Arkansas Code of 1987 (2023) › Title 23 - PUBLIC UTILITIES AND REGULATED INDUSTRIES (§§ 23-1-101 — 23-119-105) › Subtitle 2 - FINANCIAL INSTITUTIONS AND SECURITIES (§§ 23-30-101 — 23-55-1007) › Chapter 40 - ARKANSAS PREPAID FUNERAL BENEFITS LAW (§§ 23-40-101 — 23-40-126) › Section 23-40-123 - Delinquency proceedings

(a)
If it appears upon sufficient grounds or evidence satisfactory to the Insurance Commissioner that a person or a licensee has engaged in or is about to engage in an act or a practice that violates this chapter or a rule adopted or an order issued under this chapter or that the assets or capital of a licensee are impaired or the licensee's affairs are in an unsafe condition, then the commissioner may order summarily a person or a licensee to cease and desist and take control of and administer the prepaid funeral benefits contracts business operations of a licensee that sells prepaid funeral benefits, if the commissioner finds:
(1)
It is in the public interest necessary to ensure the orderly and proper handling of outstanding prepaid funeral benefits contracts to protect the interest and rights of active contract holders upon a revocation, suspension, or a lapse of a prepaid funeral benefits permit;
(2)
It is necessary to prevent loss, waste, dissipation, theft, or conversion of assets that are required by law to be held and used for the benefit and protection of the purchasers of prepaid funeral benefits contracts under this chapter;
(3)
The seller failed to deposit or remit moneys according to §
23-40-114(a)
;
(4)
The seller has misappropriated, converted, illegally withheld, or refused to pay on demand any moneys entrusted to the seller that belong to a beneficiary under a prepaid funeral benefits contract; or
(5)
The seller refused an examination by the commissioner.
(b)
(1)
If the commissioner determines that immediate action is required to protect the public health, safety, or welfare of the holders of the prepaid funeral benefits contracts, the commissioner may issue an order to a licensee to cease and desist prepaid funeral benefits contracts operations.
(2)
An order issued under subdivision (b)(1) of this section shall:
(A)
State the findings that the commissioner relied upon that required emergency action; and
(B)
Provide the licensee with a reasonable amount of time as determined by the commissioner to respond or appeal an order issued under subdivision (b)(1) of this section.
(3)
A licensee and any named party immediately shall be served with notice and a copy of the order.
(4)
The order issued under subdivision (b)(1) of this section may:
(A)
Direct the commissioner or his or her designee to take possession, custody, and control of the property, books, accounts, documents, and other records of the licensee as to its prepaid funeral benefits contracts operations; or
(B)
Require the commissioner or his or her designee to limit the disruption to the operations of the licensee by:
(i)
Prohibiting a licensee from making a disbursement or withdrawal from the licensee's trust fund;
(ii)
Making a disbursement from the trust fund for any valid claim;
(iii)
Procuring a substitute provider that is licensed under this chapter to service the prepaid funeral benefits contracts;
(iv)
Terminating or modifying a trust fund agreement; or
(v)
Authorizing the commissioner to bring and prosecute a suit in the name of the commissioner that may be necessary to collect debts or preserve assets and property for the benefit of creditors and any interested person.
(5)
The commissioner shall maintain control of the licensee until the order is modified or vacated by the commissioner.
(6)
The commissioner may order a licensee to relinquish any property of the licensee in connection with prepaid funeral benefits contracts to the State Insurance Department.
(c)
The commissioner may apply to a court of competent jurisdiction for an order to appoint him or her, in an official capacity, as receiver of the licensee to conserve, rehabilitate, or liquidate a prepaid funeral benefits contract, if:
(1)
A licensee:
(A)
Has not maintained trust funds from prepaid funeral benefit contracts under §
23-40-114
;
(B)
Is impaired or insolvent;
(C)
Refuses to submit its books, records, accounts, or affairs to an examination by the commissioner;
(D)
Has refused to be examined under oath concerning the affairs of the licensee or any officer, director, or manager of the licensee refuses to be examined; or
(E)
Has failed to file the licensee's annual report within the time and according to the insurance laws of this state and does not have an adequate explanation for failure to file the annual report after written demand by the commissioner; or
(2)
The commissioner has reasonable cause to believe that there has been embezzlement, misappropriation, or other wrongful misapplications or use of trust funds or fraud affecting the ability of the licensee to perform its obligations under prepaid funeral benefits contracts sold or assumed by the licensee.
(d)
Circuit courts shall have original jurisdiction of all delinquency proceedings under this chapter, and any such court is authorized to make all necessary or appropriate orders to carry out the purposes of this chapter.
(e)
The venue of delinquency proceedings against a licensee shall be in the Pulaski County Circuit Court.
(f)
Delinquency proceedings instituted under this chapter shall not constitute the sole and exclusive method of liquidating, rehabilitating, or conserving a licensee, and a court shall not entertain a petition for the commencement of such proceedings unless the petition is filed in the name of the state on the relation of the commissioner.
(g)
(1)
The commissioner shall commence any such proceeding by application to the court for an order directing the licensee to show cause why the commissioner should not have the relief prayed for in the application.
(2)
On the return of the order to show cause, and after a full hearing, the court shall either deny the application or grant the application, together with such other relief as the nature of the case and the interests of the prepaid contracts purchaser, contract beneficiaries, or the public may require.
(h)
An appeal shall lie to the Supreme Court from an order granting or refusing rehabilitation, liquidation, or conservation, and from every other order in delinquency proceedings having the character of a final order as to the particular portion of proceedings embraced therein.
Amended by Act 2015, No. 904,§ 7, eff. 4/1/2015.
Acts 1997, No. 372, § 10.