merge or consolidate into a resulting national financial institution. The corporate action to be taken by the investor-owned institution and its rights and liabilities and those of its investors are the same as those prescribed in section 17201 of this title, except that approval of the Commissioner is not required. (b) Upon the effective date of the merger or consolidation, the authority of the participating investor-owned Vermont financial institution shall terminate automatically. The resulting national financial institution shall notify the Secretary of State of the termination. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 17301. Mergers and consolidations; mutual or cooperative financial institutions
(a) General. Two or more mutual or cooperative financial institutions may merge or consolidate into one financial institution organized under chapter 203 of this title in accordance with the procedures and subject to the conditions and limitations set forth in this subchapter. (b) Adoption of plan. The governing body of each participating institution shall adopt, by a majority vote or higher if required by its organizational documents, a plan of merger or consolidation on such terms as are mutually agreed upon. The plan shall include: (1) the names of the participating institutions and their locations;(2) with respect to the resulting institution: the name and location of its principal office, branch offices, and facilities; the name, address, and occupation of each director who is to serve until the next annual meeting of the mutual voters; the name and address of each officer; (3) the amount of capital and the manner of converting deposits, accounts, or shares of such institution into deposits, accounts, or shares of the resulting institution; (4) the amendments required to be made to the resulting institutions organizational documents;(5) a statement that the agreement is subject to approval of the Commissioner and of the eligible account holders of each participating institution; (6) the mode for carrying the plan into effect;(7) the anticipated effective date of such merger or consolidation; and(8) such other provisions and details as may be necessary to perfect the merger or consolidation or as may be required by the Commissioner. (c) Commissioners approval. The Commissioner shall approve the plan of merger or consolidation in accordance with subsection 17101(b) of this title. (d) Vote of mutual voters. The plan of merger or consolidation, as approved by the Commissioner, shall be submitted to the mutual voters of the participating institutions for their approval at an annual meeting, or at a special meeting called for that purpose, in accordance with the organizational documents of the institution and applicable law. (e) Executed plan; certificate; effective date. The executed plan, certificate, and effective date shall be in accordance with subsection 17101(d) of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 17401. Mergers and consolidations; investor-owned and mutual or cooperative financial institutions
(a) Resulting mutual or cooperative financial institution. An investor-owned financial institution may be merged into or consolidated with a mutual or cooperative financial institution organized under the laws of this State in accordance with the procedures and subject to the conditions and limitations set forth in this subchapter and provided: (1) The resulting mutual or cooperative financial institution shall comply with the requirements of subsections 17301(a), (b), (c), and (d) of this title except that the plan of merger or consolidation shall state the amount the institution will pay for the equity interests in the investor-owned institution to be acquired and additional information the Commissioner considers appropriate. (2) The investor-owned institution to be merged or consolidated shall comply with subsections 17201(b) through (f) of this title. (b) Resulting investor-owned institution. Except as the Commissioner may authorize pursuant to subsection 17101(f) of this title, a mutual or cooperative financial institution may not merge into an investor-owned institution organized under the laws of this State without first converting into an investor-owned institution under section 16101 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 17501. Acquisition of assets
(a) General. A Vermont financial institution may acquire the assets of, or assume the liabilities of, any other financial institution authorized to do business in this State. When the value of an acquisition or assumption is worth 25 percent or more of the assets of the acquiring, assuming, or transferring entity, the transaction shall be subject to and in accordance with the procedures, and subject to the conditions and limitations, set forth in this subchapter. (b) Adoption of plan. The governing body of the acquiring or assuming institution and the governing body of the transferring institution shall adopt by majority vote a plan for acquisition, assumption, or sale on terms that are mutually agreed upon. The plan shall include: (1) the names and types of the institutions involved;(2) a statement setting forth the material terms of the proposed acquisition, assumption, or sale, including, if applicable, the plan for disposition of all assets and liabilities not subject to the plan; (3) a statement that the entire transaction is subject to written approval of the Commissioner and, if the transaction involves all or substantially all of the assets or liabilities of the transferring institution, the approval of the transferring institutions investors or mutual voters; (4) if an investor-owned institution is the transferring institution and the proposed sale is not for cash, a clear and concise statement that investors of the institution voting against the proposed sale are entitled to rights set forth in subdivision 17101(c)(2) of this title; and (5) the proposed effective date of the acquisition, assumption, or sale and all other information and provisions that are necessary to execute the transaction or that are required by the Commissioner. (c) Commissioners approval. The Commissioner shall approve the plan of merger or consolidation in accordance with subsection 17101(b) of this title. (d) Vote of investors or mutual voters. If the transaction involves all or substantially all of the assets or liabilities of the transferring institution or if the transferring institutions organizational documents require, the plan of acquisition, assumption, or sale shall be presented to the investors or mutual voters of the transferring institution for their approval, and their approval shall be obtained in accordance with subsection 17101(c) of this title. If the approval of investors is required, then investors dissenting to the transaction have the rights set forth in subdivision 17101(c)(2) of this title. (e) Executed plan; certificate; effective date. (1) If the plan is approved by the investors or mutual voters of the transferring institution, an executive officer and the secretary of such institution shall submit the executed plan to the Commissioner, together with a copy of the resolution of the investors or mutual voters approving it, each certified by these officers. (2) Upon receipt of the items set forth in subdivision (1) of this subsection and evidence that the participating institutions have complied with all applicable federal law and regulations, the Commissioner shall certify, in writing, to the participants that the plan has been approved and is in compliance with the provisions of this title. (3) Notwithstanding approval of the investors or mutual voters or certification by the Commissioner, the transferring institutions governing body may, in its discretion, abandon such a transaction without further action or approval by the investors or mutual voters, subject to the rights of third parties under any contracts relating to the transaction. (f) National financial institution as participant. If one of the participants in a transaction under this section is a national financial institution, all participants shall comply with such requirements as may be imposed by federal law for such an acquisition, assumption, or sale and provide evidence of such compliance to the Commissioner; provided that if the purchasing or assuming institution is a national financial institution, approval by the Commissioner is not required. (g) Investor-owned institution acquiring mutual or cooperative financial institution. A mutual or cooperative financial institution may not sell all or substantially all of its assets to an investor-owned institution without prior approval by the Commissioner of a plan that provides fair and equitable treatment of the depositors or members in the sale of the assets and distribution of the proceeds. (h) Applicability to transactions in ordinary course of business. This subchapter does not apply to a transfer of assets of a financial institution in the ordinary course of business that does not include any assumption of deposit liabilities. (i) Authority for expedited acquisitions. Notwithstanding any other provision of law, or any organizational document of any participating institution, the Commissioner may order that the acquisition of assets and assumption of liabilities become effective immediately if the Commissioner determines that the action is necessary for the protection of depositors or the public. This action may be taken upon receipt of the following: (1) certified copies of the authorizing resolutions adopted by the respective governing bodies of the acquiring or assuming financial institution or financial institution holding company, and a copy of the plan of acquisition of assets and assumption of liabilities approved by a majority vote of the governing bodies of the acquiring or assuming financial institution or financial institution holding company and the transferring institution; or (2) notice, containing information required by the Commissioner, from any other person of intent to acquire the assets and assume the liabilities of a financial institution or financial institution holding company. (j) The applicant in any acquisition application filed with another supervisory agency by a financial institution holding company that controls a Vermont financial institution, or by a person that intends to acquire a Vermont financial institution or financial institution holding company shall file a copy of the application with the Commissioner at the time the application is filed with the other supervisory agency. The applicant shall notify the Commissioner of any amendments to the application by filing with the Commissioner a copy of any amendments that are required to be filed with the other supervisory agency. A copy of any acquisition approval issued by the other supervisory agency shall be filed with the Commissioner by the applicant within 30 days of its issuance. The Commissioner shall not disclose any information obtained pursuant to this section which is treated as confidential by the other supervisory agency. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 17502. Assumption of liabilities
(a) Assumption of liabilities. Subject to the approval of the Commissioner, any Vermont financial institution may, by contract, assume all or any part of the deposit and other liability of any other financial institution or financial institutions and may accept in payment or part payment for the obligations so assumed, all or any part of the assets of the other financial institution; or may so accept in payment or part payment, the notes or other undertakings of the other financial institution, secured by a pledge to the assuming financial institution, or secured by any other lien or trust for its benefit, with respect to all or any part of the assets of the other financial institution or financial institutions, at least equal in value to the amount of the deposit liability assumed. Such contracts of assumption, notes, undertakings, liens, or trust agreements may be in any form approved by the Commissioner that provides for equality of treatment of all depositors and for the full payment of all assumed deposits on demand. All depositors whose deposits are so assumed shall be notified by mail of the assumption and any depositor objecting to the assumption within 60 days after that notice shall be paid the full amount of the assumed deposit, with interest to the date of the objection, computed at the proportional part of the interest rate to be paid for that period by the Vermont financial institution on other deposits, or if no rate has been determined, at the rate for the interest period next preceding the notice, not to exceed the rate prescribed by the directors for the then current period, if a rate has been so prescribed for the period. (b) Contracts for assumption of deposit liability. Contracts for the assumption of deposit liability may be entered into independently of merger of financial institutions or as a part of any such merger, and the Commissioner may authorize under the provisions of chapter 205 of this title the assuming financial institution to establish a branch at any location at which the other financial institution might have conducted its business. However, such a contract shall not be valid unless the governing bodies of the signatory financial institutions have been authorized to act by a vote of the investors or mutual voters of the financial institutions. That authorization requires the affirmative vote, in the case of a mutual or cooperative financial institution, of a majority of the mutual voters, and in the case of an investor- owned financial institution, requires the vote provided in its organizational documents for amending the charter and in any event, at least the affirmative vote of a majority of the equity interests, as well as the affirmative vote of a majority of each class of equity interest present and voting at the meeting. All classes of equity interests may vote on the question whether or not the rights of any class to vote generally have been suspended under the terms of the charter by reason of nonpayment of dividends. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  302, eff. July 1, 2022.) 
 17601. Change in control
(a) The applicant in any acquisition application filed under the federal Bank Change in Control Act, the federal Savings and Loan Holding Company Act or the Bank Holding Company Act by a holding company that controls a Vermont financial institution, or by a person that intends to acquire a Vermont financial institution or financial institution holding company shall file a copy of the application with the Commissioner at the time the application is filed with the appropriate federal supervisory agency. The applicant shall notify the Commissioner of any amendments to the application by filing with the Commissioner a copy of any amendments that are required to be filed with the appropriate federal supervisory agency. A copy of any acquisition approval issued by the appropriate federal supervisory agency shall be filed with the Commissioner by the applicant within 30 days of its issuance. The Commissioner shall not disclose any information obtained pursuant to this section which is treated as confidential under federal law. (b) Any other acquisition of a Vermont financial institution, or acquisition of 25 percent or more of the equity interests of a Vermont financial institution or a holding company controlling a Vermont financial institution subsidiary that is not included in subsection (a) of this section, shall be considered a change in control and subject to subsections (c), (d), and (e) of this section. (c) Any person seeking to obtain control of a Vermont financial institution or financial institution holding company controlling a Vermont financial institution subsidiary shall be required to file an application with the Commissioner on a form prescribed by the Commissioner containing the following information: (1) The name and address of each person by whom or on whose behalf the acquisition of control is to be effected, referred to in this section as the acquiring party, and: (A) if such person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any crime conviction during the past ten years; (B) if such person is not an individual, a report of the nature of its business operations during the past five years or for such lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by such person and such persons subsidiaries; and a list of all individuals who are or who have been selected to become directors or executive officers of such person, or who perform or will perform functions appropriate to such positions. Such list shall include for each such individual the information required by subdivision (1)(A) of this subsection. (2) The source, nature, and amount of the consideration used or to be used in effecting the acquisition of control, a description of any transaction in which funds were or are to be obtained for any such purpose, and the identity of persons furnishing such consideration; provided, however, that where a source of such consideration is a loan made in the lenders ordinary course of business, the identity of the lender shall remain confidential, if the person filing such statement so requests. (3) Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party, or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement. (4) Any plans or proposals which each acquiring party may have to liquidate such financial institution, to sell its assets, or merge or consolidate it with any person, or to make any other material change in its business or organizational structure or management. (5) The number of shares of equity interests which each acquiring party proposes to acquire, and the terms of the acquisition, and a statement as to the method by which the fairness of the proposal was determined. (6) The amount of each class of any equity interest which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party. (7) A full description of any contracts, arrangements, or understandings with respect to any equity interest in which any acquiring party is involved. Such description shall identify the persons with whom such contracts, arrangements or understandings have been entered. (8) A description of the purchase of any equity interest during the 12 calendar months preceding the filing of the statement, by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid or agreed to be paid. (9) Copies of all agreements to acquire or exchange any equity interests.(10) The terms of any agreement made with any broker-dealer and the amount of any fees, commissions, or other compensation to be paid to any broker-dealer. (11) Such additional information as the Commissioner may prescribe.(d) The Commissioner, in his or her discretion, may accept all or part of a copy of an application filed with another supervisory agency that contains the information required by subsection (c) of this section. (e) The application shall be subject to the provisions of chapter 201, subchapter 7 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  303, eff. July 1, 2022.) 
 18101. Effect of merger, share exchange, consolidation, conversion, or acquisition
(a) Applicability. From and after the effective date of a merger, including a share exchange, consolidation, conversion, or acquisition, under chapter 205, 206, or 207 of this title, the resulting institution may conduct business in accordance with the terms of the plan as approved and in accordance with this chapter. (b) Continuing entity. Whenever the authority of any participating or converting institution has been terminated, the resulting institution shall be deemed to be a continuation of the entity of the participating or converting institution such that all property of the participating or converting institution, including rights, titles, and interests in and to all property of whatsoever kind, whether real, personal, or mixed, and things in action, and every right, privilege, interest, and asset of any conceivable value or benefit then existing, or pertaining to it, or which would inure to it, including appointments, designations, and nominations, and all other rights and interests as trustee, personal representative, guardian, and conservator, and in every other fiduciary capacity, shall immediately by act of law and without any conveyance or transfer and without further act or deed be vested in and continue to be that property of the resulting institution; and such institution shall have, hold, and enjoy the same in its own right as fully and to the same extent as the same was possessed, held, and enjoyed by the participating or converting institution and such resulting institution as of the time of the taking effect of such merger, consolidation, conversion, or acquisition shall continue to have and succeed to all the rights, obligations, and relations of the participating or converting institution. (c) Effect on judicial proceedings. All pending actions and other judicial proceedings to which the participating or converting institution is a party shall not be deemed to have been abated or to have been discontinued by reason of such merger, consolidation, conversion, or acquisition, but may be prosecuted to final judgment, order, or decree in the same manner as if such merger, consolidation, conversion, or acquisition had not been taken; and such institution resulting from such merger, consolidation, conversion, or acquisition may continue such action in its new name, and any judgment, order, or decree may be rendered for or against it which might have been rendered for or against the participating or converting institution involved in such judicial proceedings. (d) Creditors rights. The resulting institution in a merger, consolidation, conversion, or acquisition shall be liable for all obligations of the participating or converting institution which existed prior to such merger, consolidation, conversion, or acquisition, and the merger, consolidation, conversion, or acquisition taken shall not prejudice the right of a creditor of the participating or converting institution to have his or her debts paid out of the assets thereof, nor shall such creditor be deprived of, or prejudiced in, any action against the officers, directors, corporators, or members of a participating or converting institution for any neglect or misconduct. (e) Exception. In the event of an acquisition of assets pursuant to section 17501 of this title, the provisions of subsections (b), (c), and (d) of this section shall apply only to the assets acquired and the liabilities assumed by the resulting institution; provided that the transferring institution retains sufficient assets to satisfy all liabilities not assumed by the resulting institution. (f) Powers and attributes of resulting organization. Whenever financial institutions merge or consolidate, the resulting organization, except as provided in this subchapter, shall have, possess, and own, but separately and distinguishably as provided by this subchapter, all property, rights, powers, franchises, privileges, and appointments whether existing, contingent, or future, corporeal or incorporeal, tangible or intangible, of every nature whatsoever of each of the merging organizations. If any of the merging organizations are acting or have been acting or have been nominated, appointed, delegated, or designated by any court, person, or otherwise to act as trustee, attorney, agent, executor, administrator, receiver, assignee, guardian, or in any like capacity, the resulting organization shall have, possess and be vested with and succeed to all of the property, rights, powers, privileges, duties, and obligations appertaining to each such fiduciary capacity, without further or additional appointment, obligation or designation. The resulting financial institution shall be a continuation of the entity of each and all of the organizations so merged; each such entity, however, remaining separable and distinguishable to the extent provided in this subchapter. It may exercise the franchise of each of the organizations separably and distinguishably as well as the composite franchises of all. Except as provided in this subchapter, it shall hold, exercise, and perform all rights, powers, privileges, duties, and obligations appertaining to any and all trust, representative, or fiduciary relationships of each of the merged financial institutions, and shall be liable for all of the debts, contracts, and obligations of each of the merged financial institutions. Any such debt, undertaking, or obligations of any merged financial institution may be enforced against it as fully and effectively as it could have been against the merged financial institution. (g) Disposal of property and assets. The resulting financial institution shall have the right to use, control, sell, or dispose of all real and personal estate, rights, or interests of the merged financial institutions and convey the same by deed, assignment, endorsement, contract, or other conveyance, either in its own name or in the name of any merged financial institutions as provided in this section, or in the names of both, as fully and effectively as the merged financial institutions could have done; and may maintain suit in its own name or in the name of any such financial institution, as provided in this subchapter, or in the names of both, to foreclose or recover any title, right, demand, or claim appertaining to the merged financial institutions. To this end and except as provided in the contract of merger, the corporate existence of each of the merged financial institutions shall be deemed and treated as having continued each separably and distinguishably for all purposes necessary or convenient to liquidate the assets of any merged financial institutions. Any receipt; assignment; endorsement; transfer; option; contract to sell, convey, or exchange; compromise; acquittance; and release may be executed in its name or in the name of the resulting financial institutions, or both. Any other thing may be done in either or both of these names that may be necessary or proper for the reduction to cash of any assets of a foreclosure of any rights or titles or the doing of any other acts or things appropriate to the winding up of the affairs of the merging organization as a separate entity. Those contracts and agreements shall be executed and those acts shall be done under the control of the directors of the resulting organization. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  304, eff. July 1, 2022.) 
 18201. Nonconforming activities; cessation
(a) Applicability. If, as a result of a merger, consolidation, conversion, or acquisition pursuant to this title, the resulting institution is to be of a different type or of a different character than any one or all of the participating or converting institutions, such resulting institution shall be subject to the conditions and limitations as set forth in this subchapter. (b) Plan for termination. The plan of merger, consolidation, conversion, or acquisition shall set forth the method and schedule for terminating those activities not permitted by the laws of this State for the resulting institution, but which were authorized for any of the participating or converting institutions. (c) Effective date. The plan of merger, consolidation, conversion, or acquisition shall state that from the effective date of such action, the resulting institution shall not engage in any nonconforming activities, except to the extent necessary to fulfill obligations existing prior to merger, consolidation, conversion, or acquisition, pursuant to subsection (d) of this section. (d) Compliance with limitations. If, as a result of such merger, consolidation, conversion, or acquisition, the resulting institution exceeds any lending, investment, or other limitations imposed by this title, it shall conform to such limitations within such period of time as shall be established by the Commissioner. (e) Divestiture. The Commissioner may, as a condition to such merger, consolidation, conversion, or acquisition, require a nonconforming activity to be divested in accordance with such additional requirements as he or she may deem appropriate under the circumstances. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19101. Applicability to Vermont financial institutions; independent trust companies; state financial institutions
(a) The provisions of subchapters 1 through 4 of this chapter apply to Vermont financial institutions. The provisions of subchapters 2, 3, and 4 of this chapter shall also apply to independent trust companies organized and regulated under chapter 77 of this title as if they were financial institutions. (b) The provisions of subchapter 5 of this chapter shall apply to state financial institutions doing business in this State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19102. Governors proclamation
Whenever it appears to the Governor that the public welfare and the equal protection of depositors in Vermont financial institutions doing business in this State require it, he or she may proclaim such bank holidays as in his or her judgment are necessary. Those holidays, except as otherwise provided in the proclamation, shall not be considered as business days for the transaction of all banking business, including the demand or payment of deposits, and shall have the incidents of a legal holiday for the purposes specified in 9A V.S.A. Article 3. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19103. Business restricted
During holidays and subject to the provisions of the proclamation, the Commissioner, in addition to all other powers conferred by law, may order any Vermont financial institution to restrict all or any part of its business, and to limit or postpone for any length of time the payment of any amount or proportion of the deposits in savings, commercial, or any other department of the institution, separate and distinct from the other, as the Commissioner may deem necessary or expedient and may regulate further payments as to time and amount, as the interest of the public or the financial institution or the depositors thereof may require. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  305, eff. July 1, 2022.) 
 19104. Restrictions continued after holidays
After those holidays, the order may be continued in effect as to any particular financial institution if, in the opinion of the Commissioner, circumstances warrant or require the continuance and the Governor approves. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19105. Orders as to deposits and debts due financial institution
During those holidays and so long thereafter as the Governor approves, the Commissioner may issue such orders as to the receipt and payment of deposits by, and the creation and discharge of debts and obligations to or from a Vermont financial institution under the Commissioners supervision, as the Commissioner may deem necessary for the protection and preservation of the public safety and convenience or the equal protection of those Vermont financial institutions depositors in view of then existing banking, business, or other pertinent conditions. Those orders may apply to any Vermont financial institution, as may be necessary for those purposes; and the orders may restrict or regulate all business or any part of the business of a financial institution affected thereby, including the time or manner or medium of payment, or limitations on the amount or percentages of payment of deposits or of debts or obligations, or the investment or the loaning of money, or the approval and acceptance of security for new loans. The orders may classify financial institutions or departments thereof or deposits or assets and liabilities and may vary with the different classes, as may be required for fulfilling the purposes of this section and sections 19102 through 19104 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19106. Withdrawals, rateable share of depositors interest
While restrictions are in force on the withdrawal of the deposits in a Vermont mutual or cooperative financial institution, except those imposed by the financial institution under the provisions of its internal governance documents, withdrawals shall be counted as a part of the rateable share of the withdrawing depositors interest in the assets of a mutual or cooperative financial institution to which he or she was entitled at the time the restrictions were imposed if final liquidation of the financial institution takes place before all those restrictions are removed. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19107. Publication of orders
Orders under sections 19103 through 19106 of this title may be issued and notice thereof given in such manner as the Commissioner determines and may be amended, modified, changed, expanded, or revoked in whole or in part whenever in his or her judgment circumstances warrant or require. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  306, eff. July 1, 2022.) 
 19108. Appeal; receiver
The propriety and necessity of the orders issued by the Commissioner under sections 19103 through 19107 of this title shall be open to review upon action brought in the usual form by an aggrieved party within 14 days to the Superior Court of Washington County. No injunction may be issued without prior notice to the Commissioner, and the court, on motion of the Commissioner, may appoint a temporary receiver of a financial institution involved in those proceedings. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2017, No. 11,  7.) 
 19109. New commercial or savings deposits authorized; withdrawals
The Commissioner, by order, may authorize Vermont financial institutions thereafter to receive new commercial deposits or new savings deposits, and the new deposits shall be special deposits and designated as new commercial deposits or new savings deposits, as the case may be, and shall be segregated from all other deposits. New commercial deposits shall also be segregated from new savings deposits. They may be invested only in assets approved by the Commissioner as being sufficiently liquid to be available when needed to meet any demands on account of those new deposits, which assets shall not be merged with other assets of the institution, but shall be held in trust for the security and payment of those new deposits, except that income from those assets, to the extent authorized by the Commissioner, may be used by the financial institution for other proper purposes of the institution. The withdrawal of those new deposits shall not be subject in any respect to restriction or limitation under this section and sections 19102 through 19108 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19110. Costs and expenses
Costs and expenses incurred by the Commissioner in the exercise of powers given under sections 19101 through 19109 of this title may be assessed by the Commissioner against the Vermont financial institutions concerned and, when so assessed, shall be paid by those financial institutions. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19201. Appointment and bonding of conservators
Whenever the Commissioner deems it necessary in order to conserve the assets of a Vermont financial institution for the benefit of the depositors and other creditors thereof, the Commissioner may appoint a conservator for the financial institution and require of the conservator such bond and security as the Commissioner deems proper. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19202. Conservation of assets
Under the direction of the Commissioner, the conservator shall take possession of the books, records, and assets of every description of the Vermont financial institution and take such action as may be necessary to conserve the assets thereof pending further disposition of its business as provided by law. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19203. Powers of conservator
The conservator shall have all the rights, powers, and privileges possessed by receivers consistent with this subchapter and shall be subject to the obligations and penalties to which receivers are subject. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19204. Rights of interested parties
During the time the conservator remains in possession of the Vermont financial institution, the rights of all parties with respect to the institution, subject to the provisions of law, shall be the same as if a receiver had been appointed therefor. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  307, eff. July 1, 2022.) 
 19205. Fiduciary powers; appointment of new trustee for trust accounts
The conservator shall have the right to exercise all the fiduciary powers which the Vermont financial institution had been exercising. However, if all of the beneficiaries, named in any trust that the financial institution for which the conservator is appointed was trustee, desire another trustee appointed to administer and manage the trust, the Probate Division may appoint a new trustee for the trust. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19206. Expenses; salary
All expenses of any such conservatorship shall be paid out of the assets of the financial institution and shall be a lien thereon which shall be prior to any other lien provided by law. The conservator shall receive as salary an amount to be fixed by the Governor. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19207. Withdrawals
While the financial institution is in the hands of the conservator appointed by the Commissioner, the Commissioner may require the conservator to set aside and make available for withdrawal by depositors and payment to other creditors, on a rateable basis, such amounts as in the opinion of the Commissioner may safely be used for this purpose. The conservator may borrow money on the assets of the financial institution to provide funds for the purposes specified in this section. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  308, eff. July 1, 2022.) 
 19208. Deposits
(a) In the Commissioners discretion, the Commissioner may permit the conservator to receive deposits, but deposits received while the financial institution is in the hands of the conservator shall not be subject to any limitation as to payment or withdrawal, and those deposits shall be segregated and shall not be used to liquidate any indebtedness of the financial institution existing at the time that a conservator was appointed to it, or any subsequent indebtedness incurred for the purpose of liquidating any indebtedness of the financial institution existing at the time the conservator was appointed. (b) Deposits so received while the financial institution is in the hands of the conservator shall be kept on hand in cash, invested in the direct obligations of the United States, or deposited in financial institutions approved by the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19209. Termination of conservatorship
If the Commissioner becomes satisfied that it may safely be done and that it would be in the public interest, in the Commissioners discretion, the Commissioner may terminate the conservatorship and permit the financial institution to resume the transaction of its business subject to such terms, conditions, restrictions and limitations as the Commissioner may prescribe. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19210. Notice to depositors of termination of conservatorship
In case the Commissioner, in the exercise of the Commissioners discretion, is satisfied that it would be in the public interest to terminate the conservatorship either with or without reorganization, before the conservator shall turn back the affairs of the Vermont financial institution to its governing body, the Commissioner shall cause to be published in a newspaper in the city, town, or county in which the financial institution is located, a notice in form approved by the Commissioner stating the date on which the affairs of the financial institution will be returned to its governing body. On the date of the publication of that notice, the conservator shall immediately send to every person who is a depositor in the financial institution a copy of that notice by mail, addressed to the last known address of that person as shown by the records of the financial institution, and the conservator shall send similar notice in like manner to every person making a deposit in that financial institution under section 19208 of this title after the date of that newspaper publication and before the time when the affairs of the financial institution are returned to its governing body. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19301. Application for receiver; petition to divide losses
If the Commissioner ascertains that a Vermont financial institution is insolvent or that it is unsafe for it to continue to transact business, the Commissioner shall apply to the Superior Court of Washington County for the appointment of a receiver unless, in case of a mutual or cooperative financial institution, the Commissioner deems it advisable to join with the governing body in a petition to divide the losses among the depositors as provided in this subchapter. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  309, eff. July 1, 2022.) 
 19302. Appointment of receiver; notice and hearing
The Court shall issue a notice to the treasurer and executive officer of such Vermont financial institution to appear at a time and place named in the notice and show cause why a receiver should not be appointed. If sufficient cause is not shown, the Court shall appoint a receiver to take charge of the property and effects of the financial institution, who shall be subject to the Superior Court. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  310, eff. July 1, 2022.) 
 19303. Bonding of receiver
The receiver shall give bonds to the State with sufficient surety, in a sum fixed by the Court, for the faithful discharge of his or her duties and for the due accounting of the monies received by the receiver. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19304. Commissioner as receiver
The Commissioner shall be appointed as such receiver unless the Superior judge is satisfied that it would be inadvisable for the Commissioner to act in that capacity. The Commissioner and successors of the Commissioner as receiver shall serve without compensation other than his or her stated compensation as Commissioner, but the Commissioner shall be allowed clerical and other expense necessary in the conduct of the receivership. The Court may appoint the Commissioners successor in office as receiver. However, if a change in the receivership, in the judgment of the Superior judge, would be against the financial interest of those concerned, the Court may continue the receiver in office at such reasonable compensation as the Court may determine. If the deposits of the insolvent financial institution are insured by the Federal Deposit Insurance Corporation, the Superior judge, in his or her discretion, may appoint as receiver of the financial institution the Federal Deposit Insurance Corporation to serve without bonds and without compensation. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19305. Duties and rights of receiver
The receiver shall collect, sue, and receive the debts and demands due and the property that belong to the Vermont financial institution and shall convert into cash its real and personal estate and, upon the approval of the Superior judge, may borrow money and pledge any part or all of the assets of such financial institution as security for such loan and shall make report to the Court of the condition of the trust at such times as the Superior judge orders. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19306. Federal deposit insurance corporation
If the Federal Deposit Insurance Corporation shall have been appointed receiver of a closed Vermont financial institution, it may advance, with the consent and approval of the Superior judge, monies to pay insured deposits or for other proper purposes and shall have a lien upon all or any part of the assets of such financial institution as the Court may direct for the repayment of such advances, which shall be deemed to be in the nature of a loan, but provision shall be made in such order to secure ultimately as large a percentage payment on account of uninsured deposits as would be finally available for such deposits if such assets were not so pledged. The Federal Deposit Insurance Corporation, whether or not acting as receiver, may become the purchaser of any assets of such Vermont financial institution which have been offered for public bids, under such terms and conditions as the Superior judge may direct, provided that the purchase be approved by the Superior judge after hearing held on such reasonable notice by publication or otherwise as the Superior judge may direct. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19307. Subrogation
Whenever any Vermont financial institution shall have been closed, and the Federal Deposit Insurance Corporation shall pay the insured deposit liabilities of such closed institution, such corporation, whether or not it shall have become a receiver of such closed financial institution, shall be subrogated to the extent of such payment to all rights of the owners of such deposits against such closed financial institution. The Superior judge shall by order define the manner and extent of such subrogation. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19308. Order
When on hearing and after such reasonable notice as the Superior judge may direct, any order as to a lien upon assets of a closed Vermont financial institution or of subrogation to the rights of depositors in the institution made by the judge under the authority of sections 19304 through 19307 of this title, and provided no objections have been filed within 10 days after the making of the order, the order shall be binding and effective to the extent necessary to secure the repayment of monies advanced. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  311, eff. July 1, 2022.) 
 19309. Limitation on time for proving claims
(a) By order, the Superior judge shall limit the time for creditors of the Vermont financial institution to present and prove their claims before the receiver. (b) Within 60 days from the date of such order, the receiver shall cause notice thereof to be given by publication for three weeks successively in a newspaper printed and circulated in the county where such Vermont financial institution is located. The time allowed for creditors to present and prove their claims shall not be less than six months and may be extended as circumstances require. Claims not presented within the time limit shall not share in the assets of the Vermont financial institution. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19310. Submission of disallowed claims to Superior judge
Claims presented to the receiver, upon his or her request or upon that of a person interested in the financial institution, or upon request of a creditor within 20 days after notice of the disallowance of his or her claim in whole or in part, shall be submitted to the Superior judge for the purpose of proving the same at such time and in such manner as the Superior judge orders. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19311. Order to discontinue unauthorized practices
Whenever it appears to the Commissioner from the examination made by him or her, or from any report made to him or her, that a Vermont financial institution has committed a violation of its charter or of law, or is conducting its business and affairs in an unsafe or unauthorized manner, or that it or any of its officers have failed to comply with all the rules, restrictions, and conditions provided by law, including the rules and requirements of the Commissioner made in conformity to law, the Commissioner shall, by a written order delivered to the treasurer of such organization and the offending officer or officers, direct such organization and such officer or officers to discontinue such illegal, unsafe, or unauthorized practices or conduct, and to proceed in strict conformity with the requirements of law. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19312. Failure to comply with Commissioners order
If such financial institution or any of its officers refuses or neglects to comply with such order, the Commissioner may apply to the Superior Court of Washington County for such an injunction or order against such financial institution and its officers as the circumstances require. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19313. Authority of Court to enforce Commissioners order
The Court shall issue a notice to the treasurer and president of such financial institution and to any officer who is alleged in such petition to have failed to proceed in conformity with the requirements of law to appear at a time and place named in the notice and show cause why an injunction or proper remedial order should not be issued. If sufficient cause is not shown, the Court shall have power: (1) to allow such financial institution to continue to transact business in conformity with the requirements of law subject to such orders, conditions or restrictions as the evidence in the case and the interests involved shall require; or (2) if it appears that it is unsafe or inexpedient for such financial institution to continue to transact business, to appoint a receiver or receivers to take charge of the property and effects of the financial institution; and such receivership shall be subject to the provisions of this subchapter applicable in case of a receiver appointed on petition of the Commissioner on ascertainment of a financial institutions insolvency. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  312, eff. July 1, 2022.) 
 19314. Accounting and report of receiver
Annually, on or before January 31, and at such other time as may be required by the Commissioner, so long as the receivership is continued, the receiver of a financial institution shall make and transmit to the Commissioner a full statement of the affairs of such institution showing the nature and amount of the assets and liabilities, also a true account of the expenses incurred and not previously reported, giving the items thereof. Such report shall be printed with and as a part of the annual report of the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19315. Appeal
A person dissatisfied with an order or decree of the Superior judge in any proceeding arising under this chapter may file an appeal as in other cases. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  313, eff. July 1, 2022.) 
 19401. Plan for reopening or establishment of new financial institution
If any Vermont financial institution has been closed by action of the Commissioner or its governing body and a receiver, either temporary or permanent, appointed or petitioned for, the depositors thereof, representing not less than 75 percent of the deposit liability, and with the approval and consent of the Commissioner, may join in a plan for the reopening or reorganization of the financial institution or the establishing of a new financial institution, and may select a committee of not more than 12 depositors to represent them for the purpose of carrying the plan into effect. However, a depositor who has been notified and does not refuse to give his or her consent within 15 days of that notification shall be included in reckoning that 75 percent. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19402. Petitioning Court for hearing; notice; hearing; approval of plan
(a) Upon receiving the approval of the plan by the Commissioner, the committee or the Commissioner may petition the Superior Court of Washington County, setting forth the details of the plan which has been agreed upon and requesting the court to set a day for hearing thereon. Thereupon the Court shall make an order fixing a day for the hearing of the petition, notice of which shall be given to the depositors and the holders of equity interests in the financial institution by publication once in each week for not less than two successive weeks immediately preceding the date of hearing in some newspaper printed in the county where the financial institutions principal place of business is located, or in such other newspaper, having a general circulation in the county, as the Court may direct and by posting a copy of the notice upon the front door of the financial institution. (b) The Court may adjourn the hearing from time to time and no further notice shall be required. At the date of hearing, or any adjournment thereof, the Court shall take testimony, and if it appears that it is for the best interests of the depositors that the plan be approved, the Court may make an order approving the same and fixing the terms and conditions upon which the receivership may be terminated. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19403. Depositors objection to plan; receivership continued
If any of the depositors of the Vermont financial institution file written objections to the approval of the plan and refuse to consent to the plan, the Court at the hearing may direct the receiver to set aside assets of each class of the receivership, in such amounts and character as the Court finds to be just and equitable. Upon such terms as may be just and equitable, the Court shall continue the receivership as to those assets and those depositors, and direct the receiver to turn over the remainder of the assets of the financial institution in his or her hands to the new or reorganized financial institution when directed so to do by the Commissioner, and discharge the receiver from further liability. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  314, eff. July 1, 2022.) 
 19404. Deposits of public money
If, in any financial institution referred to in section 19401 of this title, there are deposits of public money belonging to the State or any political subdivision of the State, the State Treasurer, if the deposit belongs to the State, and the Treasurer of any political subdivision, by and with the consent of the governing body of the political subdivision to which any such deposit may belong, may join with other depositors of the financial institution in a plan for the reopening or reorganizing of the institution or the establishment of a new financial institution, or the restricting of the withdrawal of deposits and for that purpose may bind the State or political subdivision, after being authorized, to limit withdrawals from that deposit over a period of time and in accordance with the plan as may have been agreed to by the other depositors of the financial institution joining in the plan. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  315, eff. July 1, 2022.) 
 19405. Deposits not paid or received; business continued
When a proceeding has been brought under section 19401 of this title, a deposit shall not be paid or received by that financial institution after the filing of the petition until the final decree of the Superior judge or, unless the Commissioner, in his or her discretion, and under such orders as the Commissioner may prescribe and from time to time alter and amend, permits the financial institution to continue in business pending final decree. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19406. Orders under which financial institution may continue business
Those orders shall provide that deposits received after the petition is filed and before the final decree shall be kept in cash or invested in such liquid securities as the Commissioner shall approve and segregated from the prior assets of the financial institution and shall constitute a fund for the repayment in full of deposits made after the filing of the petition. Those orders shall further provide that no withdrawal of prior deposits may be permitted except on such notice and to such specified amounts and in such specified percentage as the Commissioner determines clearly will not result in a preference. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19407. Expenses; deposits received after petition filed
The expense of operation between filing of the petition and final decree shall be apportioned between the original assets and the new assets in such manner as the Superior judge may deem just. The deposits received between the filing of the petition and the final decree shall not be reduced by the decree except only to meet those expenses of operation, if any, or losses incurred with respect to those segregated assets. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 19408. Petition denied; receiver to wind up affairs
If the petition is denied, the Commissioner shall apply for a receiver to wind up the affairs of the financial institution, as provided in sections 19301 through 19315 of this title. In that case, the deposits, if any, received after petition filed and the resulting assets shall be administered separately from the other assets and liabilities, and those assets shall be distributed to the depositors by the receiver as soon as possible after his or her appointment and without deduction on account of the expense of the receivership except as provided in section 19407 of this title. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  316, eff. July 1, 2022.) 
 19501. Petition; powers; procedure
(a) The Commissioner may apply to the Superior Court of Washington County to be appointed ancillary receiver of a state financial institution or any branch or subsidiary of a state financial institution in hazardous financial condition, if the Commissioner finds that: (1) the protection of customers or depositors in this State so requires;(2) there are sufficient assets of the state financial institution located in this State to justify the appointment of an ancillary receiver; and (3) the Federal Deposit Insurance Corporation has not been appointed receiver of the entity.(b) The Court may issue an order appointing the Commissioner on whatever terms it shall deem appropriate. The Commissioner, as receiver, shall administer or liquidate the assets and deposits of such financial institution found in this State under the provisions of this chapter as though the entity were a Vermont financial institution. (c) If a person in the home state of the entity or the Federal Deposit Insurance Corporation is appointed receiver subsequent to the appointment of the Commissioner under subsections (a) and (b) of this section, the Commissioner shall notify the Superior Court. The Court may release the Commissioner as receiver if the Court finds that the interests of Vermont customers or depositors of the entity are adequately protected in the proceedings in the home state of the entity. The Court may impose conditions on the entity to ensure protection of its Vermont customers or depositors. (d) The filing or recording of the order with the Superior Court of Washington County or the town clerk of the town in which its principal office or place of business is located; or, in the case of real estate, with the town clerk of the town where the property is located, and such filing or recording shall impart the same notice that a deed, bill of sale, or other evidence of title duly filed or recorded with that town clerk would have imparted. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  317, eff. July 1, 2022.) 
 20101. Reorganization of a mutual or cooperative financial institution as a mutual holding company
A Vermont mutual or cooperative financial institution may reorganize, under a plan of reorganization adopted by the financial institution and submitted to and approved by the Commissioner as provided in this chapter, as a mutual holding company owning an investor-owned mutual holding company subsidiary financial institution in the following manner: (1) By taking or causing to be taken the following actions:(A) organizing a mutual holding company subsidiary financial institution in accordance with the procedures in section 20102 and chapter 202 of this title, the voting common stock or other ownership interest of which will be owned by the mutual holding company emerging from the reorganization, except otherwise permitted in section 20106 of this title; (B) transferring to the mutual holding company subsidiary financial institution the substantial part of its assets and liabilities, including all of its insured liabilities, in exchange for voting common stock or other ownership interest of the mutual holding company subsidiary financial institution; and (C) adopting amended and restated organizational documents changing its name, and conforming its organization, governance, and powers to those prescribed for a mutual holding company by section 20104 of this title; or (2) Pursuant to any other form of restructuring approved by the Commissioner. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.)
 20102. Procedure for adopting a plan of reorganization
(a) Plan of reorganization. he plan of reorganization pursuant to which the reorganization is to be carried out, and the proposed amended organizational documents, shall be approved by the governing body of the mutual or cooperative financial institution by resolution adopted by two-thirds of the whole number of the governing body. The plan of reorganization, along with the proposed amended organizational documents, shall then be submitted for adoption to a regular or special meeting of the mutual voters of the financial institution called in the manner provided by its internal governance documents. Copies or summaries of the plan and amended organizational documents shall be enclosed with the notice of the meeting. Adoption of the plan of reorganization shall be by the affirmative vote of two-thirds of the mutual voters casting votes. A mutual voter may vote at such regular or special meeting either in person or by proxy executed in writing by the mutual voter or by his or her duly authorized attorney-in-fact. (b) Notice to Commissioner. A mutual or cooperative financial institution, having adopted a plan of reorganization in accordance with subsection (a) of this section, shall provide the Commissioner with 60 days prior written notice of the proposed reorganization. The notice shall include the plan of reorganization, accompanied by certified copies of the votes of its governing body and mutual voters required by subsection (a) of this section, and such other relevant information as the Commissioner shall require. Unless the Commissioner, within such 60-day notice period, disapproves the proposed mutual holding company reorganization, or extends for another 30 days the period during which such disapproval may issue, the proposed reorganization shall be deemed approved and the mutual or cooperative financial institution providing such notice may proceed with the proposed reorganization. The Commissioner may disapprove any proposed mutual holding company formation only if: (1) such disapproval is necessary to prevent unsafe or unsound banking practices;(2) the financial or management resources of the financial institution warrant disapproval;(3) the mutual or cooperative financial institution does not furnish the information required by this section; (4) the mutual or cooperative financial institution does not comply with subsection (a) of this section; or (5) the proposed reorganization would be unfair to depositors.(c) Notice to depositors. After a mutual or cooperative financial institution has complied with the provisions of subsections (a) and (b) of this section, it shall give its depositors at least 60 days prior written notice of the effective date of the reorganization. Such notice shall include a brief description of the plan of reorganization and a statement of the depositors right to withdraw any amount deposited to his or her account without penalty. The form of such notice shall be approved by the Commissioner and shall be sent to each depositor by first-class mail. Any depositor objecting to the reorganization within 60 days after such notice may withdraw any amounts on deposit and shall be paid the full amount of the deposit, with interest to the date of payment computed at the rate established by the deposit agreement or, in the absence of an agreement, at the rate paid by the financial institution on other similar interest-bearing accounts. Any depositor who does not withdraw the amount deposited to his or her credit prior to the effective date of the reorganization shall be deemed to have assented to the reorganization. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001; amended 2021, No. 105 (Adj. Sess.),  318, eff. July 1, 2022.) 
 20103. Retention of capital assets at holding company level
With the approval of the Commissioner, the plan of reorganization of a mutual or cooperative financial institution may provide for the retention of capital assets at the mutual holding company level, provided such retention will not cause the mutual holding company subsidiary financial institution to fail to meet any applicable capital adequacy requirement prescribed by state or federal laws or regulations. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 20104. Effect of reorganization; ownership and governance
(a)(1) The organizational existence of the reorganizing mutual or cooperative financial institution shall not terminate, and the mutual holding company resulting from the reorganization shall be deemed to be a continuation of the entity of such financial institution, not as a depository institution but as a financial institution holding company. The depositors of the mutual or cooperative financial institution immediately prior to the reorganization shall be entitled to deposits in the mutual holding company subsidiary financial institution of like amounts, interest rate, and other terms, without interruption of interest and such deposits shall continue to be insured by the Federal Deposit Insurance Corporation up to the maximum amount provided by law. The depositors of the mutual or cooperative financial institution immediately before the reorganization, shall, by virtue of the reorganization, have proprietary interests in the net worth of the mutual holding company of the same nature, rights, and proportions as the proprietary interests which they had in the mutual or cooperative financial institution immediately prior to the reorganization, in lieu of such former interests. Except as otherwise set forth in this section with respect to the rights of depositors, creditors of the reorganizing mutual or cooperative financial institution immediately prior to the reorganization shall be deemed to have such rights as creditors solely with respect to the mutual holding company subsidiary financial institution upon consummation of the reorganization. (2) Except as otherwise specifically provided in the plan of reorganization adopted pursuant to section 20102 of this title, upon consummation of the reorganization into mutual holding company form, the mutual holding company subsidiary financial institution shall by operation of law be deemed to have succeeded to all rights of or in all tangible or intangible property, franchises, and interests of the mutual or cooperative financial institution, including appointments, designations, nominations, and all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, and every other fiduciary capacity, in the same manner and to the same extent as such rights, franchises, and interests were held or enjoyed by the reorganizing mutual or cooperative financial institution immediately prior to the effective date of the reorganization, and without further additional assignment, appointment, or designation. (b)(1) A mutual holding company shall not issue capital stock. Its net earnings and net worth shall inure to the benefit of the persons who are from time to time the savings depositors of its mutual holding company subsidiary financial institution and any other persons acquiring proprietary interests in the earnings and net worth of the mutual holding company, whether by merger or otherwise. Such net earnings may be distributed among such depositors and other persons at such times and in such equitable manner as the governing body of the mutual holding company, in its discretion, may determine. Apart from any such distributions, the proportionate proprietary interests of such depositors and other persons in the net earnings and net worth of the mutual holding company shall be realized only upon liquidation of the mutual holding company after the claims of all of its creditors have been satisfied. The proprietary interest of any depositor of the mutual holding company subsidiary financial institution in the net earnings and net worth of the mutual holding company shall terminate upon the complete withdrawal by such depositor of his or her accounts. Neither the depositors of the mutual holding company subsidiary financial institution nor any other persons acquiring proprietary interests in the mutual holding company shall have any voting rights in the organization. (2) The powers of the mutual holding company shall vest in its corporators or governing body, as the case may be. The initial corporators or directors shall consist of such of the persons who were serving as corporators or directors of the reorganizing mutual or cooperative financial institution immediately prior to the reorganization and as are named in the plan of reorganization. Thereafter, the corporators or directors shall be chosen from time to time in the manner set forth in the internal governance documents of the mutual holding company. The management of the mutual holding company shall be vested in its governing body, who shall be elected by the corporators in the case of a mutual financial institution. The initial governing body shall consist of such of the persons who were serving as the directors of the mutual or cooperative financial institution immediately prior to the reorganization and as are named in the plan of reorganization. Such persons shall hold office until the first annual meeting of the corporators and until their successors have been chosen and qualified. The governing body shall hold an organizational meeting immediately following consummation of the reorganization for the adoption of internal governance documents and the election of officers in such manner as the internal governance documents may prescribe. Any action by a mutual holding company which, if taken by a business corporation, would require the approval of its shareholders under 11A V.S.A. chapter 10, 11, 12, or 14, shall require the vote of concurrence of the corporators of the mutual holding company and in such proportion of the corporators as would be required for the approval of similar action by shareholders of a business corporation. (3) The general purpose of a mutual holding company shall be conducting and carrying on the business and activities of a financial institution holding company. A mutual holding company shall not take deposits. It shall have the general powers of business corporations as set forth in 11A V.S.A.  3.02 and shall have the powers of, and be subject to the limitations on, bank holding companies under the federal Bank Holding Company Act of 1956, as amended or the Savings and Loan Holding Company Act, as amended, as the case may be. Without limiting the generality of the foregoing and subject to provisions of applicable state and federal law, a mutual holding company may: (A) invest in the stocks and securities of any depository institution;(B) acquire control of any depository institution;(C) merge or consolidate with or otherwise acquire another mutual holding company;(D) merge or consolidate any subsidiary of the mutual holding company with another subsidiary thereof or transfer all or a portion of the assets of one such subsidiary to another; (E) make capital contributions and loans to its subsidiaries and affiliates and otherwise assist them financially; (F) engage in, directly or indirectly through a subsidiary, any non-banking activity authorized for a bank holding company under state or federal law or regulation; (G) issue capital debentures;(H) pledge the common stock of its subsidiaries to secure the indebtedness of the mutual holding company, provided that the proceeds of such indebtedness are used to fund the business operations, or to effect other business purposes, of the mutual holding company or its subsidiaries; and (I) sell or transfer the common stock of its mutual holding company subsidiary financial institution, provided that the Commissioner has approved the transaction, and provided further that it does not result in the mutual holding company holding less than 51 percent of the outstanding stock of the mutual holding company subsidiary financial institution. (4) A mutual holding company may convert from mutual to investor-owned form subject to the same procedures and requirements as are applicable to the conversion of a mutual or cooperative financial institution to investor-owned form under chapter 206 of this title. (5) The mutual holding company shall obtain the Commissioners approval before entering into any transaction described in subdivision (b)(3)(B), (C), or (D) of this section. In addition to any other applicable law governing the approval of the transaction, the Commissioner shall disapprove any transaction which is unfair to the holders of the proprietary interests in the mutual holding company. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 20105. Chartering of mutual holding company subsidiary financial institution
(a) Procedures. The procedures for the organization of a mutual holding company subsidiary financial institution shall be as prescribed in chapter 202 of this title, except that: (1) A majority of the governing body of the reorganizing mutual or cooperative financial institution may serve as the incorporators of the mutual holding company subsidiary financial institution being formed and as the petitioners seeking approval of its incorporation. (2) The initial capital requirement of section 12103 of this title shall not apply prior to the effective date of the reorganization. (3) If the Commissioner grants the petition under 12102 of this title, he or she shall condition such approval upon the transfer by the reorganizing mutual or cooperative financial institution to the mutual holding company subsidiary financial institution (in organization), before such transferee shall commence business, of assets having a value in excess of the amount of the transferred liabilities, as determined by the Commissioner, such that the mutual holding company subsidiary financial institution will at the time of such transfer meet all applicable net worth and capital adequacy requirements prescribed by state or federal statutes or regulations. (b) Filing of amended charter. Contemporaneously with consummation of the reorganization, duplicate originals of the amended and restated charter adopted by the mutual or cooperative financial institution under section 20102 of this title, governing the continuing entity as a mutual holding company, shall be filed in the Office of the Secretary of State. The amended and restated charter of the continuing entity as a mutual holding company shall take effect as of the date of the filing of such duplicate originals in the Office of the Secretary of State. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 20106. Issuance of capital stock and debentures by reorganized savings financial institution
A mutual holding company subsidiary financial institution may issue up to 49 percent of its voting common stock to persons other than the mutual holding company. Depositors of a mutual holding company subsidiary financial institution at the time of commencement of any public offering of voting common stock shall be given the opportunity to participate in such offering in accordance with terms reasonably established by the governing body. A mutual holding company subsidiary financial institution may issue nonvoting stock, preferred stock, or capital debentures to the mutual holding company or to any person other than the mutual holding company. The issuance of stock or debentures by a mutual holding company subsidiary financial institution shall be subject to the procedures and requirements of chapter 204 of this title; provided, however, that the liquidation rights of any preferred shareholders shall be limited to repayment of their original investment in such shares and any dividends earned but unpaid prior to such liquidation. (Added 1999, No. 153 (Adj. Sess.),  2, eff. Jan. 1, 2001.) 
 30101. Definitions
As used in this part:(1) Chief executive officer means the person appointed by the governing body to be in charge of the operations of the credit union, regardless of the title given to such person. (2) Commissioner means the Commissioner of Financial Regulation.(3) Community development credit union means a credit union that serves predominantly low income members, as defined by the Commissioner, or a credit union that meets the requirements of a community development financial institution as defined in the Community Development Banking and Financial Institutions Act of 1994, 12 U.S.C.  4702(5). (4) Corporate credit union means a credit union organized under subchapter 7 of chapter 221 of this title whose field of membership consists primarily of other credit unions. (5) Credit union means any Vermont credit union, state credit union, or federal credit union. (6) Credit union service organization or CUSO means an entity, organized under subchapter 7 of chapter 222 of this title or organized under state or federal law, whose services are closely related to credit union business, are convenient and useful to credit union business, are reasonably related to the operations of a credit union, or are financial in nature, as determined by the Commissioner. (7) Department means the Vermont Department of Financial Regulation.(8) Director means a member of the governing body of a credit union.(9) Executive committee means the committee, if any, established by the governing body under section 31303 of this title. (10) Federal credit union means a credit union organized pursuant to the Act of Congress, entitled the Federal Credit Union Act, 12 U.S.C. Chapter 14, as amended. (11) Financial institution means a financial institution as defined in subdivision 11101(32) of this title. (12) Governing body means the body that oversees the affairs of a credit union. The governing body may also be referred to as the board of directors, board of trustees, or board of managers, depending upon the organizational structure of the credit union. (13) Home state means, for a federal credit union, the state in which the main office of the federal credit union is deemed to be located, and for a state credit union, the state by which the credit union is chartered. (14) Host state means a state, other than the home state of a credit union, in which the credit union maintains or seeks to establish and maintain an office. (15) Immediate family member means persons related by blood, civil marriage, or civil union and includes foster children, stepchildren, and adopted children, as well as surviving spouses of persons who were members in good standing at the time of their death. (16) Insider means a director, an executive officer, a member of a governing-body-appointed committee, a member of an elected committee, a member of senior management, or any person identified by the governing body as someone who participates or has authority to participate in the major policy making functions of the credit union. (17) Member means a person or entity within the credit unions field of membership who has been duly admitted as a member, has paid any required entrance or membership fee, has paid in one or more shares, and has complied with such other requirements as the organizational documents specify. (18) Member business loan means any loan, line of credit, or letter of credit, the proceeds of which will be used by the member for the following purposes, subject to rules adopted by the Commissioner: (A) commercial;(B) corporate;(C) agricultural; or(D) other business investment property or venture.(19) Net worth means the retained earnings balance of the credit union at quarter end as determined under generally accepted accounting principles. Only undivided earnings, including any segregated allocations of undivided earnings, are included in net worth. For community development credit unions, net worth also includes secondary capital accounts that are uninsured and subordinate to all other claims. (20) Organizational document means the credit unions charter, certificate of organization, articles of incorporation, articles of association, articles of organization, bylaws or other internal governance documents, operating agreement, partnership agreement, or any other similar document pertaining to the credit union. (21) Regular reserve account means the account established and maintained in accordance with section 31502 of this title for the purpose of absorbing losses that exceed undivided earnings and other appropriations. (22) Reserves means all reserves, including the allowance for loan and lease losses account, undivided earnings or surplus, and accumulated gain or loss on available for sale securities. (23) Retained earnings means undivided earnings, regular reserves, and any other appropriations designated by management or by state or federal regulatory authorities. (24) State credit union means a credit union organized under the laws of a state other than Vermont or by special act of the legislature of a state other than Vermont and is regulated in its home state in an equivalent manner, as determined by the Commissioner, to a Vermont credit union. Nothing in this definition shall be deemed to be a grant of authority to any person to operate as a credit union unless otherwise authorized under law. (25) Supervisory committee means the committee established in accordance with the standards and procedures established in section 31306 of this title. (26) Vermont credit union means a credit union organized under the laws of the State of Vermont. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2009, No. 3,  12a, eff. Sept. 1, 2009; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 30201. Administration
Any state-chartered credit union organized or operating in Vermont shall be under the supervision of the Commissioner of Financial Regulation. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 30202. Fees and Department expenses
The provisions of sections 18 and 19 of this title shall apply to credit unions in the same manner as they apply to financial institutions. Except for fees related to the formation of a credit union, formation of a credit union service organization, and formation of a corporate credit union, credit unions with less than $30 million in assets shall not be charged more than $100.00 per service for the services described in subsection 19(a) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30203. Rules and regulations
The Commissioner may adopt rules as may be necessary for the proper conduct of credit unions organized or operating under chapters 220226 of this title. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  319, eff. July 1, 2022.) 
 30301. Office hours
(a) A credit union shall establish the days and hours its offices are open for business. The credit unions governing body is responsible for determining the scope of operations of each office, including the services to be provided and the days and hours of operation. (b) A credit union shall post the days and hours of operation at or near the public entrances to its offices and shall provide customers with reasonable advance notice of reduction in services or hours of operation. (c) Any act authorized, required, or permitted to be performed at, by, or with respect to any credit union on a day the credit union is closed may be performed on the next succeeding day the credit union is open for business, and liability or loss of rights of any kind to such credit union shall not result from this delay. (d) A copy of such schedule of office hours shall be filed with the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005.)
 30302. Closing for cause
A credit union may temporarily close any of its offices for reasons that include good cause, extreme weather conditions, and community events. If a credit union temporarily closes any of its offices for all or any part of a day it is normally open for business, the credit union shall post a conspicuous notice of the closing at all points of public access to the closed offices. A closing may not become effective until such notice is posted at the office to be closed. Posting this notice relieves the credit union from liability for failure to perform any of the business of the credit union at the closed offices. The Commissioner may adopt rules governing the form and content of the notice required under this section and may require dissemination of the notice of closing by any other reasonable means. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30303. Emergency closing by credit union
If an emergency arises or is so imminent and immediate as to interfere with or threaten the conduct of normal business transactions or the safety and welfare of a credit unions plant, assets, or personnel, the credit union officer or official in charge of any office open to the public may determine not to open the office so threatened or close the same, if open. The credit union shall notify the Commissioner of the emergency closing as soon as reasonably possible. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30401. Preservation of records
(a) A Vermont credit union and any state-chartered credit union with an office in this State shall keep such books, accounts, and records relating to all of its transactions that will enable the Commissioner to ensure full compliance with the laws of this State. Each such credit union shall retain its business records for such periods as prescribed by the Commissioner by regulation. (b) Any such credit union may dispose of any record which has been retained for the period prescribed by or in accordance with the regulation for retention of records of its class, and thereafter shall be under no duty to produce the record in any action or proceeding. (c) Records required to be preserved and retained by law or regulation may be maintained in paper, photograph, microprocess, magnetic, digital, mechanical, or electronic media, or in or by any other information storage device or process which forms a durable medium providing reasonable assurances against tampering and degradation of any reproduction of the original record, and which can be accurately transferred to paper in a legible written form within a reasonable time. Records maintained in a computer-based format shall be archival in nature only, so as to preclude the possibility of alteration of the content of the record by computer once the record has been transferred to that format. Any record reproduced from a record maintained in compliance with this subsection shall have the same force and effect as the original thereof and may be admitted in evidence equal to the original. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30501. Financial reports
(a) The Commissioner shall require each credit union to submit a quarterly report of its condition within 30 days of the end of each calendar quarter in such manner and on such forms as the Commissioner may require. Reports shall be verified to be true, correct, and complete by the oath of the person preparing the report. (b) The Commissioner may require a credit union to file additional reports or special reports at such frequency and within such time periods as the Commissioner may require in his or her discretion. The Commissioner may require that such additional or special reports include such information and be in such format as the Commissioner may direct. (c) Promptly following the completion of any annual audit, any verification of member accounts, or any other verification or examination performed by or at the request of the supervisory committee, the supervisory committee shall file a copy of such written report with the governing body. (d) Each credit union shall forward to the Commissioner a copy of all reports required by the National Credit Union Administration, or any successor thereof. (e) If any report is not filed by the date it is due, a fine of not more than $100.00 for each day the report remains in arrears may be levied against the offending credit union. If the report is not filed within 15 days of the due date, the Commissioner may, after written notice to the chief executive officer of the credit union of its intention to do so, suspend or revoke the certificate of approval, issue a cease and desist order, take possession of the business and property of the credit union, order its liquidation in accordance with section 36101 of this title, or take any other action permitted by law or regulation. (f) The Commissioner, in his or her discretion, may accept reports filed with other regulators for purposes of the requirements of this section. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30502. Periodic reports from state credit unions with an office or activity in this State
(a) The Commissioner may require periodic reports from any state-chartered credit union that has established and maintains an office in this State or that conducts any activity in this State. (b) Any reporting requirements prescribed by the Commissioner under this section shall be: (1) consistent with the reporting requirements applicable to credit unions incorporated under the laws of this State; and (2) appropriate for the purpose of enabling the Commissioner to carry out his or her responsibilities under the laws relating to branching, offices, or activities. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30503. Exemption from annual report to Secretary of State
Vermont credit unions shall not be required to make any annual report to the Vermont Secretary of State. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30601. Examinations
(a) The Commissioner shall conduct a regular examination of the condition of each Vermont credit union at least once every three years or more frequently as the Commissioner deems prudent. (b) The Commissioner may at any time conduct a special examination or may expand the scope of any regular examination. An entity examined pursuant to this subsection shall be responsible for examination fees and expenses as provided in sections 18 and 19 of this title. (c) The Commissioner shall be given access to all the files, books, accounts, securities, and assets of the credit union and any person under contract with it to perform services for the credit union that the Commissioner deems material to the financial condition of the credit union and shall be afforded every reasonable facility for making an examination of the affairs of the credit union and such person under contract. (d) Whenever the Commissioner deems it necessary, the Commissioner may examine any company which is owned in whole or in part by a Vermont credit union or which is found by the Commissioner to be controlled by a Vermont credit union. (e) A report of the examination shall be forwarded to the chairperson of the credit unions governing body after the completion of the examination. The report shall contain comments relative to the management of the affairs of the credit union and also as to the general condition of its assets. Within 30 days of the receipt of the report, a general meeting of the directors and committee members shall be called to consider matters contained in the report. Upon request of the credit union, a representative of the Department shall attend the meeting. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30602. Confidentiality of investigation and examination reports
(a) Regardless of source, all records of investigations, including information pertaining to a complaint by or for a consumer, and all records and reports of examinations by the Commissioner, whether in the possession of a supervisory agency or another person, shall be confidential and privileged, shall not be made public, and shall not be subject to discovery or introduction into evidence in any private civil action. No person who participated on behalf of the Commissioner in an investigation or examination shall be permitted or required to testify in any such civil action as to any findings, recommendations, opinions, results, or other actions relating to the investigation or examination. The Commissioner may, in his or her discretion, disclose, publish, or authorize the disclosure or publication of any such record or report or any part thereof to civil or criminal law enforcement authorities for use in the exercise of such authoritys duties, in such manner as the Commissioner may deem proper. (b) For the purposes of this section, records of investigations and records and reports of examinations shall include joint examinations by the Commissioner and any other supervisory agency. When such records are considered confidential by such agency or foreign government and the records are in the possession of the Commissioner, records of investigations and reports of examinations shall also include records of examinations and investigations conducted by: (1) any supervisory agency; and(2) the supervisory agency of any foreign government with jurisdiction over any credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30603. Examinations by federal regulatory agencies; departmental participation
Where an examination is normally conducted by the Department jointly with a federal regulatory authority, the Commissioner, at such times as the Commissioner deems necessary or appropriate because of departmental fiscal restraints, may reduce or eliminate the departments participation in such examination. Where the Commissioner determines such reductions are necessary or appropriate, the Commissioner is authorized to rely on the examination report of the federal regulatory authority as the basis for exercising his or her powers and discharging his or her responsibilities under this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30604. Examinations; cooperative agreements
(a) To the extent consistent with section 30605 of this title, the Commissioner may make such examinations of any office established and maintained in this State by a state credit union as the Commissioner may deem necessary to determine whether the office is being operated in compliance with the laws of this State and in accordance with safe and sound practices. The provisions of sections 18, 19, 30601, 30602, and 30603 of this title shall apply to such examinations. (b) The Commissioner may enter into contracts with any credit union supervisory agency that has concurrent jurisdiction over a Vermont credit union or a state credit union maintaining an office or location in this State to engage the services of such supervisory agencys examiners, or to provide the services of the Commissioners examiners to such supervisory agency. (c) The Commissioner may enter into joint examinations or joint enforcement actions with other supervisory agencies having concurrent jurisdiction over any activity engaged in by a credit union in Vermont, over any office or location established and maintained in this State by a state credit union, or any office or location located in any host state that is established and maintained by a Vermont credit union; provided that the Commissioner may at any time take such actions independently if the Commissioner deems such actions to be necessary or appropriate to carry out his or her responsibilities under this title or to ensure compliance with the laws of this State; but provided further, that in the case of a credit union that has its principal place of business in a state other than this State, the Commissioner shall recognize the authority of the home state regulator over organizational governance matters and the primary responsibility of the home state regulator with respect to safety and soundness. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30605. Cooperative and other agreements
(a) The Commissioner may enter into cooperative, coordinating, and information-sharing agreements with any other governmental agency, the Federal Home Loan Bank, or any organization affiliated with or representing one or more governmental agencies with respect to the periodic examination or other supervision of any activity, office, or location in this State of a state credit union, or any activity or office of a Vermont credit union located in any host state. Such agreements may be used to resolve conflicts arising from inconsistent regulatory requirements and to specify the manner in which any application process under section 33102 or 33103 of this title shall be coordinated. (b) Agreements under this section may also be entered with any other regulatory agencies on matters affecting any credit union organized or doing business in this State. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2017, No. 1,  3, eff. Feb. 23, 2017.) 
 30701. Enforcement powers of Commissioner
(a) The Commissioner may:(1) Restrict the withdrawal of share or deposit accounts from a Vermont credit union or a Vermont office of a state-chartered credit union when the Commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of members in the affected credit union. (2) Order any person to cease violating this title, a lawful regulation, or order of the Commissioner issued under it, or to cease engaging in any unsafe or unsound practice. (3) Except as provided in subdivision (4) of this subsection, impose an administrative penalty of not more than $15,000.00 upon any credit union or any person who, for each violation of this title, a lawful regulation, or order of the Commissioner issued under it: (A) knowingly violates this title or a lawful regulation or order issued under it;(B) has knowingly engaged or participated in any materially unsafe or unsound practice in connection with a credit union; or (C) has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union, including, violations of section 31313 of this title. (4) Impose an administrative penalty of not more than $100.00 per day on any person who fails without good cause to file any report or other filing under this title when due. (5) Remove from a Vermont credit union or state credit union regulated under this title any director, officer, committee member, employee, agent of the credit union, or other person who: (A) knowingly violates this title or a lawful regulation or order issued under it;(B) is convicted of a crime involving dishonesty;(C) has knowingly engaged or participated in any materially unsafe or unsound practice in connection with the credit union; (D) has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the credit union; or (E) is not eligible for bond coverage or who loses his or her ability to be covered by a bond. (b) In determining the amount of any administrative penalty assessed pursuant to this section, the Commissioner shall consider the following factors: (1) the appropriateness of the administrative penalty with respect to the financial resources and good faith of the person or credit union charged; (2) the gravity of the violation or practice;(3) the history of previous violations or practices of a similar nature;(4) the economic benefit, if any, derived by any person from the violation or practice;(5) whether the credit union has suffered or probably will suffer financial loss or other damage; (6) whether the interest of members could be seriously prejudiced by such violation, practice, or breach of fiduciary duty; or (7) other factors as justice may require.(c)(1) Except as provided in subdivision (2) of this subsection, the Commissioner shall provide notice of any enforcement order proposed pursuant to this section and the grounds therefore by mail to the credit union and to any person named as a party to the enforcement proceeding. The credit union or any person so served may, within 30 days after service on the credit union, request that the Commissioner hold a hearing. If no hearing is requested, the proposed order shall become final 30 days after service on the credit union or such person. The provisions of 3 V.S.A. chapter 25 and any applicable Department rules shall govern any hearing held by the Commissioner under this section. An appeal under this section shall be filed within 30 days after the date of the Commissioners decision and shall be to the Washington Superior Court. (2) Notwithstanding subdivision (1) of this subsection, the Commissioner may, ex parte without notice, issue any enforcement order under this section in any case in which the Commissioner determines such action is necessary to: (A) conserve the assets of any credit union; or(B) protect the interests of the members of such credit union.(d) The hearing on a removal order shall be private unless the Commissioner determines that a public hearing is necessary to protect the public interest. If the Commissioner deems it necessary to ensure the continued safety and soundness of the credit union, the Commissioner may, in his or her discretion, order an immediate suspension of any person pending completion of further administrative proceedings on his or her removal. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2013, No. 29,  18, eff. May 13, 2013; 2021, No. 105 (Adj. Sess.),  320, eff. July 1, 2022.) 
 30702. Power of Commissioner to impose corrective action
(a) The Commissioner may, in addition to any other powers exercisable by the Commissioner under the provisions of this title, require a Vermont credit union or state credit union with an office in this State to: (1) maintain its accounts in accordance with such rules as the Commissioner may prescribe having regard to the size of the organization; (2) observe methods and standards which the Commissioner may prescribe for determining the value of various types of assets; (3) charge off or sell the whole or part of an asset which was acquired in violation of:(A) the credit unions investment policy;(B) the credit unions loan policy; or(C) an order of the Commissioner;(4) write down an asset to its market value;(5) record liens and other interests in property;(6) obtain a financial statement from a borrower to the extent that the credit union can do so; (7) obtain insurance against damage to real estate taken as security;(8) search, or obtain insurance of, the title to real estate taken as security;(9) maintain adequate insurance against such other risks as the Commissioner may deem necessary and appropriate for the protection of members and the public; and (10) maintain such additional policies and procedures as the Commissioner may require.(b) Any order of the Commissioner issued under this section shall be subject to subsection 30701(c) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  321, eff. July 1, 2022.) 
 30703. Criminal penalties
(a) It shall be a criminal offense, punishable by a fine of not more than $1,000.00 or imprisonment of not more than one year, or both, for any person to violate any existing order of the Commissioner, or, after receipt of a removal order or an order assessing a penalty, to perform any duty or exercise any power of or on behalf of any credit union until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the Commissioner or by a court of competent jurisdiction. (b) It shall be a criminal offense, punishable by a fine of not more than $10,000.00 or imprisonment of not more than one year, or both, for any person to violate willfully any existing order of the Commissioner, or, after receipt of a removal order, or an order assessing a penalty, to perform willfully any duty or exercise any power of or on behalf of any credit union until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the commissioner or by a court of competent jurisdiction. (c) An executive officer, director, or an appointed or elected member of a credit union committee subject to the laws of this State under this title who willfully misapplies any of the monies, funds, or credits of such credit union, or any of the monies, funds, assets, or securities entrusted to the care of such credit union, or to the care or custody of such executive officer, director, or member, shall be fined not more than $100,000.00 or imprisoned not more than five years, or both. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30704. Indemnification
A credit union shall not indemnify any person for any penalty or fine imposed under this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30705. Commissioners coordination of enforcement and corrective action with home state
The Commissioner shall promptly give notice to the home state supervisory agency of each enforcement or corrective action proposed to be undertaken against a state credit union and, to the extent practicable, shall consult and cooperate with the home state regulator in pursuing and resolving such enforcement action. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30801. Application of subchapter
(a) An application required to be filed under chapter 221, 224, or 225 of this title for the approval of the Commissioner, including an application for a charter, merger, acquisition, conversion, change in bylaws, change in organizational documents, or other similar request, shall be submitted to and considered by the Commissioner in accordance with the provisions of this subchapter. (b) An application required to be filed under chapter 222 or 223 of this title for the approval of the Commissioner shall be filed on a form prescribed by the Commissioner and considered in accordance with the standards in section 30803 of this title. If the Commissioner finds that the application promotes the general good, a certificate of approval may be issued in summary fashion. No further approval shall be required. (c) Nothing in this subchapter shall prevent the Commissioner from issuing a certificate of approval for any application that the Commissioner finds may be approved as filed without further process. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30802. Applications
(a) Upon receipt of an application subject to this section in the form prescribed by the Commissioner, the Commissioner shall determine whether the application is complete. The Commissioner shall have the power to request modifications in, and additional information relating to, any application prior to certifying its completeness. (b) As soon as the application is deemed substantially complete, the Commissioner may order the applicant to provide notice of the application in the manner and form as he or she may prescribe. (c) Any person may submit written comments on the proposed application to the Commissioner. If the Commissioner orders publication or other notice to be given, he or she shall establish a deadline for receipt of written comments on the application which shall be no less than five business days following the completion of publication or other notice. The Commissioner may, but shall not be compelled to, consider written comments filed after the close of the written comment period. All comments shall be maintained in the public files of the department. (d) Applications accepted by the Commissioner shall be placed on public file at the office of the department and shall be made available for public inspection or copying, at cost; provided that any information that is exempt from public inspection under 1 V.S.A. chapter 5 shall be removed before public inspection of the file is permitted. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30803. Hearings on applications; decisions; general good standard
(a) The Commissioner may conduct public hearings on any application subject to this subchapter in his or her discretion. (b) After consideration of all relevant matters presented in the application, in any written comments, in any department investigation, and at any hearing, the Commissioner shall issue a decision approving or disapproving the application. (c) If the Commissioners decision is favorable, a certificate of approval shall issue with the decision. If the Commissioners decision is not favorable, the Commissioner shall provide the reasons for the disapproval. (d) No credit union shall commence operations; open an office; or effectuate a merger, acquisition, conversion, reorganization, or dissolution; amend its bylaws or organizational documents; or take any other similar action without first securing a certificate of approval. (e) The Commissioner shall approve an application if he or she determines that the proposed transaction promotes the general good of the State of Vermont. (f) In determining whether the proposed transaction promotes the general good of the State of Vermont, the Commissioner may consider the following factors: (1) the character, ability, and overall sufficiency of the management, including directors or organizers of the credit union; (2) the adequacy of capital and financial resources of the credit union;(3) the competitive abilities and future prospects of the credit union;(4) the convenience and needs of the market area or areas to be served;(5) the competitive effect of the proposed transaction on the price, availability, and quality of services in the market area or areas to be served; (6) the effect on the applicants members;(7) if an existing credit union, whether the proposed transaction contributes to the financial strength and success of the credit union; (8) the fairness and equities involved in any conversion, merger, or acquisition;(9) whether the credit unions proposal conforms to Vermont law; and(10) such other aspects of the proposed transaction as the Commissioner deems advisable. (Added 2005, No. 16,  1, eff. July 1, 2005.)
 30804. Notification of approval or denial of application
(a) Within 60 days after the filing of a completed application, the conclusion of any public hearing, and the conclusion of any public comment period, the Commissioner shall notify the applicant of the approval or denial of the application. (b) The Commissioner may extend the period to notify the applicant of the approval or denial of the application for an additional 30-day period by providing notice to the applicant within the time period specified in subsection (a) of this section that the Commissioner intends to extend the time period. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 30805. Review of denial of application
(a) If the application is denied, the applicant may request that the Commissioner reconsider the application by making such request in writing, within 15 days of the denial, responding specifically to the Commissioners stated reason or reasons for denial. The Commissioner shall reconsider the application in light of the response stated in the applicants request for reconsideration. (b) The Commissioner shall notify the applicant of the approval or denial of the applicants request for review of denial within 60 days of the filing of the request. (c) The applicant may request review by the Superior Court in Washington County upon action brought in the usual form by an aggrieved party within 15 days after written notice of the denial of the request for reconsideration. (Added 2005, No. 16,  1.) 
 30901. Taxation
Any credit union organized under this or any other credit union statute and all shares and deposits in the credit union shall be exempt from all taxation imposed by this jurisdiction before or after the enactment of this section or any taxing authority within this jurisdiction, and no law that taxes corporations in any form, or the shares or deposits thereof, or the accumulations thereon, shall apply to any credit union, except that any real property and any tangible personal property owned by any credit union shall be subject to taxation to the same extent as other similar property is taxed. However, this exception shall not permit the imposition of any sales or use taxes on the credit union. The shares of any credit union shall not be subject to transfer taxes, either when issued or when transferred from one member to another. The participation by a credit union in any government programs providing unemployment, Social Security, old age pension, or other benefits shall not be deemed a waiver of the taxation exemption hereby granted. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  322, eff. July 1, 2022.) 
 31101. Application to organize
(a) Application. Seven or more individuals, all of whom are within the proposed field of membership to be served by the credit union and all of whom are of legal age, may agree in writing to associate themselves for the purpose of forming a credit union pursuant to this chapter, and those persons shall be considered as the organizers of the applicant. The organizers shall file with the Commissioner a written application for permission to organize a credit union. The application shall contain the following: (1) the name by which the credit union will be known, which name shall be in compliance with the requirements of section 31202 of this title; (2) the purpose for which it is to be formed;(3) the city or town within this State where the credit unions principal office is to be located; (4) the par value of the shares of the credit union, which must be at least $5.00, but not greater than $25.00; (5) the names, addresses, and occupations of the organizers of the credit union, together with a statement as to the character, reputation, financial responsibility, and competence of such persons; (6) documents that set forth the proposed credit unions organizational structure and business plan, including: (A) a copy of the organizational and governing documents;(B) the names of the people who are to serve as the directors of the credit union until the initial meeting of the members or until their successors are elected and qualified, and the names, addresses, and occupations of the directors who will be voted on by the members at the initial meeting, together with a statement as to the character, reputation, and financial responsibility of each; (C) a business plan, including a three-year financial projection;(D) a list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the governing body, all members of any committees, and the executive officers; a statement as to the character, reputation, financial responsibility, and competence and experience in financial services and business of such persons, and such disclosure and conflict of interest statements as required by sections 31310 and 31313 of this title; (7) the proposed field of membership, specified in detail;(8) a survey of the demographic makeup of potential members which demonstrates that the potential members within the proposed field of membership are sufficient to support the likely success of the proposed credit union; (9) copies of any application filed with any other supervisory agency; and(10) any additional information the Commissioner may require.(b) Fees. At the time of making the application, the applicant shall pay to the Commissioner the charter fee required by section 30202 of this title. The Commissioner may charge the applicant for other services in accordance with section 30202. (c) Publication of notice. After determining that the application required by this section is complete, the Commissioner shall advise the organization or the organizers of the entity to publish any notice that will be required by the Commissioner under subchapter 8 of chapter 220 of this title. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  323, eff. July 1, 2022.) 
 31102. Issuance of certificate of approval; refusal to issue certificate of approval
(a) Certificate of approval. The Commissioner shall determine whether a certificate of approval shall be granted to organize a credit union and shall make the decision in accordance with the requirements of subchapter 8 of chapter 220 of this title. (b) Conditions. A grant of a certificate of approval may include such terms and conditions as the Commissioner determines necessary. These may include conditions regarding the organizational form of the credit union under this chapter. (c) Effect of refusal to issue certificate of approval. If the Commissioner refuses to issue a certificate of approval, the organizers may file a new application after one year from the date of the refusal. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31103. Requirements to commence business; minimum initial share deposits; certificate of authority
(a) At the time the certificate of approval is issued, the Commissioner shall issue an order granting permission to organize which shall set forth the minimum amount of share deposits that the credit union will be required to have to commence business, which in no event shall be less than $25,000.00. (b) The Commissioner may, in particular cases, require different minimum share deposit requirements for different credit unions, and in determining the minimum amount of share deposits for a proposed credit union, may consider such factors as the population of the area where the proposed credit union is to be located, the field of membership for the proposed credit union, competition in that locale, the projected volume and type of business to be conducted, the inherent risks in the business to be conducted, and the need to protect members and other creditors of the credit union. (c) All share deposits shall be in the form of cash or pledges, unless otherwise approved by the Commissioner. (d) Upon receipt of a certificate of approval pursuant to section 31102 of this title, the organizers set forth in the application for permission to organize shall hold the credit unions charter until such time as the requirements of this subchapter are met or the Commissioner determines that said requirements have not been met. (e)(1) Within 30 days of receipt of a certificate of approval pursuant to section 31102 of this title, the first meeting of the organizers of the credit union shall be called by a notice signed by the organizer or organizers, if any were designated in the application for that purpose, or by a majority of the organizers. Such notice shall state the time, place, and purposes of the meeting. A copy of the notice shall be given to each organizer at least three days before the date appointed for the meeting, or left at each organizers residence or usual place of business, or deposited in the post office and addressed to such organizer at that organizers residence or usual place of business, and another copy thereof, together with an affidavit of one of the organizers that the notice has been duly served, shall be recorded with the records of the credit union. If all the organizers, in writing indorsed upon the application to organize, waive such notice and fix the time, place, and purposes of the meeting, no notice is required. (2) At such meeting or at any adjournment thereof, the organizers shall by ballot select a temporary secretary, adopt the organizational documents of the credit union and, in such manner as the internal governance document or the law provides, elect directors and officers. All persons so elected shall qualify for their offices as provided in subchapter 3 of this chapter. (3) The temporary secretary shall make and attest to a record of the proceedings until the secretary has been chosen and sworn, including a record of such choice and qualification. (4) The secretary shall file copies of the organizational documents with the Commissioner within 10 days after their adoption. Within 15 business days of receipt, the Commissioner shall, after examining such organizational documents for conformance with the requirements of this title and other applicable law, approve or disapprove the filed documents. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31104. Submission to Secretary of State
Following the meeting required under subdivision 31103(e)(1) of this title and approval of the organizational documents by the Commissioner under subdivision 31103(e)(4) of this title, the directors so elected shall submit to the Secretary of State an attested copy of the credit unions organizational documents as required by Title 11B. The Secretary of State shall determine whether such organizational documents satisfy the requirements of Title 11B. If such requirements are met, the Secretary of State shall file the organizational documents according to the provisions of law. The filing of the organizational documents by the Secretary of State shall not authorize the transaction of business by the credit union until all conditions of this subchapter are satisfied. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31105. Payment of share deposits
(a) A credit union organized under this chapter shall not commence business until the minimum share deposits required by the order granting permission to organize have been deposited in cash to the credit of the credit union in a depository designated by the governing body. Share deposits taken as pledges pursuant to subsection 31103(c) of this title must be converted to cash and deposited to the credit of the credit union to be included in the minimum share deposit requirement of this subsection. (b) At such time as the credit union has received in cash the minimum share deposits required in section 31103 of this title, a complete list of the share depositors, with the name, address, occupation, and the amount of the share deposited by each shall be filed with the Commissioner, which list shall be verified by an officer and the secretary of the credit union. Such deposits shall be handled by the credit union in accordance with subchapter 5 of this chapter. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31106. Certificate to commence business; insurance; bond
(a) Upon receipt of the statement required in subsection 31105(b) of this title, the Commissioner shall cause an examination to be made to determine if the minimum share deposits have been credited to the account of the credit union, and that all requirements of this section and other provisions of law have been met. (b) Upon completion of the examination, and if it appears to the Commissioner that the whole of the required share deposits has been paid in, the Commissioner shall issue a certificate under seal authorizing the credit union to commence business, and this certificate shall be filed with the Secretary of State. (c) The certificate of authority to commence business shall be conclusive of the facts stated in the certificate, and it shall be unlawful for any credit union to begin transacting business until a certificate of authority to commence business has been granted. The certificate of authority to commence business shall be conclusive of the facts stated therein, and it shall be unlawful for any credit union to begin transacting business until a certificate of authority to commence business has been granted. (d) A credit union shall not commence business until its shares and deposits are insured by the National Credit Union Administration (NCUA) or its successor agency as required by section 31601 of this title. (e) A credit union shall not commence business until it has acquired such bonds and insurance as required by section 31602 of this title. (f) In the case of a violation of this provision, the officers and directors assenting to the activity shall be personally liable for all debts incurred before the certificate is issued and filed. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  324, eff. July 1, 2022.) 
 31107. Failure to commence business
(a) The proposed credit unions certificate of approval and its right to do business shall lapse if the credit union fails to commence business as a credit union within two years after receiving a certificate of approval under section 31102 of this title. (b) Notwithstanding the time limitation in subsection (a) of this section, the Commissioner may extend the period in which business shall be commenced for a period not to exceed six months upon written application by the proposed credit union setting forth the reasons for the extension, filed before the expiration of the time period established by subsection (a) of this section. The Commissioner shall notify the Secretary of State of any such extension granted by the Commissioner. (c) Upon the expiration of the time periods set forth in subsections (a) and (b) of this section, the contributors of initial share deposits of such proposed credit union shall be entitled to the return of any amounts which they have paid to the credit union, and all expenses incurred in the organization of the proposed credit union shall be borne by the original organizers who were named in the application for permission to organize. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31108. Amendment to articles of incorporation
(a) The articles of incorporation, or comparable organization document as applicable to the credit union, may be amended as provided in the bylaws. Notwithstanding the provisions of the bylaws, however, written notice of the meeting and text of the proposed amendment shall be given to each director at least seven days prior to the meeting and to each member in accordance with section 31408 of this title. (b) The credit union shall file with the Commissioner within ten days after its adoption one copy of any proposed amendment. The credit union shall not amend its articles or comparable organizational document without the written approval of the Commissioner. (c) Following the Commissioners approval of the amendment, the credit union shall submit the amendment to the Secretary of State for filing as required by Title 11B. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31201. Bylaws; amendment of bylaws
(a) The organizers applying for the organization of a credit union shall adopt bylaws that prescribe the manner in which the business of the credit union shall be conducted. The bylaws shall include at least the following: (1) the name of the credit union, which name shall comply with the requirements of section 31202 of this title; (2) the field of membership of the credit union and the qualifications for membership;(3) the par value of shares;(4) the number of directors, supervisory committee members, and advisory directors, if applicable, the length of terms they serve, and the permissible term length of any interim director or supervisory committee member and procedures for election or appointment; (5) any qualification for eligibility to serve on the credit unions governing body or supervisory committee; (6) the frequency of regular meetings of the board and the supervisory committee, and the manner in which members of the board and supervisory committee are to be notified of meetings; (7) the powers and duties of board officers;(8) the manner in which a credit committee, credit manager, loan officer, or any combination thereof shall be responsible for the credit functions of the credit union; (9) the timing and manner of conducting the annual membership meeting and the provisions for voting; (10) the manner in which members may call a special membership meeting;(11) the manner in which members are to be notified of membership meetings;(12) the number of members constituting a quorum at a membership meeting;(13) conditions for payment on, receipt of, or withdrawal of shares and deposits;(14) provisions, if any, for the indemnification of directors, supervisory committee members, officers, employees, and others by the credit union, if not included in the articles of incorporation; and (15) any other provision which is not inconsistent with this chapter and such other matters as the governing board deems necessary. (b) The bylaws may be amended as provided in the bylaws. Written notice of the meeting and text of the proposed amendment, or a summary of the proposed amendment with a notice that a copy of the proposed amendment is available upon request, shall be hand-delivered or mailed to each director at least seven business days prior to any directors meeting to approve such amendment and shall be given to each member in the manner set forth in section 31408 of this title. Notice to a director may be given electronically if the director has specifically requested or consented to electronic notification of meetings. (c) The credit union shall file with the Commissioner, within ten days after its adoption, one copy of any proposed amendment. Any amendment to the bylaws of a credit union shall become effective only upon the written approval of the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31202. Credit union name
(a) The name of every credit union organized under this title shall include the phrase credit union. No credit union may adopt a name either identical to the name of any other credit union or entity doing business in this state or so similar to the name of any other credit union or entity doing business in this state as to be misleading or to cause confusion. (b) No person, other than a credit union incorporated under this title, the acts of other states, the Federal Credit Union Act, an association of credit unions, or an organization or corporation, whose membership or ownership is limited to credit unions or credit union organizations, may use a name or title containing the phrase credit union or any derivation thereof, or may represent itself as a credit union or conduct business as a credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31301. Number and election of directors
(a) The governing body of a credit union shall consist of an odd number of directors, at least five in number. The initial governing body shall be elected at the organizational meeting of the credit union as provided in subsection 31103(e) of this title, and thereafter by the members of the credit union at the annual meeting. (b) Each director shall hold office for the term provided in the bylaws as long as the director is qualified to serve and until the directors successor has qualified. The term of a director may not exceed three years. A director may serve more than one term. If directors are elected for terms in excess of one year, their terms of office shall be staggered so that, insofar as possible, an equal number expires each year. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31302. Duties of governing body
The governing body shall have authority for the general management of the credit union and, among other things, the governing body shall: (1) have the authority and responsibility for directing the operations, funds, and records of the credit union; (2) act upon applications for membership or appoint an executive committee, a membership committee, or one or more membership officers from among the members of the credit union, other than the treasurer, an assistant treasurer, the chief executive officer, an assistant chief executive officer, or a loan officer, who may be authorized by the governing body to approve applications for membership under such conditions as the governing body may prescribe; except that the membership committee or membership officers so authorized shall submit to the governing body or to the executive committee, if applicable, at each monthly meeting a list of approved or pending applications for membership received since the previous monthly meeting, together with such other related information as the bylaws or the governing body may require; (3) provide a blanket fidelity bond covering the directors, officers, employees, members of official committees, attorneys at law, and other agents as required by subsection 31602(a) of this title; (4) fill vacancies on the governing body until successors elected at the next annual meeting have qualified; (5) establish personnel policies, including policies for the compensation of employees;(6) authorize the employment and compensation of the chief executive officer and the treasurer;(7) authorize the employment of such person or persons as may be necessary to carry on the business of the credit union or delegate such authorization to the chief executive officer who shall hire such other persons necessary to carry on the business of the credit union, or contract with persons or organizations as may be necessary to carry on the operations of the credit union; (8) determine the number of shares and the amount of deposits that may be owned by a member, the limitations to apply alike to all members; (9) approve an annual operating budget for the credit union;(10) authorize the conveyance of property;(11) have the power to borrow or lend money to carry on the functions of the credit union;(12) have the power to appoint any special committees deemed necessary;(13) determine, from time to time, the interest rates not in excess of that allowed by law that shall be charged on loans to members, and authorize interest refunds, if any, to members in proportion to the interest paid by them on loans, or, at the discretion of the governing body, delegate to the executive committee or the chief executive officer the authority to establish interest rates pursuant to policies and guidelines adopted by the governing body; (14) establish lending policies and, within any limitations set forth in the credit unions bylaws, fix a maximum amount that may be lent with and without security to a member; (15) have the authority to review a loan application denied by a loan officer or denied by the credit committee, as applicable; (16) declare dividends on share accounts at a credit union and determine the interest rate which will be paid on deposits at a community development credit union, or, at the discretion of the governing body, delegate to the executive committee or the chief executive officer the authority to establish dividend rates and interest rates that will be paid on share accounts and on deposits pursuant to policies and guidelines adopted by the governing body; (17) establish investment policies and invest credit union funds, except that the governing body may designate an investment committee or any qualified individual or entity responsible for making investments under policies established by the governing body; (18) review and approve or reject loans to other credit unions that are not members if surplus funds warrant it, and review and approve or reject loans to members of the supervisory and credit committees; (19) suspend or remove any or all officers, or any or all members of the credit, supervisory, membership, or other committees from their positions on the committees for failure to perform their duties; (20) establish and maintain a system of internal controls consistent with applicable law;(21) review and ratify all written policies of the credit union at least annually;(22) perform such other duties as the members from time to time direct, and perform or authorize any action not inconsistent with this part and not specifically reserved by the bylaws to the members; and (23) establish other policies as the governing body deems reasonable or prudent, and such policies as required by law, by regulation, or by the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  325, eff. July 1, 2022.) 
 31303. Executive committee
(a) The executive committee, if one is appointed by the governing body, shall consist of an odd number of no fewer than three directors of the credit union. (b) The executive committee shall meet in accordance with section 31304 of this title and as often as necessary, and shall act for the governing body between meetings of the governing body in all other matters except for approval of policies and amendments to the organizational documents or bylaws, subject to such conditions and limitations as prescribed by the governing body. (c) The executive committee shall keep complete minutes of all of its actions, copies of which shall be submitted to the governing body at its next meeting. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31304. Meetings of governing body
(a) The governing body of a credit union shall meet as often as necessary and at least monthly, provided, that if the governing body delegates its authority to an executive committee, the executive committee shall meet during the months in which the governing body does not meet. The governing body shall meet at least six times a year, including once each quarter. The governing body and the executive committee, if appointed, shall keep complete minutes of all of their meetings, which minutes shall include the names of all persons present at each meeting. Minutes of the executive committee meetings shall be ratified by the governing board. (b) Unless the bylaws provide otherwise, the governing body may permit any and all directors to participate in all except one meeting per year of the governing body through the use of any means of communication by which all directors participating in the meeting may simultaneously hear each other and communicate during the meeting. A director participating in a meeting by this means is deemed to be present at the meeting. (c) At the meeting of the governing body following the annual meeting of members, the governing body shall elect officers of the governing board as provided in section 31305 of this title. (d) Unless a greater number is required by the bylaws, a majority of the governing body shall constitute a quorum. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the governing body unless the act of a greater number is required by this part or the bylaws of the credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31305. Officers
(a) At the first regularly scheduled meeting of the entire governing body at which a quorum is present following the organizational meeting and thereafter following each annual meeting, but in no event more than 30 days after such organizational meeting or annual meeting of the members, as applicable, the directors shall elect from their own number a chairperson of the governing body, and one or more vice chairpersons, a treasurer, and a secretary. Only the treasurer and the secretary may be the same individual. (b) Unless sooner removed, the terms of the officers shall be one year, or until their successors are chosen and have duly qualified. (c) The duties of the officers shall be prescribed in the bylaws.(d) The governing body shall appoint a person to act as the chief executive officer of the credit union and to be in charge of its operations. (e) A credit union may use any titles it chooses for the officials holding the positions described in this section, provided such titles are not misleading. (f) Any person elected to fill a vacancy caused by death, resignation, or removal of an officer shall be appointed by the governing body to serve for the unexpired term of such office until his or her successor is duly elected and qualified. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31306. Supervisory committee
(a) The supervisory committee shall consist of no fewer than three members of the credit union, none of whom shall simultaneously serve as a director, serve on the credit committee, serve as an officer of the credit union, and be otherwise regularly employed by such credit union. supervisory committee members shall be members of the credit union in good standing. (b) Supervisory committee members shall be appointed by the directors at the first regularly scheduled meeting of the entire governing body at which a quorum is present following the annual meeting of the members. supervisory committee members shall hold office for the term provided in the bylaws, as long as such supervisory committee member remains qualified to serve, and until the committee members successor has been duly appointed and qualified. The term of a supervisory committee member shall not exceed three years. A supervisory committee member may serve more than one term. If the supervisory committee members are appointed for terms in excess of one year, their terms of office shall be staggered so that, insofar as possible, an equal number expires each year. (c) The supervisory committee shall be responsible for ensuring that members of senior management and directors meet required financial reporting objectives and establish practices and procedures sufficient to safeguard members assets. To meet its responsibilities, the supervisory committee shall determine whether internal controls are established and effectively maintained, accounting records and financial reports are promptly prepared and accurate, relevant plans, policies, and procedures established by the governing body are properly administered, and the governing bodys plans, policies, and control procedures are sufficient to safeguard against error, carelessness, conflict of interest, self-dealing, and fraud. (d) The supervisory committee shall have the sole authority to engage or terminate outside and internal auditors. The supervisory committee may engage any assistance necessary for the performance of its duties, including having any audit, examination, or verification required by law, regulation, or bylaw. Any agreement between the supervisory committee and an outside auditor shall be documented by an engagement letter that specifies the terms, conditions, and objectives of the engagement or statement of agreed-upon procedures in accordance with this subsection and shall permit access by the Commissioner to the work papers of the auditor. (e) The supervisory committee shall make or cause to be made a comprehensive annual audit of the books and affairs of the credit union, including its assets, liabilities, capital, income, expense accounts, and the minutes of all governing body and governing-body-appointed committee meetings. Such audit shall cover the period elapsed since the last audit. The annual audit shall include an assessment of internal controls and security measures in place covering the credit unions electronic information processing and its electronic commerce systems, if any. Any compensated outside auditors performing audits for the supervisory committee shall be independent of any management employee, any member of the governing body, any member of a governing-body-appointed committee, the credit manager, any loan officer, and any member of the immediate families of any of these. The annual audit shall meet the following minimum guidelines: (1) a credit union with total assets of $100 million or more shall have an opinion audit of the credit unions financial statement performed by an independent licensed certified public accountant; and (2) a credit union with total assets of less than $100 million shall have:(A) An opinion audit of its financial statements performed by an independent licensed certified public accountant; or (B) an opinion audit of its balance sheet performed by an independent licensed certified public accountant; or (C) an agreed-upon procedures engagement performed by a person having adequate technical training and proficiency as an auditor commensurate with the level of sophistication and complexity of the credit union under audit, provided if such engagement is not comprehensive, the supervisory committee shall satisfy any remaining requirements of a comprehensive audit in accordance with this subsection and which, in any event, shall meet the minimum standards and guidelines established by regulation of the National Credit Union Administration (NCUA); or (D) a comprehensive audit performed by the supervisory committee or the credit unions internal auditors or the internal auditor of another credit union, which audit shall meet the minimum standards and guidelines established by regulation of the NCUA. (f) The supervisory committee shall perform or cause to be performed a verification of members accounts at least once every two years through: (1) verification of share and loan accounts of all members;(2) statistical sampling of member share and loan accounts done in connection with an opinion audit of the financial statements performed by an independent licensed certified public accountant; or (3) verification of accounts and passbooks in accordance with the requirements of the National Credit Union Administration. (g) The supervisory committee shall make any additional audits and supplemental verifications and examinations of the affairs of the credit union that it deems appropriate or that the governing body or Commissioner requires. (h) Promptly following the completion of an audit or other verification or examination, the supervisory committee shall: (1) file a written report at the main office of the credit union;(2) present the report to the governing body at its next meeting;(3) provide a summary of the results of the audit to the members of the credit union, orally or in writing, at the next annual meeting, and if the audit was not performed by the supervisory committee, the outside auditor shall provide the written or oral summary thereof; and (4) file a copy of the written report and any written summary with the Commissioner.(i) The supervisory committee shall provide related working papers, policies, and procedures concerning the annual audit, internal audit, examination, and verification to the Commissioner upon the Commissioners request, and shall require any independent licensed or certified public accountant, internal auditor, or any other auditor to provide such related working papers, policies, and procedures concerning the annual audit, internal audit, examination, and verification to the Commissioner upon the Commissioners request. The governing body shall require that the auditor submit to the governing body a signed report of the audit or examination showing the condition of the credit union within a reasonable period of time from the effective date of the audit or examination. (j) At any time that the supervisory committee discovers any operating practices of the credit union that it deems unsafe which have not been corrected by the governing body, the supervisory committee shall give notice to all credit union members of a special meeting of members to be held for the purpose of receiving the report of the supervisory committee of such operating practices. The membership of the credit union shall have the authority to accept or reject the report of the supervisory committee. (k) The supervisory committee shall meet as often as necessary and at least annually and shall keep complete minutes of all of its meetings, including the names of those members present. (l) If the supervisory committee or its independent auditor or other person fails to comply with requirements of this section or the terms of an engagement letter required by this section, the Commissioner may: (1) reject the audit report and provide a reasonable opportunity to correct deficiencies;(2) impose the remedies available in subsection (m) of this section, provided any of the conditions specified in that subsection are present; and (3) seek formal administrative sanctions against the supervisory committee or its independent auditor, or both. (m) The Commissioner may compel a credit union to obtain an audit which meets the minimum requirements of subdivision (e)(1) or (2)(A) of this section for any fiscal year in which any of the following three conditions are present: (1) the supervisory committee has not obtained or performed an audit;(2) the supervisory committee had obtained or performed an audit which does not meet the requirements of this section; or (3) the credit union has experienced serious and persistent recordkeeping deficiencies.(n) The Commissioner may compel a credit union to obtain an opinion audit of its financial statement performed in accordance with generally accepted auditing standards by an independent person who is licensed by the State of Vermont, even if such audit is not required by subsection (e) of this section, for any fiscal year in which the credit union has experienced serious and persistent recordkeeping deficiencies. (o) For purposes of this section, a recordkeeping deficiency is serious if the Commissioner reasonably believes that the governing body and the management of the credit union have not met financial reporting objectives in a timely manner and established practices and procedures sufficient to safeguard members assets. A serious recordkeeping deficiency is persistent when it continues beyond a usual, expected, or reasonable period of time. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2007, No. 178 (Adj. Sess.),  4; 2021, No. 105 (Adj. Sess.),  326, eff. July 1, 2022.) 
 31307. Credit committee; credit manager
(a) Except as provided in section 31313 of this title, the governing body may delegate, in accordance with its bylaws, all or part of its lending authority to a credit committee, a credit manager, one or more loan officers, or any combination thereof, who shall review and act on all applications for extensions of credit, or for release or substitution of collateral, in accordance with the loan policy prescribed by the governing body. (b) If the bylaws of a credit union provide for a credit committee, such committee shall consist of an odd number of three or more members of the credit union and may be appointed by the governing body or elected by the members, as provided in the bylaws. (c) No member of the credit committee shall simultaneously serve on the Supervisory Committee or on the governing body, and all such credit committee members shall be members of the credit union in good standing. (d) The credit committee, if any, shall meet as often as necessary, but at least monthly. All actions by the committee shall be by majority vote of those members present at any meeting at which a quorum is present. A majority of the credit committee shall constitute a quorum. The credit committee shall keep complete minutes of all of its meetings, including the names of those present. (e) The credit manager or loan officer shall provide to the governing body or the credit committee, if any, on at least a monthly basis, a complete listing of all applications for extensions of credit or for release or substitution of collateral that were reviewed and acted upon or, alternatively, inform the governing body that such information is available upon request. (f) A credit manager or loan officer shall not disburse the funds of the credit union for any extension of credit approved by such credit manager or loan officer. (g) An applicant for an extension of credit or release or substitution of collateral that has been disapproved by a credit manager or loan officer may appeal to the credit committee or, in the absence of a credit committee, to the governing body. In those instances where the credit committee made the initial denial of an applicants request for an extension of credit or release or substitution of collateral, the applicant may appeal to the governing body. Any such appeal to the credit committee or the governing body, as applicable, shall be acted upon at the next regular meeting of the credit committee or governing body. If the initial denial of the loan application has not been reviewed by the credit committee or governing body, as applicable, the notice of loan denial given to the member shall include a notice that the member has a right, upon written request, to appeal the loan denial to the credit committee or the governing body, as applicable. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31308. Duties of officers, directors, and committee members
(a) All officers, directors, and members of any committees of a credit union subject to the laws of this State under this title shall comply with the standards for such officers and directors established under Title 11B. Members of committees of credit unions shall comply with the same standards as directors. (b) All officers, directors, and members of the supervisory or credit committees of a credit union subject to the laws of this State under this title shall administer the affairs of the credit union fairly and impartially and without discrimination in favor of or against any particular member. (c) All executive officers, directors, and committee members shall comply with the conflict of interest standards established pursuant to section 31313 of this title. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2011, No. 21,  11.) 
 31309. Oaths of office; certificate of election
(a) Within ten days after election to any position, each person so elected or appointed shall execute an oath of office by which he or she agrees to accept, and diligently and faithfully to carry out, the duties and responsibilities of the position to which he or she has been elected and not negligently or willfully to violate, or permit to be violated, any provision of this title or the bylaws of the credit union. (b) The chairperson of the governing body and the secretary shall execute a certificate of election, which shall set forth the names and addresses of the officers, directors, and committee members elected or appointed. (c) The oath of office and the certificate of election shall be executed on forms prepared by the Department, and one copy of each shall be filed with the Department within 15 days after the election or appointment. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31310. Prohibited management interlocks
(a) Except with the Commissioners prior written approval, a director, officer, or employee of any other credit union or financial institution shall not at the same time be a director, officer, or employee of a credit union with a place of business or doing business in the State of Vermont. (b) The terms of this section shall not apply to:(1) a credit union which is in liquidation, receivership, conservatorship, or similar proceedings; (2) a corporate credit union;(3) a credit union service organization affiliated by reason of common ownership or control of at least 25 percent of the voting interest of such affiliated credit union service organization; or (4) any other relationship otherwise permitted under guidelines or regulations of federal supervisory authorities or the Commissioner adopted from time to time, relating to management interlocks. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31311. Suspension and removal
(a) The governing body of a credit union shall have the power to remove, by a two-thirds vote of its members at a regular or special meeting, a director or a governing-body-appointed committee member: (1) who fails, without good cause, to attend three consecutive meetings of the governing body or committee or one-half of such meetings held during a calendar year; (2) who is no longer qualified to serve; or(3) for any of the causes enumerated and in accordance with subsection (b) of this section.(b) The governing body of a credit union shall have the power to suspend at any time, by a two-thirds vote of its members, at a regular or special meeting, any director, member of a governing-body-appointed committee, officer, or agent for good cause, including: (1) a violation of any statute, regulation, or order applicable to such credit union;(2) the participation in any unsafe or unsound practice in connection with such credit union; (3) the commission of or participation in a crime which is punishable by imprisonment for a term exceeding one year under state or federal law, as charged in any information, indictment, or complaint, and if continued service or participation by such director, member of a governing-body-appointed committee, officer, or agent may pose a threat to the interests of the members of such credit union; (4) the failure of such person to perform his or her duties or breach of his or her fiduciary duty; (5) the use of his or her official position in a manner contrary to the interests of the credit union or its members; and (6) the breach of a written agreement with the Commissioner.(c) The suspension shall take effect immediately, and the Commissioner shall be notified promptly of such suspension. Within seven business days after the effective date of the suspension, the governing body shall cause notice to be given to all members of the credit union of a special meeting of members to be held for the purpose of hearing the report of the governing body regarding the suspension and voting on removal, provided such notice shall not be given if the director, member of a governing-body-appointed committee, officer, or agent who is subject to suspension resigns. The special meeting shall be held no more than 21 business days after the effective date of the suspension. The membership of the credit union shall have, by majority vote, the authority to accept or reject the report of the governing body. If such action involves removal, the credit union shall promptly notify the Commissioner of such removal. (d) If any person required to be bonded by this part or by applicable regulation shall cease to be bonded or shall lose his or her ability to be bonded, such person shall be suspended and removed immediately, and the Commissioner shall be notified promptly of such suspension and removal. (e) The supervisory committee shall have the power to suspend at any time, by a two-thirds vote of its members at a meeting called for that purpose, any director, member of a governing-body-appointed committee, officer, or agent for cause. The suspension shall take effect immediately, and the Commissioner shall be notified promptly of such suspension. Not later than seven business days after the effective date of the suspension, the supervisory committee shall cause notice to be given to all members of the credit union of a special meeting of members to be held for the purpose of hearing the report of the supervisory committee regarding the suspension and voting on removal, provided such notice shall not be given if the person who is subject to suspension resigns. The special meeting shall be held not more than 21 business days after the date of suspension. The membership of the credit union shall have the authority to accept or reject the report of the supervisory committee. The supervisory committee shall take any related action as the members deem necessary. If such action involves removal, the credit union shall promptly notify the Commissioner of such removal. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  327, eff. July 1, 2022.) 
 31312. Vacancies
A vacancy on the governing body, the supervisory committee, or any other governing-body-appointed or member-elected committee that exists due to the death, resignation, or removal of a director or committee member shall be filled by majority vote of the remaining directors, regardless of whether the remaining directors constitute a quorum. A director or committee member appointed by the governing body to fill a vacancy on a committee where the members elect the members of such committee shall hold office until the next annual meeting, at which time the members of the credit union shall vote to fill the remainder of the unexpired term. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31313. Conflict of interest
(a) The governing body of a credit union shall adopt a written conflict of interest policy that includes provisions addressing transactions with insiders, employees, volunteers, and their immediate family members, and other persons having a common ownership, investment, or other pecuniary interest in a business enterprise with such insiders and immediate family members of such persons. (b) An extension of credit to an insider, other than a residential real estate loan secured by a first lien on property that is owned or will be owned by the insider as a primary residence, shall require the approval of the governing body if such insider is the debtor, guarantor, endorser, or cosigner of the extension of credit. If the insider is a member of the governing body, an extension of credit shall require the approval of the supervisory committee as well as the approval of the noninterested members of the governing body. Notwithstanding the foregoing, a loan to an insider that, when aggregated with the amount of all other extensions of credit to such insider and to all related interests and all related persons of such insider, would not exceed five percent of the credit unions unimpaired capital and surplus or $25,000.00, whichever is less, may be approved solely by a majority of the noninterested members of any one of the following committees: (1) the credit committee, if any;(2) the supervisory committee; or(3) the governing body.(c) An insider of a credit union, or a professional retained by a credit union, shall not, directly or indirectly, participate in any decision affecting such persons pecuniary interest or the pecuniary interest of any immediate family member, or any corporation, partnership, or association other than the credit union in which such person is directly or indirectly interested. (d) An insider, an immediate family member of such insider, or any other person having a common ownership, investment, or other pecuniary interest in a business enterprise with an insider or immediate family member of such insider shall not obtain an extension of credit from the credit union with preferential rates, terms, or conditions, or act as guarantor or endorser thereon, and shall not be involved in the appraisal or valuation of assets which are to be used as collateral for an extension of credit to such person. (e) No insider or immediate family member of such insider shall receive, directly or indirectly, any commission, fee, or other compensation, except those of a nominal value, in connection with any extension of credit by the credit union. Notwithstanding the foregoing, this subsection: (1) shall not prohibit payment by a credit union of:(A) salaries to employees;(B) incentives or bonuses to employees based on the credit unions overall financial performance;(C) incentives or bonuses to employees, other than a member of senior management, in connection with an extension of credit, provided the governing body establishes written policies and internal controls in connection with such incentives or bonuses and monitors compliance with such policies and controls at least annually; (D) fees to an insider or immediate family member of such insider for the performance of title searches, loan closings, and collections, provided the credit union has complied with subsection (k) of this section prior to engaging such insider or immediate family member of such insider; and (2) shall not prohibit a director, member of a governing-body-appointed committee, or employee who is not a member of senior management or an immediate family member of such director, committee member, or employee, from receiving compensation from a person unrelated to the credit union for a service or activity performed unrelated to the credit union, provided no referral has been made by the credit union or the director, committee member, employee, or immediate family member of such director, committee member, or employee. (f) No insider or his or her immediate family members or an employee of a credit union shall receive anything of value in connection with the making of an investment or deposit of credit union funds by the credit union, unless the governing body determines that the involvement of the insider, his or her immediate family member, or the employee does not present a conflict of interest and includes such determination in its minutes. The prohibition contained in this subsection shall not prohibit the credit union from paying salaries, incentives, and bonuses to employees in connection with the making of such investments or deposits. An insider shall conduct all transactions that are not prohibited under this subsection at arms length and in the best interests of the credit union. (g) No insider or his or her immediate family members shall receive any direct or indirect compensation or benefit in connection with the credit unions insurance or group purchasing activities for members and employees. The prohibition contained in this subsection shall also apply to any employee not otherwise covered if the employee is directly involved in insurance or group purchasing activities, unless the governing body determines that the employees involvement does not present a conflict of interest and includes such determinations in its minutes. An insider and his or her immediate family member shall conduct all transactions that are not prohibited under this subsection at arms length and in the best interests of the credit union. (h) A credit union shall not buy, lease, or otherwise acquire premises from any of the following without the prior approval of the governing body, such approval to be included in the governing bodys minutes: (A) an insider or his or her immediate family member;(B) a corporation in which an insider or immediate family member is an officer or director or has an ownership interest of ten percent or more; or (C)(1) a partnership in which any insider or his or her immediate family member is a general partner or a limited partner with an interest of ten percent or more. (2) The prohibition contained in this subsection shall also apply to any employee not otherwise covered if the employee is directly involved in investments in fixed assets, unless the governing body determines that the employees involvement does not present a conflict of interest and includes such determinations in its minutes. (i) No insider, employee, or any immediate family member of such insider or employee shall purchase, directly or indirectly, any of the assets of the credit union for an amount less than the current market value thereof without the prior approval of the governing body, which approval shall include a determination that the transaction is in the best interests of the credit union. Such approval and determination shall be included in the governing bodys minutes. (j) With the prior written approval of the commissioner, a credit union may have as an employee or director a person who serves as an officer, employee, or director of any other financial institution. (k) When a credit union retains an insider or his or her immediate family member to render services to the credit union, the hiring shall be approved by the noninterested members of the governing body, and the governing body shall document in its minutes that such hiring was at arms length, was in the best interests of the credit union, and was in accordance with the competitive bidding and appropriate due diligence process as provided in the credit unions conflict of interest policy. (l) The directors, committee members, members of senior management, and the immediate family members of such persons that have outstanding loans or investments in a credit union service organization shall not receive any salary, commission, investment income, or other income or compensation from such credit union service organization, either directly or indirectly, or from any person being served through the credit union service organization. This provision shall not prohibit: (1) such credit union insiders or the immediate family members of such persons from assisting in the operation of such credit union service organization, provided such persons are not compensated by the credit union service organization; and (2) reimbursement to the credit union for the services provided by such directors, committee members, or senior management members if the credit union service organization pays in full the amounts due to the credit union at least quarterly. (m) A credit union shall not grant a member business loan if any additional income received by the credit union or senior management of the credit union is tied to the profit or sale of the business or commercial endeavor for which the loan is made. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31314. Compensation; insurance; expenses
(a) No officer of the governing body, no director, nor any committee member, other than the treasurer, may be compensated for services as such. However, providing reasonable health, accident, and similar insurance protection shall not be considered compensation. (b) A credit union may, with the approval of a majority of the governing body, provide personal liability or indemnity insurance coverage for its directors and other committee members. (c) Directors, officers of the governing body, and committee members may be reimbursed for necessary expenses incidental to the performance of official business of the credit union. (d) Notwithstanding the foregoing, directors, officers of the governing body, and committee members may be compensated for services, other than duties performed as such director, officer of the governing body, or committee member, in accordance with the conflict-of-interest provision set forth in section 31313 of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31401. Field of membership
(a)(1) Except as provided in subdivision (2) of this subsection, the field of membership of a credit union is limited to: (A) a single common bond membership;(B) a multiple common bond membership;(C) persons or organizations within one or more well-defined communities, neighborhoods, municipalities, or counties; or (D) any combination of subdivisions (A), (B), or (C).(2) Within the field of membership of a credit union, members may include:(A) members of the immediate family or household of all members of the credit union included under subdivision (1)(A), (B), (C), or (D) of this subsection; (B) organizers and employees of such credit union;(C) the surviving spouse or party to a civil union of a deceased member of such credit union; and (D) notwithstanding any change in employment, occupation, residence, or other condition initially controlling the eligibility for membership in any credit union, any person properly admitted to membership in a credit union who may continue membership during such persons lifetime. (3) The field of membership may include associations and organizations of individuals, the majority of whom are eligible for membership in such credit union, partnerships in which the majority of the partners are individuals who are eligible for membership in such credit union, corporations in which the majority of shareholders are individuals who are eligible for membership in such credit union, and such entities in which a majority of the employees are individuals who are eligible for membership in such credit union. (b)(1) The Commissioner may approve an amendment to the bylaws of a credit union to expand its field of membership if the Commissioner finds that: (A) the credit union has not engaged in any material unsafe or unsound practice during the one-year period preceding the date on which the proposed amendment is filed with the Commissioner; (B) the credit union maintains its net worth in accordance with subchapter 5 of this chapter; and (C) the credit union has the administrative capability to serve the proposed membership group and the financial resources to meet the need for additional staff and assets to serve the new membership group. (2) The Commissioner may approve an amendment to the bylaws of a credit union to change its field of membership whenever the Commissioner determines that continued operation of the credit union without the proposed amendment may result in liquidation or merger of such credit union. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  328, eff. July 1, 2022.) 
 31402. Membership application
The governing body shall act upon applications for membership as prescribed in its bylaws. The governing body may delegate its authority to act on applications for membership as provided in subdivision 31302(2) of this title. A person denied membership by a membership officer or membership committee may appeal the denial to the governing body. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31403. Liability of members
The members of the credit union shall not be personally or individually liable for the acts, debts, liabilities, or obligations of the credit union or the payment of the credit unions debts solely by virtue of their membership in the credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31404. Membership termination
(a) Any member may withdraw from a credit union at any time upon giving notice of withdrawal as required by the bylaws. (b) Any member may be expelled by a majority vote of the members present at any regular membership meeting or a special membership meeting called to consider the matter at which a quorum is present, but only after the member has been given an opportunity to be heard. (c) The governing body may expel a member by a majority vote of a quorum of directors, pursuant to a written policy adopted by the governing body. Any member may be expelled if he or she violates the membership agreement, any policy or procedure adopted by the governing body, the bylaws of the credit union, or if the member is physically or verbally abusive to credit union members or staff. If such a policy is adopted, written notice of the policy as adopted and the effective date of such policy shall be mailed to each member of the credit union at the members current address appearing on the records of the credit union no fewer than 30 days prior to the effective date of such policy. In addition, each new member shall be provided written notice of any such policy prior to or upon applying for membership. Copies of such policies shall be available to members upon request. Any person expelled by the governing body shall have the right to request a hearing before the governing body to reconsider the expulsion. (d) A person whose membership has been terminated, whether by withdrawal or expulsion, shall have no further rights in the credit union, but is not released from any obligation owed to the credit union. (e) A member who has been expelled as provided in this section may not be readmitted to membership except upon approval by a majority vote of the governing body after application and proof that the applicant remains within the credit unions field of membership, has adequately explained, addressed, or remedied the conditions leading to expulsion, and will abide by the terms and conditions of membership. Not more than one such application for readmission may be made within any 12-month calendar period. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31405. Suspension of services
A credit union may suspend or limit the use of services to credit union members who have caused a loss to the credit union, who have violated the membership agreement or any policy adopted by the governing body, or who are physically or verbally abusive to credit union members or staff. Members with suspended or limited services may maintain a share account and may continue to vote at annual and special membership meetings. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31406. Meetings of members
(a) The annual meeting and any special meetings of the members of the credit union shall be held in accordance with the bylaws. (b) On all questions and elections brought to the membership for a vote, each member shall have one vote, regardless of the members shareholdings. No member may vote by proxy, but a member may vote by early voter absentee ballot, mail ballot, or other method if the bylaws of the credit union so provide. (c) The bylaws may establish a minimum age, not greater than the age of majority as defined in 1 V.S.A.  173, as a qualification of eligibility to vote at meetings of the members. A minor, as defined in 1 V.S.A.  173, may not be a voting member of the governing body, the supervisory committee, or any other appointed or elected committee. (d) An organization having membership in the credit union may be represented and have its vote cast by an officer of the organization or its designated agent so authorized by the organizations governing body as evidenced by a certified copy of such authorization provided to the credit union before the vote is cast. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31407. Special membership meetings
(a) The supervisory committee by a majority vote may call a special meeting of the members to consider any violation of this part, any other law or regulation applicable to the credit union, the credit unions articles of incorporation or bylaws, or any practice of the credit union deemed unsafe or unauthorized by the supervisory committee. (b) The bylaws may also prescribe the manner in which a special meeting of the members may be called by the members or by the governing body, or both. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31408. Notice to members of annual and special meeting
(a) Notice of any annual or special meeting shall be given in accordance with the requirements of the Vermont Nonprofit Corporation Act, Title 11B, Vermont Statutes Annotated. Notice may be given electronically if the member has specifically requested or consented to electronic notification of meetings. (b) Notice of any special meeting shall state the purpose for which it is to be held, and no business other than that related to the purpose set forth in the notice shall be transacted at the special meeting. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31501. Net worth
Every Vermont credit union shall establish and maintain adequate levels of net worth pursuant to standards established by the Commissioner, as amended from time to time. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31502. Regular reserve account
(a) Every credit union shall accumulate and maintain a regular reserve account which shall be held to meet losses until the credit union is dissolved, when it may be distributed among the members. The regular reserve account shall be accumulated and regulated pursuant to standards established by the Commissioner, as the same may be amended from time to time. (b) Any sums recovered on items previously charged to the regular reserve account shall be credited to the regular reserve account. (c) Except as permitted under subsection 31506(b) of this title, the governing body of a credit union shall not transfer any part of the regular reserve account to the undivided earnings account without the prior written approval of the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31503. Allowance for loan and lease loss
(a) An allowance for loan and lease loss account shall be established and maintained in an amount that represents the current estimated loss on loans and leases. The allowance for loan and lease loss account requirement shall be computed and adjusted through the provision for loan and lease loss expense account prior to the payment of dividends. This account shall be calculated in accordance with standards established by the Commissioner, as the same may be amended from time to time. (b) Any sums recovered on items previously charged to allowance for loan and lease loss account shall be credited to the allowance for loan and lease loss account. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31504. Unrealized gain or loss on available for sale securities
(a) An unrealized gain or loss on available for sale securities account shall be established and maintained in an amount that represents the current estimated gain or loss on investments. (b) Changes to the allowance for unrealized gain or loss on securities account resulting from appreciation or depreciation in the value of shares or securities acquired in accordance with the provisions of this chapter shall be accounted for in accordance with standards established by the Commissioner, as the same may be amended from time to time. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31505. Additional or special reserves
If the Commissioner determines that any reserve account is inadequate for any reason, he or she may require the establishment of such additional or special reserves as he or she deems necessary for the protection of the members. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31506. Dividends to shareholders; conditions precedent
(a) The governing body of any credit union may declare a dividend from the credit unions current period undivided earnings, which dividend shall be calculated as provided in this subchapter for any period determined by the governing body. (b)(1) The governing body may declare a dividend from the undivided earnings of a prior period of the credit union without the prior approval of the Commissioner if, following such distribution, the remaining net worth of the credit union will be more than a two-percent margin above the greatest of: (A) the minimum net worth required by this subchapter or by standards established by the Commissioner; (B) the net worth ratio requirement of a well-capitalized credit union as defined under the prompt corrective action guidelines of the National Credit Union Administration; or (C) such other net worth requirement as established for the credit union by the Commissioner.(2) Any other distribution of earnings from a prior period of the credit union may be made only with the prior written approval of the Commissioner. (c)(1) Earnings from all sources for the period for which a dividend is to be paid, except as provided in sections 31502, 31503, 31504, and 31505 of this title, may be credited to the profit and loss account of the credit union, and the following items shall be charged against such account in the determination of the amount available for dividends to shareholders: (A) all operating expenses paid or incurred by the credit union in the management of its affairs, the collection of its debts, or the transaction of its business; (B) the interest paid or accrued on debts owed by the credit union;(C) all losses projected or incurred on loans and leases in excess of the allowance for loan and lease loss account; and (D) all losses projected or incurred on investments according to generally accepted accounting principles. (2) The credit balance of the profit and loss account as thus determined shall constitute the current period net earnings of the credit union at the close of such period, and shall be applicable to the payment of dividends except as provided in subsection (d) of this section. (d) No dividend shall be credited or paid without the prior approval of the Commissioner, unless the credit union has: (1) Made good any existing impairment of its net worth below the standards established by the Commissioner. (2) Carried to its reserve account such part of its net earnings as may be required by the standards established by the Commissioner, as the same may be amended from time to time. (3) Carried to its allowance for loan and lease loss account such part of its earnings as is required by section 31503 of this title. (4) Carried to its special reserve account such part of its earnings as is required by section 31505 of this title. (e) Dividends may be paid on shares and share certificates at various rates with due consideration of the conditions that pertain to each type of account such as minimum balance, notice, and time requirements. (f) Subject to the liability and standards set forth in 11B V.S.A.  8.33, other than subdivision 8.33(b)(2), when any dividend shall be declared in excess of the amount available for dividends as determined in accordance with the provisions of this section, the directors voting for such dividend may be held jointly and severally liable to the credit union for the amount of the excess so declared, unless specifically permitted and approved by the Commissioner. The provisions of 11B V.S.A.  8.33(b)(2) shall not apply to dividends declared by the directors. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31507. Standards
For purposes of this subchapter, in the absence of standards otherwise prescribed by the Commissioner, a credit union shall follow the standards established by the National Credit Union Administration (NCUA). In the event standards established by the NCUA require the credit union to accumulate or maintain accounts in an amount in excess of the standard established by the Commissioner, the credit union shall accumulate and maintain such accounts in a manner sufficient to satisfy the requirements of the NCUA. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  329, eff. July 1, 2022.) 
 31601. Share insurance
(a) Every credit union authorized to do business in this State under this title shall insure its members shares with the National Credit Union Administration (NCUA) or the successor to that federal agency. (b) A credit union insured under this section shall have the duty and power to comply with all statutes and regulations governing insurance of shares by the NCUA; provided that nothing contained in this section shall be construed as repealing, modifying, or impairing any powers, duties, rights, or responsibilities of the Commissioner, or the credit union so insured, under the provisions of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31602. Bonds and insurance
(a) Every credit union authorized to do business in this State under this title shall acquire and maintain a blanket fidelity bond covering the directors, officers, employees, members of official committees, attorneys at law, and other agents with protection against loss caused by dishonesty, burglary, robbery, larceny, theft, holdup, forgery or alteration of instruments, misplacement or mysterious disappearance, and for faithful performance of duty in an amount not less than the amount prescribed by the Commissioner. The Department shall prescribe in its rules the amount of minimum bond coverage required for all credit unions according to their asset categories. (b) Every credit union authorized to do business in this State under this title shall acquire and maintain suitable insurance to protect the credit union against burglary, robbery, theft, and other insurable hazards to which the credit union may be exposed. (c) To the extent not otherwise covered by subsections (a) and (b) of this section, every credit union authorized to do business in this State under this title shall acquire and maintain such bonds and insurance to the extent the same is required by 12 C.F.R. Part 713, as amended from time to time. (d) The Commissioner may require a credit union authorized to do business in this State under this title to secure additional bonds and insurance. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31701. General application
(a) Any corporate credit union chartered by the Commissioner shall be subject to such rules and orders as the Commissioner deems appropriate and, except as otherwise specifically provided in such rules or orders, shall be vested with or subject to the same rights, privileges, duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to all Vermont state-chartered credit unions. (b) A corporate credit union shall be federally insured by the National Credit Union Administration (NCUA), or its successor, and shall be subject to such regulations and orders as the NCUA or its successor deems appropriate. In the event State laws or rules are inconsistent with the regulations of the NCUA or its successor, the federal regulations will supersede. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  330, eff. July 1, 2022.) 
 31702. Organization
(a) Application to form a corporate credit union shall be made in writing to the Commissioner. A corporate credit union shall be organized and operated under the provisions of this part, except to the extent such provisions are not consistent with this subchapter. (b) A corporate credit union shall use the word corporate in its name. (Added 2005, No. 16,  1, eff. July 1, 2005.)
 31703. Membership
(a) Membership in the corporate credit union may consist of Vermont-chartered credit unions, any other state-chartered credit union, any federally chartered credit union, organizations or associations of credit unions, and such other organizations provided for in the articles of incorporation. (b) A member of the corporate credit union shall designate one person to be its authorized representative to attend meetings of the corporate credit union and to vote on behalf of the member. A credit union member of the corporate credit union may only designate a member of its own credit union as its authorized representative. No person may serve as the authorized representative of more than one member of the corporate credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31704. Purposes
A corporate credit union is a credit union whose members consist primarily of other credit unions and whose purposes are to: (1) accumulate and prudently manage the liquidity of its member credit unions through interlending and investment services; (2) act as an intermediary for credit union funds between members and other corporate credit unions; (3) obtain liquid funds from other credit union organizations, financial intermediaries, and other sources; (4) foster and promote in cooperation with other state, regional, and national corporate credit unions and credit union organizations or associations the economic security, growth, and development of member credit unions; and (5) Perform such other financial services of benefit to its members that are authorized by the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 31705. Powers
A corporate credit union shall enjoy the powers and privileges of any other credit union incorporated under this part in addition to those powers enumerated in this subchapter, notwithstanding any limitation or restrictions found elsewhere in this part. The Commissioner may adopt such rules concerning the establishment and operation of corporate credit unions as he or she deems necessary and proper. Subject to such rules, a corporate credit union may: (1) accept shares or deposits in any form from its members, from other state, regional, or national corporate credit unions, and from credit union organizations and associations; (2) make loans to its members, to other credit unions, and to other state, regional, and national corporate credit unions, organizations, and associations of credit unions; (3) establish lines of credit for members and participate with other credit unions in making loans to its members under the terms and conditions determined by the board of directors; (4) invest in the shares of or make deposits in credit unions;(5) borrow money, accept demand deposits, and issue notes or debentures;(6) acquire or sell the assets and assume the liabilities of a member; and(7) enter into agreements with credit unions to discount or purchase loans made pursuant to government-guaranteed loan programs, real estate loans made by members, or any obligations of the United States or any agency thereof held by members. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  331, eff. July 1, 2022.) 
 31706. Reserves
Each corporate credit union shall maintain such reserves and accounts as required by the regulations of the National Credit Union Administration, or its successor, as amended from time to time. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  332, eff. July 1, 2022.) 
 32101. Applicability of chapter
The provisions of this chapter set forth the powers granted to all credit unions organized pursuant to this part and offices of any state-chartered credit union authorized to do business in Vermont under this title. The powers, privileges, duties, and restrictions conferred and imposed in the articles of association of any credit union organized under the prior laws of this State are abridged, enlarged, or modified to conform the articles of association to this title. Notwithstanding anything in the articles of association of such a credit union, every such credit union possesses the powers, rights, and privileges and is subject to the duties, restrictions, and liabilities conferred and imposed by this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32102. General powers
(a) Subject to applicable law, a Vermont credit union may exercise the following powers:(1) make contracts;(2) sue and be sued;(3) adopt and use a common seal and alter such seal at pleasure;(4) purchase, hold, and dispose of property necessary or incidental to its operations;(5) establish, acquire, invest or participate in, or utilize a credit union service organization;(6) subject to the approval of the Commissioner, contract with another credit union or credit unions for office or agency services or to provide those services to the customers of that credit union; (7) subject to the approval of the Commissioner, purchase the assets of another credit union or sell all or substantially all of its assets to another credit union; (8) offer related financial services to its members, including electronic financial services, safe deposit boxes, negotiable instruments, leasing, and correspondent arrangements with other financial institutions, and charge a reasonable fee for such services; (9) hold membership in other credit unions organized under the laws of this State, the laws of the United States, or the laws of another state or territory of the United States and in associations and organizations; (10) make reasonable contributions to any nonprofit civic, charitable, or service organization;(11) require the payment of an entrance fee or annual membership fee, or both, of any person admitted to membership, pursuant to resolution of the governing body; (12) receive savings from its members in the form of shares and honor requests for withdrawals or transfers of all or any part of member share accounts, in any manner approved by the governing body; (13) lend funds to its members;(14) Subject to rules adopted by the Commissioner, sell at a discount any obligations owed to the credit union; (15) invest surplus funds, subject to the provisions of section 32104 of this title;(16) Invest in shares of other credit unions and make deposits in other financial institutions, provided such credit union or financial institution is federally insured; (17) assess fees and charges to members subject to applicable law, for failure to meet promptly their obligations to the credit union; (18) declare and pay dividends on various types of share accounts, pay interest on deposit accounts held by a community development credit union, and pay interest refunds to borrowers; (19) subject to applicable State and federal law, including applicable insurance laws, act as the agent for any fire, life, accident, health, credit life, disability, or other insurance company, other than a title insurance company, authorized by the State of Vermont, by soliciting and selling insurance and collecting premiums on policies issued by such company and receive for services so rendered such fees or commissions as may be agreed upon by the credit union and the insurance company for which it may act as agent; provided, however, that no such credit union shall in any case assume or guaranty the payment of any premium on insurance policies issued through its agency by its principal; and provided further that the credit union shall not guaranty the truth of any statement made by an insured in filing his or her application for insurance; (20) purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the credit union, or who is or was serving at the request of the credit union as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such persons status as such, whether the credit union would have the power to indemnify such person against such liability; (21) enter into lease agreements, lease contracts, and lease-purchase agreements with members;(22) indemnify and limit the personal liability of volunteers;(23) enter into marketing arrangements and joint ventures to facilitate its members voluntary purchase of goods, insurance, and other services from third parties. A credit union may be compensated for services so provided; (24) borrow an aggregate amount not exceeding 20 percent of its assets, and borrow amounts in excess of 20 percent, but not in excess of 50 percent of its assets, if prior written approval has been given by the Commissioner; (25) with the approval of the Commissioner, maintain one or more offices other than the principal place of business as may be necessary to conduct the affairs of the credit union; (26) accept payment for any electric, electric distribution, gas, water, or telephone company or other utility company operating within this State in receiving money due such company for utility services furnished by it; (27) provide loan processing, loan servicing, member check and money order cashing services, disbursement of share withdrawals and loan proceeds, money orders, internal audits, automated teller machine services, and other similar services to other Vermont credit unions, federal credit unions, and out-of-state credit unions; and (28) exercise other powers and actions as authorized under this part of this title or as authorized by regulation of the Commissioner. (b) The expressed powers for a credit union authorized under this section do not preclude the exercise of additional powers deemed to be incidental to the transaction of a general credit union business pursuant to this part. (c) Subject to the limitations of this part and other applicable law, a Vermont credit union may exercise the powers granted nonprofit corporations under Title 11B. In the event of any conflict between the provisions of Title 11B and this title, the provisions of this title govern. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  333, eff. July 1, 2022.) 
 32103. Expanded powers of Vermont credit unions
(a) Subject to the requirements of this section, in addition to all other powers permitted under these statutes, a credit union may exercise any of the powers or engage in any activity conferred upon a federal credit union chartered under the laws of the United States of America. (b) Prior to engaging in such power or activity, the credit union shall notify the Commissioner of its intent to engage in the activity or power conferred upon a federal credit union. The notification shall identify the power or activity, shall identify the specific federal law or regulation that permits such power or activity, shall identify any Vermont law or regulation that may prohibit or restrict such power or activity, and shall provide such additional information as the Commissioner may request. (c) If the Commissioner determines that such power or activity is permitted by federal law or regulation, that such power or activity would not adversely affect the safety or soundness of such credit union, and that such power or activity is not prohibited or restricted by any other applicable Vermont law or regulation, the Commissioner shall issue a written letter of nonobjection to the credit unions engaging in such power or activity. A credit union shall not engage in such power or activity without first obtaining a written letter of nonobjection from the Commissioner. (d) The Commissioner shall respond to the credit unions notification within the time frame set forth in section 30804 of this title. (e) In the event the Commissioner objects to the credit unions proposed power or activity, the credit union shall have the reconsideration and appeal rights set forth in section 30805 of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32104. Investments
(a) A Vermont credit union may invest its assets prudently in accordance with the best judgment of its governing body, subject to the limitations set forth in this section and in the credit unions adopted investment policy. (b) A Vermont credit unions governing body shall establish a written investment policy, which it shall review and ratify at least annually, that addresses, at a minimum, the following: (1) investment quality parameters.(2) investment mix and diversification.(3) investment maturities; and(4) Delegation of authority to officers and committees responsible for administering the portfolio. (c) Funds not used in loans to members may be invested:(1) in loans to or in shares or deposits of other credit unions and central credit unions, corporate credit unions, or a central liquidity facility established under state or federal law. (2) in the capital shares, obligations, or preferred stock issues of any agency or an association organized either as a stock company, mutual association or membership corporation; provided the membership or stockholdings, as the case may be, of such agency or association are primarily confined or restricted to credit unions or organizations of credit unions, and provided the purposes for which the agency or association is organized are designed primarily to service or otherwise assist credit union operations. (3) in shares of a cooperative society organized under the laws of this state or of the laws of the United States in the total amount not exceeding ten percent of the shares, deposits, and surplus of the credit union. (4) in loans to any credit union association or corporation, national or state, of which the credit union is a member, except that the investments shall be limited to two percent of the assets of the credit union. (5) in any investment legal for financial institutions as they are defined in subdivision 11101(32) of this title, but in no event common stock. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32201. Deposit powers
(a) Applicability. The provisions of subsection 14201(b) of this title governing deposit accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (b) Insurance. A Vermont credit union that accepts deposits or an office of a state-chartered credit union authorized to do business in this State shall not accept deposits in this State unless the credit union has insurance with the National Credit Union Administration or the successor to that federal agency. (c) Cash reserve on deposits and accounts. A credit union shall maintain reserves on deposits or accounts as required from time to time by the Federal Reserve Act, as amended, and any regulations adopted pursuant to the Act. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  334, eff. July 1, 2022.) 
 32202. Payment of deposits to administrators from another state or country
The provisions of section 14202 of this title governing the payment of deposits to administrators from another state or country shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32203. Trust deposits; payment on death of trustee
(a) When a deposit is made in a credit union by one or more persons in trust for another, the name and residence of the person for whom the deposit is made shall be disclosed, and the deposit shall be credited to the depositor or depositors as trustee for such person. (b)(1) The credit union may accept deposits:(A) in the name of a member in trust for a member beneficiary;(B) in the name of a member in trust for a nonmember beneficiary; or(C) in the name of a nonmember trustee for a beneficiary who is a member.(2) No beneficiary or trustee, unless a member in his or her own right, shall be permitted to vote, obtain loans, or hold office, or be required to pay an entrance or membership fee. (c) When other notice of the existence and terms of a legal trust is not given in writing to the credit union, at the death of the trustee, or if there is more than one trustee, at the death of the surviving trustee, the deposit or any part thereof, with the interest thereon, may be paid to the person for whom the deposit was made or to his or her estate. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32204. Joint deposits
(a) The provisions of section 14204 of this title governing joint deposits shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (b) A single joint share account may hold more than one membership share, supporting membership for more than one member of the credit union. If more than one joint owner seeks credit union membership through the joint account, the joint account must contain a membership share for each member. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32205. Payable on death accounts
The provisions of section 14205 of this title governing payable on death accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32206. Deposits of minors; exemption from trustee process
The provisions of section 14206 of this title governing deposits of minors and exemption from trustee process shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32207. Provisions when title to deposit is litigated
The provisions of section 14207 of this title relating to when title to a deposit is litigated shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32208. Real estate trust and escrow
The provisions of section 14210 of this title governing pooled real estate trust and escrow accounts shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32209. Claims not clearly consistent
The provisions of section 14211 of this title governing claims not clearly consistent with the terms of any applicable authority on file with the credit union shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32210. Lien; setoff
The credit union shall have a lien on the shares, share certificates, deposits, deposit certificates, and accumulated dividends or interest of a member in an individual or joint account for any sum past due the credit union from said member or for any loan endorsed by such member. The credit union shall also have a right of immediate setoff with respect to every such account. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32211. Applicability of other laws
The provisions of subsection 11501(c)(examination) and section 14212 (joint fiduciary accounts) of this title shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32301. Loan authority
(a) Unless otherwise restricted by applicable law, rule, or regulation, a credit union may lend to its members for such purposes as prescribed by the governing body. The governing body shall establish a written loan policy in accordance with the requirements of this section. (b) Every loan application shall be in writing upon a form approved by the governing body, which application shall state the purpose for which the loan is desired and the security, if any, offered for such loan. (c) Written loan policy. A credit unions governing body and credit committee shall establish a written loan policy. (1) the written loan policy shall address, at a minimum, the following:(A) loan portfolio mix and diversification standards;(B) prudent underwriting standards, including loan-to-value limits that are clear and measurable; (C) Loan administration procedures, including delegation and individual lending officer authority; and (D) documentation and approval requirements to monitor compliance with lending policies.(2) The lending policies adopted pursuant to this section shall be consistent with safe and sound practices and appropriate to the size of the credit union and nature and scope of its operations. (d) Interest and charges on loans. Credit unions may demand and receive interest and charges on their loans in accordance with chapter 4 of Title 9 or as otherwise provided by law. (e) Limitations. The total direct or indirect liabilities of any one member, however incurred, to a credit union shall not exceed, at the time incurred, the greater of $200.00 or 10 percent of the credit unions total assets. (1) Loans or extensions of credit to one person will be attributed to another person, and each person shall be deemed a borrower as follows: (A) In the case of obligations of one person, the proceeds of a loan or extension of credit to a person will be deemed to be used for the direct benefit of another person and will be attributed to the other person when the proceeds or assets purchased with the proceeds are transferred to another person, other than a bona fide arms length transaction in which the proceeds are used to acquire property, goods, or services. (B) In the case of obligations of a partnership or association, the obligations of each general partner and of each member of the association. (C) In the case of obligations of a general partner or a member of an association, the obligations of the partnership or association. (D) In the case of obligations of a corporation, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest. (E) In the case of obligations of a limited liability company, the obligations of any subsidiaries in which it holds, directly or indirectly, a controlling equity interest. (F) In the case of obligations of a corporation or limited liability company, the amount of a loan made to any other person to the extent that the proceeds of the loan directly or indirectly are to be: (i) lent to the corporation or limited liability company;(ii) used for the acquisition from the corporation or limited liability company of any equity interest in the corporation or company; and (iii) transferred to the corporation or limited liability company without fair and adequate consideration; provided, however, that the discharge of an equivalent amount of debt previously incurred in good faith for value shall be deemed fair and adequate consideration. (2) The following shall not be counted as indebtedness subject to the limitation of this subsection: (A) Indebtedness evidenced by bills of exchange or drafts drawn against existing values and secured by a lien upon goods in transit with a shippers order, bills of lading, or comparable instruments attached. (B) Indebtedness evidenced by notes or other paper secured by readily marketable corporate stock having a fair market value of not less than 125 percent of the indebtedness. (C) Indebtedness evidenced by notes or other paper secured by an assignment of accounts receivable or of amounts due or to become due on open account or on a contract to the extent of not less than 125 percent of the indebtedness. (D) Indebtedness evidenced by notes or other paper secured by liens upon agricultural products, manufactured goods, or other chattels in storage in warehouses or elevators with warehouse or elevator receipts attached, or goods released on trust receipts, when the value of the security is not less than 125 percent of the indebtedness, and the financial institutions interest is insured against loss by insurance policies or certificates of insurance attached. (E) Indebtedness arising out of the daily transaction of the business of any clearinghouse association. (F) Indebtedness secured to the extent thereof by the cash surrender value of life insurance evidenced by policies of insurance validly issued and assigned. (G) Indebtedness secured to the extent thereof by savings deposits or certificates of deposit of solvent financial institutions up to the amount federally insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, and duly assigned. (H) Any portion of any indebtedness that the U.S. government, or an agency or instrumentality of the United States, unconditionally agreed to purchase or has unconditionally guaranteed as to payment of both principal and interest, including loans insured or guaranteed under the National Housing Act or the Servicemens Readjustment Act of 1944, as amended. (I) Additional funds advanced for the benefit of a borrower by a credit union for payment of taxes, insurance, utilities, security, and maintenance and operating expenses necessary to preserve the value of real property securing the loan. (J) Amounts paid against uncollected funds in the normal process of collection; or(K) That portion of a loan or extension of credit sold as a participation by a credit union on a nonrecourse basis; provided that the participation results in a pro rata sharing of credit risk proportionate to the respective interests of the originating and participating lenders. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  335, eff. July 1, 2022.) 
 32302. Real estate loans
(a) Clear title. All loans secured by mortgages on real estate shall be supported by written evidence satisfactory to the credit union that title to the security is marketable, and the lien is valid and enforceable. A mortgage on lands subject to lease under which rents are reserved to the owner, with all of the owners rights and options under the lease collaterally assigned to the credit union as security or a mortgage upon lands impressed with a public use, sometimes known as lease, society, or glebe lands, but held under a durable lease, shall not be deemed to be subordinate to such lease or public use. (b) Appraised value. The appraisal of real estate securing a real estate related transaction entered into by a credit union shall comply with Part 722 of the National Credit Union Administration regulations, as amended from time to time. (c) Servicing of loans. A credit union may contract with another credit union, corporation, or association whose transactions are in whole or in part the handling and servicing of mortgage loans to handle and service loans in its behalf. Whenever such a contract is made, the credit union shall not lose or suffer any impairment of any right of deduction or offset it might have against anyone liable for the mortgage debt. (d) Home loan escrow accounts. Any credit union which requires a home loan escrow account to be established and maintained by a borrower shall follow the provisions of section 10404 of this title. (e) Loans insured or guaranteed by federal law. Any mortgage on real estate given to secure a loan insured or guaranteed by the federal housing commissioner, the administrator of veterans affairs, or the administrator of the Small Business Administration under the National Housing Act, the Servicemens Readjustment Act of 1944, or the Small Business Act, respectively, as amended, shall not be subject to the provisions of any law of this state prescribing the nature, amount, or form of security, or manner of repayment, or requiring security upon which loans or advances of credit may be made, or prescribing or limiting the period or principal amount of which loans may be made, or prescribing or limiting the interest which may be charged or other charges which may be made or taken upon any loan or advance of credit. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  336, eff. July 1, 2022.) 
 32303. Credit cards
The provisions of section 14303 of this title governing credit cards shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32401. Authority
No credit union shall make member business loans unless it has complied with the provisions of this subchapter and such rules adopted by the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32402. Commissioner approval
A credit union shall obtain the written approval of the Commissioner prior to engaging in the business of making member business loans. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32501. Participation loans
(a) Subject to the provisions of this section, a credit union may participate in loans to credit union members jointly with other state or federally chartered credit unions, credit union organizations, or other federally insured financial institutions pursuant to written policies established by the credit unions governing body. As used in this section, credit union organization means any organization established primarily to serve the daily operational needs of its member credit unions. The term does not include trade associations, membership organizations principally composed of credit unions, or corporations or other businesses that principally provide services to credit union members as opposed to corporations or businesses whose business relates to the daily in-house operations of credit unions. (b) No credit union shall obtain an interest in a participation loan if the sum of that interest and any other indebtedness owing to the credit union by the borrower exceeds the limitations set forth in this title and in rules adopted by the Commissioner. (c) The credit union shall execute a written master participation agreement and shall retain the written master agreement in the credit unions office. The master agreement shall include provisions for identifying, either through a document that is incorporated by reference into the master agreement or directly in the master agreement, the participation loan or loans prior to their sale. (d) A credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest. (e) The credit union originating the loan shall:(1) Originate loans only to its members.(2) Retain an interest of at least ten percent in the face amount of the loan.(3) Retain the original or copies of the loan documents.(4) Require the credit committee or loan officer to use the same underwriting standards for participation loans as are used for loans that are not being sold in a participation agreement, unless there is a participation agreement in place prior to the disbursement of the loan. Where a participation agreement is in place prior to disbursement, either the credit unions loan policies or the participation agreement shall address any variance from nonparticipation loan underwriting standards. (f) A participant credit union that is not the originating lender shall:(1) participate only in loans it is empowered to grant, and shall have a participation policy in place that sets forth the loan underwriting standards prior to entering into a participation agreement. (2) participate in participation loans only if made to its own members or members of another participating credit union; however, this subdivision shall not apply if the originating lender is a federally insured financial institution that is not a credit union. (3) retain the original or a copy of the written participation loan agreement and a schedule of the loans covered by the agreement; and (4) obtain the approval of the governing body, such person or persons or such committee authorized by the governing body to act on participation loans, or the investment committee for the disbursement of proceeds to the originating lender in accordance with the credit unions loan participation policy. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32601. Failure to pay rent; removal of contents
The provisions of section 14501 of this title governing safe deposit boxes shall apply to credit unions in the same manner as they apply to financial institutions as defined in subdivision 11101(32) of this title. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32701. Organization of a credit union service organization
(a) With the approval of the Commissioner, a credit union may establish a credit union service organization (CUSO) by itself or jointly with one or more other Vermont credit unions, federal credit unions, state-chartered credit unions, or other federally insured depository institutions within or outside this State. The establishing credit union shall file an application with the Commissioner, which application shall include a description of the services to be engaged in by the CUSO, an explanation of how the proposed services are related to credit union services, the application fee, and any other information that the Commissioner may require. (b) A CUSO shall be organized as a corporation or as a limited liability company and the potential exposure of each credit union shall be no more than the amount of funds invested in or lent to the CUSO by such credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32702. Expansion of services
A CUSO shall not expand its services without the prior written approval of the Commissioner. A CUSO shall file a written notice with the Commissioner setting forth its intention to expand its services, a description of the proposed expanded services, an explanation of how the proposed expansion is related to credit union services, and any other information that the Commissioner may require. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32703. Records, reports, and examination
(a) A CUSO shall:(1) account for all transactions in accordance with generally accepted accounting principles;(2) prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards; (3) preserve all of its books and records in accordance with rules adopted by the Commissioner applicable to credit unions; (4) provide the Commissioner with complete access to its books, records, and internal controls for review, evaluation, and examination; (5) provide such additional audits and reports as requested by the Commissioner; and(6) pay the actual cost of any review, evaluation, or examination conducted by the Commissioner.(b) As frequently as the Commissioner deems appropriate or necessary, the Commissioner may conduct an examination of the records and books of a CUSO in which a credit union has invested or to which it has lent funds or which was organized by a credit union. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  337, eff. July 1, 2022.) 
 32704. Limitation on loans to and investments in a CUSO
(a) A credit union may invest its funds in or make loans to a CUSO, provided the total of any such investment in or loan to any one CUSO does not exceed two percent of the total paid-in and unimpaired capital and surplus and share deposits as of its last calendar year-end financial report of the credit union without regard to the amount derived from the profitability of such CUSO. (b) As used in subsection (a) of this section:(1) paid-in and unimpaired capital and surplus means shares plus postclosing, undivided earnings (this does not include regular reserves or special reserves required by law, regulation, or special agreement between the credit union and its regulator or share insurer); and (2) total investments in and total loans to CUSO will be measured consistent with generally accepted accounting principles. (c) If the Commissioner determines that a credit unions investments in or loans to any CUSO exceed the limitations of this section or are otherwise not prudent for the credit union to maintain, the Commissioner may require the credit union to divest such loans or investments. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32705. Investing in, lending to, or joining an existing CUSO
(a) Subject to the limitations of section 32704 of this title, a credit union may invest its funds in, join, or lend to an existing CUSO. The credit union shall file with the Commissioner prior written notice of its intention to make such investment in or loan to an existing CUSO. (b) Prior to investing in or lending to an existing CUSO, a credit union shall:(1) obtain a written agreement that the CUSO will:(A) account for all transactions in accordance with generally accepted accounting principles;(B) prepare quarterly financial statements and obtain an annual opinion audit by a licensed certified public accountant on its financial statements in accordance with generally accepted auditing standards; (C) provide the Commissioner with complete access to all books and records of the CUSO and with the ability to review CUSO internal controls, as the Commissioner deems necessary; and (D) pay the actual cost of any examination conducted by the Commissioner; and(2) obtain a written legal opinion that the CUSO is established as a corporation or a limited liability company and that the potential exposure of the credit union is limited to no more than the loss of funds invested in or lent to the CUSO. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32706. Customer base
A credit union may organize, invest in, or lend to a CUSO only if the credit union service organization primarily serves credit unions, its membership, or the membership of credit unions contracting with the CUSO. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32707. Bond
Each credit union service organization and each of its directors, officers, managers, general partners, employees, and authorized agent of a CUSO who has charge or possession of the funds, securities, or other assets of such CUSO shall be bonded by a surety company authorized to do business in this State. Such bond shall be in favor of the CUSO and in such amount as is approved by the governing body of the CUSO. The Commissioner may require the amount of the bond to be increased. A copy of each bond and any renewal thereof shall be promptly filed with the Commissioner. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32708. Prohibited activities
A CUSO shall not acquire control of, either directly or indirectly, another depository financial institution, nor invest in shares, stocks, or obligations of an insurance company, trade association, liquidity facility, or similar organization, corporation, or association. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32709. Separate entities
(a) A credit union and a CUSO shall be operated in a manner that demonstrates to the public the separate existence of the credit union and the CUSO. (b) At the request of the Commissioner, the credit union shall provide to the Commissioner a written legal opinion of counsel as to whether the CUSO is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or lent to, the CUSO. The legal opinion shall address factors that have led courts to pierce the corporate veil such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records. Independent legal counsel of the investing credit union or the CUSO may provide the legal opinion. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32710. Suspension, liquidation, insolvency, conservation, involuntary merger, and appointment of directors and managing officers of a troubled CUSO
A CUSO shall be subject to chapter 226 of this title governing suspension, liquidation, insolvency, conservation, involuntary merger, and appointment of directors and managing officers of a troubled CUSO. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 32711. Rules and regulations
The Commissioner may adopt such additional rules governing CUSOs as the Commissioner deems appropriate. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  338, eff. July 1, 2022.) 
 33101. Relocation of main office
(a) With the approval of the Commissioner, a Vermont credit union may relocate its main office anywhere within the State to serve effectively its members. (b) The Commissioner, before granting an approval under subsection (a) of this section, shall consider: (1) the field of membership to be served by the proposed relocation of the main office;(2) the adequacy of the current main office;(3) the economic need for and cost of the proposed relocation; and(4) the convenience and necessity to the field of membership of the proposed relocation. (Added 2005, No. 16,  1, eff. July 1, 2005.)
 33102. In-State and out-of-State offices
(a) A Vermont credit union shall not establish an office in this State or outside this State without the prior approval of the Commissioner in accordance with subsection 30801(b) of this title. (b) Prior to approving the credit unions application to establish an office in this State or outside this State, the Commissioner must find that: (1) establishment of the proposed office is consistent with the safety and soundness of the credit union; (2) establishment of the proposed office is consistent with the credit unions field of membership; (3) the credit union has a record of compliance with the requirements of applicable State and federal law; and (4) in the case of an out-of-State office, the laws of such other State authorize the establishment of such office. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  339, eff. July 1, 2022.) 
 33103. Offices of State-chartered credit unions
(a) A state credit union may, with the prior written approval of the Commissioner, establish one or more offices in this State; provided the laws of its home state authorizes under conditions no more restrictive than those imposed by the laws of this State, as determined by the Commissioner, a Vermont credit union to establish an office in that state. Prior to approving the state credit unions application to establish an office in this State, the Commissioner must find that such state credit union: (1) is financially solvent;(2) maintains bonds and share insurance as required under chapter 221, subchapter 6 of this title; (3) is effectively examined and supervised by an official of the state in which it is chartered: and (4) is in compliance with the requirements set forth in subsection 33102(b) of this title.(b) The Commissioner may examine and supervise the Vermont offices of any state credit union and may enter into agreements with other state credit union regulators concerning such examinations or supervision. (c) To the extent federal law does not preempt the same, no state credit union may conduct business in this State unless it: (1) charges interest in compliance with the provisions of 9 V.S.A. chapter 4 when making loans in this State; (2) complies with the consumer protection statutes and rules applicable to Vermont credit unions; (3) agrees to furnish the Commissioner with a copy of the examination report conducted by its regulatory agency or to submit to an examination by the commissioner; and (4) designates and maintains an agent for the service of process in this State.(d) The Commissioner may, after giving notice and an opportunity to be heard to any state credit union, revoke or suspend the approval given to such state credit union to establish an office in this State for any reason that would be sufficient grounds to deny an application to establish an office in this State. (e) The Commissioner may revoke the approval of a state credit union conducting business in this State if the Commissioner finds that: (1) The state credit union no longer meets the requirements of this section.(2) The state credit union has violated the laws of this State or lawful rules or orders issued by the Commissioner. (3) The state credit union has engaged in a pattern of unsafe or unsound credit union practices. (4) Continued operation by the state credit union is likely to have a substantially adverse impact on the financial, economic, or other interests of residents of this State. (5) The state credit union is prohibited from operating in its home state. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  340, eff. July 1, 2022.)
 33104. Supervisory agreements; costs of examinations
(a) In implementing this chapter, the Commissioner may cooperate with credit union regulators in other states or jurisdictions and may share with the regulators the information received by the Commissioner to the extent necessary to supervise and regulate the credit union. (b) The Commissioner may enter into supervisory agreements with a state credit union and its regulators to prescribe the applicable laws governing the powers and authorities of Vermont offices of the state credit union. (c) The agreements may address, but are not limited to, corporate governance and operational matters. The agreements may resolve any conflict of laws and specify the manner in which the examination, supervision, and application processes must be coordinated with the regulators. (d) The Commissioner may adopt rules for the periodic examination and investigation of the affairs of a state credit union operating in this State. The costs of examination and supervision must be fully borne by the state credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 34101. Mergers
(a) General. Any two or more credit unions may merge into one Vermont credit union in accordance with the procedures and subject to the conditions and limitations set forth in this chapter. (b) Adoption of plan. The governing body of each participating credit union shall adopt, by a majority vote or higher if required by its organizational documents, a plan of merger on such terms as mutually agreed upon. The plan shall include: (1) the names of the participating credit unions and their locations;(2) with respect to the continuing credit union: the name and location of its principal office, offices, and facilities; the name, address, and occupation of each director who is to serve until the next annual meeting of the members; and the name and address of each officer; (3) the amount of capital, the number of outstanding shares, and provisions governing the manner and basis of converting deposits, accounts, or shares of such credit union into deposits, accounts, or shares of the continuing credit union; (4) the amendments required to be made to the continuing credit unions organizational documents; (5) the resulting field of membership of the continuing credit union;(6) a statement that the agreement is subject to approval of the Commissioner and of the members of each participating credit union; (7) provisions, if applicable, governing the manner in which the continuing credit union will return accounts and shares, with interest to date, to dissenting members of the participating credit unions; (8) a business plan for the continuing credit union;(9) the anticipated effective date of such merger; and(10) such other provisions and details as may be necessary to perfect the merger or as may be required by the Commissioner. (c) Commissioners approval. Following approval by a majority vote of the governing body of each participating credit union, unless a higher percentage is required by either credit unions organizational documents, the plan of merger or assumption, together with certified copies of the authorizing resolutions adopted by the governing body of each participating credit union, shall be forwarded to the Commissioner for approval pursuant to chapter 220, subchapter 8 of this title; provided, however, the approval of the Commissioner shall not be required for any transaction in which the continuing credit union will be a federal credit union. If the Commissioner disapproves the plan, the Commissioner shall state the reasons for the disapproval in writing and furnish them to the participating credit unions. The credit unions shall be given an opportunity to amend the plan to eliminate the reasons for disapproval. (d) Vote of members. The plan of merger, as approved by the Commissioner, shall be submitted to the members of each participating credit union for their approval at such credit unions annual meeting or at a special meeting called for that purpose in the following manner. Unless a greater percentage is required by the organizational documents of either credit union, the plan of merger or assumption must be approved by a majority vote of the members present at a meeting called for this purpose. The vote constitutes the adoption of the organizational documents of the continuing credit union, including amendments, contained in the merger agreement. (e) Executed plan; certificate; effective date. The following provisions apply to the executed plan, certificate, and effective date:(1) Upon approval by the members of each participating credit union, an executive officer and the secretary of each credit union shall submit the executed plan of merger to the Commissioner, together with the certified record of the vote of the members approving it, each certified by these officers. (2) Upon receipt of the items in subdivision (1) of this subsection and evidence that the participating credit unions have complied with all applicable State and federal law, the Commissioner shall issue to the continuing credit union a certificate specifying the name of each participating credit union and the name of the continuing credit union. The continuing credit union shall file a copy of the certificate with the Secretary of State for recording. This certificate is conclusive evidence of the merger and of the correctness of all proceedings relating to the merger in all courts and places. The certificate may be filed in the appropriate land records offices to evidence the new name in which property of each participating credit union is to be held. (3) Unless a later date is specified in the certificate, the merger is effective upon filing of the certificate as provided in subdivision (2) of this subsection, and the authority of all but the surviving credit union shall terminate automatically upon filing. The Commissioner may file or order any credit union to file conforming documents with the Secretary of State. (4) Any plan of merger may contain a provision that, notwithstanding approval of the members or the Commissioner, the plan may be abandoned at any time prior to the effective date of the merger by the governing body of any participating credit union, either at the absolute discretion of the governing body or upon the occurrence of any stated condition. (f) Federal credit union as participant. If one of the parties to a merger with a Vermont credit union is a federal credit union, the participants shall comply with all requirements imposed by federal law for such merger in addition to the requirements contained in this title and shall provide evidence of such compliance to the Commissioner. (g) Sections 34103 and 34104 of this title apply to mergers and acquisitions made pursuant to this chapter. (h) Authority for expedited mergers. Notwithstanding any other provision of law or any organizational document of any participating credit union, following approval of the plan of merger by a majority vote of the governing body of each participating credit union and receipt by the Commissioner of certified copies of the authorizing resolutions adopted by the governing body of each participating credit union, the Commissioner may waive any requirement of subsection (b) of this section, may waive the requirements of subsection (d) of this section, and may order that the merger become effective immediately if the Commissioner believes that the action is necessary for the protection of the members or the public. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  341, eff. July 1, 2022.) 
 34102. Merger of Vermont credit union with federal credit union
(a) Nothing contained in the law of this State restricts the right of a credit union organized under this title to merge into a continuing federal credit union. The corporate action to be taken by the Vermont credit union and its rights and liabilities and those of its members are the same as those prescribed in section 34101 of this title, except that approval of the Commissioner is not required. (b) Upon the effective date of the merger, the authority of the participating Vermont credit union shall terminate automatically. The continuing federal credit union shall notify the Secretary of State of the termination. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 34103. Effect of merger or conversion
(a) Applicability. From and after the effective date of a merger or conversion, under chapter 224 or 225 of this title, the continuing credit union may conduct business in accordance with the terms of the plan as approved and in accordance with this chapter. (b) Continuing entity. Whenever the authority of any participating or converting credit union has been terminated, the continuing credit union shall be deemed to be a continuation of the entity of the participating or converting credit union such that all property of the participating or converting credit union, including rights, titles, and interests in and to all property of whatsoever kind, whether real, personal, or mixed, and things in action, and every right, privilege, interest, and asset of any conceivable value or benefit then existing, or pertaining to it, or which would inure to it, including appointments, designations, and nominations, and all rights and interests in any fiduciary capacity, shall immediately by act of law and without any conveyance or transfer and without further act or deed be vested in and continue to be that property of the continuing credit union; and such continuing credit union shall have, hold, and enjoy the same in its own right as fully and to the same extent as the same was possessed, held, and enjoyed by the participating or converting credit union, and such continuing credit union as of the time of the taking effect of such merger or conversion shall continue to have and succeed to all the rights, obligations, and relations of the participating or converting credit union. Furthermore, unless the plan provides otherwise or the Commissioner orders otherwise, the resulting field of membership of the continuing credit union shall be the combined field of membership of both participating credit unions, and the continuing credit union may continue to operate the offices of the other participating credit union. (c) Effect on judicial proceedings. All pending actions and other judicial proceedings to which the participating or converting credit union is a party shall not be deemed to have been abated or to have been discontinued by reason of such merger or conversion, but may be prosecuted to final judgment, order, or decree in the same manner as if such merger or conversion had not been taken; and such credit union resulting from such merger or conversion may continue such action in its new name, and any judgment, order, or decree may be rendered for or against it which might have been rendered for or against the participating or converting credit union involved in such judicial proceedings. (d) Creditors rights. The continuing credit union in a merger or conversion shall be liable for all obligations of the participating or converting credit union which existed prior to such merger or conversion, and the merger or conversion taken shall not prejudice the right of a creditor of the participating or converting credit union to have his or her debts paid out of the assets thereof, nor shall such creditor be deprived of or prejudiced in any action against the officers, directors, corporators, or members of a participating or converting credit union for any neglect or misconduct. (e) Powers and attributes of continuing organization. Whenever credit unions merge, the surviving organization, except as provided in this chapter, shall have, possess, and own, but separately and distinguishably as provided by this chapter, all property, rights, powers, franchises, privileges, and appointments whether existing, contingent or future, corporeal or incorporeal, tangible or intangible of every nature whatsoever of each of the merging organizations. If any of the merging organizations are acting or have been acting or have been nominated, appointed, delegated, or designated by any court, person, or otherwise to act in a fiduciary capacity, the continuing organization shall have, possess, and be vested with and succeed to all of the property, rights, powers, privileges, duties, and obligations appertaining to each such fiduciary capacity without further or additional appointment, obligation, or designation. The continuing credit union shall be a continuation of the entity of each and all of the organizations so merged; each such entity, however, remaining separable and distinguishable to the extent provided in this chapter. It may exercise the franchise of each of the organizations separably and distinguishably as well as the composite franchises of all. Except as provided in this chapter, it shall hold, exercise, and perform all rights, powers, privileges, duties, and obligations appertaining to any and all representative or fiduciary relationships of each of the merged credit unions, and shall be liable for all of the debts, contracts, and obligations of each of the merged credit unions. Any such debt, undertaking, or obligations of any merged credit union may be enforced against it as fully and effectively as it could have been against the merged credit union. (f) Disposal of property and assets. The continuing credit union shall have the right to use, control, sell, or dispose of all real and personal estate, rights, or interests of the merged credit unions and convey the same by deed, assignment, endorsement, contract, or other conveyance, either in its own name or in the name of any merged credit unions as provided in this section, or in the names of both, as fully and effectively as the merged credit unions could have done; and may maintain suit in its own name or in the name of any such credit union, as provided in this subchapter, or in the names of both, to foreclose or recover any title, right, demand, or claim appertaining to the merged credit unions. To this end and except as provided in the contract of merger, the existence of each of the merged credit unions shall be deemed and treated as having continued each separably and distinguishably for all purposes necessary or convenient to liquidate the assets of any merged credit unions. Any receipt, assignment, endorsement, transfer, option, compromise, acquittance, release, or contract to sell, convey, or exchange may be executed in its name or in the name of the continuing credit unions, or both. Any other thing may be done in either or both of these names that may be necessary or proper for the reduction to cash of any assets of a foreclosure, of any rights or titles, or the doing of any other acts or things appropriate to the winding up of the affairs of the merging organization as a separate entity. Those contracts and agreements shall be executed, and those acts shall be done under the control of the directors of the continuing organization. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  342, eff. July 1, 2022.) 
 34104. Nonconforming activities; cessation
(a) Applicability. If, as a result of a merger or conversion pursuant to this title, the continuing credit union is to be of a different type or of a different character than any one or all of the participating or converting institutions, such continuing credit union shall be subject to the conditions and limitations as set forth in this chapter. (b) Plan for termination. The plan of merger or conversion shall set forth the method and schedule for terminating those activities not permitted by the laws of this state for the continuing credit union, but which were authorized for any of the participating or converting institutions. (c) Effective date. The plan of merger or conversion shall state that from the effective date of such action, the continuing credit union shall not engage in any nonconforming activities, except to the extent necessary to fulfill obligations existing prior to merger or conversion, pursuant to subsection (d) of this section. (d) Compliance with limitations. If, as a result of such merger or conversion, the continuing credit union exceeds any lending, investment, or other limitations imposed by this title, it shall conform to such limitations within such period of time as shall be established by the Commissioner. (e) Divestiture. The Commissioner may, as a condition to such merger or conversion, require a nonconforming activity to be divested in accordance with such additional requirements as he or she may deem appropriate under the circumstances. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 35101. Conversions
(a) General. The provisions of this chapter shall apply whenever a federal credit union seeks to convert to a Vermont credit union or whenever a Vermont credit union seeks to convert to a federal credit union; provided, however, that conversion from a Vermont credit union to a federal credit union shall be as permitted in federal law and shall not require the Commissioners approval, and that federal law shall be controlling to the extent the laws of this state are inconsistent. (b) Types of conversions. The types of conversions permitted under this chapter are as follows:(1) conversion from a federal credit union to a Vermont credit union; and(2) conversion from a Vermont credit union to a federal credit union.(c) Manner of conversion. Any credit union may convert under this chapter in the following manner:(1) The governing body of the credit union shall approve the plan of conversion by at least a majority vote, unless a higher percentage is required by the credit unions organizational documents. (2) The approved plan of conversion, together with a certified copy of the authorizing resolution adopted by the governing body of the credit union, shall be submitted to the Commissioner for approval pursuant to the requirements and procedures of subchapter 8 of chapter 220 of this title, except as provided in subsection (a) of this section. (3) The plan of conversion, as approved by the Commissioner, shall be submitted to members of the credit union for their approval at an annual meeting or at a special meeting called for that purpose. (4) The approved plan shall be finalized as provided in subsection 35101(f) of this section.(d) Contents of plan of conversion. The plan of conversion shall include:(1) the name of the credit union and its location;(2) the type of credit union that the resulting credit union is to be;(3) a method and schedule for terminating any nonconforming activities that would result from such conversion; (4) a statement of the competitive impact resulting from such conversion, including the loss of particular financial services in the market area resulting from such conversion; (5) a statement that the conversion is subject to approval of the Commissioner, except for conversions from a Vermont credit union to a federal credit union; (6) a statement that the conversion is subject to approval of the credit unions members; and (7) such additional information as the Commissioner may require.(e) Member voting requirements. A majority of the members of the credit union casting votes at a duly called and noticed meeting, unless a higher percentage is required by the credit unions organizational documents, is necessary to approve the plan of conversion at the meeting. For purposes of this section, written notice must be delivered in person to each member or mailed to each member at the address for such member appearing on the records of the credit union, not more than 30 days nor less than seven days prior to the date of the meeting. Notice may be given electronically if the member has specifically requested or consented to electronic notification of meetings. An affirmative vote constitutes approval of the adoption of any amendments to the organizational documents of the credit union that are necessary to effect the transaction. (f) Finalizing the plan of conversion. Except as provided in subsection (g) of this section, the credit union shall effect its conversion as follows: (1) Upon approval by the members, the credit union shall submit the executed conversion plan to the Commissioner, together with all necessary amendments to the credit unions organizational documents, each certified by an officer of the credit union. (2) The Commissioner shall issue to the resulting credit union a certificate specifying the name of the converting credit union and the name and organizational structure of the resulting credit union. The resulting credit union shall file one copy of the certificate issued by the Commissioner with the Secretary of State for recording. The certificate shall be conclusive evidence of the conversion and the correctness of all proceedings relating to the conversion in all courts and places. The certificate may be filed in any land records office to evidence the new name in which property of the converting credit union is to be held. (3) Unless a later date is specified in the conversion plan, the conversion becomes effective upon filing of the certificate as provided in subdivision (2) of this subsection, and the former charter of the converting credit union shall terminate automatically. The Commissioner may file or order any credit union to file conforming documents with the Secretary of State. (g) Completion of conversion into federal credit union. Upon completion of a conversion into a federal credit union, the federal credit union shall certify in writing to the Commissioner and the Secretary of State that the conversion has been completed under applicable federal law. The charter of the converting credit union shall terminate automatically upon issuance of the federal credit union charter. (h) If the Commissioner disapproves the conversion plan, the Commissioner shall state the reasons for the disapproval in writing and furnish them to the credit union. The credit union shall be given a reasonable opportunity to amend the plan to eliminate the reasons for disapproval. (i) Authority for expedited conversion. Notwithstanding any other section of law or any organizational document of the credit union, the Commissioner may order that a charter conversion become effective immediately when the Commissioner finds it is necessary for the protection of members or the public. (k) Rules of the Commissioner. The Commissioner shall issue such rules governing the conversion of a credit union organized under this chapter to a federal credit union and the conversion of a federal credit union to a credit union organized under this chapter as the Commissioner deems necessary or appropriate. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  343, eff. July 1, 2022.) 
 35102. Conversion of a credit union to a mutual financial institution or a cooperative financial institution
(a) In addition to the provisions of chapter 206 of this title, a credit union may convert to a mutual or cooperative financial institution if all of the following are met: (1) At least 30 days before the governing body votes on a plan of conversion under subdivision (2) of this subsection, the governing body shall give written notice to the members that it is considering a conversion. The governing body shall mail the notice to the members and shall not include any other mailing with the notice. The notice shall include all of the following: (A) a brief statement of why the governing body is considering the conversion;(B) a brief statement of the major positive and negative effects of the proposed conversion; and (C) a request for members written comments on the proposed conversion.(2) The governing body must approve of the plan of conversion and file the plan of conversion with the Commissioner. An affirmative vote of two-thirds of the entire governing body is required to approve a plan of conversion. The plan of conversion shall meet all of the following: (A) The conversion plan discloses to the members information concerning the advantages and disadvantages of the proposed conversion and contains a statement indicating any material differences in powers between a credit union and a mutual or cooperative financial institution. (B) The conversion is not intended to circumvent a pending supervisory action initiated by the Commissioner or another regulatory agency because of a concern over the safety and soundness of the credit union. (C) The conversion plan does not provide any official of the converting credit union with any remuneration or other economic benefit in connection with the conversion. (D) After conversion, the mutual or cooperative financial institution is likely to be economically viable. (3) The governing body shall call a special meeting of the members to vote on the conversion plan and shall mail to each member a notice of the meeting and proposed conversion 60 days before the date of the special meeting. The notice shall include all of the following: (A) a summary of the positive and negative effects of the proposed conversion;(B) a statement that the directors will not receive any remuneration or other economic benefit in connection with the conversion of the credit union; (C) a statement that any interested person may obtain more detailed information about the conversion from the credit union at its principal place of business or by any method approved in advance by the Commissioner; (D) a statement that the governing body may substantively amend the proposed plan of conversion before the special meeting based on comments from regulatory authorities or any other reason, and that the governing body may terminate the proposed plan of conversion; (E) instructions for obtaining a copy of the conversion plan;(F) the date of the special meeting and a statement that the vote on the conversion will close on that date; and (G) any other information required by the Commissioner.(4) Thirty days before the special meeting of the members, the governing body shall mail a notice of the meeting and proposed conversion to each member. The notice shall include all of the information described in subdivision (3) of this subsection for the 60-day notice and shall include the date, time, and place of the special member meeting, a ballot and postage-paid return envelope, and a summary of the methods permitted for casting votes. (5) If the governing body substantively amends the plan of conversion, at least 30 days before the vote of the members on the plan, the governing body shall mail a notice to each member. The notice shall contain the information concerning the amended plan of conversion described in subdivision (3) of this subsection for a notice under that subdivision. (6) At the special meeting of members, the members, by a two-thirds vote of members voting, must approve of the conversion and the plan of conversion. A member may vote in person or by mail. With the prior approval of the Commissioner, a credit union may accept member votes by an alternative method that is reasonably calculated to ensure each member has an opportunity to vote. (7) The credit union shall file with the Commissioner all of the following:(A) certified copies of records of all proceedings held by the governing body and members of the credit union; (B) copies of member comments submitted to the credit union under subdivision (1)(C) of this subsection; (C) if such consent or approval is required, a certified copy of the consent or approval of any state or federal regulatory authority with jurisdiction over the mutual or cooperative financial institution after the conversion and, if a holding company is to be formed in connection with the conversion, the regulations of the federal reserve board of governors or of the office of thrift supervision applicable to holding companies; and (D) verification that deposits in the converted mutual or cooperative financial institution qualify for federal insurance. (b) If the requirements of this section are met and the Commissioner determines that the notices to members were accurate, timely, and not misleading, and that conduct of the vote on the conversion plan was fair and lawful, the Commissioner shall approve the conversion, and the conversion shall be effective. (c) Except as otherwise required by the Commissioner, this section does not apply to a credit union that submitted to the Commissioner a plan of conversion to a mutual or cooperative financial institution before the effective date of this part. (d) In the event of any conflict between the provisions of this section and the provisions of chapter 206 of this title, the provisions of this section shall govern. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 35103. Conversion of a mutual financial institution or a cooperative financial institution to a credit union
Chapter 206 of this title shall govern the conversion of a mutual financial institution or a cooperative financial institution to a credit union. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 36101. Suspension, voluntary liquidation, and involuntary liquidation
(a) Suspension. If it appears that any credit union is bankrupt or insolvent or that it has willfully violated this chapter or is operating in an unsafe or unsound manner, the Commissioner shall issue an order temporarily suspending the credit unions operations for not more than 60 days. The governing body shall be given notice by registered mail of the suspension, which notice shall include a list of the reasons for the suspension or a list of the specific violations of this chapter. The Commissioner shall also notify the insuring organization of any suspension. Upon receipt of the suspension notice, the credit union shall immediately cease all operations. The directors of the credit union shall then file with the Commissioner a reply to the suspension notice, request a hearing to present a plan of corrective actions proposed if they desire to continue operations, or request that the credit union be declared insolvent and a liquidating agent appointed. If the credit union fails to answer the suspension notice or request a hearing with the Commissioner, the Commissioner may then revoke the credit unions charter, appoint a liquidating agent, and liquidate the credit union in accordance with subsection (d) of this section. (b) Voluntary liquidation. At a meeting specially called to consider the matter, a majority of the entire membership may vote to dissolve the credit union if a copy of the notice was mailed to the members of the credit union at least 10 days prior to the meeting. Any member not present at the meeting may within the next 20 days vote in favor of dissolution by signing a statement in a form approved by the Commissioner, and the vote shall have the same force and effect as if cast at the meeting. The credit union shall thereupon immediately cease to do business except for the purposes of liquidation, and the chairperson of the governing body and secretary shall, within five days following the meeting, notify the Commissioner of the credit unions intention to liquidate and shall include in the notification a list of the names and addresses of the directors and officers of the credit union. (c) Involuntary liquidation. If the Commissioner, after issuing notice of suspension and providing an opportunity for a hearing, rejects the credit unions plan to continue operations, the Commissioner may issue a notice of involuntary liquidation and appoint a liquidating agent. The credit union may request a stay of execution of that action by appealing to the Superior Court of Washington County. Involuntary liquidation may not be ordered before the suspension procedures outlined in subsection (a) of this section are completed. (d) Liquidating procedure. The credit union shall continue in existence for the purpose of discharging its debts, collecting and distributing its assets, and doing all acts required in order to wind up its business and may sue and be sued for the purpose of enforcing those debts and obligations until its affairs are fully adjusted. The governing body or, in the case of involuntary dissolution, the liquidating agent shall use the assets of the credit union to pay: first, expenses incidental to liquidation including any surety bond that may be required; second, any liability due nonmembers; third, deposits and savings club accounts as provided in this chapter. Assets then remaining shall be distributed to the members proportionately to the shares held by each member as of the date liquidation was voted. As soon as the governing body or the liquidating agent determines that all assets from which there is a reasonable expectancy of realization have been liquidated and distributed as set forth in this section, it shall execute a certificate of liquidation on a form prescribed by the Commissioner and file it with the Secretary of State. The certificate shall, after filing or recording and indexing, be forwarded to the Commissioner whereupon the credit union shall be dissolved. (e) NCUA as liquidating agent. In the case in which the administrator of the National Credit Union Administration is appointed liquidating agent, the Administrator shall have the right to be subrogated to the rights of the members of the liquidating credit union. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2021, No. 105 (Adj. Sess.),  344, eff. July 1, 2022.) 
 36102. Involuntary merger of credit union
(a) Notwithstanding any other provision of law, the Commissioner may initiate the involuntary merger of a credit union which is insolvent or is in danger of insolvency or is operating in an unsafe or unsound manner with any other credit union or may authorize a credit union to purchase any of the assets of or assume any of the liabilities of any other credit union which is insolvent or in danger of insolvency or is operating in an unsafe or unsound manner if the Commissioner is satisfied that: (1) an emergency requiring expeditious action exists with respect to such other credit union; (2) other alternatives are not reasonably available; and(3) the public interest would best be served by approval of such merger, consolidation, purchase, or assumption. (b) The credit union may request a stay of the involuntary merger by appealing to the Washington Superior Court. (c)(1) Notwithstanding any other provision of law, the Commissioner may authorize an institution whose deposits or accounts are insured to purchase any of the assets of or assume any of the liabilities of a credit union which is insolvent or in danger of insolvency or is operating in an unsafe or unsound manner; and (2) For purposes of the authority contained in this section, insured share and deposit accounts of the credit union may, upon consummation of the purchase and assumption, be converted to insured deposits or other comparable accounts in the acquiring institution, and the Commissioner and the insuring organization shall be absolved of any liability to the credit unions members with respect to those accounts. (d) Notwithstanding any other provision of law, the Commissioner may waive the need for a membership vote of both the acquired and continuing credit union to approve the involuntary merger and may waive the requirement that the governing body of the acquired credit union approve the involuntary merger. (Added 2005, No. 16,  1, eff. July 1, 2005.) 
 36103. Conservatorship
(a) The Commissioner may, ex parte without notice, appoint himself or herself or an insuring organization or any other person as conservator and immediately take possession and control of the business and assets of any credit union in any case in which: (1) The Commissioner determines that such action is necessary to conserve the assets of any credit union or to protect the interests of the members of such credit union. (2) A credit union, by a resolution of its governing body, consents to such an action by the Commissioner. (3) The attorney general notifies the Commissioner in writing that a credit union has been found guilty of a criminal offense. (4) There is a willful violation of a cease and desist order which has become final.(5) There is concealment of books, papers, records, or assets of the credit union or refusal to submit books, papers, records, or affairs of the credit union for inspection to any examiner or to any lawful agent of the Commissioner. (6) The credit union is significantly undercapitalized and has no reasonable prospect of becoming adequately capitalized. (7) The credit union is critically undercapitalized.(b) Not later than 14 days after the date on which the Commissioner takes possession and control of the business and assets of a credit union pursuant to subsection (a) of this section, such credit union may apply to the Superior Court of Washington County for an order requiring the Commissioner to show cause why the Commissioner should not be enjoined from continuing such possession and control. Except as provided in this subsection, no court may take any action, except at the request of the Commissioner by regulation or order, to restrain or affect the exercise of powers or functions of the Commissioner as conservator. (c) Except as provided in subsection (b) of this section, the Commissioner may maintain possession and control of the business and assets of such credit union and may operate such credit union until such time: (1) as the Commissioner shall permit such credit union to continue business subject to such terms and conditions as may be imposed by the Commissioner; or (2) as such credit union is liquidated in accordance with the provisions of section 36101 of this title. (d) The Commissioner may appoint such agents as he or she considers necessary in order to assist the Commissioner in carrying out his or her duties as a conservator under this subsection. (e) All expenses incurred by the Commissioner in exercising his or her authority under this subsection with respect to any credit union shall be paid out of the assets of such credit union. (f) The conservator shall have all the powers of the members, the directors, the officers, and the committees of the credit union and shall be authorized to operate the credit union in its own name or to conserve its assets in the manner and to the extent authorized by the Commissioner. (g) The authority granted by this subsection is in addition to all other authority granted to the Commissioner under this title. (Added 2005, No. 16,  1, eff. July 1, 2005; amended 2017, No. 11,  8.) 
 36104. Appointment of director and managing officers of troubled credit unions
The Commissioner shall approve any director elected or appointed to serve on the governing body and any person appointed as the managing officer of a troubled credit union, before the director or officer takes office. As used in this section, troubled credit union means any credit union that, in the opinion of the Commissioner: (1) is insolvent or is in danger of becoming insolvent;(2) is not likely to be able to meet the demands of its members or to pay its obligations in the normal course of business or is likely to incur losses that may deplete all or substantially all of its capital; or (3) is being operated in an unsafe and unsound manner. (Added 2005, No. 16,  1, eff. July 1, 2005.)
 80. Insurance Regulatory and Supervision Fund
(a) There is hereby created a fund to be known as the Insurance Regulatory and Supervision Fund for the purpose of providing the financial means for the Commissioner of Financial Regulation to administer Parts 3 and 6, except chapter 133 of this title, and except as provided under subsection 6017(a) of this title. All fees and assessments received by the Department pursuant to such administration shall be credited to this Fund. All fines and administrative penalties, however, shall be deposited directly into the General Fund. (b) All payments from the Insurance Regulatory and Supervision Fund for the maintenance of staff and associated expenses, including contractual services as necessary, shall be disbursed from the State Treasury only upon warrants issued by the Commissioner of Finance and Management, after receipt of proper documentation regarding services rendered and expenses incurred. (c) Annually, $30,000.00 shall be transferred from the Fund to the Fire Service Training Council Special Fund established in 20 V.S.A.  3157. (d) At the end of each fiscal year, the balance in the Insurance Regulatory and Supervision Fund shall be transferred to the General Fund. (e) The Commissioner of Finance and Management may anticipate receipts to the Insurance Regulatory and Supervision Fund and issue warrants based thereon. (Added 1985, No. 242 (Adj. Sess.),  310; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 1999, No. 49,  216; 1999, No. 87 (Adj. Sess.),  4; 2003, No. 80 (Adj. Sess.),  75, eff. March 8, 2004; 2005, No. 71,  268; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012.) 
 1801. Purposes
The expression development credit corporation hereinafter called the corporation, as used in this chapter shall mean a corporation, incorporated under the general laws of the State, the purposes of which shall be: (1) to provide financial assistance to industrial, agricultural, recreational, or other enterprises potentially valuable to the State or its citizens, when and to the extent which, such financing shall lie beyond the prescribed limits of laws governing banks of deposit; (2) to assist by research and counsel such enterprises;(3) to conduct ex parte inquiries into ways and means of improving, promoting, or increasing the general welfare of the State, its political subdivisions, and its citizens by financial aid, counsel, or otherwise; and (4) to dedicate its energies to the discovery of ways and means of returning to maximum productivity any and all presently nonproducing assets in the State, for the dual purpose of increasing the welfare of the owner and of augmenting the taxable potential of the State. (Added 1969, No. 64,  1, eff. Jan. 1, 1970; amended 1999, No. 153 (Adj. Sess.),  3, eff. Jan. 1, 2001.) 
 1802. General and specific power
A development credit corporation shall have such general and specific rights and powers, within the limitations of its charter, as are enjoyed by other Vermont corporations, and, in addition, such rights and powers as are granted hereafter. (Added 1969, No. 64,  1, eff. Jan. 1, 1970.) 
 1803. Determination of public good
Prior to the granting of a charter to a development credit corporation, the Commissioner shall find that such grant shall promote the general good of the State. (Added 1969, No. 64,  1, eff. Jan. 1, 1970; amended 1989, No. 225 (Adj. Sess.),  25(b); 1995, No. 180 (Adj. Sess.),  38(a); 2003, No. 105 (Adj. Sess.),  9.) 
 1804. Tax exempt status
Being an institution of public welfare created primarily to increment, augment, and increase sources of taxation within the State, and, in order to induce continuing public support to the corporation, earnings of the corporation shall be exempt from State income taxes, and the holder or holders of any security issued by the corporation shall, in like manner, be exempt from payment of income taxes on dividends or interest paid thereon. (Added 1969, No. 64,  1, eff. Jan. 1, 1970.) 
 2100. Application of chapter
(a) Except as otherwise provided in this part, this chapter applies to a person doing or soliciting business in this State as described in this part. (b) This chapter does not apply to:(1) development credit corporations subject to chapter 65 of this title; or(2) independent trust companies subject to chapter 77 of this title. (Added 2019, No. 20,  2; amended 2019, No. 103 (Adj. Sess.),  1.)
 2101. Definitions
Except as otherwise provided in this part:(1) Commercial loan means a loan or extension of credit that is described in 9 V.S.A.  46(1), (2), or (4). The term does not include a loan or extension of credit secured in whole or in part by an owner occupied one- to four-unit dwelling. (2) Commissioner means the Commissioner of Financial Regulation.(3) Control means the possession, direct or indirect, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10 percent or more of the voting securities or other interest of any other person. (4) Depository institution has the same meaning as in 12 U.S.C.  1813 and includes any bank and any savings association as defined in 12 U.S.C.  1813. The term also includes a credit union organized and regulated as such under the laws of the United States or any state. (5) Dwelling has the same meaning as in 15 U.S.C.  1602.(6) Federal banking agencies means the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the National Credit Union Administration, and the Federal Deposit Insurance Corporation or any successor of any of these. (7) Holder means:(A) the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; (B) the person in possession of a negotiable tangible document of title if the goods are deliverable either to bearer or to the order of the person in possession; or (C) the person in control of a negotiable electronic document of title.(8) Immediate family member means a spouse, child, sibling, parent, grandparent, or grandchild, aunt, uncle, nephew, niece, including stepparents, stepchildren, stepsiblings, step grandparents, step grandchildren, and adoptive relationships. The term also includes former spouses dividing property in connection with a divorce or separation. (9) Individual means a natural person.(10) Insurance company means an institution organized and regulated as such under the laws of any state. (11) Licensee means a person required to be licensed or registered under this part.(12) Material litigation means a litigation that according to generally accepted accounting principles is deemed significant to an applicants or a licensees financial health and is required to be disclosed in the applicants or licensees annual audited financial statements, report to shareholders, or similar records. (13) Mortgage loan means a loan secured primarily by a lien against real estate.(14) Nationwide Multistate Licensing System and Registry or Nationwide Mortgage Licensing System and Registry or NMLS means a multistate licensing system developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators and operated by the State Regulatory Registry LLC for the licensing and registration of non-depository financial service entities in participating state agencies, or any successor to the Nationwide Multistate Licensing System and Registry. (15) Person has the same meaning as in 1 V.S.A.  128.(16) Record means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. (17) Residential mortgage loan means a loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on either a dwelling or residential real estate, upon which is constructed or intended to be constructed a dwelling. (18) Residential real estate means real property located in this State, upon which is constructed or intended to be constructed a dwelling. (19) Responsible individual means an individual who is employed by a licensee and has principal, active managerial authority over the provision of services in this State. (20) State means a state of the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States, except that when capitalized the term means the State of Vermont. (21) Unique identifier means a number or other identifier assigned by protocols established by the Nationwide Multistate Licensing System and Registry. (22) Unsafe or unsound practice means a practice or conduct by a person licensed to do business in this State that creates the likelihood of material loss, insolvency, or dissipation of the licensees assets, or otherwise materially prejudices the interests of its customers. (Added 2019, No. 20,  2.) 
 2102. Application for license
(a) Application for a license or registration shall be in writing, under oath, and in the form prescribed by the Commissioner, and shall contain the legal name, any fictitious name or trade name, and the address of the residence and place of business of the applicant, and if the applicant is a partnership or an association, of every member thereof, and if a corporation, of each officer and director thereof; also the county and municipality with street and number, if any, where the business is to be conducted and such further information as the Commissioner may require. (b) At the time of making an application, the applicant shall pay to the Commissioner a fee for investigating the application and a license or registration fee for a period terminating on the last day of the current calendar year. The following fees are imposed on applicants: (1) For an application for a lender license under chapter 73 of this title, $1,000.00 as a license fee and $1,000.00 as an application and investigation fee for the initial license. For each additional lender license from the same applicant, $500.00 as a license fee and $500.00 as an application and investigation fee. (2) For an application for a lender license under chapter 73 of this title for a lender only making commercial loans, $500.00 as a license fee and $500.00 as an application and investigation fee. (3) For an application for a mortgage broker license under chapter 73 of this title, other than a mortgage broker that meets each of the requirements of subdivisions (b)(4)(A)-(B) of this section, $500.00 as a license fee and $500.00 as an application and investigation fee. (4) For an application for a mortgage broker license under chapter 73 of this title that meets each of the following requirements, $250.00 as a license fee and $250.00 as an application and investigation fee: (A) the applicant is an individual sole proprietor; and(B) no person, other than the applicant, shall be authorized to act as a mortgage broker under the applicants license. (5) For an application for a mortgage loan originator license under chapter 73 of this title, $50.00 as a license fee and $50.00 as an application and investigation fee. (6) For an application for a sales finance company license under chapter 73 of this title, $350.00 as a license fee and $350.00 as an application and investigation fee. (7) For an application for a loan solicitation license under chapter 73 of this title, $500.00 as a license fee and $500.00 as an application and investigation fee. (8) [Repealed.](9) For an application for a consumer litigation funding company registration under chapter 74 of this title, $200.00 as a registration fee and $300.00 as an application and investigation fee. (10) For an application for a money transmission license under chapter 79 of this title, $1,000.00 as a license fee, $1,000.00 as an application and investigation fee, and $25.00 as a license fee for each authorized delegate location. (11) For an application for a check cashing and currency exchange license under chapter 79 of this title, $500.00 as a license fee and $500.00 as an application and investigation fee. (12) For an application for a debt adjuster license under chapter 83 of this title, $250.00 as a license fee and $500.00 as an application and investigation fee. (13) For an application for a loan servicer license under chapter 85 of this title, $1,000.00 as a license fee and $1,000.00 as an application and investigation fee. (14) For an application for a personal information protection company license under chapter 78 of this title, $500.00 as a license fee and $500.00 as an application and investigation fee. (c) In connection with an application for a license, the applicant, each officer, director, and responsible individual of the applicant, each person in control of the applicant, and any other person the Commissioner requires in accordance with NMLS guidelines or other multistate agreements, shall furnish to the Nationwide Multistate Licensing System and Registry information concerning each persons identity, including: (1) fingerprints for submission to the Federal Bureau of Investigation, and any governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check; (2) personal history and experience in a form prescribed by the Nationwide Multistate Licensing System and Registry, including the submission of authorization for the Nationwide Multistate Licensing System and Registry and the Commissioner to obtain: (A) an independent credit report and credit score obtained from a consumer reporting agency described in 15 U.S.C.  1681a for the purpose of evaluating the applicants financial responsibility at the time of application; and the Commissioner may obtain additional credit reports and credit scores to confirm the licensees continued compliance with the financial responsibility requirements of this part; (B) information related to any administrative, civil, or criminal findings by any governmental jurisdiction; and (3) any other information required by the Nationwide Multistate Licensing System and Registry or the Commissioner. (d) The applicant shall provide a list of any material litigation in which the applicant has been involved in the 10-year period preceding the submission of the application. (e) If an applicant is a corporation, limited liability company, partnership, or other entity, the applicant shall also provide: (1) the date of the applicants incorporation or formation and state or country of incorporation or formation; (2) if applicable, a certificate of good standing from the state or country in which the applicant is incorporated or formed; (3) a brief description of the structure or organization of the applicant, including any parent or subsidiary of the applicant, and whether any parent or subsidiary is publicly traded; (4) the legal name, any fictitious or trade name, all business and residential addresses, and the employment, in the 10-year period preceding the submission of the application, of each executive officer, manager, responsible individual, director of, or person in control of, the applicant; (5) a list of any criminal convictions, material litigation, or disciplinary actions in which any executive officer, manager, responsible individual, director of, or individual in control of, the applicant has been involved in the 10-year period preceding the submission of the application; (6) a copy of the applicants audited financial statements for the most recent fiscal year and, if available, for the two-year period preceding the submission of the application; (7) a copy of the applicants unconsolidated financial statements for the current year, whether audited or not, and, if available, for the two-year period preceding the submission of the application; (8) if the applicant is publicly traded, a copy of the most recent 10-K report filed with the U.S. Securities and Exchange Commission; and (9) if the applicant is a wholly owned subsidiary:(A) a copy of audited financial statements for the parent company for the most recent fiscal year; and (B) of a corporation publicly traded in the United States, a copy of the parent corporations most recent 10-K report filed with the U.S. Securities and Exchange Commission, or if the applicant is a wholly owned subsidiary of a corporation publicly traded outside the United States, a copy of similar documentation filed with the regulator of the parent corporations domicile outside the United States. (f) If the applicant is not an individual, the name and address of the applicants registered agent in this State. (g) Upon the filing of an application, the Commissioner shall investigate the financial condition and responsibility, financial and business experience, character, and general fitness of the applicant and any person named in the application. The Commissioner may conduct an on-site investigation of the applicant, the cost of which the applicant shall bear pursuant to section 18 of this title. (h) This section does not apply to a person applying for a commercial lender license under section 2202a of this title. (Added 2019, No. 20,  2; 2019, No. 70,  1; amended 2019, No. 103 (Adj. Sess.),  2; 2021, No. 25,  2, eff. May 12, 2021.) 
 2103. Approval of application and issuance of license
(a) Upon the filing of an application, payment of the required fees, and satisfaction of any applicable bond and liquid asset requirements, the Commissioner shall issue a license to the applicant if the Commissioner finds: (1)(A) The financial responsibility, experience, character, and general fitness of the applicant command the confidence of the community and warrant belief that the business will be operated honestly, fairly, and efficiently pursuant to the applicable chapter of this title. (i) If the applicant is a partnership or association, such findings are required with respect to each partner, member, and responsible individual of, and each person in control of, the applicant. (ii) If the applicant is a corporation, such findings are required with respect to each officer, director, and responsible individual of, and each person in control of, the applicant. (B) For purposes of assessing whether a person is financially responsible, the Commissioner may consider how the person has managed his or her own financial condition, which may include factors such as whether the person has: (i) current outstanding judgments, except judgments solely as a result of medical expenses;(ii) current outstanding tax liens or other government liens and filings;(iii) foreclosures within the past three years; or(iv) a pattern of seriously delinquent accounts within the past three years.(2) Allowing the applicant to engage in business will promote the convenience and advantage of the community in which the applicant will conduct its business. (3) The applicant, each officer, director, and responsible individual of, and each person in control of, the applicant, has never had a financial services license or similar license revoked in any governmental jurisdiction, except that a subsequent formal vacation of such revocation shall not be deemed a revocation. (4) The applicant, each officer, director, and responsible individual of, and each person in control of, the applicant has not been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign, or military court: (A)(i) during the seven-year period preceding the date of the application for licensing and registration; or (ii) at any time preceding such date of application, if such felony involved an act of fraud or dishonesty, a breach of trust, or money laundering; and (B) provided that any pardon or expungement of a conviction shall not be a conviction for purposes of this subsection. (5) The applicant has satisfied the applicable surety bond and liquid asset requirement as follows: (A) for an application for a lender license, mortgage broker license, mortgage loan originator license, or loan solicitation license, the applicable bond and liquid asset requirements of sections 2203 and 2203a of this title; (B) for an application for a litigation funding company registration, the financial stability requirement of section 2252 of this title; (C) for an application for a money transmitter license, the bond and net worth requirements of sections 2507 and 2510 of this title; (D) for an application for a debt adjuster license, the bond requirement of section 2755 of this title; and (E) for an application for a loan servicer license, the bond requirement of sections 2903 and 2907 of this title. (6) For an application for a mortgage loan originator license, the applicant has satisfied the prelicense education requirement of section 2204a of this title and the prelicensing testing requirement of section 2204b of this title. (b)(1) If the Commissioner finds the applicant does not meet the requirements of subsection (a) of this section, the Commissioner shall not issue a license. (2) Not later than 60 days after an applicant files a complete application, the Commissioner shall notify the applicant of the denial, stating the reason or reasons therefor. (3) If the applicant does not file a timely request for reconsideration pursuant to section 2104 of this title, the Commissioner shall: (A) return to the applicant any amounts paid for the applicable bond requirement and license fee; and (B) retain the investigation fee to cover the costs of investigating the application.(c)(1) If the Commissioner finds that an applicant meets the requirements of subsection (a) of this section, he or she shall issue the license not later than 60 days after an applicant submits a complete application. (2) Except as otherwise provided in this title, a license is valid until the licensee surrenders the license or the Commissioner revokes, suspends, terminates, or refuses to renew the license. (d) For good cause shown and consistent with the purposes of this section, the Commissioner may waive or modify the requirements of subdivision (a)(3) of this section; provided, however, that the Commissioner may not waive the requirement of subdivision (a)(3) of this section for applicants for a mortgage loan originator license. (e) If an application remains incomplete for 120 days, the Commissioner may deem the application abandoned or withdrawn. (f) This section does not apply to a person applying for a commercial lender license under section 2202a of this title. (Added 2019, No. 20,  2; amended 2019, No. 103 (Adj. Sess.),  7.) 
 2104. Request for reconsideration; review of denial of application
(a)(1) If the Commissioner denies an application, not later than 15 days after the date of denial the applicant may request that the Commissioner reconsider the application. (2) The applicant shall submit his or her request in writing and shall respond specifically to the Commissioners stated reason or reasons for denial. (b)(1) The Commissioner shall reconsider the application in light of the applicants request and response and issue a decision not later than 60 days after the date of the request. (2) If the Commissioner finds that the applicant meets the requirements of subsection 2103(a) of this title, he or she shall issue a license. (3) If the Commissioner finds that the applicant does not meet the requirements of subsection 2103(a) of this title, the Commissioner shall not issue a license and shall: (A) return to the applicant the bond, if any, and any amounts paid for the applicable license fee; and (B) retain the investigation fee to cover the costs of investigating the application.(c) The applicant may appeal the Commissioners decision by filing an action in the civil division of the Washington County Superior Court not later than 15 days after the date the Commissioner denied the request for reconsideration. (Added 2019, No. 20,  2; amended 2019, No. 103 (Adj. Sess.),  8.) 
 2105. Contents of license; nontransferable
(a) A license shall state the address at which a licensee will conduct its business, shall state fully the name of the licensee, and, if the licensee is not an individual, shall state the date and place of its organization or incorporation. (b) A mortgage loan originator license shall state fully the name of the individual, his or her sponsoring company, and the licensed location to which he or she is assigned. (c) A licensee shall not transfer or assign a license.(d) The Commissioner, in his or her discretion, may issue a license through the NMLS. (Added 2019, No. 20,  2; amended 2021, No. 25,  6, eff. May 12, 2021.)
 2106. Additional place of business; change of place of business
(a)(1) A license is required for each place of business.(2) Except as otherwise provided in this title, the Commissioner may issue more than one license to the same licensee for additional places of business if the licensee meets the requirements for each place of business. (b)(1) A licensee shall provide written notice to the Commissioner and fee of $100.00 not less than 30 days before changing or closing a place of business. (2) Upon receiving the notice and fee, the Commissioner shall record the change of location and the date, and the licensee may operate at the new location. (Added 2019, No. 20,  2.) 
 2107. Change of control
(a) A licensee shall give the Commissioner notice of a proposed change of control within 30 days of the proposed change and request approval of the acquisition. A money transmitter licensee shall also submit with the notice a nonrefundable fee of $500.00. (b) After review of a request for approval under subsection (a) of this section, the Commissioner may require the licensee to provide additional information concerning the proposed persons in control of the licensee. The additional information shall be limited to the same categories of information required of the licensee or persons in control of the licensee as part of its original license or renewal application. (c) The Commissioner shall approve a request for change of control under subsection (a) of this section if, after investigation, the Commissioner determines that the person or group of persons requesting approval has the competence, experience, character, and general fitness to operate the licensee or person in control of the licensee in a lawful and proper manner, and that the interests of the public will not be jeopardized by the change of control. (d) The Commissioner shall approve or deny a request for change of control not later than 60 days after a complete request is filed and notify the licensee of the decision in a record. The Commissioner for good cause may extend the review period. (e) The following persons are exempt from the prefiling requirements of subsection (a) of this section, but the licensee shall notify the Commissioner of the change of control and request the Commissioners approval using the standards in subsection (b) of this section for a change of control: (1) a person that acts as a proxy for the sole purpose of voting at a designated meeting of the security holders or holders of voting interests of a licensee or person in control of a licensee; (2) a person that acquires control of a licensee by devise or descent;(3) a person that acquires control as a personal representative, custodian, guardian, conservator, or trustee, or as an officer appointed by a court of competent jurisdiction or by operation of law; and (4) a person that the Commissioner, by rule or order, exempts in the public interest.(f) Subsection (a) of this section does not apply to public offerings of securities.(g) Before filing a request for approval to acquire control, a person may request in a record a determination from the Commissioner as to whether the person would be considered a person in control of a licensee upon consummation of a proposed transaction. If the Commissioner determines that the person would not be a person in control of a licensee, the Commissioner shall enter an order to that effect, and the proposed person and transaction is not subject to the requirements of subsections (a) through (c) of this section. (Added 2019, No. 20,  2.) 
 2108. Notification of material change
(a) A licensee shall notify the Commissioner in writing within 30 days of any material change in the information provided in a licensees application. (b) A licensee shall notify the Commissioner in writing within 30 days of any change in the list of executive officers, managers, directors, or responsible individuals. (c) A licensee shall file a report with the Commissioner within 15 business days after the licensee has reason to know of the occurrence of any of the following events involving the licensee, or any executive officer, manager, director, person in control, responsible individual, or equivalent of the licensee: (1) the filing of a petition by or against the licensee or such person under the U.S. Bankruptcy Code for bankruptcy or reorganization; (2) the filing of a petition by or against the licensee for receivership, the commencement of any other judicial or administrative proceeding for its dissolution or reorganization, or the making of a general assignment for the benefit of its creditors; (3) the commencement of a disciplinary proceeding or a license denial against the licensee or such person in a state or country in which the licensee engages in business or is licensed, including any action by the Attorney General of any state; (4) the cancellation or other impairment of the licensees bond or other security;(5) a charge or conviction against the licensee or such person for a felony;(6) a charge against or conviction of an authorized delegate for a felony;(7) receiving notification of the initiation of a class action lawsuit against the licensee; or (8) any change in the organizational structure of the licensee or any parent company of the licensee. (Added 2019, No. 20,  2.) 
 2109. Annual renewal of license
(a) On or before December 1 of each year, every licensee shall renew its license or registration for the next succeeding calendar year and shall pay to the Commissioner the applicable renewal of license or registration fee. At a minimum, the licensee or registree shall continue to meet the applicable standards for licensure or registration. At the same time, the licensee or registree shall maintain with the Commissioner any required bond in the amount and of the character as required by the applicable chapter. The annual license or registration renewal fee shall be: (1) For a lender license under chapter 73 of this title, $1,200.00.(2) For a lender license under chapter 73 of this title for a lender only making commercial loans, $500.00. (3) For a mortgage broker license under chapter 73 of this title, other than a mortgage broker that meets each of the requirements of subdivisions (4)(A)-(C) of this section, $500.00. (4) For a mortgage broker license under chapter 73 of this title that meets each of the following requirements, $250.00: (A) the mortgage broker license is held by an individual sole proprietor;(B) no person, other than the individual sole proprietor, shall be authorized to act as a mortgage broker under this license; and (C) the mortgage broker originated five or fewer loans within the last calendar year.(5) For a mortgage loan originator license under chapter 73 of this title, $100.00.(6) For a sales finance company license under chapter 73 of this title, $350.00.(7) For a loan solicitation license under chapter 73 of this title, $500.00.(8) [Repealed.](9) For a consumer litigation funding company registration under chapter 74 of this title, $200.00. (10) For a money transmission license under chapter 79 of this title, $1,000.00, plus an annual renewal fee of $25.00 for each authorized delegate, provided that the total renewal fee of all authorized delegate locations shall not exceed $3,500.00. (11) For a check cashing and currency exchange license under chapter 79 of this title, $500.00. (12) For a debt adjuster license under chapter 83 of this title, $250.00.(13) For a loan servicer license under chapter 85 of this title, $1.000.00.(14) For a personal information protection company license under chapter 78 of this title, $500.00. (b) A license originally issued on or after November 1 of the current year is valid for the next succeeding year. (c) In addition to the annual renewal fee, on or before April 1 of each year a money transmission licensee shall pay the Department an annual assessment equal to $0.0001 per dollar volume of money services activity performed for, or sold or issued to, Vermont customers for the most recent year ending December 31, which assessment shall not be less than $100.00 and shall not be greater than $15,000.00. (d) An individual holding a mortgage loan originator license shall also satisfy the annual continuing education requirement of section 2204c of this title. (e) Notwithstanding any other provision of this title, the license of a mortgage loan originator who fails to pay the annual renewal fee or fails to satisfy all of the minimum license renewal standards by December 1 shall automatically expire on December 31. (f) Notwithstanding any other provision of this title, the registration of a litigation funding company that fails to pay the annual renewal fee or fails to satisfy all of the minimum registration renewal requirements by December 1 shall automatically expire on December 31. (Added 2019, No. 20,  2; 2019, No. 70,  1a; amended 2019, No. 103 (Adj. Sess.),  3; 2021, No. 25,  3, eff. May 12, 2021.) 
 2110. Revocation, suspension, termination, or nonrenewal of license; cease and desist orders
(a) The Commissioner may deny, suspend, terminate, revoke, condition, or refuse to renew a license or order that any person or licensee cease and desist in any specified conduct if the Commissioner finds: (1) the licensee failed to pay the renewal of license fee or an examination fee as provided in this part, or to maintain in effect the required liquid assets or the bond or bonds required under the provisions of this part, or to file any annual report or other report, or to comply with any lawful demand, ruling, or requirement of the Commissioner; (2) the licensee violated any applicable provision of this part; chapter 200 of this title; 9 V.S.A. chapter 4, 59, or 61; or any rule, order, or directive, adopted pursuant to those provisions; (3) the licensee engages in fraud, intentional misrepresentation, or gross negligence;(4) the licensee engages in an unsafe or unsound practice;(5) the licensee is convicted of a violation of a state or federal anti-money-laundering statute; (6) the competence, experience, character, or general fitness of the licensee, person in control of a licensee, or responsible individual of the licensee indicates that it is not in the public interest to permit the person to provide services in this State; (7) the licensee fails to continue to meet the initial licensing requirements of this title, or withholds information, or fails to cooperate with an examination or investigation, or makes a material misstatement in a license application, license renewal, or any document submitted to the Commissioner or to the Nationwide Multistate Licensing System and Registry; (8) any cause for which issuance of the license could have been refused had it then existed and been known to the Commissioner at the time of issuance, including unconscionable conduct that takes advantage of a borrowers lack of bargaining power or lack of understanding of the terms or consequences of the transaction. (9) the licensee has demonstrated a pattern of failure or refusal to promptly pay obligations on payment instruments or transmissions of money, is insolvent, suspends payment of its obligations, or makes an assignment for the benefit of its creditors; or (10) a money transmission licensee does not remove an authorized delegate after the Commissioner issues and serves upon the licensee a final order including a finding that the authorized delegate has violated this part. (b) The Commissioner may issue orders or directives to any person:(1) to cease and desist from conducting business;(2) to cease any harmful activities or violations of this part; chapter 200 of this title; 9 V.S.A. chapter 4, 59, or 61; or any order, directive, or rule adopted pursuant to those provisions; (3) to cease business under a license or any conditional license if the Commissioner determines that such license was erroneously granted or the licensee is currently in violation of this part; chapter 200 of this title; 9 V.S.A. chapter 4, 59, or 61; or any order, directive, or rule, adopted pursuant to those provisions; (4) enjoining or prohibiting any person from engaging in the financial services industry in this State; (5) to remove any officer, director, employee, responsible individual, or control person; or (6) regarding any other action or remedy as the Commissioner deems necessary to carry out the purposes of this part. (c) The Commissioner shall provide not less than 15 days notice and an opportunity to be heard before he or she issues an order or directive pursuant to subsection (b) of this section. Mailing notice to the licensees current address as stated on the license shall be presumptive evidence of its receipt by the licensee. However, if the Commissioner finds that the public safety or welfare imperatively requires emergency action, action with no prior notice or prior opportunity to be heard may be taken, pending proceedings for revocation or other action. (Added 2019, No. 20,  2.) 
 2111. Revocation, suspension, termination, or nonrenewal where more than one place of business
The Commissioner may revoke, suspend, terminate, or refuse to renew only the license for a particular place of business at which grounds for revocation, suspension, termination, or refusal to renew may occur or exist, or if the Commissioner finds that such grounds for revocation, suspension, termination, or refusal to renew are of general application to all licensed places of business, or to more than one licensed place of business, operated by such licensee, the Commissioner shall revoke, suspend, terminate, or refuse to renew all of the licenses issued to the licensee or such licenses as such grounds apply to, as the case may be. (Added 2019, No. 20,  2.) 
 2112. Surrender of license; no effect on liability; reinstatement
(a) A licensee may surrender a license by delivering to the Commissioner notice that the licensee surrenders the license. (b) Surrender shall not affect the licensees administrative, civil, or criminal liability for acts committed prior to surrender. A revocation, suspension, termination, refusal to renew, or surrender of a license does not impair or affect the obligation of a preexisting lawful contract. (c) The Commissioner may reinstate a revoked, suspended, terminated, expired, inactive, or nonrenewed license or issue a new license to a licensee whose license was revoked, suspended, terminated, expired, inactive, or nonrenewed if no fact or condition then exists that would have warranted the Commissioner to refuse to issue the license under this part; provided, however, that the Commissioner shall not issue a new license or reinstate a license to a mortgage loan originator whose license was revoked unless the revocation order is vacated. (Added 2019, No. 20,  2.) 
 2113. Appeal of final order
(a) The Commissioner shall serve his or her findings and order of suspension, termination, revocation, or to cease and desist in specified conduct on the licensee by mail at the licensees current address as stated on the license, which shall be presumptive evidence of its receipt by the licensee. (b) The licensee may appeal the Commissioners decision by filing an action in the civil division of the Washington County Superior Court not later than 15 days after the date of service. (Added 2019, No. 20,  2.) 
 2114. Rules
The Commissioner may adopt rules and issue orders, rulings, demands, and findings as is necessary to perform his or her duties under this part. (Added 2019, No. 20,  2.) 
 2115. Penalties
(a) The Commissioner may:(1) impose an administrative penalty of not more than $10,000.00, plus the States cost and expenses of investigating and prosecution of the matter, including attorneys fees, for each violation upon any person who violates or participates in the violation of this part; chapter 200 of this title; 9 V.S.A. chapter 4, 59, or 61; or any lawful rule adopted, or directive or order issued, pursuant to those sections; and (2) order any person to make restitution to another person for a violation of this part, chapter 200 of this title, or 9 V.S.A. chapter 4, 59, or 61. (b) Each violation, or failure to comply with any directive or order of the Commissioner, is a separate and distinct violation. (c) It shall be a criminal offense, punishable by a fine of not more than $100,000.00, or not more than a year in prison, or both, for any person, after receiving an order that directs the person to cease exercising the duties and powers of a licensee and imposes an administrative penalty under this part, to perform the duties or exercise the powers of a licensee until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the order is vacated by the Commissioner or by a court of competent jurisdiction. (d)(1) A loan contract made in knowing and willful violation of subdivision 2201(a)(1) of this title is void, and the lender shall not collect or receive any principal, interest, or charges; provided, however, in the case of a loan made in violation of subdivision 2201(a)(1) of this title, where the Commissioner does not find a knowing and willful violation, the lender shall not collect or receive any interest or charges, but may collect and receive principal. (2) If a person who receives an order that directs the person to cease exercising the duties and powers of a licensee and imposes an administrative penalty under this part continues to perform the duties or exercise the powers of a licensee without satisfying the penalty, or otherwise reaching a satisfactory resolution between the parties, or securing a decision vacating the order by the Commissioner or by a court of competent jurisdiction, a loan contract made by the person after receipt of such order is void and the lender shall not collect or receive any principal, interest, or charges. (e) The powers vested in the Commissioner in this part are in addition to any other powers to enforce penalties, fines, or forfeitures authorized by law. (Added 2019, No. 20,  2; amended 2019, No. 103 (Adj. Sess.),  9.) 
 2116. Administrative procedure
All administrative proceedings under this part shall be conducted in accordance with 3 V.S.A. chapter 25 and any rules adopted by the Commissioner on hearing procedure. (Added 2019, No. 20,  2.) 
 2117. Examinations and investigations; examination fees
(a) In addition to any authority allowed under this part or other law, and for the purpose of examination, or discovering or investigating violations or complaints of or arising under this part; chapter 200, subchapter 2 of this title; chapter 200 of this title; 9 V.S.A. chapter 4, 59, or 61; or a rule adopted, or an order or directive issued pursuant to those sections, or securing information required or useful thereunder, and for purposes of initial licensing, license renewal, license suspension, license conditioning, license revocation or termination, or general or specific inquiry or investigation, the Commissioner or his or her representative may: (1) conduct investigations and examinations;(2) access, receive, and use any books, accounts, records, files, documents, information, or evidence including: (A) criminal, civil, and administrative history information, including nonconviction data;(B) personal history and experience information, including independent credit reports obtained from a consumer reporting agency described in 15 U.S.C.  1681a; and (C) any other documents, information, or evidence the Commissioner deems relevant to the inquiry or investigation regardless of the location, possession, control, or custody of such documents, information, or evidence. (b)(1) The Commissioner may review, investigate, or examine any person, regardless of whether the person has obtained a license under this part, as often as necessary in order to carry out the purposes of this part. (2) The Commissioner may direct, subpoena, or order the attendance of, and examine under oath, a person whose testimony is required about the loans or the business or subject matter of an examination or investigation, and may direct, subpoena, or order the person to produce books, accounts, records, files, and any other documents the Commissioner deems relevant to the inquiry. (c)(1) A person subject to this part shall make available to the Commissioner upon request the books and records relating to the operations of the person. (2) The Commissioner shall have access to the books and records and to interview the officers, principals, responsible individuals, control persons, mortgage loan originators, employees, independent contractors, agents, and customers of the person concerning its business. (d) A person subject to this part shall make or compile reports or prepare other information as directed by the Commissioner in order to carry out the purposes of this section, including: (1) accounting compilations;(2) information lists and data concerning transactions in a format prescribed by the Commissioner; and (3) any other information as the Commissioner deems necessary to carry out the purposes of this part. (e)(1) In making any examination or investigation authorized by this part, the Commissioner may control access to the documents and records of the person under examination or investigation. (2) The Commissioner may take possession of the documents and records or place a person in exclusive charge of the documents and records in the place where they are usually kept. (3) During the period of control, a person shall not remove or attempt to remove any of the documents and records except pursuant to a court order or with the consent of the Commissioner. (4) Unless the Commissioner has reasonable grounds to believe the documents or records of the person have been or are at risk of being altered or destroyed for purposes of concealing a violation of this part, the licensee or owner of the documents and records shall have access to the documents or records as necessary to conduct its ordinary business affairs. (f) In order to carry out the purposes of this part, the Commissioner may:(1) retain attorneys, accountants, or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations; (2) enter into agreements or relationships with other government officials or regulatory associations to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this section; (3) use, hire, contract, or employ public or privately available analytical systems, methods, or software to examine or investigate a person subject to this part; (4) accept and rely on examination or investigation reports made by other government officials within or outside this State; or (5) accept audit reports made by an independent certified public accountant for the person subject to this part in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the Commissioner. (g) The authority of this section shall remain in effect, whether a person subject to this part acts or claims to act under any licensing or registration law of this State, acts without such authority, or surrenders his or her license. (h) No person subject to investigation or examination under this section may knowingly withhold, abstract, remove, mutilate, destroy, or secrete any books, records, computer records, or other information. (i) The Commissioner may, in the case of any person subject to this part who does not maintain a Vermont office, accept reports of examinations prepared by another state or federal regulatory agency as substitutes if such reports are available to the Commissioner and are determined to be adequate in exercising his or her powers and discharging his or her responsibilities under this part. (j)(1) A person subject to this part shall pay to the Department all fees, costs, and expenses of any examination, review, and investigation as prescribed by section 18 of this title, which fees, costs, and expenses shall be billed when they are incurred. (2) In addition to the powers set forth in section 2110 of this title, the Commissioner may maintain an action for the recovery of examination, review, and investigation fees, costs, and expenses as prescribed in section 18 of this title in any court of competent jurisdiction. (k) Information obtained during an examination or investigation under this part shall be confidential and privileged and shall be treated as provided in section 23 of this title. (Added 2019, No. 20,  2.) 
 2118. Joint examinations
(a)(1) The Commissioner may conduct an on-site examination in conjunction with representatives of other state agencies or agencies of another state or of the federal government. (2) Instead of an examination, the Commissioner may accept the examination report of an agency of this State or of another state or of the federal government or a report prepared by an independent certified public accountant. (b)(1) A joint examination or an acceptance of an examination report does not preclude the Commissioner from conducting an examination as provided by law. (2) A joint report or a report accepted under this subsection is an official report of the Commissioner for all purposes. (Added 2019, No. 20,  2.) 
 2119. Records required of licensee
(a)(1) A licensee shall keep, use in the licensees business, and make available to the Commissioner upon request, the books, accounts, records, and data compilations as will enable the Commissioner to determine whether the licensee is complying with the provisions of this part and with the rules adopted by the Commissioner. (2) A licensee shall preserve the books, accounts, records, and data compilations in a secure manner for not less than seven years after making the final entry on any loan recorded therein. (3) After the seven-year retention period, the licensee shall dispose of the books, accounts, records, and data compilations in accordance with 9 V.S.A.  2445. (b) A licensee may maintain records in any form permitted in subsection 11301(c) of this title. (Added 2019, No. 20,  2.) 
 2120. Annual report; call reports
(a)(1) In addition to any specific information required by the applicable chapter, annually, on or before April 1, a licensee shall file a report with the Commissioner to provide the information the Commissioner reasonably requires concerning the business and operations conducted in this State during the preceding calendar year. (2) The licensee shall submit the report under oath and in the form the Commissioner requires.(3) For good cause, the Commissioner may extend the due date for the annual report required by this subsection. (4) If a licensee does not file its annual report on or before April 1, or within any extension of time granted by the Commissioner, the licensee shall pay to the Department $1,000.00 for each month or part of a month that the report is past due, beginning on the date that is five business days after April 1 or the last date of such extension, as applicable. (b)(1) Annually, not later than 90 days after the end of its fiscal year, a licensee shall file financial statements with the Commissioner in a form and substance acceptable to the Commissioner, which financial statements shall include a balance sheet and income statement. (2) This subsection does not apply to a lender making only commercial loans.(c) A licensee shall submit to the Nationwide Multistate Licensing System and Registry reports of condition in a form and including the information the Nationwide Multistate Licensing System and Registry requires, if applicable. (d) The Commissioner may require more frequent reports from any licensee. (Added 2019, No. 20,  2; amended 2019, No. 103 (Adj. Sess.),  10; 2021, No. 25,  4, eff. May 12, 2021.)
 2121. Deceptive advertising
(a) A person subject to this part shall not advertise, print, display, publish, distribute, or broadcast or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, a statement or representation that is false, misleading, or deceptive. (b) The Commissioner may order a person to cease conduct that violates this section. (Added 2019, No. 20,  2.)
 2122. Use of other names or business places
(a) A licensee shall not conduct business or make a loan subject to regulation under this part under any other name or at any other place of business than as specified in its license. (b) Mortgage loan originators and employees of licensees may work remotely through a licensed location without being physically present at such location, provided the mortgage loan originator or employee is assigned to a licensed location, is adequately supervised by the licensee, and the licensee and the mortgage loan originator or employee meet such additional conditions as the Commissioner may require. (c) This section does not apply to a commercial loan made to a borrower located outside Vermont for use outside Vermont. (Added 2019, No. 20,  2; amended 2021, No. 25,  7, eff. May 12, 2021.) 
 2124. Nationwide Multistate Licensing System and Registry
(a) In furtherance of the Commissioners duties under this part, the Commissioner may participate in the Nationwide Multistate Licensing System and Registry and may take such action regarding participation in the licensing system as the Commissioner deems necessary to carry out the purposes of this part, including: (1) issue rules or orders, and establish procedures, to further participation in the Nationwide Multistate Licensing System and Registry; (2) facilitate and participate in the establishment and implementation of the Nationwide Multistate Licensing System and Registry; (3) establish relationships or contracts with the Nationwide Multistate Licensing System and Registry or other entities designated by the Nationwide Multistate Licensing System and Registry; (4) authorize the Nationwide Multistate Licensing System and Registry to collect and maintain records and to collect and process any fees associated with licensure on behalf of the Commissioner; (5) require persons engaged in activities that require a license under this part to utilize the Nationwide Multistate Licensing System and Registry for license applications, renewals, amendments, surrenders, and such other activities as the Commissioner may require and to pay through the System all fees provided for under this part; (6) authorize the Nationwide Multistate Licensing System and Registry to collect fingerprints on behalf of the Commissioner in order to receive or conduct criminal history background checks; (7) in order to reduce the points of contact which the Federal Bureau of Investigation may have to maintain for purposes of this part, use the Nationwide Multistate Licensing System and Registry as a channeling agent for requesting information from and distributing information to the Department of Justice or any governmental agency; and (8) in order to reduce the points of contact that the Commissioner may have to maintain for purposes of subsection 2102(c) of this chapter, use the Nationwide Multistate Licensing System and Registry as a channeling agent for requesting and distributing information to and from any source so directed by the Commissioner. (b)(1) The Commissioner may require persons engaged in activities that require a license under this part to submit fingerprints, and the Commissioner may utilize the services of the Nationwide Multistate Licensing System and Registry to process the fingerprints and to submit the fingerprints to the Federal Bureau of Investigation, the Vermont State Police, or any equivalent state or federal law enforcement agency for the purpose of conducting a criminal history background check. (2) The licensee or applicant shall pay the cost of such criminal history background check, including any charges imposed by the Nationwide Multistate Licensing System and Registry. (c) A person engaged in an activity that requires a license under this part shall pay all applicable charges to utilize the Nationwide Multistate Licensing System and Registry, including the processing charges the administrator of the Nationwide Multistate Licensing System and Registry establishes, in addition to the fees required under this part. (d) The Nationwide Multistate Licensing System and Registry is not intended to and does not replace or affect the Commissioners authority to grant, deny, suspend, terminate, revoke, or refuse to renew licenses. (Added 2019, No. 20,  2.) 
 2125. Report to Nationwide Multistate Licensing System and Registry
(a) Subject to State privacy and confidentiality laws, and subject to section 2126 of this title, the Commissioner shall report regularly violations of this part, enforcement actions, and other relevant information to the Nationwide Multistate Licensing System and Registry. (b) A licensee may challenge information the Commissioner reports to the Nationwide Multistate Licensing System and Registry in accordance with 3 V.S.A. chapter 25 and any rules adopted by the Commissioner on hearing procedures. (Added 2019, No. 20,  2.) 
 2126. Confidentiality
In order to promote more effective regulation and reduce regulatory burden through supervisory information sharing: (1)(A) The privacy or confidentiality of any information or material provided to the Nationwide Multistate Licensing System and Registry, and any privilege arising under federal or state law with respect to such information or material, including the rules of any federal or state court, shall continue to apply to the information or material after the information or material is disclosed to the Nationwide Multistate Licensing System and Registry. (B) The Commissioner may share the information and material with state and federal regulatory officials who have oversight authority without affecting the privilege or confidentiality protections provided by federal law or state law. (2) The Commissioner may enter agreements or sharing arrangements with other governmental agencies, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, State Regulatory Registry LLC, or other associations representing governmental agencies. (3) Information or material that is subject to privilege or confidentiality under subdivision (1) of this section is not subject to: (A) disclosure under any federal or state law governing the disclosure to the public of information held by an officer or an agency of the federal government or the respective state; or (B) subpoena or discovery, or admission into evidence, in any private civil action or administrative process, unless with respect to a privilege held by the Nationwide Multistate Licensing System and Registry, the person to whom such information or material pertains waives the privilege. (4) This section does not apply to information or material relating to the employment history of, and publicly adjudicated disciplinary and enforcement actions against, mortgage loan originators that are included in the Nationwide Multistate Licensing System and Registry for access by the public. (Added 2019, No. 20,  2.) 
 2200. Definitions
As used in this chapter:(1)(A) Employee means, subject to subdivision (B) of this subdivision (1), an individual whose manner and means of work are subject to the right of control of, or are controlled by a person and whose compensation for federal income tax purposes is reported, or required to be reported, on a W-2 form issued by: (i) the controlling person;(ii) an entity that directly or indirectly owns 100 percent of the controlling person; or (iii) an entity that is directly or indirectly 100 percent owned by the same parent company as the controlling person. (B) For purposes of a registered mortgage loan originator, the term employee has such binding definition as may be issued by the federal banking agencies in connection with their responsibilities under the federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008. (2) Engage in the business of a mortgage loan originator means to act as, or to hold oneself out as acting as, or to represent to the public that one can provide the services of, a mortgage loan originator, in a commercial context, and with some degree of habitualness or repetition. Habitualness or repetition is met if either the individual who acts as a mortgage loan originator does so with a degree of habitualness or repetition or the source of the prospective financing provides such financing or performs other phases of origination of residential mortgage loans with a degree of habitualness or repetition. Acting in a commercial context is met if either the individual or an entity for which the individual acts does so for the purpose of obtaining profit rather than exclusively for governmental or family purposes. (3) Housing finance agency means any authority:(A) that is chartered by a state to help meet the affordable housing needs of the residents of the state; (B) that is supervised directly or indirectly by the state government;(C) that is subject to audit and review by the state in which it operates; and(D) whose activities make it eligible to be a member of the National Council of State Housing Agencies. (4) Lead means any information identifying a potential consumer of a loan.(5) Lead generation means to:(A) initiate consumer interest or inquiry in a loan by online marketing, direct response advertising, telemarketing, or other similar consumer contact; (B) engage in the business of selling leads for loans;(C) generate or augment leads for other persons for, or with the expectation of, compensation or gain; or (D) refer Vermont borrowers to other persons for loans for, or with the expectation of, compensation or gain. (6) Loan processor or underwriter means an individual who performs clerical or support duties as an employee at the direction and subject to the supervision and instruction of a person licensed, or exempt from licensing, under this chapter. (A) For purposes of this subdivision (6), the term clerical or support duties may include, subsequent to the receipt of a residential mortgage loan application: (i) the receipt, collection, distribution, and analysis of information common for the processing or underwriting of a residential mortgage loan; and (ii) communicating with a consumer to obtain the information necessary for the processing or underwriting of a loan, to the extent that such communication does not include offering or negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or terms. (B) An individual engaging solely in loan processor or underwriter activities shall not represent to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform any of the activities of a mortgage loan originator. (7)(A) Loan solicitation means, for compensation or gain or with the expectation of compensation or gain, to: (i) offer, solicit, broker, directly or indirectly arrange, place, or find a loan for a prospective Vermont borrower; (ii) engage in any activity intended to assist a prospective Vermont borrower in obtaining a loan, including lead generation; (iii) arrange, in whole or in part, a loan through a third party, regardless of whether approval, acceptance, or ratification by the third party is necessary to create a legal obligation for the third party, through any method, including mail, telephone, Internet, or any electronic means; or (iv) represent to the public through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that a person can or will provide a loan or any of the services described in subdivisions (i)-(iii) of this subdivision (7)(A). (B) As used in this subdivision (7), loan solicitation does not:(i) apply to residential mortgage loans;(ii) include a broker-dealer registered or exempt from registration under 9 V.S.A.  5401 when the broker-dealer provides the services described in subdivision (A) of this subdivision (7) and the broker-dealer is not compensated by the consumer for those services; (iii) include an agent registered or exempt from registration under 9 V.S.A.  5402 when the agent provides the services described in subdivision (A) of this subdivision (7) and the individual agent is not compensated by the consumer for those services; (iv) include an insurance producer licensed under 8 V.S.A.  4800 when the insurance producer provides the services described in subdivision (A) of this subdivision (7) and the individual insurance producer is not compensated by the consumer for those services; (v) include a seller of goods or services that provides the services described in subdivision (A) of this subdivision (7) in connection with financing the sale or proposed sale of the sellers goods or services and the seller is not compensated by the consumer for the services described in subdivision (A) of this subdivision (7); or (vi) include other categories of loans or service providers as determined by the Commissioner by rule or order. (8) Mortgage broker means any person who for compensation or gain, or in the expectation of compensation or gain, directly or indirectly negotiates, places, assists in placement, or finds, or offers to negotiate, place, assist in placement, or find mortgage loans, other than commercial loans, on real property for others. The term shall not include real estate brokers or salespersons, as defined in 26 V.S.A.  2211, who in connection with services performed in a prospective real estate transaction, provide mortgage information or assistance to a buyer, if such real estate broker or real estate salesperson is not compensated for providing such mortgage information or assistance in addition to the compensation received from the seller or buyer for such real estate brokerage activity. The term shall not include attorneys licensed to practice law in this State acting in their professional capacity. The term shall not include persons engaged in the foregoing activities solely in connection with the sale, assignment, or other transfer of one or more previously originated loans. (9) Mortgage loan originator:(A) Means an individual who for compensation or gain or in the expectation of compensation or gain: (i) takes a residential mortgage loan application;(ii) offers or negotiates terms of a residential mortgage loan;(iii) represents to the public, through advertising or other means of communicating or providing information, including the use of business cards, stationery, brochures, signs, rate lists, or other promotional items, that such individual can or will perform the services described in subdivision (i) or (ii) of this subdivision (9)(A). (B) An individual takes a residential mortgage loan application if the individual receives a residential mortgage loan application for the purpose of facilitating a decision whether to extend an offer of residential mortgage loan terms to a borrower or prospective borrower, or to accept the terms offered by a borrower or prospective borrower in response to a solicitation, whether the application is received directly or indirectly from the borrower or prospective borrower. (C) An individual offers or negotiates terms of a residential mortgage loan for compensation or gain if the individual: (i)(I) presents for consideration by a borrower or prospective borrower particular residential mortgage loan terms; (II) communicates directly or indirectly with a borrower or prospective borrower for the purpose of reaching a mutual understanding about prospective residential mortgage loan terms; or (III) recommends, refers, or steers a borrower or prospective borrower to a particular lender or set of residential mortgage loan terms, in accordance with a duty to or incentive from any person other than the borrower or prospective borrower; and (ii) receives or expects to receive payment of money or anything of value in connection with the activities described in subdivision (i) of this subdivision (9)(C) or as a result of any residential mortgage loan terms entered into as a result of such activities. (D) Does not include:(i) an individual engaged solely as a loan processor or underwriter, except as otherwise provided in subsection 2201(g) of this chapter; (ii) a person or entity that only performs real estate brokerage activities and is licensed or registered in accordance with Vermont law, unless the person or entity is compensated by a buyer or a seller in addition to the compensation received for such real estate brokerage activity or is compensated by a lender, mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator; or (iii) a person or entity solely involved in extensions of credit relating to timeshare plans, as that term is defined in 11 U.S.C.  101(53D). (10) Nontraditional mortgage product means any mortgage product other than a 30-year fixed rate mortgage. (11) Real estate brokerage activity means any activity that involves offering or providing real estate brokerage services to the public, including: (A) acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of real property; (B) bringing together parties interested in the sale, purchase, lease, rental, or exchange of real property; (C) negotiating, on behalf of any party, any portion of a contract relating to the sale, purchase, lease, rental, or exchange of real property, other than in connection with providing financing with respect to any such transaction; (D) engaging in any activity for which a person engaged in the activity is required to be registered or licensed as a real estate agent or real estate broker under any applicable law; and (E) offering to engage in any activity or act in any capacity described in subdivision (A), (B), (C), or (D) of this subdivision (11). (12) Registered mortgage loan originator means any individual who:(A) meets the definition of mortgage loan originator and is an employee of:(i) a depository institution;(ii) a subsidiary that is:(I) owned and controlled by a depository institution, as determined by a federal banking agency; and (II) regulated by a federal banking agency; or(iii) an institution regulated by the Farm Credit Administration; and(B) is registered with, and maintains a unique identifier through, the Nationwide Multistate Licensing System and Registry. (13) Residential mortgage loan application means a request, in any form, for an offer, or a response to a solicitation of an offer, of residential mortgage loan terms, and information about the borrower or prospective borrower that is customary or necessary in a decision on whether to make such an offer. (14) Sales finance company means any person who has purchased one or more retail installment contracts, as defined in 9 V.S.A.  2351(5) and 2401(7), from one or more retail sellers located in this State. Taking one or more retail installment contracts as security for a loan or loans shall not be construed as purchasing for purposes of this definition. (Added 1995, No. 162 (Adj. Sess.),  1, eff. Jan. 1, 1997; amended 1995, No. 180 (Adj. Sess.),  38(a); 1997, No. 98 (Adj. Sess.),  2, eff. April 16, 1998; 1999, No. 153 (Adj. Sess.),  11, eff. Jan. 1, 2001; 2009, No. 29,  1; 2009, No. 134 (Adj. Sess.),  24a; 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2011, No. 85 (Adj. Sess.),  1, eff. April 20, 2012; 2013, No. 34,  3; 2015, No. 128 (Adj. Sess.),  F.3, eff. May 24, 2016; 2017, No. 22,  18, eff. May 4, 2017; 2019, No. 20,  3.) 
 2201. Licenses required
(a) Without first obtaining a license under this chapter from the Commissioner, a person shall not: (1) Engage in the business of making loans of money, credit, goods, or things in action and charge, contract for, or receive on any such loan interest, a finance charge, discount, or consideration therefor. (2) Act as a mortgage broker.(3) Engage in the business of a mortgage loan originator.(4) Act as a sales finance company.(5) Engage in the business of loan solicitation. A person licensed as a lender, sales finance company, or mortgage broker is not required to obtain a separate loan solicitation license when acting on the persons own behalf. (b) A licensed mortgage loan originator shall register and maintain a valid unique identifier with the Nationwide Multistate Licensing System and Registry and shall be either: (1) An employee actively employed at or assigned to a licensed location of, and supervised and sponsored by, only one licensed lender or licensed mortgage broker operating in this State. (2) An individual sole proprietor who is also a licensed lender or licensed mortgage broker.(3) An employee engaged in loan modifications employed at or assigned to a licensed location of, and supervised and sponsored by, only one third-party loan servicer licensed to operate in this State pursuant to chapter 85 of this title. As used in this subsection, loan modification means an adjustment or compromise of an existing residential mortgage loan. The term loan modification does not include a refinancing transaction. (c) A person licensed pursuant to subdivision (a)(1) of this section may engage in mortgage brokerage and sales finance if such person informs the Commissioner in advance that he or she intends to engage in sales finance and mortgage brokerage. Such person shall inform the Commissioner of his or her intention on the original license application under section 2102 of this title, any renewal application under section 2109 of this title, or pursuant to section 2106 of this title, and shall pay the applicable fees required by subsection 2102(b) of this title for a mortgage broker license or sales finance company license. (d) A lender license, mortgage broker license, sales finance company license, or loan solicitation license shall not be required of: (1) A state agency, political subdivision, or other public instrumentality of a state.(2) A federal agency or other public instrumentality of the United States.(3) A gas or electric utility subject to the jurisdiction of the Public Utility Commission engaging in energy conservation or safety loans. (4) A depository institution or a financial institution as defined in subdivision 11101(32) of this title. (5) A pawnbroker.(6) An insurance company.(7) A seller of goods or services that finances the sale of such goods or services, other than a residential mortgage loan. (8) Any individual who offers or negotiates the terms of a residential mortgage loan secured by a dwelling that served as the individuals residence, including a vacation home, or inherited property that served as the deceaseds dwelling, provided that the individual does not act as a mortgage loan originator or provide financing for such sales so frequently and under such circumstances that it constitutes a habitual activity and acting in a commercial context. (9) Lenders that conduct their lending activities, other than residential mortgage loan activities, through revolving loan funds, that are nonprofit organizations exempt from taxation under 26 U.S.C.  501(c) and that register with the Commissioner of Economic Development under 10 V.S.A.  690a. (10) Persons who lend, other than residential mortgage loans, an aggregate of less than $250,000.00 in any one year at rates of interest of no more than 12 percent per annum. (11) A seller who, pursuant to 9 V.S.A.  2355(f)(1)(D), includes the amount paid or to be paid by the seller to discharge a security interest, lien interest, or lease interest on the traded-in motor vehicle in a motor vehicle retail installment sales contract, provided that the contract is purchased, assigned, or otherwise acquired by a sales finance company licensed pursuant to this title to purchase motor vehicle retail installment sales contracts or a depository institution. (12)(A) A person making an unsecured commercial loan, which loan is expressly subordinate to the prior payment of all senior indebtedness of the commercial borrower regardless of whether such senior indebtedness exists at the time of the loan or arises thereafter. The loan may or may not include the right to convert all or a portion of the amount due on the loan to an equity interest in the commercial borrower. (B) As used in this subdivision (12), senior indebtedness means:(i) all indebtedness of the commercial borrower for money borrowed from depository institutions, trust companies, insurance companies, and licensed lenders, and any guarantee thereof; and (ii) any other indebtedness of the commercial borrower that the lender and the commercial borrower agree shall constitute senior indebtedness. (13) Nonprofit organizations established under testamentary instruments, exempt from taxation under 26 U.S.C.  501(c)(3), and that make loans for postsecondary educational costs to students and their parents, provided that the organizations provide annual accountings to the Probate Division of the Superior Court. (14) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual. (15) A housing finance agency.(16) A person who makes no more than three mortgage loans in any consecutive three-year period beginning on or after July 1, 2011. (e) A mortgage loan originator license shall not be required of:(1) Registered mortgage loan originators, when employed by and acting for an entity described in subdivision 2200(12) of this chapter. (2) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member of the individual. (3) Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individuals residence, including a vacation home, or inherited property that served as the deceaseds dwelling, provided that the individual does not act as a mortgage loan originator or provide financing for such sales so frequently and under such circumstances that it constitutes a habitual activity and acting in a commercial context. (4) An individual who is an employee of a federal, state, or local government agency, or an employee of a housing finance agency, who acts as a mortgage loan originator only pursuant to his or her official duties as an employee of the federal, state, or local government agency or housing finance agency. (5) A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorneys representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of such lender, mortgage broker, or other mortgage loan originator. To the extent an attorney licensed in this State undertakes activities that are covered by the definition of a mortgage loan originator, such activities do not constitute engaging in the business of a mortgage loan originator, provided that: (A) such activities are considered by the State governing body responsible for regulating the practice of law to be part of the authorized practice of law within this State; (B) such activities are carried out within an attorney-client relationship; and(C) the attorney carries them out in compliance with all applicable laws, rules, ethics, and standards. (6) A person who makes no more than three mortgage loans in any consecutive three-year period beginning on or after July 1, 2011. (f) If a person who offers or negotiates the terms of a mortgage loan is exempt from licensure pursuant to subdivision (d)(16) or (e)(6) of this section, there is a rebuttable presumption that he or she is not engaged in the business of making loans or being a mortgage loan originator. (g) Independent contractor loan processors or underwriters. A loan processor or underwriter who is an independent contractor may not engage in the activities of a loan processor or underwriter unless such independent contractor loan processor or underwriter obtains and maintains a mortgage loan originator license. Each independent contractor loan processor or underwriter licensed as a mortgage loan originator must have and maintain a valid unique identifier issued by the Nationwide Multistate Licensing System and Registry. (h) This chapter shall not apply to commercial loans of $1,000,000.00 or more. (Amended 1969, No. 243 (Adj. Sess.),  1; 1979, No. 173 (Adj. Sess.),  2, eff. April 30, 1980; 1985, No. 38,  2; 1991, No. 1,  1, eff. Feb. 27, 1991; 1995, No. 162 (Adj. Sess.),  2, eff. Jan. 1, 1997; 1999, No. 153 (Adj. Sess.),  12, eff. Jan. 1, 2001; 2001, No. 55,  4, eff. June 12, 2001; 2005, No. 143 (Adj. Sess.),  2; 2007, No. 159 (Adj. Sess.),  1, eff. May 20, 2008; 2007, No. 178 (Adj. Sess.),  1; 2009, No. 29,  1; 2009, No. 137 (Adj. Sess.),  1a; 2009, No. 154 (Adj. Sess.),  238a, eff. Feb. 1, 2011; 2011, No. 21,  1, eff. May 11, 2011; 2011, No. 85 (Adj. Sess.),  2, eff. April 20, 2012; 2013, No. 29,  3; 2013, No. 34,  4; 2013, No. 199 (Adj. Sess.),  21; 2015, No. 51,  E.4; 2017, No. 22,  19, eff. May 4, 2017; 2019, No. 20,  4; 2019, No. 103 (Adj. Sess.),  6; 2021, No. 25,  8, eff. May 12, 2021.)
 2202a. Application for commercial lender license
(a) Application for a license for a lender making solely commercial loans shall be in writing, under oath, and in the form prescribed by the Commissioner, and shall contain the name and address of the residence and the place of business of the applicant and, if the applicant is a partnership or association, of every member thereof, and, if a corporation, of each officer, director, and control person thereof; the county and municipality with street and number, if any, where the business is to be conducted; and such further information as the Commissioner may require. (b) At the time of making application, the applicant shall pay to the Commissioner an initial licensing fee and an application and investigation fee pursuant to subdivision 2102(b)(2) of this title. (c) In connection with an application for a commercial lender license, the applicant and each officer, director, and control person of the applicant shall furnish to the Nationwide Multistate Licensing System and Registry information concerning the applicants identity and the identity of each of the applicants officers, directors, and control persons, including: (1) fingerprints for submission to the Federal Bureau of Investigation and for any other governmental agency or entity authorized to receive such information for a state, national, and international criminal history background check; (2) personal history and experience in a form prescribed by the NMLS, including the submission of authorization for the NMLS and the Commissioner to obtain information related to any administrative, civil, or criminal findings by any governmental jurisdiction; and (3) any other information required by the NMLS or the Commissioner. (Added 2009, No. 134 (Adj. Sess.),  24c; amended 2019, No. 20,  6.)
 2202b. Approval of application; issuance of commercial lender license
(a) Upon the filing of an application and payment of the required fees, the Commissioner shall issue a commercial lender license to the applicant if the Commissioner finds: (1) The experience, character, and general fitness of the applicant command the confidence of the community and warrant belief that the business will be operated honestly, fairly, and efficiently within the purposes of this chapter. (A) If the applicant is a partnership or association, such findings are required with respect to each partner, member, and person in control of the applicant. (B) If the applicant is a corporation, such findings are required with respect to each officer, director, and person in control of the applicant. (2) The applicant and each officer, director, and person in control of the applicant has never had a lender license, mortgage broker license, mortgage loan originator license, or similar license revoked in any governmental jurisdiction, except that a subsequent formal vacation of such revocation shall not be deemed a revocation. (3) The applicant and each officer, director, and person in control of the applicant has not been convicted of or pled guilty or nolo contendere to a felony in a domestic, foreign, or military court: (A) during the seven-year period preceding the date of the application for licensing, except a conviction for driving under the influence or a similarly titled offense in this State or in any other jurisdiction; or (B) at any time preceding the date of application, if the felony involved an act of fraud, dishonesty, or a breach of trust, or money laundering; and (C) provided that any pardon of a conviction shall not be a conviction for purposes of this subsection. (b)(1) If the Commissioner finds that the applicant does not meet the requirements of subsection (a) of this section, the Commissioner shall not issue a license. (2) Not later than 60 days after an applicant files a complete application, the Commissioner shall notify the applicant of the denial, stating the reason or reasons therefor. (3) If the applicant does not file a timely request for reconsideration pursuant to section 2104 of this title, the Commissioner shall: (A) return to the applicant the sum paid by the applicant as a license fee; and(B) retain the investigation fee to cover the costs of investigating the application.(c)(1) If the Commissioner finds that an applicant meets the requirements of subsection (a) of this section, he or she shall issue the license not later than 60 days after the applicant submits a complete application. (2) Provided that the licensee annually renews the license, the license shall be valid until the licensee surrenders the license or until the Commissioner revokes, suspends, terminates, or refuses to renew the license. (d) For good cause shown and consistent with the purposes of this section, the Commissioner may waive or modify the requirements of subdivision (a)(2) of this section. (Added 2009, No. 134 (Adj. Sess.),  24f; amended 2017, No. 22,  5, eff. May 4, 2017; 2019, No. 20,  7.) 
 2203. Bond; liquid assets required
(a) Prior to issuance of a license, the applicant shall file with the Commissioner, and shall keep in force thereafter for as long as the license remains in effect, a bond in a form and substance to be approved by the Commissioner in which the applicant shall be the obligor, in such sum as the Commissioner may require. The aggregate liability for any and all claims on any bond shall in no event exceed the sum thereof. No surety obligation on a bond shall be terminated unless at least 60 days prior written notice is given by the surety to the obligor and the Commissioner. When one person is issued licenses to conduct the licensed activity at more than one office, the Commissioner may accept a single bond covering all such offices. The bond shall run to the State for the use of the State and of any person or persons who may have cause of action against the obligor of such bond under the provisions of this chapter. Such bond shall be conditioned that the obligor will faithfully conform to and abide by the provisions of this chapter and of all rules and regulations lawfully made by the Commissioner hereunder, and will pay to the State and to any such person or persons any and all monies that may become due or owing to the State or to such person or persons from such obligor under and by virtue of the provisions of this chapter. The Commissioner shall require that the amount of the bonds shall be based upon the dollar amount of loans originated in Vermont and, at a minimum: (1) For licensed lenders:(A) who annually originate $0.00 to $1,000,000.00 in loans, a surety bond not less than $50,000.00; (B) who annually originate $1,000,000.01 to $15,000,000.00 in loans, a surety bond not less than $100,000.00; (C) who annually originate $15,000,000.01 or more in loans, a surety bond not less than $150,000.00. (2) For mortgage brokers:(A) who annually originate $0.00 to $2,000,000.00 in mortgage loans, a surety bond not less than $25,000.00; (B) who annually originate $2,000,000.01 to $5,000,000.00 in mortgage loans, a surety bond not less than $50,000.00; (C) who annually originate $5,000,000.01 to $15,000,000.00 in mortgage loans, a surety bond not less than $75,000.00; (D) who annually originate $15,000,000.01 or more in mortgage loans, a surety bond not less than $100,000.00. (3) The Commissioner may adopt regulations modifying the minimum bond requirements set forth in this subsection. (b) Each mortgage loan originator shall be covered by a surety bond in accordance with this section. In the event that the mortgage loan originator is an employee of a person subject to this chapter, the surety bond of such licensed lender or licensed mortgage broker can be used in lieu of the mortgage loan originators surety bond requirement, provided that the surety bond shall provide coverage for each mortgage loan originator in an amount as prescribed in this section. (c) A loan solicitation licensee shall maintain a surety bond in an amount not less than $25,000.00 or in such other amount as the Commissioner may require. (d) When an action is commenced on a licensees bond, the Commissioner may require the filing of a new bond. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond. (e) Every applicant for a lenders license shall also prove, in form satisfactory to the Commissioner, that the applicant has liquid assets of $25,000.00, or such greater amount as the Commissioner may require, available for the operation of such business at the location specified in the application. Every applicant wishing to make commercial loans shall prove liquid assets in an amount of $50,000.00 or such greater amount as the Commissioner may require. (f) Notwithstanding subsections (a) and (e) of this section, the Commissioner may waive or modify the requirement for or amount of a bond or liquid asset set forth in this section, or accept other appropriate means of assuring the financial responsibility of a licensee. (g) This section does not apply to a lender making only commercial loans. (Amended 1983, No. 35,  2; 1995, No. 162 (Adj. Sess.),  4, eff. Jan. 1, 1997; 2005, No. 36,  3; 2009, No. 29,  1; 2009, No. 134 (Adj. Sess.),  24d; 2017, No. 22,  21, eff. May 4, 2017.)
 2203a. Additional bond; liquid assets to be maintained
(a) If the Commissioner finds at any time that a licensees bond is insecure, exhausted, insufficient, or otherwise doubtful, the Commissioner shall require one or more additional bonds meeting the standards set forth in section 2203 of this title. The licensee shall file the bond within 10 days of the Commissioners written demand to do so. (b) Every licensee, except as set forth in subsection (c) of this section, shall maintain at all times assets in amounts as set forth in section 2203 of this title, or in such greater amount deemed necessary by the Commissioner. Assets must be either in liquid form available for the operation of or actually used in the conduct of such business at the location specified in the license. (c) Every licensee making commercial loans shall maintain liquid assets in an amount deemed necessary by the Commissioner, but in no event less than $50,000.00. (Amended 1983, No. 35,  3; 1989, No. 244 (Adj. Sess.),  3; 1995, No. 162 (Adj. Sess.),  8, eff. Jan. 1, 1997; 2009, No. 29,  1; 2019, No. 20,  8.) 
 2204a. Mortgage loan originator prelicensing and relicensing education requirement
(a) In order to meet the prelicensing education requirement for a mortgage loan originator, a person shall complete at least 20 hours of education approved in accordance with subsection (b) of this section, which shall include at least: (1) three hours of federal law and regulations;(2) three hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; (3) two hours of training related to lending standards for the nontraditional mortgage product marketplace; and (4) two hours of Vermont law and regulations.(b) For purposes of subsection (a) of this section, prelicensing education courses shall be reviewed and approved by the Nationwide Multistate Licensing System and Registry based upon reasonable standards. Review and approval of a prelicensing education course shall include review and approval of the course provider. (c) Nothing in this section shall preclude any prelicensing education course, as approved by the Nationwide Multistate Licensing System and Registry, that is provided by the employer of the applicant or an entity which is affiliated with the applicant by an agency contract, or any subsidiary or affiliate of such employer or entity. (d) Prelicensing education may be offered either in a classroom, online, or by any other means approved by the Nationwide Multistate Licensing System and Registry. (e) The prelicensing education requirements approved by the Nationwide Multistate Licensing System and Registry in subdivisions (a)(1), (2), and (3) of this section for any state shall be accepted as credit toward completion of prelicensing education requirements in Vermont. (f) A person previously licensed as a mortgage loan originator under this chapter applying to be licensed again must prove that he or she has completed all of the continuing education requirements for the year in which the license was last held. This subsection does not apply to an individual who is required to retake 20 hours of prelicensing education pursuant to subsection (g) of this section. (g) A person who has completed 20 hours of prelicensing education under 12 U.S.C.  5104(c) must retake such prelicensing education to be eligible to apply for a Vermont loan originator license if he or she: (1) within three years of completing the prelicensing education, does not acquire a valid mortgage loan originator license in any state or does not become a federally registered mortgage loan originator; or (2) within three years of completing the prelicensing education, obtains a valid mortgage loan originator license in any state or becomes a federally registered mortgage loan originator and subsequently does not maintain an approved mortgage loan originator license in any state or an approved federal registration for a period of three years or more. (h) A person who has completed two hours of Vermont prelicense education as required by subdivision (a)(4) of this section must retake such prelicensing education to be eligible to apply for a Vermont mortgage loan originator license if he or she: (1) does not acquire a valid Vermont mortgage loan originator license within three years of completing the prelicense education; or (2) obtains a valid Vermont mortgage loan originator license and then subsequently does not maintain an approved Vermont mortgage loan originator license for a period of three years or more. (Added 2009, No. 29,  1; amended 2013, No. 29,  4, eff. May 13, 2013; 2017, No. 22,  4, eff. May 4, 2017; 2019, No. 20,  10.) 
 2204b. Testing of mortgage loan originators
(a) An individual applying for a mortgage loan originator license shall pass, in accordance with the standards established under this section, a qualified written test developed by the Nationwide Multistate Licensing System and Registry and administered by a test provider approved by the Nationwide Multistate Licensing System and Registry based upon reasonable standards. (b) A written test shall not be treated as a qualified written test for purposes of subsection (a) of this section unless the test adequately measures the applicants knowledge and comprehension in appropriate subject areas, including: (1) ethics;(2) federal law and regulation pertaining to mortgage origination;(3) State law and regulation pertaining to mortgage origination; and(4) federal and State law and regulation, including instruction on fraud, consumer protection, the nontraditional mortgage marketplace, and fair lending issues. (c) Nothing in this section shall prohibit a test provider approved by the Nationwide Multistate Licensing System and Registry from providing a test at the location of the employer of the applicant or the location of any subsidiary or affiliate of the employer of the applicant. (d) An individual shall not be considered to have passed a qualified written test unless the individual achieves a test score of not less than 75 percent correct answers to questions. (e) An individual may take a test three consecutive times, with each consecutive test occurring at least 30 days after the preceding test. After failing three consecutive tests, an individual shall wait at least six months before taking the test again. (f) A licensed mortgage loan originator who fails to maintain a valid license for a period of five years or longer shall retake the test, not taking into account any time during which such individual is a registered mortgage loan originator. (Added 2009, No. 29,  1; amended 2011, No. 85 (Adj. Sess.),  4, eff. April 20, 2012; 2019, No. 20,  11.) 
 2204c. Continuing education for mortgage loan originators
(a) In order to meet the annual continuing education requirements, a licensed mortgage loan originator shall complete at least eight hours of education approved in accordance with subsection (b) of this section, which shall include at least: (1) three hours of federal law and regulations;(2) two hours of ethics, which shall include instruction on fraud, consumer protection, and fair lending issues; and (3) two hours of training related to lending standards for the nontraditional mortgage product marketplace. (b) For purposes of subsection (a) of this section, continuing education courses shall be reviewed and approved by the Nationwide Multistate Licensing System and Registry based upon reasonable standards. Review and approval of a continuing education course shall include review and approval of the course provider. (c) Nothing in this section shall preclude any education course, as approved by the Nationwide Multistate Licensing System and Registry, that is provided by the employer of the mortgage loan originator or an entity that is affiliated with the mortgage loan originator, or any subsidiary or affiliate of the employer. (d) Continuing education may be offered either in a classroom, online, or by any other means approved by the Nationwide Multistate Licensing System and Registry. (e) A licensed mortgage loan originator:(1) except for subsection (i) of this section, may only receive credit for a continuing education course in the year in which the course is taken; and (2) may not take the same approved course in the same or successive years to meet the annual requirements for continuing education. (f) A licensed mortgage loan originator who is an approved instructor of an approved continuing education course may receive credit for the licensed mortgage loan originators own annual continuing education requirement at the rate of two hours of credit for every one hour taught. (g) A person having successfully completed the education requirements approved by the Nationwide Multistate Licensing System and Registry in subdivisions (a)(1), (2), and (3) of this section for any state shall be accepted as credit toward completion of continuing education requirements in Vermont. (h) A licensed mortgage loan originator who subsequently becomes unlicensed must complete the continuing education requirements for the last year in which the license was held prior to issuance of a new or renewed license. This subsection does not apply to an individual who is required to retake 20 hours of prelicensing education pursuant to subsection 2204a(g) of this title. (i) A person who otherwise meets the requirements for renewal of a license may make up any deficiency in continuing education as established by order or rule of the Commissioner. (Added 2009, No. 134 (Adj. Sess.),  24f; amended 2017, No. 22,  5, eff. May 4, 2017; 2019, No. 20,  12.) 
 2204d. Mortgage loan originator license inactive status
The license of a mortgage loan originator that has satisfied all of the requirements of licensure, other than being employed by a licensed lender or licensed mortgage broker, may be placed in an approved inactive status. (Amended 1995, No. 162 (Adj. Sess.),  7, eff. Jan. 1, 1997; 2009, No. 29,  1; 2013, No. 29,  5, eff. May 13, 2013; 2019, No. 20,  13.) 
 2208a. Mortgage loan originator change of employer or sponsor
(a) No mortgage loan originator may be employed, supervised, and sponsored by more than one licensed lender or licensed mortgage broker operating in this State. Alternatively, a mortgage loan originator may be an individual sole proprietor who is also licensed as a lender or mortgage broker in this State. (b) A mortgage loan originator shall notify the Commissioner and update its status on the Nationwide Mortgage Licensing System and Registry within 15 days of any change in the employer and sponsor of the mortgage loan originator subsequent to the initial employer and sponsor. A fee of $50.00 payable to the Commissioner shall accompany notice of such change of employer and sponsor. (Added 2009, No. 134 (Adj. Sess.),  19.) 
 2216. Mortgage lending; specific requirements; exceptions
Every licensee engaging in the making of loans secured by a lien against real estate located in this State, whether conducting its affairs as an agent or principal and whether operating from facilities within the State or by mail, telephone, or by electronic means, shall comply with the general provisions of this chapter unless exempted herein. A licensee making such loans through a third person shall only make loans through a person licensed as a mortgage broker and as a mortgage loan originator under this chapter, unless such third person is exempt from such licensing provisions. Any lender who makes such loans through a third person required to be licensed and not so licensed, in addition to being subject to all applicable penalties under Vermont law, shall be responsible for the acts or omissions of the third person as a principal is responsible for the acts and omissions of its agent. Every licensee making loans secured by a lien against real estate shall comply with sections 10403 and 10404, and subchapter 2 of chapter 200 of this title, and shall also be subject to the following specific limitations: (1) For loans secured by a first lien, the term shall not exceed 480 months, and the licensees may not exceed the interest rate permitted by 9 V.S.A.  41a(b)(8). All such lien documents shall include a power of sale pursuant to 12 V.S.A  4531a et seq. The limitations on permitted charges contained in sections 2231 and 2233 of this title and 9 V.S.A.  42, 44, and 46 shall not apply to any loan within the scope of 12 U.S.C.  1735f-7a. Permitted charges shall be as specified in 9 V.S.A.  42, 44, and 46 for any loan secured by a first lien on real estate that is not included within the scope of 12 U.S.C.  1735f-7a, instead of sections 2231 and 2233 of this title. (2) For loans secured by a subordinate lien, the term shall not exceed 360 months, and the licensees may not exceed the interest rate permitted by 9 V.S.A. chapter 4. All such lien documents shall include a power of sale pursuant to 12 V.S.A.  4531a et seq. Permitted charges for loans secured by a subordinate lien shall be as specified in 9 V.S.A.  42, 44, and 46, instead of sections 2231 and 2233 of this title. (3) No licensee shall take a lien upon real estate as security for any loan made under this chapter, except such lien as is created by law upon the recording of a judgment or such lien as secures a loan in principal amount in excess of $3,000.00 at the time of making. (4) Interest shall be computed by the actuarial method in accordance with 9 V.S.A. 41a(d).(5) Any loan secured by a lien on real estate, except a commercial loan, which does not contain a fixed rate or substantially equal payments for full amortization within the repayment period shall conform to federal regulations on alternative mortgages where applicable by reason of federal law or action of the Commissioner. (6) This section shall not apply to commercial loans. (Added 1983, No. 35,  1; amended 1989, No. 244 (Adj. Sess.),  1; 1995, No. 162 (Adj. Sess.),  17, eff. Jan. 1, 1997; 1997, No. 23,  12, eff. Jan. 1, 1997; 1997, No. 98 (Adj. Sess.),  3, eff. April 16, 1998; 1999, No. 153 (Adj. Sess.),  15, eff. Jan. 1, 2001; 2009, No. 29,  1.)
 2217. Mortgage brokers
(a) No licensee or other person shall act as a mortgage broker in any transaction in which the licensee or such other person is acting as a mortgage lender. (b) Each mortgage broker required to be licensed under this chapter shall retain for a minimum of six years after a contract is executed pursuant to section 2219 of this title, the original contract between the mortgage broker and the prospective borrower, a copy of the settlement statement, an account of fees received in connection with the loan, correspondence, papers, or records relating to the loan and such other documents as the Commissioner may require. (c) A mortgage broker and a mortgage loan originator shall only negotiate, place, or assist in placement of Vermont mortgage loans with lenders licensed pursuant to this chapter, or with depository institutions authorized to do such business in Vermont. (Added 1995, No. 162 (Adj. Sess.),  18, eff. Jan. 1, 1997; amended 2009, No. 29,  1.) 
 2218. Segregated accounts
(a) All permitted charges paid by loan applicants or borrowers to a lender or a mortgage broker subject to this chapter shall be deposited in one or more accounts maintained at a bank approved by the Commissioner, and with respect to such funds the lender or mortgage broker shall act as a fiduciary. Such account or accounts shall be segregated from all other accounts of the lender or broker. No permitted charges shall be used in the conduct of a lenders or a brokers personal affairs, nor in a lenders or a brokers business affairs not specifically related to the applicant or borrower. (b) Such lender or mortgage broker may withdraw funds from the segregated account for payment directly to third parties for authorized fees. (c) Such lender or mortgage broker may withdraw funds from the segregated account for commissions to which it is entitled for services actually performed. Services are deemed to have been performed when a loan has closed, the loan applicant has withdrawn the loan application in writing, or such mortgage broker or lender has provided to the loan applicant or borrower written notice that the loan has been denied. (d) Such lender or mortgage broker may return funds from the segregated account to the borrower if not prohibited by the application or contract. (e) Such lender or mortgage broker shall maintain complete and accurate account records, including, at a minimum, the source of all deposits, the nature of all disbursements, the date and amount of each transaction, and the name of the loan applicant or borrower. All documents pertaining to account activity shall be produced upon request of the Commissioner. (Added 1995, No. 162 (Adj. Sess.),  19, eff. Jan. 1, 1997; amended 2009, No. 29,  1.) 
 2219. Contract required of mortgage broker
(a) In advance of taking any fee or collecting any charges or at the time the prospective borrower submits a signed application, a written agreement in a form approved by the Commissioner shall be prepared by the mortgage broker and shall be signed by both the mortgage broker and the prospective borrower. The agreement shall set forth the particulars of the service to be performed by the mortgage broker, including specifics as to what shall constitute reasonable efforts on the part of the mortgage broker to perform the agreed upon services, shall state clearly that the mortgage broker shall represent the interests of the prospective borrower rather than those of any lender, and shall state the fee for the services. (b) A mortgage broker who acts as an independent contractor loan processor or an underwriter who performs loan processing or underwriting activities for a licensed or exempt mortgage broker or lender is not required to provide a mortgage broker agreement to the prospective borrower, provided: (1) the mortgage broker is acting as an independent contractor loan processor or underwriter as described in subsection 2201(g) of this chapter; (2) the mortgage brokers activities are limited to loan processor or underwriting activities as described in subdivision 2200(6) of this chapter; (3) the mortgage broker is paid a fee solely by the licensed or exempt mortgage broker or lender, is not paid by the prospective borrower, and is not paid a commission based upon the dollar amount of the loan; and (4) if the mortgage broker is acting as an independent contractor loan processor or underwriter on behalf of a mortgage broker, such mortgage broker has already entered into a written mortgage broker agreement with the prospective borrower. (c) A mortgage broker that engages solely in lead generation and does not employ or sponsor any mortgage loan originators is not required to provide a mortgage broker agreement but must include clearly and conspicuously in all advertisements of loans and solicitation of leads, the following disclosure: THIS IS A LOAN SOLICITATION ONLY. [INSERT LICENSEE NAME] IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS. (Added 1995, No. 162 (Adj. Sess.),  20, eff. Jan. 1, 1997; amended 2009, No. 29,  1; 2013, No. 29,  6, eff. May 13, 2013; 2017, No. 22,  24; 2019, No. 20,  23.) 
 2220. Disclosure required by mortgage lender
In advance of taking any fee or collecting any charges for a mortgage loan, or at the time the prospective borrower submits a signed application, a written disclosure shall be provided by the lender to the prospective borrower setting forth all provisions relating to interest rates applicable to the loan, and specific disclosure regarding any possibility that the lender may change its role to that of a mortgage broker. This section shall not apply to commercial loans. (Added 1995, No. 162 (Adj. Sess.),  21, eff. Jan. 1, 1997; amended 2009, No. 29,  1.) 
 2220a. Disclosure required by loan solicitation licensee
Each loan solicitation licensee shall include clearly and conspicuously in all advertisements of loans and solicitations of leads, the following statement: THIS IS A LOAN SOLICITATION ONLY. [INSERT LICENSEE NAME] IS NOT THE LENDER. INFORMATION RECEIVED WILL BE SHARED WITH ONE OR MORE THIRD PARTIES IN CONNECTION WITH YOUR LOAN INQUIRY. THE LENDER MAY NOT BE SUBJECT TO ALL VERMONT LENDING LAWS. THE LENDER MAY BE SUBJECT TO FEDERAL LENDING LAWS. (Added 2017, No. 22,  25.) 
 2221. Out-of-state mortgage loans
A mortgage loan made outside Vermont for use outside Vermont shall be deemed to be made outside the state of Vermont and shall not be subject to this chapter except upon written agreement of the borrower and the licensee. (Added 1995, No. 162 (Adj. Sess.),  22, eff. Jan. 1, 1997; amended 2009, No. 29,  1.) 
 2222. Examinations
The Commissioner shall examine the affairs, business, and records of each licensee under this chapter, other than a loan solicitation company, at least once every three years. The Commissioner shall examine the affairs, business, and records of each loan solicitation company as often as the Commissioner deems necessary to carry out the purposes of this part. (Amended 1979, No. 157 (Adj. Sess.),  6; 1987, No. 119,  6; 1995, No. 162 (Adj. Sess.),  23, eff. Jan. 1, 1997; 1997, No. 23,  6a; 1999, No. 153 (Adj. Sess.),  16, eff. Jan. 1, 2001; 2009, No. 29,  1; 2019, No. 20,  24.) 
 2223. Additional records required of loan solicitation licensees
(a) In addition to any records required by section 2119 of this title, a licensee that engages in loan solicitation activity shall maintain the following records for not less than seven years: (1) copies of all solicitation materials used in its business, regardless of medium, including business cards, telephone scripts, mailers, electronic mail, and radio, television, and Internet advertisements; (2) records of any contact or attempted contact with a consumer, including the name, date, method, and nature of contact, and any information provided to or received from the consumer; and (3) the name, address, and, if applicable, unique identifier of any person who received, requested, or contracted for leads or referrals and any fees or consideration charged or received for such services. (b) Thereafter, the licensee shall dispose of such records in accordance with 9 V.S.A.  2445. (Amended 1995, No. 162 (Adj. Sess.),  24, eff. Jan. 1, 1997; 2009, No. 29,  1; 2017, No. 22,  26, eff. May 4, 2017; 2019, No. 20,  25.)
 2225. Statement of rates of charge
Rates of charge shall be stated fully and clearly in such manner as necessary to prevent misunderstanding thereof by prospective borrowers. (Amended 1995, No. 162 (Adj. Sess.),  26, eff. Jan. 1, 1997; 2009, No. 29,  1.) 
 2227. Conduct of unrelated business
No licensee shall conduct the business of making noncommercial loans under this chapter within any office, room, or place of business in which any other business is solicited or engaged in, or in association or conjunction therewith, except as may be authorized in writing by the Commissioner upon his or her finding that the character of such other business is such that the granting of such authority would not facilitate evasions of this chapter or of the rules and regulations lawfully made hereunder. (Amended 1995, No. 162 (Adj. Sess.),  28, eff. Jan. 1, 1997; 2009, No. 29,  1.) 
 2229. Confessions of judgment; powers of attorney; contents of notes
No licensee shall take any confession of judgment. No licensee shall take any power of attorney excepting such as may be incorporated in a form of note approved by the Commissioner for use in the financing of insurance premiums. No licensee shall take any note, promise to pay, or security that does not accurately disclose the actual amount of the loan, the time for which it is made, and the agreed rate of interest, nor any instrument in which blank spaces are left to be filled in after execution. Notwithstanding the foregoing provisions of this section, the Commissioner may by rule exempt from all or part of this section commercial loans. (Amended 1987, No. 142 (Adj. Sess.),  1, eff. April 11, 1988; 1989, No. 244 (Adj. Sess.),  7; 2009, No. 29,  1.) 
 2230. Rate of interest
(a) Every licensee may charge, contract for, and receive thereon interest, calculated according to the actuarial method as set forth in 9 V.S.A.  41a(d), not exceeding the rates permitted by 9 V.S.A. chapter 4, except that the rate of interest on loans secured by motor vehicles, mobile homes, travel trailers, aircraft, watercraft and farm equipment may not exceed the rate permitted by 9 V.S.A.  41a(b)(4). (b) Interest may be charged, contracted for, and received at the single annual percentage rate that would earn the same interest as the graduated rates when the loan is paid according to its agreed terms and the calculations are made according to the actuarial method. Interest shall not be paid, deducted, received, or added to principal in advance, except that the advance collection of interest for a period not to exceed 30 days shall be permitted upon the origination of a mortgage loan. Except for loans made pursuant to section 2216 of this title, the maximum interest permitted on loans made under this chapter shall be computed on the basis of the number of days actually elapsed. For the purpose of these computations, a year is any period of 365 consecutive days and 366 days during a leap year. (c) No licensee shall induce or permit any person jointly or severally to become obligated, directly or contingently or both, under more than one contract of loan made under this section at the same time, for the purpose of obtaining a higher rate of interest than would otherwise be permitted by law. (d) This section shall not apply to commercial loans. (Amended 1969, No. 243 (Adj. Sess.),  3; 1979, No. 173 (Adj. Sess.),  6, eff. April 30, 1980; 1981, No. 26,  1; 1981, No. 89,  5, eff. May 13, 1981; 1983, No. 35, 5, 9; 1995, No. 162 (Adj. Sess.),  30, eff. Jan. 1, 1997; 2009, No. 29,  1.)
 2231. Contracts to be repayable in monthly installments; maximum term; additional charges prohibited; invalidity of loan contract
(a) Except for loans made pursuant to section 2216 of this title and in compliance with applicable regulations of the Commissioner, all loan contracts made under the provisions of this chapter shall require repayment in substantially equal consecutive monthly installments of principal and interest combined. (b) In addition to the interest and charges herein provided for no further or other charge or amount for any examination, service, brokerage, commission, expense, fee, bonus, or other thing or otherwise shall be directly or indirectly charged, contracted for, or received except filing, recording, releasing, or termination fees paid or to be paid to a public officer; the premium or identifiable charge for credit life or disability insurance obtained, provided, or sold by the licensee subject to the provisions of sections 4101-4115 or sections 3805 and 3806 of this title and any gain or advantage to the licensee from such shall not be deemed in violation of this chapter nor an additional charge in violation of this section or section 2230 of this title. For loans subject to this subsection, if any interest, consideration, or charges in excess of those permitted by this subsection, except as the result of an accidental or bona fide error are charged, contracted for, or received, the contract of loan shall be void and the licensee shall have no right to collect or receive any principal, interest, or charges whatsoever. (c) This section shall not apply to commercial loans.(d) The provisions of subsection (b) of this section shall not apply to mortgage loans. (Amended 1969, No. 243 (Adj. Sess.),  4; 1979, No. 173 (Adj. Sess.),  7, eff. April 30, 1980; 1981, No. 26,  2; 1981, No. 89,  6, eff. May 13, 1981; 1983, No. 35,  6, 9; 1995, No. 162 (Adj. Sess.),  31, eff. Jan. 1, 1997; 1997, No. 98 (Adj. Sess.),  4, 5, eff. April 16, 1998; 2009, No. 29,  1.)
 2232a. Requirements regarding the borrower
(a) Each licensed lender shall deliver to the borrower at the time any loan is made a statement showing in clear and distinct terms the amount and date of the loan and of its maturity, the nature of the security, if any, for the loan, the name and address of the borrower and of the licensee, and the agreed rate of charge. (b) Each licensed lender shall, in advance of any loan closing, deliver to each prospective borrower, based on the type of loan applied for, a full and accurate schedule of the charges to be made and the method of computing the same. (c) Each licensed lender or holder shall give to the borrower a plain and complete statement of all payments made on account of any such loan specifying the amount applied to finance charges and the amount, if any, applied to principal, and stating the unpaid principal balance, if any, of such loan. When payment is made, a licensee shall provide the borrower with a statement therefor within 30 days after the payment is received, or shall provide, on an annual basis, statements setting forth the information required herein. Each licensed lender or holder shall provide a transaction history of the loan to the borrower upon request. (d) Each licensed lender or holder shall permit payment to be made in advance without prepayment premium or penalty in any amount on any contract of loan at any time, but the licensee or holder may apply such payment first to all finance charges in full at the agreed rate up to the date of such payment. (e) Each licensed lender or holder shall, upon repayment of the loan in full, promptly mark indelibly every obligation and security signed by the borrower with the word Paid or Canceled, and within 30 days release any mortgage, restore any pledge, cancel and return any note, record or file any necessary release or discharge, cancel and return any assignment given to the licensee by the borrower, and refund to the borrower, in accordance with rules adopted by the Commissioner any unearned portion of the premium for credit life or disability insurance if a premium for such insurance was disbursed on behalf of the borrower at the time the loan was originally made. The provisions of this subsection shall not affect the right of action created by 27 V.S.A.  464. (f) This section shall not apply to commercial loans. (Amended 1979, No. 173 (Adj. Sess.),  8, eff. April 30, 1980; 1981, No. 26,  3; 1981, No. 89,  7, eff. May 13, 1981; 1983, No. 35,  7-9; 1995, No. 162 (Adj. Sess.),  32, eff. Jan. 1, 1997; 2009, No. 29,  1; 2015, No. 97 (Adj. Sess.),  9.)
 2233. Charges; loan solicitation; specialized financing
(a) Other than a mortgage broker fee pursuant to section 2219 of this title, no person who is required to be licensed under this chapter, shall directly or indirectly charge, contract for, or receive any interest, discount, consideration, or charge greater than is authorized by 9 V.S.A.  41a or 46. No such loan for which a greater rate of interest, finance charge, consideration, or charges than is authorized by 9 V.S.A.  41a or 46 has been charged, contracted for, or received shall be enforced in this State, and every person in any way participating therein in this State shall be subject to the provisions of this chapter. However, any loan legally made in any state which then had in effect a regulatory loan law similar in principle to this chapter may be enforced in this State only to the extent of collecting the principal amount owed and interest thereon at a rate not greater than that authorized by 9 V.S.A.  41a or 46. (b) A loan solicited or made by mail, telephone, or electronic means to a Vermont resident shall be subject to the provisions of this chapter notwithstanding where the loan was legally made. No person shall engage in the business of soliciting or making loans by mail, telephone, or electronic means to residents of this State unless duly licensed. Such licensee shall be subject to the applicable provisions of this title and 9 V.S.A. chapters 4, 59, and 61, but shall not be required to have or maintain a place of business in the State. (c) No person other than a depository institution, pawnbroker, insurance company, or seller of merchandise or services shall engage in specialized financing, including tuition plans or other such financing, but not including insurance premium financing, for residents of this State unless duly licensed. Such licensee shall be subject to the applicable provisions of this title and 9 V.S.A. chapters 4, 59, and 61, but shall not be required to maintain a place of business in this State. Such financing may include more than one loan per borrower. A license granted to such lenders shall be explicit in its authority with respect to the types of business permitted. (Amended 1969, No. 243 (Adj. Sess.),  7; 1975, No. 76; 1979, No. 173 (Adj. Sess.),  10, eff. April 30, 1980; 1983, No. 77,  2; 1995, No. 162 (Adj. Sess.),  33, eff. Jan. 1, 1997; 2009, No. 29,  1.) 
 2234. Assignment of wages
The payment in money, credit, goods, or things in action, as consideration for any sale or assignment of, or order for, the payment of wages, salary, commissions, or other compensation for services, whether earned or to be earned, for the purpose of regulation under this chapter, shall be deemed a loan secured by such assignment. The amount by which such assigned compensation exceeds the amount of such consideration actually paid, for the purposes of regulation under this chapter, shall be deemed finance charges or charges upon such loan from the date of such payment to the date such compensation is payable. Such transactions shall be governed by and subject to applicable provisions of this title and 9 V.S.A. chapters 4, 59, and 61. (Amended 1969, No. 243 (Adj. Sess.),  6; 1979, No. 173 (Adj. Sess.),  9, eff. April 30, 1980; 1995, No. 162 (Adj. Sess.),  34, eff. Jan. 1, 1997; 2009, No. 29,  1.) 
 2235. Requirements for assignment of wages
No assignment of or order for payment of any salary, wages, commissions, or other compensation for services, earned or to be earned, given to secure any loan made by any licensee under this chapter, shall be valid unless the amount of such loan is paid to the borrower simultaneously with its execution. Such assignment or order, or any chattel mortgage or other lien on household furniture then in the possession and use of the borrower, shall not be valid unless it is in writing, signed in person by the borrower, nor shall it be valid if the borrower is married unless it is signed in person by both husband and wife. However, written assent of a spouse shall not be required if the borrower has title as a result of a court order. (Amended 1995, No. 162 (Adj. Sess.),  35, eff. Jan. 1, 1997; 2009, No. 29,  1.) 
 2236a. Extent of assignment; service upon employer
Under any such assignment or order for the payment of future salary, wages, commissions, or other compensation for services given as security for a loan made by any licensee under this chapter, a sum not to exceed 10 percent of the borrowers salary, wages, commissions, or other compensation for services shall be collectible from the employer of the borrower by the licensee at the time of each payment to the borrower of such salary, wages, commissions, or other compensation for services, from the time that a copy of such assignment, verified by the oath of the licensee or the licensees agent, together with a similarly verified statement of the amount unpaid upon such loan, is served upon the employer. (Amended 2009, No. 29,  1.) 
 2238. Out-of-state commercial loans
A commercial loan made to a borrower located outside Vermont for use outside Vermont shall be deemed to be made outside the State of Vermont and shall not be subject to this chapter except upon written agreement of the licensee and borrower. (Amended 2009, No. 29,  1.) 
 2239. Commercial leases
This chapter shall not apply to commercial leases as defined in 9 V.S.A. chapters 59 and 61. (Amended 2009, No. 29,  1.) 
 2241. Prohibited acts and practices
It is a violation of this chapter for a person or individual to:(1) directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person; (2) engage in any unfair or deceptive practice toward any person;(3) obtain property by fraud or misrepresentation;(4) solicit or enter into a contract with a borrower that provides in substance that the person or individual may earn a fee or commission through best efforts to obtain a loan even though no loan is actually obtained for the borrower; (5) solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting; (6) conduct any business covered by this chapter without holding a valid license as required under this chapter, to assist or aid and abet any person in the conduct of business under this chapter without a valid license as required under this chapter, or to refer a person to, or receive a fee from, any person who must be licensed but was not licensed as of the time the licensees services were provided; (7) fail to make disclosures as required by this chapter and any other applicable State or federal law, including regulations thereunder; (8) fail to comply with this chapter or rules adopted under this chapter, or fail to comply with any orders or directives from the Commissioner, or fail to comply with any other State or federal law, including the rules thereunder, applicable to any business authorized or conducted under this chapter; (9) make, in any manner, any false or deceptive statement or representation, including with regard to the rates, points, or other financing terms or conditions for a mortgage loan, to engage in bait and switch advertising, or to represent to the public that the licensee is able to perform an activity requiring licensure unless such licensee is duly licensed or is exempt from licensure; (10) negligently make any false statement or knowingly and willfully make any omission of material fact in connection with any information or reports filed with a governmental agency or the Nationwide Mortgage Licensing System and Registry or in connection with any investigation conducted by the Commissioner or another governmental agency; (11) make any payment, threat, or promise, directly or indirectly, to any person for the purposes of influencing the independent judgment of the person in connection with a residential mortgage loan, or make any payment, threat, or promise, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property; (12) collect, charge, attempt to collect or charge, or use or propose any agreement purporting to collect or charge any fee prohibited by this chapter; (13) cause or require a borrower to obtain property insurance coverage in an amount that exceeds the replacement cost of the improvements as established by the property insurer; (14) fail to account truthfully for monies belonging to a party to a mortgage loan transaction;(15) fail to identify clearly and conspicuously the licensee and the purpose of the contract in its written and oral communications with a consumer; or (16) fail to provide the ability to opt out of any unsolicited advertisement communicated to a consumer via an e-mail address; to initiate an unsolicited advertisement via e-mail to a consumer more than 10 business days after the receipt of a request from such consumer to opt out of such unsolicited advertisements; or to sell, lease, exchange, or otherwise transfer or release the e-mail address or telephone number of a consumer who has requested to opt out of future solicitations. (Added 2009, No. 29,  1; amended 2017, No. 22,  28, eff. May 4, 2017.) 
 2244. Unique identifier shown
(a) The unique identifier issued by the Nationwide Mortgage Licensing System and Registry of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations, or advertisements, including business cards or websites, and any other documents as established by rule or order of the Commissioner. (b) The unique identifier issued by the Nationwide Mortgage Licensing System and Registry of any person engaging in the business of lending or acting as a mortgage broker, sales finance company, or loan solicitation licensee shall be clearly shown on all loan application forms, solicitations, or advertisements, including business cards and websites, and any other documents as established by rule or order of the Commissioner. (Added 2009, No. 29,  1; amended 2013, No. 29,  7, eff. May 13, 2013; 2017, No. 22,  29, eff. May 4, 2017.) 
 2245. Pension loans
Any person who engages in the business of offering consideration in exchange for a secured interest in all or part of pension proceeds in the possession of a participant, beneficiary, or member of a pension plan, program, or system shall be deemed to be engaged in the business of making loans pursuant to subdivision 2201(a)(1) of this chapter and shall be subject to 9 V.S.A. chapters 4 and 63. (Added 2013, No. 109 (Adj. Sess.),  2.) 
 2251. Definitions
As used in this chapter:(1) Charges means the amount a consumer owes to a company in addition to the funded amount and includes an administrative fee, origination fee, underwriting fee, processing fee, and any other fee regardless of how the fee is denominated, including amounts denominated as interest or rate. (2) Consumer means a natural person who is seeking or has obtained consumer litigation funding for a pending legal claim, provided: (A) the claim is in Vermont; or(B) the person resides or is domiciled in Vermont, or both.(3) Consumer litigation funding or funding means a nonrecourse transaction in which a company purchases and a consumer assigns to the company a contingent right to receive an amount of the potential net proceeds of a settlement or judgment obtained from the consumers legal claim. If no proceeds or net proceeds are obtained, the consumer is not required to repay the company the funded amount or charges. (4) Consumer litigation funding company, litigation funding company, or company means a person that provides consumer litigation funding to a consumer. The term does not include an immediate family member of the consumer. (5) Funded amount means the amount of monies provided to, or on behalf of, the consumer pursuant to a litigation funding contract. The term excludes charges. (6) Health care facility has the same meaning as in 18 V.S.A.  9402(6).(7) Health care provider has the same meaning as in 18 V.S.A.  9402(7).(8) Litigation funding contract or contract means a contract between a company and a consumer for the provision of consumer litigation funding. (9)(A) Net proceeds means the amount recovered by a consumer as a result of a legal claim less costs associated with the legal claim or the underlying events giving rise to the legal claim, including: (i) attorneys fees, attorney liens, litigation costs;(ii) claims or liens for related medical services owned and asserted by the provider of such services; (iii) claims or liens for reimbursement arising from third parties who have paid related medical expenses, including claims from insurers, employers with self-funded health care plans, and publicly financed health care plans; and (iv) liens for workers compensation benefits paid to the consumer.(B) This definition of net proceeds shall in no way affect the priority of claims or liens other than those for payments to the consumer litigation funding company under a consumer litigation funding contract subject to this chapter. (Added 2015, No. 128 (Adj. Sess.),  A.1; amended 2019, No. 20,  33.) 
 2252. Registration; financial stability
(a) A company shall not engage in the business of consumer litigation funding without first filing a registration with the Commissioner on a form prescribed by the Commissioner and submitting a registration fee and proof of financial stability. (b) A company shall file with the Commissioner evidence of its financial stability which shall include proof of a surety bond or irrevocable letter of credit issued and confirmed by a financial institution authorized by law to transact business in Vermont that is equal to double the amount of the companys largest funded amount in Vermont in the prior three calendar years or $50,000.00, whichever is greater. (Added 2015, No. 128 (Adj. Sess.),  A.1; amended 2017, No. 22,  1, eff. May 4, 2017; 2019, No. 20,  34.) 
 2253. Contracts; disclosures and requirements
(a) A contract shall be written in a clear and coherent manner using words with common, everyday meanings to enable the average consumer who makes a reasonable effort under ordinary circumstances to read and understand the terms of the contract without having to obtain the assistance of a professional. (b) Each contract shall include consumer disclosures on the front page. The consumer disclosures shall be in a form prescribed by the Commissioner and shall include: (1) a description of possible alternatives to a litigation funding contract, including secured or unsecured personal loans, and life insurance policies; (2) notification that some or all of the funded amount may be taxable;(3) a description of the consumers right of rescission;(4) the total funded amount provided to the consumer under the contract;(5) an itemization of charges;(6) the annual percentage rate of return;(7) the total amount due from the consumer, including charges, if repayment is made any time after the funding contract is executed; (8) a statement that there are no fees or charges to be paid by the consumer other than what is disclosed on the disclosure form; (9) in the event the consumer seeks more than one litigation funding contract, a disclosure providing the cumulative amount due from the consumer for all transactions, including charges under all contracts, if repayment is made any time after the contracts are executed; (10) a statement that the company has no right to make any decisions regarding the conduct of the legal claim or any settlement or resolution thereof and that the right to make such decisions remains solely with the consumer and his or her attorney; (11) a statement that, if there is no recovery of any money from the consumers legal claim, the consumer shall owe nothing to the company and that, if the net proceeds of the claim are insufficient to repay the consumers indebtedness to the company, then the consumer shall owe the company no money in excess of the net proceeds; and (12) any other statements or disclosures deemed necessary or appropriate by the Commissioner.(c) Each contract shall include the following provisions:(1) Definitions of the terms consumer, consumer litigation funding, and consumer litigation funding company. (2) A right of rescission, allowing the consumer to cancel the contract without penalty or further obligation if, within five business days following the execution of the contract or the consumers receipt of any portion of the funded amount, the consumer gives notice of the rescission to the company and returns any funds provided to the consumer by the company. (3) A provision specifying that, in the event of litigation involving the contract and at the election of the consumer, venue shall lie in the Vermont Superior Court for the county where the consumer resides. (4) An acknowledgment that the consumer is represented by an attorney in the legal claim and has had an opportunity to discuss the contract with his or her attorney. (Added 2015, No. 128 (Adj. Sess.),  A.1.) 
 2254. Prohibited acts
(a) A consumer litigation funding company shall not engage in any of the following conduct or practices: (1) Pay or offer to pay commissions, referral fees, or any other form of consideration to any attorney, law firm, health care provider, health care facility, or an employee of a law firm, health care provider, or health care facility for referring a consumer to the company. (2) Accept any commissions, referral fees, or any other form of consideration from any attorney, law firm, health care provider, health care facility, or an employee of a law firm, health care provider, or health care facility. (3) Advertise false or misleading information regarding its products or services.(4) Receive any right to nor make any decisions with respect to the conduct of the consumers legal claim or any settlement or resolution. The right to make such decisions shall remain solely with the consumer and his or her attorney. (5) Knowingly pay or offer to pay for court costs, filing fees, or attorneys fees either during or after the resolution of the legal claim. (6) Refer a consumer to a specific attorney, law firm, health care provider, or health care facility. (7) Fail to provide promptly copies of contract documents to the consumer or to the consumers attorney. (8) Obtain a waiver of any remedy the consumer might otherwise have against the company.(9) Provide legal advice to the consumer regarding the funding or the underlying legal claim. (10) Assign a contract in whole or in part to a third party. Provided, however, if the company retains responsibility for collecting payment, administering, and otherwise enforcing the consumer litigation funding contract, the prohibition in this subdivision (10) shall not apply to an assignment: (A) to a wholly owned subsidiary of the company;(B) to an affiliate of the company that is under common control with the company; or(C) granting a security interest under Article 9 of the Uniform Commercial Code or as otherwise permitted by law. (11) Report a consumer to a credit reporting agency if insufficient funds remain from the net proceeds to repay the company. (12) Require binding arbitration in the event of a dispute between the consumer and the company. A consumer has the right to a trial in the event of a contractual dispute. (b) An attorney or law firm retained by a consumer shall not have a financial interest in a company offering litigation funding to the consumer and shall not receive a referral fee or other consideration from such company, its employees, or its affiliates. (Added 2015, No. 128 (Adj. Sess.),  A.1.) 
 2255. Effect of communication on privileges
A communication between a consumers attorney and the company shall not be discoverable or limit, waive, or abrogate the scope or nature of any statutory or common-law privilege, including the work-product doctrine and the attorney-client privilege. (Added 2015, No. 128 (Adj. Sess.),  A.1.) 
 2256. Examinations
For the purpose of protecting consumer interests and determining a companys financial stability and compliance with the requirements of this chapter, the Commissioner may conduct an examination of a company engaged in the business of consumer litigation funding as often as the Commissioner deems necessary. (Added 2015, No. 128 (Adj. Sess.),  A.1; amended 2019, No. 20,  35.) 
 2259. Violations an unfair or deceptive act
(a) A companys failure to comply with the requirements of this part, including this chapter, shall constitute an unfair or deceptive act in commerce enforceable under 9 V.S.A. chapter 63, the Consumer Protection Act. (b) The powers vested in the Commissioner by this chapter shall be in addition to any other powers or rights of consumers or the Attorney General or others under any other applicable law or rule, including the Vermont Consumer Protection Act and any applicable rules adopted thereunder, provided the Commissioners determinations concerning the interpretation and administration of the provisions of this part, including this chapter, and rules adopted thereunder shall carry a presumption of validity. (Added 2015, No. 128 (Adj. Sess.),  A.1; amended 2019, No. 20,  38.) 
 2260. Annual reports
(a) Annually, on or before April 1, each company registered under this chapter shall file a report with the Commissioner under oath and in the form and manner prescribed by the Commissioner. In addition to information required by section 2120 of this title, the report shall include any information the Commissioner requires concerning the companys business and operations during the preceding calendar year within Vermont and, in addition, shall include: (1) the number of contracts entered into;(2) the dollar value of funded amounts to consumers;(3) the dollar value of charges under each contract, itemized and including the annual rate of return; (4) the dollar amount and number of litigation funding transactions in which the realization to the company was as contracted; and (5) the dollar amount and number of litigation funding transactions in which the realization to the company was less than contracted. (b) [Repealed.](c) [Repealed.] (Added 2015, No. 128 (Adj. Sess.),  A.1; amended 2019, No. 20,  39; 2019, No. 20,  109(b), eff. Dec. 31, 2021.)
 2401. Definitions
As used in this chapter:(1) Act as fiduciary or acting as a fiduciary means to:(A) accept or execute trusts, including to:(i) act as trustee under a written agreement;(ii) receive money or other property in its capacity as trustee for investment in real or personal property; (iii) act as trustee and perform the fiduciary duties committed or transferred to it by order of a court of competent jurisdiction; (iv) act as trustee of the estate of a deceased person; or(v) act as trustee for a minor or incapacitated person;(B) administer in any other fiduciary capacity real or tangible personal property; or(C) act pursuant to order of a court of competent jurisdiction as executor or administrator of the estate of a deceased person or as a guardian or conservator for a minor or incapacitated person. (2) Company means corporation or limited liability company.(3) Independent trust company means a company formed in this or any other state, that is chartered to act as a fiduciary or engages in a trust business, but is neither a depository institution nor a foreign bank as defined in Section 1(b)(7) of the International Banking Act of 1978. (4) Trust business means the holding out by a person to the public by advertising, solicitation or other means that the person is available to act as a fiduciary in this or another state for hire or compensation. (Added 1997, No. 98 (Adj. Sess.),  8b.) 
 2402. Authority to organize; powers; limitations; prohibitions; exemptions
(a) A company organized in this State may form an independent trust company in accordance with the provisions of this chapter. A company shall obtain a certificate of authority from the Commissioner before it may act as a fiduciary or engage in a trust business in this State. (b) An independent trust company formed and authorized under this chapter shall have the same fiduciary powers, duties, and obligation as a financial institution operating a trust department under subchapter 4 of chapter 204 of this title. An independent trust company formed under this title shall have the privileges and be subject to the provisions granted or contained in the general law governing the company and in this chapter, except where the general law governing the company is inconsistent with this chapter. In case of conflict between the general law governing the company and this chapter, this chapter shall control. Such companies shall not be required to make any annual report except as provided in this chapter. Except as provided in this chapter, subchapter 4 of chapter 204, and section 12602 of this title, no person shall engage in a trust business in this State without first obtaining a certificate of authority from the Commissioner. (c) An independent trust company shall not accept deposits or make loans or conduct any other business except that which is incidental to and consistent with a trust business. (d) An independent trust company may prudently invest its capital and surplus in stocks, bonds, mortgages, mutual funds, and other securities. An independent trust company may invest in, purchase, hold, convey, and lease real estate. (e) An independent trust company may issue or sell capital notes or debentures with the written approval of the Commissioner. (f) An independent trust company formed and authorized under this chapter shall:(1) maintain its principal place of business in this State;(2) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the Vermont registered office of the independent trust company, the Secretary of State shall be an agent of such independent trust company upon whom any process, notice, or demand may be served; (3) hold at least four meetings of its governing body each year, including once quarterly, and at least one such meeting each year shall be held in Vermont; and (4) have at least one Vermont resident as a member of its governing body.(g) For the purposes of this chapter, a person does not engage in a trust business merely by: (1) rendering services as an attorney-at-law or an accountant;(2) acting as trustee under a deed of trust made only as security for the payment of money or for the performance of another act; (3) acting as a trustee in bankruptcy or as a receiver;(4) holding trusts of real estate for the primary purpose of subdivision, development, or sale, or to facilitate any business transaction with respect to such real estate, provided the person is not regularly engaged in the business of acting as a trustee for such trusts; (5) holding assets as trustee of trusts created for charitable purposes;(6) receiving rents and proceeds of sale as a licensed real estate broker on behalf of a principal; (7) engaging in securities transactions as a broker-dealer or a sales representative registered under 9 V.S.A. chapter 131; (8) engaging in the sale of insurance policies and annuity or endowment contracts in this State issued by an insurance company authorized to write such policies or contracts and subject to regulation and control of the Commissioner; (9) if an individual, acting as a guardian, conservator, special conservator, trustee, or personal representative pursuant to a court order or other statutory authority; (10) acting under the authority of 11A V.S.A.  15.01(d); or(11) if an individual, serving as trustee of any of the following:(A) one or more trusts for each of which at least one settlor is a member of the trustees family; (B) not more than five trusts if the individual has not solicited appointment as trustee for any trusteeships. (Added 1997, No. 98 (Adj. Sess.),  8b; amended 1999, No. 153 (Adj. Sess.),  18, eff. Jan. 1, 2001; 2011, No. 78 (Adj. Sess.),  11, eff. April 2, 2012; 2017, No. 134 (Adj. Sess.),  7.) 
 2403. Formation
(a) One or more persons may form an independent trust company in accordance with the provisions of this chapter. (b) The organizers forming an independent trust company shall apply to the Commissioner for a certificate of authority on prescribed forms containing information as may be required by the Commissioner. The application shall include the proposed name of the business for approval under section 2404 of this title and the basic organizational documents including any operating agreement for the company prepared in compliance with Title 11 or 11A. (c) Upon receiving a completed application for a certificate of authority and the proposed basic organizational documents, the Commissioner shall investigate and examine the proposed independent trust company to determine whether it will be adequately staffed, equipped, and able to furnish trust services and that its establishment and maintenance will promote the general good of the State. (d) If the Commissioner finds that the establishment and maintenance of the proposed trust company will promote the general good of the State, the Commissioner shall deliver to the organizers a certificate of authority under the Commissioners seal. The certificate of authority, basic organizational documents except the operating agreement and the organizational fee shall be transmitted to the Secretary of State, who shall thereupon proceed according to the provisions of law. If the organizational documents are recorded by the Secretary, the certificate of the Commissioner shall be recorded therewith. (e) Each application for a certificate of authority shall be accompanied by an application fee as provided in section 19 of this title for new financial institutions. (f) If the proposed independent trust company fails to open for business within six months after the date the certificate of authority is granted, the certificate of authority shall be void. The Commissioner may extend the time within which the independent trust company may open for business for good cause and upon written application filed prior to the expiration of the six-month period. (g) At the time it commences business, an independent trust company shall have unimpaired capital in an amount not less than $250,000.00 or one-quarter of one percent of its assets under management, whichever is greater. Thereafter, an independent trust company shall maintain unimpaired capital in an amount not less than $250,000.00 or one-quarter of one percent of its assets under management, whichever is greater, up to a maximum of $1,000,000.00. The unimpaired capital and surplus of an independent trust company shall be held as security for the faithful discharge of the fiduciary duties undertaken as well as for the claims of other creditors. The Commissioner may from time to time require or allow increases or decreases to the unimpaired capital otherwise required by this subsection, up to such $1,000,000.00 maximum, as deemed necessary or desirable for the protection of customers and the safety of the trust business. The safety and soundness factors to be considered by the Commissioner in the exercise of such discretion include: (1) the nature and type of business conducted;(2) the nature and degree of liquidity in assets held in a corporate or company capacity;(3) the amount of fiduciary assets under management;(4) the complexity of fiduciary duties and degree of discretion undertaken; and(5) the extent and adequacy of internal controls.(h) The Commissioner, in addition to the capital requirements provided in subsection (g) of this section, may require any independent trust company authorized to do a trust business in this State to post bond in an amount acceptable to the Commissioner. (Added 1997, No. 98 (Adj. Sess.),  8b; amended 1999, No. 153 (Adj. Sess.),  19, eff. Jan. 1, 2001; 2003, No. 105 (Adj. Sess.),  11; 2009, No. 42,  2; 2009, No. 137 (Adj. Sess.),  1.) 
 2404. Name; multiple locations
(a) An independent trust company shall file any name proposed to be used in connection with a trust business or establishing a principal office or trust office in this State pursuant to this chapter. The Commissioner shall not approve a proposed name if the Commissioner determines that the name may be misleading or likely to confuse the public, or deceptively similar to any name in use in this State. (b) An independent trust company organized or regulated under this chapter may petition the Commissioner for permission to establish and maintain new or additional offices for the transaction of its trust business. (c) An independent trust company shall not operate any new or additional office unless the Commissioner has determined that the establishment of the office will promote the general good of the State, applying the standards and procedures contained in subsection 2403(c) of this title, as applicable. If the Commissioner determines that the establishment will promote the general good, the Commissioner shall approve the new or additional office. (Added 1997, No. 98 (Adj. Sess.),  8b.) 
 2405. Periodic reports; examinations; cooperative agreements
(a) The Commissioner may require reports from any independent trust company doing a trust business in this State, containing such information, including on its financial condition, at such times and in such format as the Commissioner may prescribe. (b) The Commissioner may make such examination of any person or location as the Commissioner may deem necessary to determine whether an independent trust company is being operated in compliance with the laws of this State and in accordance with safe and sound business and trust practices, to the extent consistent with subsection (c) of this section. (c) The Commissioner may enter into cooperative, coordinating, and information-sharing agreements with any other supervisory agencies or any organization affiliated with or representing one or more supervisory agencies with respect to the periodic examination or other supervision of any independent trust company not formed in this State or any office of an independent trust company in any state. The Commissioner may accept reports of examination or investigation from such agencies in lieu of conducting an independent examination or investigation. (d) The Commissioner may enter into joint examinations or joint enforcement actions with other supervisory agencies having concurrent jurisdiction over any independent trust company or any office of an independent trust company established and maintained in this State; provided, that the Commissioner may at any time take such actions independently if the Commissioner deems such actions to be necessary or appropriate to carry out the responsibilities under this chapter or to ensure compliance with the laws of this State. (e) The independent trust company shall provide the Commissioner with written notice of any regulatory action taken against it in any other jurisdiction within 30 days of receipt of such action by the independent trust company. (f) Any independent trust company that maintains one or more offices in this State shall be assessed by the following applicable method: (1) an independent trust company whose primary activity is transactional shall pay to the Department an annual assessment equal to $0.0001 per dollar volume of activity performed for the most recent year ending December 31, which assessment shall not be less than $2,000.00 or greater than $50,000.00, and which shall be paid on or before April 1 of each year; or (2) an independent trust company whose primary activity in the State is asset management shall pay to the Department an assessment based on assets under management in this State on the preceding June 30 as provided under subsection 19(d) of this title. (g) An independent trust company assessed pursuant to subdivision (f)(1) of this section shall pay to the Department the costs and expenses of all examinations, including both regular examinations and special or expanded scope examinations as provided under section 18 of this title. An independent trust company assessed pursuant to subdivision (f)(2) of this section shall not be billed for regular examinations, but shall pay to the Department the costs and expenses of all special or expanded scope examinations as provided under sections 18 and 19 of this title. (Added 1997, No. 98 (Adj. Sess.),  8b; amended 1999, No. 153 (Adj. Sess.),  20, eff. Jan. 1, 2001; 2011, No. 21,  5, eff. May 11, 2011; 2011, No. 78 (Adj. Sess.),  9, eff. April 2, 2012; 2013, No. 29,  8, eff. May 13, 2013; 2021, No. 25,  5, eff. May 12, 2021.) 
 2406. Reciprocity
(a) An independent trust company organized under the laws of a jurisdiction other than Vermont shall be authorized to engage in a trust business in this State, to the same extent and under the same conditions that an independent trust company formed in this State may operate in such other jurisdiction. The independent trust company organized under the laws of a jurisdiction other than Vermont must obtain the Commissioners written authorization before it may engage in a trust business in this State. (b) For purposes of this section, an independent trust company organized under the laws of a jurisdiction other than Vermont shall mean an entity that is organized and regulated in a manner that is substantially similar to an independent trust company formed under this chapter by whatever name, but which is not a financial institution within the meaning of subdivision 11101(32) of this title. (Added 1997, No. 98 (Adj. Sess.),  8b; amended 1999, No. 153 (Adj. Sess.),  21, eff. Jan. 1, 2001.) 
 2407. Discontinuing trust business; merger and consolidation; sale of trust business; change in control
(a) Discontinuance. An independent trust company that intends to discontinue its trust business in this State shall furnish notice to the Commissioner of its intention not less than 60 days before the discontinuance. It shall also mail written notice to the principals of each trust account affected. For purposes of this section, the term principal with respect to a trust account shall mean the individual or entity to whom the independent trust company ordinarily furnishes statements of account and other customer communications regarding such trust account. The form of notice required by this subsection shall be approved by the Commissioner and shall include a plain statement of the intended plans for discontinuance of the business of the independent trust company, and shall include the name, mailing address and telephone number of one or more officers, managers, employees, or agents of the company available during regular business hours to answer customer questions regarding the proposed discontinuance. The company shall furnish an affidavit of the mailing of the notice to the principals affected, and the affidavit shall constitute the companys compliance with the customer notice requirement of this section. Following the mailing of the notice and prior to the effective date of the discontinuance, the company shall furnish the Commissioner with satisfactory evidence that all affected trust accounts have been transferred to one or more entities with authority to engage in a trust business in this State in accordance with subsections (c) through (j) of this section, that the principal has released and discharged the independent trust company of any further obligation with respect to the account or that all accounts are otherwise protected. The independent trust company shall surrender its certificate of authority to the Commissioner upon the effective date of the discontinuance, and thereafter the company may not use the word trust in its company or trade name or in connection with its business. After surrender of the certificate, the Commissioner shall have continuing jurisdiction over the company with respect to compliance with applicable law. (b) Merger or consolidation. An independent trust company formed in this State may merge or consolidate with another entity. The independent trust company must obtain the Commissioners prior written approval of the transaction. The Commissioner shall approve the transaction if the Commissioner determines that the resulting entity is qualified to do a trust business in this State and that the transaction will promote the general good of the State. Whenever an independent trust company merges or consolidates under this section, the resulting entity shall have, possess, and own, all property, rights, powers, franchises, privileges, and appointments of every nature whatsoever of each of the merging or consolidating entities. If any of the merging or consolidating entities are acting or have been acting as a fiduciary or in any like capacity, the resulting entity shall have, possess, and be vested with and succeed to all of the property, rights, powers, privileges, duties, and obligations appertaining to each such fiduciary capacity, without further or additional appointment, obligation, or designation, provided the independent trust company or resulting entity, as the case may be, has complied with the provisions of subsections (d) through (j) of this section. The resulting entity shall be a continuation of the entity of each and all of the entities so merged or consolidated. Except as provided in this chapter, it shall hold, exercise, and perform all rights, powers, privileges, duties, and obligations appertaining to any and all trust, representative, or fiduciary relationships of each of the merged or consolidated entities, and shall be liable for all of the debts, contracts, and obligations of each of the merged or consolidated companies. Any such debt, undertaking, or obligations of any merged or consolidated entity may be enforced against it as fully and effectively as it could have been against the merged or consolidated entity. (c) Sale of assets or trust business. An independent trust company may transfer all or substantially all of its assets or all or a portion of its trust business to another entity qualified to do a trust business in this State. Prior to transferring all or substantially all of its assets or any portion or all of its trust business to another entity, an independent trust company shall obtain the Commissioners written approval. The Commissioner shall approve the transaction if the Commissioner determines that the transferee entity is qualified to do a trust business in this State and that the transaction will promote the general good. (d) Petition; notice to the Commissioner; order. Whenever an independent trust company intends to merge into, consolidate with, or transfer all or substantially all of its assets or any of its trust business to another entity qualified to do a trust business in this State as provided in subsection (b) or (c) of this section, it shall file a petition in the Probate Division of the Superior Court of the Probate District in which its main office is located requesting that the Court substitute the resulting or transferee entity, except as may be specifically excluded in such petition, in every fiduciary capacity specified in the petition. The petition may be made ex parte and need not list the fiduciary capacities in which substitution is made. A copy of the petition shall be furnished to the Commissioner prior to filing with the Probate Division of the Superior Court. Upon a finding that the resulting or transferee entity is authorized to engage in a trust business by the Commissioner, the Commissioner has approved the transaction, and that independent trust company has complied with the notification requirements in this subsection and subsection (e) of this section, the Court shall enter an order substituting the resulting or transferee entity in every fiduciary capacity for the independent trust company, except as otherwise specified in the independent trust companys petition. The petition made pursuant to this section shall be considered in a summary fashion by the Court, and the Court shall act on the petition within 30 days of filing. Upon entry of the Courts substitution order, the resulting or transferee entity shall, without further act, be deemed substituted by operation of law in every such fiduciary capacity. The substitution shall be evidenced by filing a copy of the order with the clerk of the Probate Division of the Vermont Superior Court in each Probate District in which the independent trust company served in a fiduciary capacity prior to the entry of the order. The order shall be accompanied by written notification to the Court of each fiduciary appointment previously made by the Court that is affected by the substitution order, and evidence of compliance with subsection (h) of this section. The order of substitution shall be indexed in the records of the courts in the manner in which substitutions of fiduciaries are indexed. (e) Notice of petition to customer. After the entity that will be the resulting or transferee entity under subsection (b) or (c) of this section is authorized to do a trust business in this State by the Commissioner, but at least 30 days before the filing of the petition referred to in subsection (d) of this section, the independent trust company shall mail written notice of the proposed substitution to the principals of each trust account affected. The form of notice required by this subsection shall be approved by the Commissioner and shall include a statement that the independent trust company intends to merge or consolidate with, or transfer all or substantially all of its assets or all or a portion of its trust business, to a resulting or transferee entity, as the case may be, and intends to substitute the resulting or transferee entity as or for the independent trust company. The notice shall include the name, mailing address, and telephone number of one or more officers, managers, employees, or agents of the independent trust company available during regular business hours to answer customer questions regarding the proposed substitution. The independent trust company shall furnish an affidavit of the mailing of the notice to the Probate Division of the Superior Court in conjunction with the filing of the independent trust companys petition referred to in subsection (d) of this section, and the affidavit shall constitute the independent trust companys compliance with this section. Following the mailing of the notice and prior to the effective date of the substitution order, each prospective trust customer of the independent trust company or of the resulting or transferee entity shall be furnished with a copy of the notice required by this subsection before the customer and the company enter into a trust account relationship. (f) Post-order notice. Within 30 days after the entry of the substitution order referred to in subsection (d) of this section, the resulting or transferee entity shall mail written notice of the entry of the order of substitution to the principals of each trust account affected. The notice shall specify that the substitution has been effected and shall include the name, mailing address, and telephone number of one or more officers, managers, or employees of the resulting or transferee entity available during regular business hours to answer customer questions regarding the substitution. (g) Effect of substitution order. Each fiduciary designation in a will, trust, or other instrument executed before or after the entry of an order of substitution, shall be deemed by operation of law to be a designation of the resulting or transferee entity, substituted pursuant to this section, without further act or amendment of the will, trust, or other instrument, unless the will, trust, or other instrument is executed after the date of entry of the order of substitution and specifically negates application of this section. (h) Bonds. If any company for which the resulting or transferee entity has been substituted pursuant to this section has given bond in any fiduciary capacity, the resulting or transferee entity shall be required to furnish to the Court or authority making the appointment a substitute bond in like amount and terms before the company shall be released from liability on its bond. (i) Accounting. Any company, for which the resulting or transferee entity has been substituted pursuant to this section, shall account jointly with the resulting or transferee entity for the accounting period during which the effective date of the substitution occurs. Upon substitution pursuant to this section, the company shall deliver to the resulting or transferee entity all assets addressed in the substitution order held by the company as fiduciary and upon the substitution, all the assets shall become the property of the resulting or transferee entity as fiduciary without the necessity of any instrument of transfer or conveyance. (j) Affiliated transactions. Upon substitution of the resulting or transferee entity pursuant to this section, the resulting or transferee entity shall pay fair consideration to any affiliated independent trust company for which it has been substituted as fiduciary for the trust business it has acquired from the affiliate as a result of the substitution. (k) Change in control. Any person that intends to transfer 10 percent or more of the voting interests in an independent trust company regulated under this chapter to any other person shall provide the Commissioner with at least 30 days written notice. (Added 1997, No. 98 (Adj. Sess.),  8b; amended 2009, No. 154 (Adj. Sess.),  238a, eff. Feb. 1, 2011.) 
 2408. Laws applicable; matters of contract
(a) An independent trust company exercising trust powers under this chapter shall be subject to the same responsibilities, liabilities, and penalties as an individual acting in like capacity, and the company shall have the same powers and shall receive the same compensation as individuals acting in like capacity, if fixed by law. (b) The exercise of powers not listed in subsection (a) of this section, and the performance of the other duties by the company may be as contracted for by the parties interested. (c) In performing its duties under a trust, an independent trust company shall be subject to all applicable provisions of 14 V.S.A. chapter 105. (Added 1997, No. 98 (Adj. Sess.),  8b.) 
 2409. Financial transactions
(a) No assets held in a fiduciary capacity shall be mingled with the investments of the independent trust company or be liable for the debts or obligations of the independent trust company. Independent trust companies shall keep all monies, property, or securities held separate and apart from the assets of the company and all assets held by the independent trust company as a fiduciary shall be designated in a manner that the owner, trust, or estate to which such assets belong may be clearly identified. (b) Consistent with its fiduciary obligations, every independent trust company holding funds awaiting investment or distribution may deposit or leave on deposit such funds with a federally insured state or national bank. The funds shall not be deposited or left with the same corporation or association depositing or leaving on deposit such funds, nor with a corporation or association holding or owning a majority of the capital stock of or other voting interest in the independent trust company making or leaving the deposit, unless the corporation or association shall first pledge, as security for the deposit, securities eligible for investment by state banks that have a market value equal to that of the deposited funds. No security shall be required with respect to any portion of such deposits which are insured under the provisions of any law of the United States. (c) An independent trust company acting in any capacity under a trust, unless the instrument creating the trust provides otherwise, may cause any securities or other property held by it in its representative capacity to be registered in the name of a nominee or nominees of the independent trust company. (d) An independent trust company when acting as depositary or custodian for the personal representative of a trust, unless the instrument creating the trust provides otherwise, may with the consent of the personal representative of the trust, cause any securities or other property held by it to be registered in the name of a nominee or nominees of the independent trust company. (e) An independent trust company shall be liable for any loss occasioned by the acts of any of its nominees with respect to securities or other property registered under subsections (c) and (d) of this section. (f) No corporation or the registrar or transfer agent thereof shall be liable for registering or causing to be registered upon the books of the corporation any securities in the name of any nominee of an independent trust company or for transferring or causing to be transferred upon the books of the corporation any securities theretofore registered by the corporation in the name of any nominee of an independent trust company, as provided in this section, when the transfer is made on the authorization of the nominee. (g) In its discretion, and subject to provisions of subsection (h) of this section, an independent trust company may associate together for common investment the funds of individual trusts held by it whether created by order of court or otherwise, if the terms of the trust do not require a separate investment. Without limiting the generality of the foregoing, an independent trust company may collectively invest funds received or held as fiduciary as follows: (1) in a common trust fund maintained by the independent trust company exclusively for the collective investment and reinvestment of monies contributed thereto by the independent trust company in its capacity as executor, administrator, guardian, or trustee under a will or deed; (2) in a fund consisting solely of assets of retirement, pension, profit sharing, stock bonus, or other trusts which are exempt from federal income taxation under the Internal Revenue Code; or (3) in a common trust fund, maintained by the independent trust company exclusively for the collective investment and reinvestment of monies contributed thereto by the independent trust company in its capacity as managing agent. (h) An independent trust company may create a trust investment account to which may be entrusted for investment the whole or any part of the funds of trust permissible to be associated as provided in subsection (g) of this section. Where an independent trust company which has established an associated trust investment account is the cotrustee of a trust permissible to be associated as provided in subsection (g) of this section, the whole or any part of the funds of the trust may be entrusted to that account for investment if all cotrustees of the trust consent thereto. An individual trust whose funds are thus associated shall at all times be the equitable owner of its pro rata share of the funds of the associated trust investment account and shall share pro rata the net income of that account and the net increase or decrease of its principal for any reason during the time its funds are a part of the associated trust investment account. The net income shall be distributed pro rata to the individual trust accounts at reasonable intervals. Funds of individual trusts transferred to that account or withdrawn therefrom shall be on the basis of the market value of the total funds of the account at the time being. (i) The board or similarly functioning unit of a limited liability company of an independent trust company is responsible for the proper exercise of fiduciary powers by the independent trust company and each matter pertinent to the exercise of fiduciary powers. The board shall adopt and follow written policies and procedures adequate to maintain its fiduciary activities in compliance with applicable law. The policies and procedures shall include, for the company and its directors, officers, managers, members, employees, and agents, methods for preventing conflicts of interest, self-dealing, and the improper use of material inside information in connection with any decision or recommendation made as a fiduciary. The written policies and procedures shall also prescribe the investment and disposition of property held in a fiduciary capacity. (Added 1997, No. 98 (Adj. Sess.),  8b.) 
 2410. Powers of the Commissioner
(a) In addition to other powers conferred by this chapter, the Commissioner may:(1) Restrict the transaction of any trust account when the Commissioner finds that extraordinary circumstances make the restriction necessary for the proper protection of the trust customers of the independent trust company. (2) Order the holders of shares or other voting interest in an independent trust company to refrain from voting those shares or other voting interest on any matter if the Commissioner finds that the order is necessary to protect the company against reckless, incompetent, or careless management, safeguard the assets of trust customers, or prevent the wilful violation of this chapter or of any lawful order issued under it, and in such a case, the shares or other voting interest of such a holder shall not be counted in determining the existence of a quorum or a percentage of the outstanding shares or voting interest necessary to take any company action. (3) Order any person to cease violating this title or a lawful regulation issued under it or to cease engaging in any unsound trust or fiduciary practice. (4)(A) Impose a penalty of not more than $15,000.00 for each violation upon any independent trust company which, or any director, member, trustee, officer, manager, or employee of an independent trust company who: (i) knowingly violates this title or a lawful regulation or order issued under it; or(ii) has knowingly engaged or participated in any materially unsafe or unsound practice in connection with the independent trust company; or (iii) has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the independent trust company. (B) In determining the amount of a penalty assessed pursuant to this subsection, the Commissioner shall consider the following factors: (i) the appropriateness of the penalty with respect to the financial resources and good faith of the person or independent trust company charged; (ii) the gravity of the violation or practice;(iii) the history of previous violations or practices of a similar nature;(iv) the economic benefit derived by the person from the violation or practice; and(v) other factors as justice may require.(C) An independent trust company shall not indemnify a director, member, officer, manager or employee for a penalty imposed under this subsection. (5) Suspend or revoke the certificate of authority of an independent trust company if, after notice and opportunity for a hearing, the Commissioner determines that: (A) the independent trust company has failed or refused to comply with any law or regulation or an order issued pursuant to this title; (B) the application for certificate of authority contained a false representation or omission of a material fact; or (C) any officer or manager or agent of the independent trust company, in connection with an application for a certificate of authority, knowingly made a false representation of a material fact or failed to disclose a material fact to the Commissioner or the duly authorized agent of the Commissioner. (6)(A) Remove a director, member, trustee, officer, manager, or employee of an independent trust company who: (i) knowingly violates this title or a lawful regulation or an order issued under this title; (ii) is convicted of a crime involving dishonesty;(iii) has knowingly engaged or participated in any materially unsafe or unsound practice in connection with the independent trust company; or (iv) has knowingly committed or engaged in any act, omission, or practice which constitutes a breach of fiduciary duty to the independent trust company. (B) Provided further, with respect to the acts or omissions under subdivisions (A)(iii) and (iv) of this subdivision (5) that the Commissioner finds: (i) the independent trust company has suffered or probably will suffer substantial financial loss or other damage; (ii) the interest of its trust customers or accounts could be seriously prejudiced by such violation, practice or breach of fiduciary duty; or (iii) the director, member, trustee, officer, manager, or employee has received material financial gain by reason of such violation, practice or breach. (b) The Commissioner shall provide notice of any order proposed pursuant to this chapter and the grounds thereof by mail to the independent trust company and any affected director, member, trustee, officer, manager, or employee. The independent trust company or any person so served may, within 30 days of service on the independent trust company, request that a hearing be held by the Commissioner. The provisions of 3 V.S.A. chapter 25 shall govern any hearing held by the Commissioner under this chapter. The hearing shall be private unless the Commissioner determines that a public hearing is necessary to protect the public interest. If no hearing is requested, the proposed order shall become final 30 days after service on the independent trust company. If it is deemed necessary to assure the continued safety and soundness of the independent trust company, the Commissioner may order an immediate suspension of the certificate of authority of the independent trust company or, in the case of a removal, immediate suspension of the director, member, trustee, officer, manager, or employee pending completion of further administrative proceedings on removal pursuant to subdivision (a)(6) of this section. (c) It shall be a criminal offense, punishable by a fine of $1,000.00 or a year in prison, or both, for any person to violate this title, to violate any order of the Commissioner, or, after receipt of a removal order, or an order assessing a penalty, to perform any duty or exercise any power of any independent trust company until the penalty has been satisfied, or otherwise satisfactorily resolved between the parties, or the removal or penalty order is vacated by the Commissioner or by a court of competent jurisdiction. (Added 1997, No. 98 (Adj. Sess.),  8b.) 
 2411. Unsafe condition; receivership
If the Commissioner finds a deficiency in capital or other unsafe or unsound condition of an independent trust company has not been remedied within the time prescribed under an order of the Commissioner issued pursuant to this chapter, the Commissioner may apply to the Superior Court in Washington County, to be appointed receiver for the liquidation or rehabilitation of the company. The expense of the receivership shall be paid out of the assets of the independent trust company. The provisions of subchapters 2, 3, and 4 of chapter 209 of this title shall apply to an independent trust company formed or regulated under this chapter as if the independent trust company were a financial institution to the extent applicable. (Added 1997, No. 98 (Adj. Sess.),  8b; amended 1999, No. 153 (Adj. Sess.),  22, eff. Jan. 1, 2001.) 
 2451. Definitions
As used in this section:(1) Personal information means data capable of being associated with a particular natural person, including gender identification, birth information, marital status, citizenship and nationality, biometric records, government identification designations, and personal, educational, and financial histories. (2) Personal information protection company means a business that is organized for the primary purpose of providing personal information protection services to individual consumers. (3) Personal information protection services means receiving, holding, and managing the disclosure or use of personal information concerning an individual consumer: (A) pursuant to a written agreement, in which the person receiving the individual consumers information agrees to serve as a personal information protection company, and which specifies the types of personal information to be held and the scope of services to be provided on behalf of the consumer; and (B) in the best interests and for the protection and benefit of the consumer. (Added 2017, No. 205 (Adj. Sess.),  2.)
 2452. Personal information as the subject of a fiduciary relationship
A personal information protection company that accepts personal information pursuant to a written agreement to provide personal information protection services has a fiduciary responsibility to the consumer when providing personal protection services. (Added 2017, No. 205 (Adj. Sess.),  2.) 
 2453. Qualified personal information protection company
(a) A personal information protection company shall qualify to conduct its business under the terms of this chapter, chapter 72 of this title, and applicable rules adopted by the Department of Financial Regulation. (b) A person shall not engage in business as a personal information protection company in this State without first obtaining a license from the Department. (c) A personal information protection company shall:(1) be organized or authorized to do business under the laws of this State;(2) maintain a place of business in this State;(3) appoint a registered agent to accept service of process and to otherwise act on its behalf in this State, provided that whenever the registered agent cannot with reasonable diligence be found at the Vermont registered office of the company, the Secretary of State shall be an agent of the company upon whom any process, notice, or demand may be served; (4) annually hold at least one meeting of its governing body in this State, at which meeting one or more members of the body are physically present; and (5) develop, implement, and maintain a comprehensive information security program that contains administrative, technical, and physical safeguards sufficient to protect personal information, and which may include the use of blockchain technology, as defined in 12 V.S.A.  1913, in some or all of its business activities. (Added 2017, No. 205 (Adj. Sess.),  2; amended 2019, No. 103 (Adj. Sess.),  4.) 
 2454. Name; office
A personal information protection company shall file with the Department of Financial Regulation the name it proposes to use in connection with its business, which the Department shall not approve if it determines that the name may be misleading, likely to confuse the public, or deceptively similar to any other business name in use in this State. (Added 2017, No. 205 (Adj. Sess.),  2.) 
 2455. Conduct of business
(a) A personal information protection company may:(1) operate through remote interaction with the individuals entrusting personal information to the company, and there shall be no requirement of Vermont residency or other contact for any such individual to establish such a relationship with the company; and (2) subject to applicable fiduciary duties, the terms of any agreement with the individual involved, and any applicable statutory or regulatory provision: (A) provide elements of personal information to third parties with which the individual seeks to have a transaction, a service relationship, or other particular purpose interaction; (B) provide certification or validation concerning personal information;(C) receive compensation for acting in these capacities.(b) An authorization to provide personal information may be either particular or general, provided it meets the terms of any agreement with the individual involved and any rules adopted by the Department of Financial Regulation. (Added 2017, No. 205 (Adj. Sess.),  2.) 
 2457. Reports; rules
(a) The Department of Financial Regulation may prescribe by rule the timing and manner of reports by a personal information protection company to the Department. (b) The Department may adopt rules to govern other aspects of the business of a personal information protection company, including its protection and safeguarding of personal information and its interaction with third parties with respect to personal information it holds. (Added 2017, No. 205 (Adj. Sess.),  2.) 
 2500. Definitions
As used in this chapter:(1) Authorized delegate means a person located in this State that a licensee designates to provide money services on behalf of the licensee. (2) Check cashing means receiving at least $500.00 compensation within a 30-day period for taking payment instruments or prepaid access, other than travelers checks, in exchange for money, payment instruments, or prepaid access delivered to the person delivering the payment instrument or prepaid access at the time and place of delivery without any agreement specifying when the person taking the payment instrument will present it for collection. (3) Currency exchange means receipt of revenues equal to or greater than five percent of total revenues from the exchange of money of one government for money of another government. (4) Limited station means private premises where a check casher is authorized to engage in check cashing for not more than two days of each week solely for the employees of the particular employer or group of employers specified in the check casher license application. (5) Mobile location means a vehicle or a movable facility where check cashing occurs.(6) Monetary value means a medium of exchange, whether or not redeemable in money.(7) Money means a medium of exchange that is authorized or adopted by the United States or a foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments. (8) Money services means money transmission, check cashing, or currency exchange.(9) Money transmission means to engage in the business of selling or issuing payment instruments, selling or issuing prepaid access, or receiving money or monetary value for transmission to a location within or outside the United States. (10) Outstanding, with respect to a payment instrument, means issued or sold by or for the licensee and which has been reported as sold but not yet paid by or for the licensee. (11) Payment instrument means a check, draft, money order, travelers check, or other instrument for the transmission or payment of money or monetary value, whether or not negotiable. The term does not include a credit card voucher, letter of credit, or instrument that is redeemable by the issuer in goods or services. (12) Prepaid access means funds or monetary value represented in digital electronic format, including virtual currency, whether or not specially encrypted, that are stored or capable of storage on electronic media and are retrievable and transferable electronically. (13) Virtual currency means a digital representation of value that:(A) can be a medium of exchange, a unit of account, or a store of value;(B) has an equivalent value in money or acts as a substitute for money;(C) may be centralized or decentralized; and(D) can be exchanged for money or other convertible virtual currency. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2009, No. 137 (Adj. Sess.),  1b; 2011, No. 78 (Adj. Sess.),  14, eff. April 2, 2012; 2017, No. 22,  11, eff. May 4, 2017; 2019, No. 20,  40.)
 2501. Exclusions
(a) This chapter does not apply to:(1) the United States or a department, agency, or instrumentality thereof;(2) the sale or issuance of payment instruments or prepaid access, or money transmission, by the U.S. Postal Service or by a contractor on behalf of the U.S. Postal Service; (3) a state, county, city, or any other governmental agency or governmental subdivision within a state; (4) a financial institution as defined in subdivision 11101(32) of this title, a financial institution holding company as defined in subdivision 11101(33) of this title, a credit union, an office of an international banking corporation, a branch of a foreign bank, a corporation organized pursuant to the Bank Services Company Act, an independent trust company organized under chapter 77 of this title or an entity organized under the laws of another state that is regulated by its home state in an equivalent manner to an independent trust company, or a corporation organized under the Edge Act under the laws of a state or the United States if the person does not issue, sell, or provide payment instruments or prepaid access through an authorized delegate that is not such a person; (5) electronic funds transfer of governmental benefits for a federal, state, or governmental agency by a contractor on behalf of the United States or a department, agency, or instrumentality thereof, or a state or governmental subdivision, agency, or instrumentality thereof; (6) a board of trade designated as a contract market under the Commodity Exchange Act or a person that, in the ordinary course of business, provides clearance and settlement services for a board of trade to the extent of its operation as or for such a board of trade; (7) a registered futures commission merchant under the federal commodities laws to the extent of its operation as such a merchant; (8) a person that provides clearance or settlement services pursuant to a registration as a clearing agency or an exemption from such registration granted under the federal securities laws to the extent of its operation as such a provider; (9) a person:(A) operating a payment system that provides processing, clearing, or settlement services, between or among persons excluded by this section or licensees, in connection with wire transfers, credit card transactions, debit card transactions, prepaid access transactions, automated clearing house transfers, or similar funds transfers to the extent of its operation as such; (B) that is a contracted service provider of an entity in subsection (4) of this section that provides processing, clearing, or settlement services in connection with wire transfers, credit card transactions, debit card transactions, prepaid access transactions, automated clearinghouse transfers, or similar funds transfers; or (C) that facilitates payment for goods or services, not including money transmission itself, or bill payment through a clearance and settlement process using institutions regulated under the Bank Secrecy Act pursuant to a written contract with the payee and either payment to the person facilitating the payment processing satisfies the payors obligation to the payee or that obligation is otherwise extinguished; (10) a person registered as a securities broker-dealer under federal or state securities laws to the extent of its operation as such a broker-dealer; (11) the sale or issuance of prepaid access by a school to its students and employees;(12) a seller of goods or services that cashes payment instruments incidental to or independent of a sale and does not charge for cashing the payment instrument in excess of $1.00 per instrument; or (13) a debt adjuster licensed pursuant to chapter 133 of this title when engaged in the business of debt adjustment. (b) The Commissioner may issue an order exempting any person from this chapter when such person is performing services for the benefit of the United States or a department, agency, or instrumentality thereof, or for the benefit of any state, county, city, or any other governmental agency or governmental subdivision within a state. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2001, No. 143 (Adj. Sess.),  59, eff. June 21, 2002; 2005, No. 36,  1, eff. June 1, 2005; 2017, No. 22,  12, eff. May 4, 2017; 2019, No. 20,  41.) 
 2502. License required
(a) A person shall not engage in money transmission without:(1) obtaining a license under subchapter 2 of this chapter; or(2) being an authorized delegate of a person licensed under subchapter 2 of this chapter.(b) A person shall not engage in check cashing or currency exchange without:(1) obtaining a license under subchapter 3 of this chapter;(2) obtaining a license for money transmission under subchapter 2 of this chapter; or(3) being an authorized delegate of a person licensed under subchapter 2 of this chapter.(c) A person not licensed under this chapter or not an authorized delegate of a licensee is engaged in providing money services if the person advertises those services, solicits to provide those services, or holds itself out as providing those services. (d) A license is not transferable or assignable.(e) A licensee shall file with the Commissioner any name proposed to be used in connection with a money service business or location pursuant to this chapter. The Commissioner shall not approve a proposed name if the Commissioner determines that the name may be misleading or likely to confuse the public, or deceptively similar to any name in use in this State. (f) A licensee shall register each remote access unit, commonly referred to as a kiosk, where a consumer may access money transmission services, including buying or selling virtual currency. Each kiosk is subject to the disclosure requirements established in section 10302 of this title. If a kiosk is owned by a person other than the licensee and the owner charges an additional fee to the consumer for access to the licensees services, the owner is also subject to the disclosure requirements of chapter 200 of this title. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2021, No. 139 (Adj. Sess.),  7, eff. May 27, 2022.) 
 2505. License required
A person licensed under this subchapter or that is an authorized delegate of a person licensed under this subchapter may engage in money transmission and may also engage in check cashing or currency exchange without obtaining a separate license under subchapter 3 of this chapter. (Added 2001, No. 55,  1, eff. Jan. 1, 2002.) 
 2506. Application for license; additional information
(a) In addition to the information required by section 2102 of this title, an application for a license under this subchapter shall state or contain: (1) a description of any money services previously provided by the applicant and the money services that the applicant seeks to provide in this State; (2) a list of the applicants proposed authorized delegates, and the locations in this State where the applicant and its authorized delegates propose to engage in money transmission or provide other money services; (3) a list of other states in which the applicant is licensed to engage in money transmission or provide other money services and information concerning any bankruptcy or receivership proceedings affecting the licensee; (4) a sample form of contract for authorized delegates, if applicable, and a sample form of payment instrument or instrument upon which prepaid access is recorded if applicable; (5) the name and address of any financial institution through which the applicants payment instruments and prepaid access obligations will be paid; and (6) a description of the source of money and credit to be used by the applicant to provide money services (b) The Commissioner may waive one or more requirements of this section or permit an applicant to submit substituted information in lieu of the required information. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2009, No. 134 (Adj. Sess.),  20; 2011, No. 78 (Adj. Sess.),  15, eff. April 2, 2012; 2019, No. 20,  42.) 
 2507. Security
(a) Except as otherwise provided in subsection (b) of this section, the following rules apply: (1) A surety bond, letter of credit, or other similar security acceptable to the Commissioner of not less than $100,000.00 shall accompany an application for a license. (2) If an applicant proposes to provide money services at more than one location through authorized delegates or otherwise, the amount of the security shall be increased by $10,000.00 per location, not exceeding a total of $500,000.00. (b) The Commissioner may increase the amount of security required to a maximum of $2,000,000.00 based upon the financial condition of a licensee, as evidenced by reduction of net worth, financial losses, or other relevant criteria. (c) Security shall be in a form satisfactory to the Commissioner, and payable to the State for use of the State and for the benefit of any claimant against the licensee and its authorized delegates to secure the faithful performance of the obligations of the licensee and its authorized delegates with respect to money transmission. (d) The aggregate liability on a surety bond may not exceed the principal sum of the bond. A claimant against a licensee or its authorized delegate may maintain an action directly against the bond, or the Commissioner may maintain an action on behalf of the claimant against the bond. The power vested in the Commissioner by this subsection shall be in addition to any other powers of the Commissioner under this chapter. (e) A surety bond shall cover claims effective for as long as the Commissioner specifies, but for at least five years after the licensee ceases to provide money services in this State. However, the Commissioner may permit the amount of security to be reduced or eliminated before the expiration of that time to the extent the amount of the licensees payment instruments or prepaid access obligations outstanding in this State is reduced. The Commissioner may permit a licensee to substitute another form of security acceptable to the Commissioner for the security effective at the time the licensee ceases to provide money services in this State. (f) In lieu of the security prescribed in this section, an applicant for a license or a licensee may provide security in a form otherwise permitted by the Commissioner. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2019, No. 20,  43.) 
 2510. Net worth
A licensee under this subchapter shall maintain a net worth of at least $100,000.00, determined in accordance with generally accepted accounting principles. (Added 2001, No. 55,  1, eff. Jan. 1, 2002.) 
 2511. Activities of money transmitters; receipts and refunds
(a) Every money transmitter licensee and its authorized delegates shall provide a receipt to the customer that clearly states the name, address, and telephone number of the licensee; the amount of money presented for transmission; and the total of any fees charged by the licensee. (1) If the rate of exchange for a money transmission to be paid in the currency of another country is fixed by the licensee for that transaction at the time the money transmission is initiated, then the receipt provided to the customer shall disclose the rate of exchange for that transaction, and the duration, if any, for the payment to be made at the fixed rate of exchange so specified. (2) If the rate of exchange for a money transmission to be paid in the currency of another country is not fixed at the time the money transmission is sent, the receipt provided to the customer shall disclose that the rate of exchange for the transaction will be set at the time the recipient of the money transmission picks up the funds in the foreign country. (3) As used in this section, fees does not include revenue that a licensee or its authorized delegate generates, in connection with a money transmission, in the conversion of the money of one government into the money of another government. (b) Every money transmitter licensee and its authorized delegates shall refund to the customer within 10 days of receipt of a written request for a refund all monies received for transmittal unless any of the following occurs: (1) Prior to receipt of the written request for a refund, the monies have been transmitted and delivered to the person designated by the customer. (2) Prior to receipt of a written request for a refund, instructions have been given committing an equivalent amount of money to the person designated by the customer. (3) The licensee or its authorized delegate has reason to believe that a crime has occurred, is occurring, or may potentially occur as a result of transmitting the money as requested by the customer or refunding the money as requested by the customer. (4) The licensee is otherwise barred by law from making a refund. (Added 2017, No. 22,  13.)
 2515. Check cashing and currency exchange licenses required
(a) A person licensed under this subchapter may engage in check cashing and currency exchange.(b) A person licensed under subchapter 2 of this chapter may engage in check cashing and currency exchange without first obtaining a separate license under this subchapter. (c) An authorized delegate of a person licensed under subchapter 2 of this chapter may engage in check cashing and currency exchange without first obtaining a license under this subchapter if such money services are within the scope of activity permissible under the contract between the authorized delegate and the licensee. (Added 2001, No. 55,  1, eff. Jan. 1, 2002.) 
 2516. Application for license; additional information
In addition to the information required by section 2102 of this title, an application for a license under this subchapter shall state or contain: (1) the complete addresses of locations in this State where the applicant proposes to engage in check cashing or currency exchange, including all limited stations and mobile locations; and (2) a description of the source of money and credit to be used by the applicant to engage in check cashing services and currency exchange. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2011, No. 78 (Adj. Sess.),  16, eff. April 2, 2012; 2019, No. 20,  46.) 
 2519. Activities of check cashers and currency exchanges
(a) Check cashing. (1) A licensee, in every location conducting business under a license issued pursuant to this chapter, shall conspicuously post and at all times display a notice stating all fees charged. A licensee shall file with the Commissioner a statement of the fees charged at every location licensed for services offered there. (2) Before a licensee shall deposit, with any financial institution, a payment instrument that is cashed by a licensee, each such item shall be endorsed with the actual name under which such licensee is doing business. Additionally, the words Licensed Check Cashing Business must be written legibly or stamped immediately after or below the name of the endorser. (3) A licensee shall comply with all applicable federal statutes governing currency transaction reporting. (4) A licensee may not alter or delete any information on any payment instrument cashed.(5) A licensee shall issue a receipt for each check cashing transaction upon request. The receipt shall include, among other matters the licensee may desire to include, the amount of the payment instrument and the total fee charged. (6) A licensee shall not impose any fee or other charge for bad checks other than as expressly permitted under the provisions of 9 V.S.A.  2311 and 2312. (7) Within 10 business days after being advised by the payor financial institution that a payment instrument has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity, the licensee shall notify the police department in the city or town where the payment instrument was cashed. If a payment instrument is returned to the licensee by the payor financial institution for any of the aforementioned reasons, the licensee may not release or destroy the payment instrument without the consent of the city or town police department, or other investigative law enforcement authority. (8) No licensee shall issue coupons, gift certificates, or tokens to be used in lieu of money when cashing a payment instrument. (9) No licensee shall require the customer to receive payment by a method which causes the customer to pay additional or further fees and charges to the licensee or other person, and no licensee shall charge or receive any other charges or fees in addition to the fees listed in this chapter. (10) A licensee shall pay to every customer tendering a payment instrument to be cashed the entire face amount of such instrument in cash, less any charges permitted by this section, on the same date upon which such instrument is presented to the licensee. (11) A licensee is prohibited from requiring that a customer cash two or more separate checks in a manner to avoid the limitations on the fees as set forth in this section. (12) No check casher shall:(A) charge check cashing fees, except as otherwise provided in this chapter, in excess of five percent of the face amount of the payment instrument or $5.00, whichever is greater; (B) charge check cashing fees in excess of three percent of the face amount of the payment instrument, or $2.00, whichever is greater, if such payment instrument is the payment of any kind of state public assistance or federal Social Security benefit, if the customer cashing the payment instrument is the named payee of such payment instrument; or (C) charge check cashing fees for personal checks or money orders in excess of 10 percent of the face amount of the personal check or money order or $5.00, whichever is less. (13) No licensee shall agree to hold a payment instrument for later deposit. No licensee shall cash or advance any money on a postdated payment instrument. (14) Licensees may charge a customer with a one-time membership fee not to exceed $10.00.(b) Currency exchange: (1) The rate of exchange and fees charged by a licensee for rendering currency exchange services shall be prominently displayed to the public at each business location. (2) Licensees shall provide each customer with a written receipt sufficient to identify the transaction, the licensee, the rate of exchange, the fees charged and the amount of currency exchanged. (Added 2001, No. 55,  1, eff. Jan. 1, 2002.) 
 2525. Relationship between licensee and authorized delegate
(a) In this subchapter, remit means to make direct payments of money to a licensee or its representative authorized to receive the money, or to deposit money in a depository institution within the meaning of subdivision 11101(24) of this title, in an account specified by the licensee. (b) A contract between a licensee and an authorized delegate shall require the authorized delegate to operate in full compliance with this chapter. The licensee shall furnish in a record to each authorized delegate policies and procedures sufficient to permit compliance with this chapter. (c) An authorized delegate shall remit all money owing to the licensee in accordance with the terms of the contract between the licensee and the authorized delegate. (d) If a license is suspended, revoked, or nonrenewed, the Commissioner shall notify all authorized delegates of the licensee whose names are in a record filed with the Commissioner of the suspension, revocation, or nonrenewal. After notice is sent or publication is made, an authorized delegate shall immediately cease to provide money services as a delegate of the licensee. (e) An authorized delegate may not provide money services outside the scope of activity permissible under the contract between the authorized delegate and the licensee, except for activity in which the authorized delegate is otherwise licensed or authorized to engage. (f) An authorized delegate of a licensee holds in trust for the benefit of the licensee all money less fees earned from money transmission. (g) A person shall not provide money services on behalf of a person not licensed under this chapter. A person that engages in any money services activity under this chapter shall be subject to the provisions of this chapter to the same extent as if the person were a licensee under this chapter. (h) A person may not be an authorized delegate of another authorized delegate. An authorized delegate must enter into a contract directly with a licensee. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2009, No. 134 (Adj. Sess.),  22.) 
 2530. Examinations
The Commissioner shall examine the affairs, business, and records of each licensee under this chapter as often as the Commissioner deems necessary to carry out the purposes of this part. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2011, No. 78 (Adj. Sess.),  17, eff. April 2, 2012; 2019, No. 20,  49.) 
 2532a. Change of authorized delegates; change of location
A licensee shall notify the Commissioner in writing within 30 days of any change in the list of authorized delegates or locations in this State where the licensee or an authorized delegate of the licensee provides money services, including limited stations and mobile locations. Such notice shall state the name and street address of each authorized delegate or of each location removed or added to the licensees list. Upon any such change, the licensee shall provide sufficient evidence that it is in compliance with section 2507 of this title. The licensee shall submit with the notice a nonrefundable fee of $25.00 for each new authorized delegate location and for each change in location. There is no fee to remove authorized delegates or to remove locations. (Added 2009, No. 134 (Adj. Sess.),  24.) 
 2534. Records
In addition to the records required by section 2119 of this title, a licensee shall maintain records for determining the licensees compliance with this chapter. A licensee shall maintain its records for at least five years, which records shall include: (1) a record of each payment instrument or prepaid access obligation sold;(2) a general ledger posted at least monthly containing all asset, liability, capital, income, and expense accounts; (3) bank statements and bank reconciliation records;(4) records of outstanding payment instruments and prepaid access obligations;(5) records of each payment instrument and prepaid access obligation paid within the five-year period; (6) a list of the last known names and addresses of all of the licensees authorized delegates; and (7) any other records the Commissioner requires by rule. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2019, No. 20,  53.)
 2535. Money laundering reports
(a) A licensee and an authorized delegate shall file with the Commissioner copies of all reports required by federal currency reporting, record keeping, and suspicious transaction reporting requirements as set forth in 31 U.S.C.  5311, 31 C.F.R. Part 103, and other federal and State laws pertaining to money laundering. (b) The timely filing of a complete and accurate report required under subsection (a) of this section with the appropriate federal agency is compliance with the requirements of subsection (a) of this section, unless the Commissioner notifies the licensee that reports of this type are not being regularly and comprehensively transmitted by the federal agency to the Commissioner. (Added 2001, No. 55,  1, eff. Jan. 1, 2002.) 
 2540. Maintenance of permissible investments
(a) A licensee shall maintain at all times permissible investments that have a market value computed in accordance with generally accepted accounting principles of not less than the aggregate amount of all of its outstanding payment instruments and prepaid access obligations issued or sold and money transmitted by the licensee or its authorized delegates. (b) The Commissioner, with respect to any licensee, may limit the extent to which a type of investment within a class of permissible investments may be considered a permissible investment, except for money and certificates of deposit issued by a depository institution within the meaning of subdivision 11101(24) of this title. The Commissioner, by rule, may prescribe or by order allow other types of investments that the Commissioner determines to have a safety substantially equivalent to other permissible investments. (c) Permissible investments, even if commingled with other assets of the licensee, are held in trust for the benefit of the purchasers and holders of the licensees outstanding payment instruments and prepaid access obligations in the event of bankruptcy or receivership of the licensee. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2019, No. 20,  54.) 
 2541. Types of permissible investments
(a) Except to the extent otherwise limited by the Commissioner pursuant to section 2540 of this title, the following investments are permissible under section 2540 of this title: (1) cash, a certificate of deposit, or a senior debt obligation of a depositary institution within the meaning of subdivision 11101(24) of this title; (2) a bankers acceptance or bill of exchange that is eligible for purchase upon endorsement by a member bank of the Federal Reserve System and is eligible for purchase by a Federal Reserve Bank; (3) an investment bearing a rating of one of the three highest grades, as defined by a nationally recognized organization that rates securities; (4) an investment security that is an obligation of the United States or a department, agency, or instrumentality thereof; an investment in an obligation that is guaranteed fully as to principal and interest by the United States; or an investment in an obligation of a state or a governmental subdivision, agency, or instrumentality thereof; (5) receivables that are payable to a licensee from its authorized delegates, in the ordinary course of business, pursuant to contracts that are not past due or doubtful of collection, if the aggregate amount of investments in receivables under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not have at one time investments in receivables under this subdivision in any one person aggregating more than 10 percent of the licensees total permissible investments; (6) a share or a certificate issued by an open-end management investment company that is registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C.  80a-1 et seq.), and whose portfolio is restricted by the management companys investment policy to investments specified in subdivisions (1) through (4) of this subsection; and (7) virtual currency owned by the licensee, but only to the extent of outstanding transmission obligations received by the licensee in identical denomination of virtual currency. (b) The following investments are permissible under section 2540 of this title, but only to the extent specified: (1) an interest-bearing bill, note, bond, or debenture of a person whose equity shares are traded on a national securities exchange or on a national over-the-counter market, if the aggregate of investments under this subdivision do not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time have investments under this subdivision in any one person aggregating more than 10 percent of the licensees total permissible investments; (2) a share of a person traded on a national securities exchange or a national over-the-counter market or a share or a certificate issued by an open-end management investment company that is registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940, and whose portfolio is restricted by the management companys investment policy to shares of a person traded on a national securities exchange or a national over-the-counter market, if the aggregate of investments under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time have investments under this subdivision in any one person aggregating more than 10 percent of the licensees total permissible investments; (3) a demand-borrowing agreement made to a corporation or a subsidiary of a corporation whose securities are traded on a national securities exchange, if the aggregate of the amount of principal and interest outstanding under demand-borrowing agreements under this subdivision does not exceed 20 percent of the total permissible investments of a licensee and the licensee does not at one time have principal and interest outstanding under demand-borrowing agreements under this subdivision with any one person aggregating more than 10 percent of the licensees total permissible investments; and (4) any other investment the Commissioner determines to be permissible, to the extent specified by the Commissioner. (c) The aggregate of investments under subsection (b) of this section may not exceed 50 percent of the total permissible investments of a licensee calculated in accordance with section 2540 of this title. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2017, No. 22,  16, eff. May 4, 2017.) 
 2546. Termination or suspension of authorized delegate activity
(a) Section 2110 of this title applies to authorized delegates.(b) The Commissioner may issue an order suspending or barring any authorized delegate or any responsible individual, director, officer, member, manager, partner, or person in control of such authorized delegate from continuing to be or becoming an authorized delegate of any licensee during the period for which such order is in effect, or may order that an authorized delegate cease and desist in any specified conduct. (c) Upon issuance of a suspension or bar order, the licensee shall terminate its relationship with such authorized delegate according to the terms of the order. (Added 2001, No. 55,  1, eff. Jan. 1, 2002; amended 2019, No. 20,  56.) 
 2555. Conservation, liquidation, and insolvency
To the extent applicable, the provisions of subchapters 2, 3, and 5 of chapter 209 of this title, excluding sections 19207, 19208, 19210, 19306, and 19307 of this title, shall apply to the conservation, liquidation, and insolvency of any licensee under this chapter. Such licensee shall be treated as a financial institution for the purposes of application of those subchapters. If an impaired or insolvent licensee is or becomes a debtor in bankruptcy or the subject of a bankruptcy proceeding under federal law, the Commissioner shall be relieved of any obligation otherwise imposed under this section and subchapters 2, 3, and 5 of chapter 209 of this title, and shall relinquish control of the assets and estate of such debtor to the duly appointed trustee in bankruptcy or the debtor in possession, as the case may be. (Added 2001, No. 55,  1, eff. Jan. 1, 2002.) 
 2701. Definitions
As used in this chapter:(1) Account means a demand deposit or share draft (checking) account, savings account, or other comparable consumer asset account (other than an occasional or incidental credit balance in a credit plan) regularly maintained by the consumer at a financial institution or at a credit union. (2) Financial institution means an institution as defined in subdivision 11101(32) of this title. (3) Gift certificate means a record evidencing a promise made for consideration by the seller or issuer of the record that money, goods, or services will be provided to the holder of the record for the value shown in the record. A gift certificate includes a record that contains a microprocessor chip, magnetic strip, or other means for the storage of information that is prefunded and for which the value is decremented upon each use; a gift card; an electronic gift card; a prepaid access card or certificate; a store card; or a similar record or card. A gift certificate does not include an access device such as a debit card, code, or other means of access to a consumers account regularly maintained at a financial institution or credit union that may be used by the consumer to access the funds in his or her account to initiate a withdrawal or to initiate an electronic funds transfer from the consumers account. (4) Loyalty, award, or promotional gift certificate means a gift certificate that is issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in connection with a loyalty, award, or promotional program and that is redeemable upon presentation to one or more merchants for goods or services or that is usable at automated teller machines. (5) Paid value means the value of any money or other thing of value given in exchange for a gift certificate. (6) Promotional value means any value shown on a gift certificate in excess of the paid value of the gift certificate. (Added 2005, No. 39,  1; amended 2011, No. 136 (Adj. Sess.),  7, eff. May 18, 2012; 2019, No. 20,  64.) 
 2702. Expiration date
The paid value of a gift certificate sold or offered to be sold shall be valid for not less than five years after its date of issuance or after the date funds were last loaded onto the gift certificate, whichever is later. The date of issuance and the expiration date shall be clearly identified on its face, or, if an electronic card with a banked dollar value, clearly printed upon a sales receipt transferred to the purchaser of the electronic card upon the completed transaction, or otherwise made available to the purchaser or holder of the electronic card through means of an Internet site or a toll free information telephone line. A gift certificate not clearly marked with an expiration date or for which the expiration date is not otherwise made available as provided in this section shall be deemed to have no expiration date. Following the expiration date of the gift certificate, the unused portion of the paid value of the gift certificate shall be returned to the holder of the gift certificate, if requested. (Added 2005, No. 39,  1; amended 2011, No. 136 (Adj. Sess.),  7, eff. May 18, 2012.) 
 2702a. Loyalty, award, or promotional gift certificate
A loyalty, award, or promotional gift certificate shall clearly and legibly set forth the following disclosures, as applicable: (1) a statement indicating that the gift certificate is issued for loyalty, award, or promotional purposes, which shall be included on the front of the gift certificate; (2) the expiration date for both the paid value of the gift certificate, if any, and the promotional value of the gift certificate, if any, which shall be included on the front of the gift certificate; (3) the amount of any fees that may be imposed in connection with the gift certificate and the conditions under which they may be imposed, which shall be provided on or with the gift certificate; and (4) if any fee is assessed against the gift certificate, a toll-free telephone number and, if one is maintained, a website address that a consumer may use to obtain fee information, which shall be included on the gift certificate. (Added 2011, No. 136 (Adj. Sess.),  7, eff. May 18, 2012.) 
 2703. Prohibited fees
(a) Dormancy fees, latency fees, issuance fees, redemption fees, or any other administrative fees or service charges in connection with a gift certificate are prohibited. (b) Notwithstanding subsection (a) of this section, a money transmitter licensed under chapter 79 of this title, financial institution, or credit union may charge a one-time fee upon the issuance of a prepaid access card that is reasonably related to the cost to the issuer of issuing the card, provided that in no event shall the fee exceed $10.00. (Added 2005, No. 39,  1; amended 2019, No. 20,  65; 2019, No. 103 (Adj. Sess.),  11.) 
 2704. Redemption of gift certificate for cash
If the remaining value of a gift certificate is less than $1.00, the gift certificate shall be redeemable in cash for its remaining value upon the demand of the holder of the gift certificate. (Added 2005, No. 39,  1.) 
 2705. Balance inquiry
The issuer of the gift certificate, at the holders request, shall inform the holder of the unused balance remaining on the gift certificate and the expiration date of the gift certificate. (Added 2005, No. 39,  1.) 
 2706. Penalty
(a) The Commissioner may impose an administrative penalty of not more than $1,000.00 per violation upon any person who violates any provision of this chapter, any applicable rule, or any order issued by the Commissioner, plus the States costs and expenses for the investigation and prosecution of the matter, including attorneys fees. (b) The Commissioner may order any person to make restitution to any person as a result of a violation of this chapter. (c) Any gift certificate that contains any provision in violation of this chapter is contrary to public policy, and such provision is void and unenforceable against the holder of the gift certificate. (d) The powers vested in the Commissioner by this chapter shall be in addition to any other powers of the Commissioner to enforce any penalties, fines, or forfeitures authorized by law. (e) The powers vested in the Commissioner by this chapter shall be in addition to any other powers or rights of consumers or the Attorney General or others under any other applicable law or rule, including without limitation the Vermont Consumer Protection Act and any applicable rules issued in connection therewith. (Added 2005, No. 39,  1; amended 2011, No. 109 (Adj. Sess.),  3, eff. May 8, 2012; 2011, No. 136 (Adj. Sess.),  1b, eff. May 18, 2012.) 
 2707. Exemption
Except as provided in this section, the provisions of this chapter shall not apply to the following: (1) a loyalty, award, or promotional gift certificate where no money or other thing of value is given in exchange for the gift certificate, provided that the gift certificate complies with section 2702a of this title; (2) the promotional value of a loyalty, award, or promotional gift certificate issued in exchange for paid value, provided that the gift certificate complies with sections 2702 and 2702a of this title; (3) a gift certificate donated to a charitable organization and used for fund-raising activities of a charitable organization, without any money or other thing of value being given in exchange for the gift certificate by the charitable organization, provided that the expiration date is clearly and legibly printed on the gift certificate; (4) prepaid calling cards issued solely to provide an access number and authorization code for prepaid calling services; (5) a season pass, a discount ski card, or a record sold for admission to any seasonal recreational activity; or (6) a payroll card account issued pursuant to and in full compliance with 21 V.S.A.  342(c). (Added 2005, No. 39,  1; amended 2009, No. 115 (Adj. Sess.),  2, eff. May 21, 2010; 2011, No. 136 (Adj. Sess.),  7, eff. May 18, 2012.)
 2708. Investigations and complaints; powers of Commissioner
If the Commissioner has reason to believe that any person has violated any of the provisions of this chapter, the Commissioner may make such investigation as the Commissioner shall deem necessary, and, to the extent necessary for this purpose, the Commissioners authorized representative may examine such person and shall have the power to compel the production of all relevant books, records, and documents. (Added 2005, No. 39,  1.) 
 2709. Vermont Consumer Protection Act
(a) A violation of this chapter shall be deemed also a violation of the Vermont Consumer Protection Act, 9 V.S.A. chapter 63, provided that the Commissioners determinations concerning the interpretation and administration of the provisions of this chapter and any rules adopted under this chapter shall carry a presumption of validity as to financial institutions, credit unions, and all persons licensed or required to be licensed under this title. (b) A consumer may bring a private action under this chapter or under 9 V.S.A. chapter 63 for any violation of this chapter. (Added 2005, No. 39,  1; amended 2011, No. 109 (Adj. Sess.),  3, eff. May 8, 2012; 2011, No. 136 (Adj. Sess.),  1b, eff. May 18, 2012.) 
 2710. Enforcement
(a) The Commissioner may enforce compliance with the requirements of this chapter with respect to financial institutions as defined in subdivision 11101(32) of this title, credit unions, and all persons and entities licensed or required to be licensed under this title. (b) The Attorney General shall cooperate and consult with the Commissioner prior to the commencement of any investigation or enforcement action with respect to any person or entity described in subsection (a) of this section. (c) Nothing contained in subsection (a) or (b) of this section shall prohibit the Commissioner and the Attorney General from bringing a joint enforcement action against any person or entity described in subsection (a) for a violation of this chapter. (Added 2005, No. 39,  1.) 
 2711. Rules
(a) The Commissioner may adopt such rules as are necessary to carry out the purposes of this chapter with respect to financial institutions, credit unions, and all persons and entities licensed or required to be licensed under this title. (b) The Attorney General may adopt such rules as are necessary to carry out the purposes of this chapter with respect to all persons and entities other than financial institutions, credit unions, and all persons or entities licensed or required to be licensed under this title. (Added 2005, No. 39,  1.) 
 2751. Definitions
As used in this chapter, debt adjustment means making an agreement with a debtor whereby the debt adjuster agrees to distribute, supervise, coordinate, negotiate, or control the distribution of money or evidences thereof among one or more of the debtors creditors in full or partial payment of obligations of the debtor and includes services as an intermediary between a debtor and one or more of the debtors creditors for the purpose of obtaining concessions. Debt adjustment also includes any program or strategy in which the debt adjuster furnishes services to a debtor which includes a proposed or actual payment or schedule of payments to be made by or on behalf of the debtor and is used to pay debt owed by the debtor. For purposes of this chapter, engaging in debt adjustment in this State shall include: (1) soliciting debt adjustment business from within this State, whether by mail, by telephone, by electronic means, or by other means regardless of whether the debtor resides within this State or outside this State; (2) soliciting debt adjustment business with an individual residing in this State, whether by mail, by telephone, by electronic means, or by other means; (3) entering into, or succeeding to, a debt adjustment contract with an individual residing in this State; or (4) providing, offering to provide, or agreeing to provide debt adjustment services directly or through others. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2005, No. 36,  4, eff. June 1, 2005; 2009, No. 137 (Adj. Sess.),  2, 3; 2011, No. 78 (Adj. Sess.),  19, eff. April 2, 2012; 2019, No. 20,  66.) 
 2752. License
No person shall engage in the business of debt adjustment except as authorized by this chapter and without first obtaining a license from the Commissioner. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3.) 
 2753. Application for license; additional information
(a) In addition to the information required by section 2102 of this title, an application for a license under this chapter shall state or contain: (1) A description of any debt adjustment and related services previously provided by the applicant. (2) The debt adjustment and related services that the applicant seeks to provide in this State. (3) A description of how the applicant will market its services, along with copies of all scripts, mailings, advertisements, and other marketing materials, provided that submission of these materials shall not waive any legal claim the State may have with respect to the content or use of the materials. (4) A description of the nature and amount of the fees, or the method of calculating the fees, charged to the debtor. (5) A list of the applicants locations in this State and outside this State where the applicant proposes to engage Vermont residents in debt adjustment services. (6) A list of other states in which the applicant is licensed to engage in debt adjustment services and information concerning any bankruptcy or receivership proceedings affecting the licensee, and any license revocations, suspensions, or criminal or disciplinary action taken against the applicant in other states. (7) A blank copy of the contract the applicant intends to use. The applicant shall notify the Commissioner of all changes and amendments thereto. The terms and conditions of all contracts shall be subject to prior approval by the Commissioner. (8) The name and address of the federally insured financial institution through which the applicant maintains a separate account for the benefit of debtors. (b) The Commissioner may waive one or more requirements of this section or permit an applicant to submit substituted information in lieu of the required information. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3; 2011, No. 78 (Adj. Sess.),  20, eff. April 2, 2012; 2019, No. 20,  67.) 
 2755. Bond required
(a) Each applicant shall submit to the Commissioner, with the application for a license, a bond, in such form as the Commissioner shall direct, in the amount of $50,000.00, or such greater amount as the Commissioner may determine is required by the business circumstances of the applicant. (b) The bond shall be in a form and in accordance with such terms and conditions satisfactory to the Commissioner and payable to the State for use of the State and for the benefit of any claimant against the licensee to secure the faithful performance of the obligations of the licensee. (c) The Commissioner may require a larger bond if he or she determines, in his or her sole discretion, that a licensee has engaged in a pattern of conduct resulting in bona fide consumer complaints of misconduct and that such increased bond is necessary for the protection of consumers; or the Commissioner may increase or decrease the amount of such bond based upon the applicants or licensees financial condition, business plan, number of locations, and the actual or estimated aggregate amount of payments and fees paid by debtors under the debt adjustment contracts. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3.) 
 2757a. Annual report; additional information
In addition to the information required by section 2120 of this title, the annual report shall state or contain: (1) the number of new debt adjustment contracts entered into with Vermont residents during the preceding year, the number of Vermont residents that have completed the debt adjustment contract during the preceding year, the number of Vermont residents that have cancelled their debt adjustment contract during the preceding year, and the licensees total number of debt adjustment contracts with Vermont residents; and (2) a list of the locations in this State and outside this State where the licensee engages in debt adjustment activities with Vermont residents. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3; 2019, No. 20,  71.) 
 2759. Contract with debtor
(a) Prior to taking any fee or receiving any compensation, either directly or indirectly, or payment of any sum of money by the debtor, each licensee shall make a written contract between the licensee and the debtor, which contract shall be in such form and shall contain such conditions as the Commissioner shall have approved in writing prior to the use of such contract, and the licensee shall immediately furnish the debtor with a true copy of the contract. (b) In addition to such other items as the Commissioner may require, the contract shall:(1) fully disclose all services to be provided;(2) fully disclose all fees to be charged to the debtor;(3) disclose that debt adjustment plans are not suitable for all debtors;(4) if applicable, disclose that creditors may compensate the licensee;(5) if applicable, disclose that secured debt is not covered by the contract; and(6) disclose a list of debts covered by the contract and the interest rate of those debts at the time. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3.) 
 2759a. Rescission
(a) Debtors right to cancel. (1) In addition to any other right to revoke the contract, the debtor may cancel the debt adjustment contract until midnight of the third business day after the date on which the debtor signed the debt adjustment contract. (2) Cancellation occurs when notice of cancellation is given to the licensee.(3) Notice of cancellation, if given by mail, shall be deemed given when deposited in a mailbox properly addressed and postage prepaid. (4) Notice of cancellation need not take any prescribed form and shall be sufficient if it indicates the intention of the debtor not to be bound. (b) Disclosure obligations. (1) The licensee shall furnish the debtor with a fully completed copy of the contract at the time the debtor signs the debt adjustment contract. The copy of the contract shall show the date of the debt adjustment contract, shall contain the name and address of the licensee, and in immediate proximity to the space reserved in the contract for the signature of the debtor and in boldface type of a minimum size of 10 points, a statement in substantially the following form: You may cancel this transaction at any time prior to midnight of the third business day after the date of this contract. See the attached notice of cancellation for an explanation of this right. (2) The licensee shall furnish a notice of cancellation to the debtor at the time the debtor signs the debt adjustment contract, which notice shall be attached to the contract and shall be easily detachable. (A) The notice of cancellation shall contain the following information and statements, printed in not less than ten point boldface type: NOTICE OF CANCELLATION(enter date of transaction)................................................. (date)You may cancel this transaction, without any penalty or obligation, within three business days from the above date. If you cancel, any payments made by you under the contract will be returned within ten business days following our receipt of your cancellation notice. To cancel the debt adjustment contract, mail or deliver a signed and dated copy of this cancellation notice or any other written notice, or send a telegram, to ............................................. at  (name of licensee)......................................... (address of licensees place of business)not later than midnight of ....................................................... (date)I hereby cancel this transaction........................ (date)................................. (debtors signature)(B) Before furnishing copies of the Notice of Cancellation to the debtor, the licensee shall complete both copies by entering the name of the licensee, the address of the licensees place of business, the date of the contract, and the date, not earlier than the third business day following the date of the transaction, by which the debtor may give notice of cancellation. (C) The licensee shall leave the Notice of Cancellation with the debtor.(D) In addition to the written notice of cancellation, the licensee shall orally inform the debtor of his or her right to cancel at the time of the debt adjustment contract. (3) Until the licensee has complied with this subsection, the debtor may cancel the debt adjustment contract by notifying the licensee in any manner and by any means of the debtors intention to cancel. The cancellation period of three business days shall begin to run from the time the licensee complies with this subsection. (c) Restoration of payments. Within 10 days after the debt adjustment contract has been cancelled, the licensee shall tender to the debtor any payments made by the debtor. (d) If the debt adjustment contract is principally negotiated in a language other than English, all of the disclosures required by this section shall be given in that language. (e) If the debtor is unable to write in his or her own handwriting, any of the statements required to be written by the debtor under this section shall be handwritten by a member of the debtors household at the request of the debtor. If there is no other member of the debtors household, such statements must be written by the licensee, at the request of the debtor, and the effect of such statements shall be orally explained to the debtor by the licensee. (f) Use of the cancellation provision provided for in this section shall not prevent any other action being taken under this chapter or otherwise against such licensee. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3.) 
 2759b. Cancellation of contract
A debtor may cancel a debt adjustment contract at any time without a cancellation premium or penalty. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3.) 
 2759c. Periodic statements to debtor
Periodically, but not less frequently than quarterly, the licensee shall provide the debtor with a statement showing the payments made by the debtor, how such payments have been distributed, and for each debt covered by the contract: (1) the beginning amount of such debt;(2) the current amount due on such debt; and(3) the basic terms of such debt. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3.)
 2760. Separate bank account for the benefit of creditors; books and records
(a) Each licensee shall maintain a separate federally insured bank account for the benefit of debtors in which all payments received from debtors for the benefit of creditors shall be deposited and in which all payments shall remain until a remittance is made to either a debtor or a creditor. (b) Every licensee shall keep, and use in its business, books, accounts, and records which will enable the Commissioner to determine whether such licensee is complying with the provisions of this chapter and with the regulations of the Commissioner. Every licensee shall preserve such books, accounts, and records for at least seven years after making the final entry on any transaction recorded therein. The items specified in this subsection may be maintained in any form of record as permitted in subsection 11301(c) of this title. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3.) 
 2760a. Timely payments to creditors
Licensees shall make payments to creditors in a timely manner at least once every 30 days in accordance with the contract between the licensee and the debtor. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3.) 
 2760b. Prohibited activities
(a) No person, partnership, association, corporation, or other entity, except a licensee, may make any representation, directly or indirectly, orally or in writing that he, she, or it is licensed under this chapter. (b) No licensee shall advertise its services in any media, whether print or electronic, in any manner that may be false or deceptive. All such advertisements shall contain the name and office address of such entity, which shall conform to a name and address on record with the Department and that shall indicate that the licensee is licensed by the Department. (c) No person or any other entity, other than a licensee, shall use the titles debt adjuster, budget planner, licensed debt adjuster, or licensed budget planner or the terms debt adjuster, debt reduction, budget planning, or, in each case, words of similar import in any public advertisement, business card, or letterhead. (d) No licensee shall commingle monies received from debtors with any other funds associated with the operation of its business or with any funds associated with any other type of business; provided, however, that for the sole purpose of making a single payment to a creditor, a licensee may commingle monies received from debtors under contract with one or more of its affiliates authorized to engage in debt adjustment in another state. (e) No licensee shall structure an agreement for the debtor that, at the conclusion of the agreement, would result in negative amortization of any of the debtors obligations to any creditor. (f) No licensee, or a director, manager, or officer of such licensee, or any immediate family member of such individual, or a controlling party of such licensee, shall purchase any obligation of a debtor. (g) No licensee, or a director, manager, or officer of such licensee, or any immediate family member of such individual, or a controlling party of such licensee, shall lend money or provide credit to the debtor. (h) No licensee, or a director, manager, or officer of such licensee, or any immediate family member of such individual, or a controlling party of such licensee shall obtain a mortgage or other security interest in property of the debtor. (i) No licensee shall operate as a person or entity seeking payment of obligations on behalf of any creditors that are not receiving payments pursuant to a contract between a debtor and a licensee. (j) No licensee shall execute any contract or agreement to be signed by the debtor unless the contract or agreement is fully completed, and the duration of any such contract shall be in conformance with any limitations specified pursuant to rules adopted by the Commissioner. (k) No licensee shall pay any bonus or other consideration to any person or entity for the referral of a debtor to its business, or accept or receive any bonus, commission, or other consideration for referring any debtor to any person or entity for any reason; provided, however, that nothing herein shall prohibit the payment of rebates from creditors to licensees. (l) No licensee shall disclose or threaten to disclose information concerning the existence of a debt or any other conduct that could coerce payment of the debt of a debtor with whom it has a contract. (m) No licensee shall use a communication that simulates in any manner a legal or judicial process, or that gives the false appearance of being authorized, issued, or approved by a government, a governmental agency, or an attorney-at-law. (n) No licensee, or a director, a manager, or an officer of such licensee, or any immediate family member of such individual, or a controlling party of such licensee, shall be a director, a manager, an officer, an owner, or a controlling party of any creditor or a subsidiary of any such creditor, that is receiving or will receive payments from the licensee on behalf of a debtor with whom the licensee has contracted, without the express written consent of the Commissioner. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3; 2015, No. 97 (Adj. Sess.),  12; 2021, No. 25,  1, eff. May 12, 2021.) 
 2760c. Financial privacy
The licensee shall be subject to and shall comply with subchapter 2 of chapter 200 of this title and any rules or regulations adopted in connection therewith. (Added 2003, No. 81 (Adj. Sess.),  1; amended 2009, No. 137 (Adj. Sess.),  3.) 
 2761. Examinations
The Commissioner shall examine or cause to be examined, with or without notice, the condition and affairs of each licensee under this chapter at least once every three years and otherwise as required or determined by the Commissioner. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 1979, No. 157 (Adj. Sess.),  7; 1999, No. 153 (Adj. Sess.),  26, eff. Jan. 1, 2001; 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3; 2011, No. 78 (Adj. Sess.),  21, eff. April 2, 2012; 2019, No. 20,  75.) 
 2762. Fee of licensee
The fee charged by the licensee shall be agreed upon in advance. The fee retained shall in no case exceed a $50.00 initial set up fee plus 10 percent of any payment received by the licensee from the debtor for the purpose of distribution to creditors. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3.) 
 2763. Exceptions
The provisions of this chapter shall not apply to the following:(1) any attorney admitted to the practice of law in this State, when engaged in such practice;(2) any financial institution as defined in subdivision 11101(32) of this title or a lender licensed under chapter 73 of this title, which performs debt adjustment in the regular course of its principal business; (3) any person acting pursuant to any law of this State or of the United States or acting under the order of a court; (4) any bona fide nonprofit religious, fraternal, or cooperative organization offering debt adjustment services exclusively for members; (5) any employee of a licensee when acting in the regular course of his or her employment; and (6) a certified public accountant licensed in this State, when services are rendered in the course of his or her practice as a certified public accountant. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3.) 
 2764. Private right of action and Consumer Protection Act
(a) A consumer may bring a private action against a licensee or any person that should have been licensed under this chapter for restitution because of a violation of this chapter. (b) The powers vested in the Commissioner by this chapter shall be in addition to any other powers or rights of consumers or the Attorney General or others under any other applicable law or rule, including without limitation the Vermont Consumer Protection Act and any applicable rules issued in connection therewith, provided that the Commissioners determinations concerning the interpretation and administration of the provisions of this chapter and any rules adopted thereunder shall carry a presumption of validity. (Added 1969, No. 204 (Adj. Sess.), eff. March 23, 1970; amended 1995, No. 167 (Adj. Sess.),  21; 2003, No. 81 (Adj. Sess.),  1; 2009, No. 137 (Adj. Sess.),  3; 2011, No. 109 (Adj. Sess.),  3, eff. May 8, 2012; 2011, No. 136 (Adj. Sess.),  1b, eff. May 18, 2012; 2019, No. 20,  76.) 
 2900. Definitions
As used in this chapter:(1) Loan means a residential mortgage loan.(2) Servicing means receiving a scheduled periodic payment from a borrower pursuant to the terms of a loan, including amounts for escrow accounts, and making the payments to the owner of the loan or other third party of principal and interest and other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the servicing loan document or servicing contract. In the case of a home equity conversion mortgage or a reverse mortgage, servicing includes making payment to the borrower. (3) Third party loan servicer means a person who engages in the business of servicing a loan, directly or indirectly, owed or due or asserted to be owed or due another. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011; amended 2011, No. 78 (Adj. Sess.),  2, eff. April 2, 2012; 2019, No. 20,  81.) 
 2901. License required
(a) No person shall act as a third party loan servicer, directly or indirectly, for a loan to a Vermont borrower without first obtaining a license under this chapter from the Commissioner. (b) No license shall be required of:(1) a depository institution;(2) a lender licensed under chapter 73 of this title that retains the servicing rights on a loan originally closed in the lenders name and subsequently sold in whole or in part to a third party, provided that the provisions of sections 2916 (segregated accounts) and 2922 (prohibited acts and practices) of this title shall apply to such lender; (3) a debt adjuster licensed in this State;(4) an attorney licensed in this State when collecting a debt on behalf of a client; or(5) bona fide nonprofit organizations, exempt from taxation under Section 501(c) of the Internal Revenue Code, that are approved by the Department of Housing and Urban Development as housing counseling agencies, that have a physical location in Vermont, and that lend state or federal funds. (c) This chapter shall not apply to commercial loans. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011.)
 2903. Bond
(a) Prior to issuance of a license, the applicant shall file with the Commissioner and shall keep in force thereafter for as long as the license remains in effect, a bond in a form and substance to be approved by the Commissioner in which the applicant shall be the obligor, in the amount of $100,000.00 or in such sum as the Commissioner may require. The aggregate liability for any and all claims on any bond shall in no event exceed the sum thereof. No surety obligation on a bond shall be terminated unless at least 60 days prior written notice is given by the surety to the obligor and the Commissioner. When one person is issued licenses to conduct the licensed activity at more than one office, the Commissioner may accept a single bond covering all such offices. The bond shall run to the State for the use of the State and of any person or persons who may have a cause of action against the obligor of such bond under the provisions of this chapter. Such bond shall be conditioned that the obligor will faithfully conform to and abide by the provisions of this chapter and of all rules and regulations lawfully made by the Commissioner hereunder, and will pay to the State and to any such person or persons any and all monies that may become due or owing to the State or to such person or persons from such obligor under and by virtue of the provisions of this chapter. (b) When an action is commenced on a licensees bond, the Commissioner may require the filing of a new bond. Immediately upon recovery upon any action on the bond, the licensee shall file a new bond. (c) Notwithstanding subsections (a) and (b) of this section, the Commissioner may waive or modify the requirement for or the amount of a bond or accept other appropriate means of ensuring the financial responsibility of a licensee. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011.) 
 2907. Additional bond
If the Commissioner finds at any time that a licensees bond is insecure, exhausted, insufficient, or otherwise doubtful, the Commissioner shall require one or more additional bonds meeting the standards set forth in section 2903 of this chapter. The licensee shall file the bond within 10 days of the Commissioners written demand to do so. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011.) 
 2916. Segregated accounts
(a) All amounts paid by borrowers to a licensee subject to this chapter shall be deposited in one or more accounts maintained at a federally insured depository institution and with respect to such funds, the licensee shall act as a fiduciary. Such account or accounts shall be segregated from all other accounts of the licensee. Such funds shall not be used in the conduct of the licensees personal affairs or in the licensees business affairs. (b) The licensee may withdraw funds from the segregated account for payment directly to the owner of the loan or other third party of principal and interest and other payments as may be required pursuant to the terms of the loan document or servicing contract. (c) The licensee may withdraw funds from the segregated account for commissions to which it is entitled for services actually performed. (d) The licensee may return funds from the segregated account to the borrower if not prohibited.(e) The licensee shall maintain complete and accurate account records, including, at a minimum, the source of all deposits, the nature and recipient of all disbursements, the date and amount of each transaction, and the name of the borrower. All documents pertaining to account activity shall be produced upon request of the Commissioner. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011.) 
 2917. Examinations
The Commissioner shall examine the affairs, business, and records of each licensee under this chapter at least once every three years. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011; amended 2019, No. 20,  94.) 
 2922. Prohibited acts and practices
(a) It is a violation of this chapter for a person to:(1) directly or indirectly employ any scheme, device, or artifice to defraud or mislead borrowers or lenders or to defraud any person; (2) engage in any unfair or deceptive practice toward any person;(3) obtain property by fraud or misrepresentation;(4) use any unfair or unconscionable means in servicing a loan;(5) knowingly misapply or recklessly apply loan payments to the outstanding balance of a loan; (6) knowingly misapply or recklessly apply payments to escrow accounts;(7) require the unnecessary forced placement of insurance, when adequate insurance is currently in place; (8) fail to provide loan payoff information within the time period set forth in 27 V.S.A.  464;(9) charge excessive or unreasonable fees to provide loan payoff information;(10) fail to manage and maintain escrow accounts in accordance with section 10404 of this title; (11) knowingly or recklessly provide inaccurate information to a credit bureau, thereby harming a consumers creditworthiness; (12) fail to report both the favorable and unfavorable payment history of the consumer to a nationally recognized consumer credit bureau at least annually if the servicer regularly reports information to a credit bureau.; (13) collect private mortgage insurance beyond the date for which private mortgage insurance is no longer required; (14) knowingly or recklessly facilitate the illegal foreclosure of real property collateral;(15) knowingly or recklessly facilitate the illegal repossession of chattel collateral;(16) fail to respond to consumer complaints in a timely manner;(17) conduct any business covered by this chapter without holding a valid license as required under this chapter, or assist or aid and abet any person in the conduct of business under this chapter without a valid license as required under this chapter; (18) fail to comply with any federal or state law, rule, or other legally binding authority relating to the evaluation of loans for modification purposes or the modification of loans; (19) fail to comply with this chapter or rules adopted under this chapter, or fail to comply with any orders or directives from the Commissioner, or fail to comply with any other state or federal law, including the rules thereunder, applicable to any business authorized or conducted under this chapter. (b) A violation of this section is an unfair and deceptive act or practice under 9 V.S.A.  2453, provided that the Commissioners determinations concerning the interpretation and administration of the provisions of this chapter and any rules adopted thereunder shall carry a presumption of validity. Prior to initiating an action for a violation of this chapter, the Attorney General shall consult with the Commissioner regarding the proposed action. (Added 2009, No. 96 (Adj. Sess.),  1, eff. Jan. 1, 2011.)