2023 Colorado Revised Statutes › Title 10 - INSURANCE (§§ 10-1-101 — 10-23-110) › LIFE AND HEALTH INSURANCE PROTECTION (§§ 10-20-101 — 10-20-120) › Article 20 - LIFE AND HEALTH INSURANCE PROTECTION ASSOCIATION (§§ 10-20-101 — 10-20-120) › Section 10-20-108 - Powers and duties of the association

(1)
If a member insurer is an impaired insurer, the association may, 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:
(a)
Guarantee, assume, reissue, or reinsure or cause to be guaranteed, assumed, reissued, or reinsured any or all of the policies or contracts of the impaired insurer; or
(b)
Provide such moneys, pledges, loans, notes, guarantees, or other means as proper to effectuate paragraph (a) of this subsection (1) and assure payment of the contractual obligations of the impaired insurer pending action under said paragraph (a).
(2)
If a member insurer is an insolvent insurer, the association shall, in its discretion, either:
(a)
Guarantee, assume, reissue, or reinsure or cause to be guaranteed, assumed, reissued, or reinsured the covered policies or contracts of the insolvent insurer and provide such money, pledges, notes, guarantees, or other means as are reasonably necessary to discharge those duties; or
(b)
Assure payment of the contractual obligations of the insolvent insurer to the residents and provide such moneys, pledges, notes, guarantees, or other means as are reasonably necessary to discharge those duties; or
(c)
Provide benefits and coverages in accordance with the following provisions:
(I)
With respect only to life insurance, health insurance, health benefit plans, and annuities, assure payment of benefits that would have been payable under the policies or contracts of the insolvent insurer for claims incurred:
(A)
With respect to group policies and contracts, not later than the earlier of the next renewal date under the policies or contracts or forty-five days, but in no event less than thirty days, after the date on which the association becomes obligated with respect to the policies or contracts;
(B)
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 thirty days, after the date on which the association becomes obligated with respect to the policies or contracts.
(II)
Make diligent efforts to provide to all known insureds, enrollees, or annuitants for nongroup policies and contracts, or to group policy or contract owners with respect to group policies and contracts, thirty days' notice of the termination under subsection (2)(c)(I) of this section of the benefits provided.
(III)
With respect to nongroup life insurance, health insurance, health benefit plans, and annuities covered by the association, make available to each known insured, enrollee, or annuitant, or to the owner if other than the insured, enrollee, or annuitant, and with respect to an individual formerly insured or enrolled or formerly an annuitant under a group policy or contract who is not eligible for replacement group coverage, substitute coverage on an individual basis in accordance with subsection (2)(c)(IV) of this section, if the insureds, enrollees, or annuitants had a right under law or the terminated policy, contract, or annuity to convert coverage to individual coverage or to continue an individual policy, contract, or annuity in force until a specified age or for a specified time, during which the insurer or health maintenance organization had no right to unilaterally make changes in any provisions of the policy, contract, or annuity or had a right only to make changes in premium by class.
(IV)
(A)
In providing the substitute coverage required under subsection (2)(c)(III) of this section, the association may offer either to reissue the terminated coverage or to issue an alternative policy or contract at actuarially justified rates approved by the commissioner.
(B)
The association shall offer alternative or reissued policies or contracts without requiring evidence of insurability, and the policies or contracts must not provide for any waiting period or exclusion that would not have applied under the terminated policy or contract.
(C)
The association may reinsure any alternative or reissued policy or contract.
(V)
(A)
Alternative policies or contracts adopted by the association are subject to the approval of the commissioner. The association may adopt alternative policies or contracts of various types for future issuance without regard to any particular impairment or insolvency.
(B)
Alternative policies or contracts must contain at least the minimum statutory provisions required in this state and provide benefits reasonably related to the premium charged. The association shall set the premium in accordance with a table of rates that the association adopts. The premium must reflect the amount of insurance or coverage to be provided and the age and class of risk of each insured but must not reflect any changes in the health of the insured after the original policy or contract was last underwritten.
(C)
Any alternative policy or contract issued by the association must provide coverage of a type similar to that of the policy or contract 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 or contract, the association shall set an actuarially justified premium in accordance with the amount of insurance or coverage provided and the age and class of risk, subject to approval by the commissioner.
(VII)
The obligations of the association, with respect to coverage under any policy or contract of the impaired or insolvent insurer or under any reissued or alternative policy or contract, cease on the date the coverage, policy, or contract is replaced by another similar policy or contract by the policy owner, insured, enrollee, or association.
(VIII)
When proceeding under this subsection (2)(c), with respect to any policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with section
10-20-104 (2)(b)(III)
.
(3) and (4)
Repealed.
(5)
Nonpayment of premiums within thirty-one days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage terminates the obligations of the association under the policy, contract, or coverage under this article 20 with respect to the policy, contract, or coverage, except with respect to any claims incurred or any net cash surrender value that may be due in accordance with this article 20.
(6)
Premiums due for coverage after entry of an order of liquidation of an insolvent insurer belong to and are payable at the direction of the association, and the association is liable for unearned premiums due to policy or contract owners arising after the entry of the order.
(6.5)
The protection provided by this article does not apply when guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.
(7)
In carrying out its duties under subsection (2) of this section, the association may, subject to approval by a court of competent jurisdiction:
(a)
Impose permanent policy or contract liens in connection with any guarantee, assumption, or reinsurance agreement, if the association finds that the amounts which can be assessed under this article are less than the amounts needed to assure full and prompt performance of the duties of the association under this article, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens to be in the public interest;
(b)
Impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value. In addition, in the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans or on any other right to withdraw funds held in conjunction with policies or contracts out of the assets of the impaired or insolvent insurer, the association may defer its payment of cash values, policy loans, or other rights of the association for the period of the moratorium or moratorium charge by the receivership court, except for claims covered by the association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
(8)
If the association fails to act within a reasonable period of time as provided in subsection (2) of this section, the commissioner shall have the powers and duties of the association under this article with respect to insolvent insurers.
(9)
There shall be no liability on the part of, and no cause of action shall arise against, the association, or any transferee from the association in connection with the transfer by reinsurance or otherwise of all or any part of an impaired or insolvent insurer's business by reason of any action taken or any failure to take any action by the impaired or insolvent insurer at any time.
(10)
The association may render assistance and advice to the commissioner, upon the commissioner's request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
(11)
The association has standing to appear or intervene before any court or agency in this state that has jurisdiction over a member insurer for which the association is or may become obligated under this article 20, or with jurisdiction over any person or property against which the association may have rights through subrogation or otherwise. The association's standing extends to all matters germane to the powers and duties of the association, including proposals for reinsuring, reissuing, modifying, or guaranteeing the policies or contracts of the member insurer and the determination of the policies or contracts and contractual obligations. The association also has the right to appear or intervene before a court or agency in another state with jurisdiction over a member insurer for which the association is or may become obligated or with jurisdiction over any person or property against whom the association may have rights through subrogation or otherwise.
(12)
(a)
Any person receiving benefits under this article 20 is deemed to have assigned the rights under, and any causes of action against any person for losses arising under, resulting from, or otherwise relating to, the covered policy or contract to the association to the extent of the benefits received because of this article 20, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or the provision of substitute or alternative policies, contracts, or coverage. The association may require any payee, policy or contract owner, beneficiary, insured, enrollee, or annuitant to assign the person's rights under, and causes of action against any person for losses arising under, resulting from, or otherwise relating to, the covered policy or contract to the association as a condition precedent to the receipt of any right or benefits conferred by this article 20 upon the person.
(b)
The subrogation rights of the association under this subsection (12) have the same priority against the assets of the impaired or insolvent insurer as the rights possessed by the person entitled to receive benefits under this article 20.
(c)
In addition to subsections (12)(a) and (12)(b) of this section, the association has all common-law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer, owner, beneficiary, enrollee, or payee of a policy or contract.
(d)
If any provision of subsection (12)(a), (12)(b), or (12)(c) of this section is invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations is reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies or contracts or portions of the policies or contracts covered by the association.
(e)
If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights as described in subsections (12)(a) to (12)(d) of this section, the person shall pay to the association the portion of the recovery attributable to the policies or contracts, or portions of policies or contracts, covered by the association.
(13)
The association may:
(a)
Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this article;
(b)
Sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments pursuant to section
10-20-109
and to settle claims or potential claims against it;
(c)
Borrow money to effect the purposes of this article 20, and any notes or other evidence of indebtedness of the association not in default are legal investments for domestic member 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 article;
(e)
Take such legal action as necessary to avoid payment of improper claims or recover payment of improper claims;
(f)
Exercise, for the purposes of this article 20 and to the extent approved by the commissioner, the powers of a domestic life insurer, health insurer, or health maintenance organization, but the association shall not issue policies or contracts other than those issued to perform its obligations under this article 20;
(g)
Negotiate and contract with any liquidator or ancillary receiver to carry out the powers and duties of the association;
(g.5)
Request information from persons seeking coverage from the association in order to aid the association in determining its obligations under this article with respect to the person; and a person receiving such request shall promptly comply;
(g.7)
Take other necessary or appropriate action to exercise its powers and discharge its duties and obligations under this article;
(h)
With respect to covered policies for which the association becomes obligated after an entry of an order of liquidation, elect to succeed to the rights of an insolvent insurer arising after the date of the order of liquidation under any contract of reinsurance to which the insolvent insurer was a party, to the extent that such contract provides coverage for losses occurring after the date of the order of liquidation. As a condition to making this election, the association shall pay unpaid premiums due with respect to policies covered by the association for coverage relating to periods both before and after the date of the order of liquidation.
(i)
File for an actuarially justified rate or premium increase for any policy or contract that it guarantees, assumes, reinsures, reissues, or otherwise provides coverage under this section in accordance with the terms and conditions of the policy or contract and in accordance with other applicable provisions of state law.
(14)
The association may join an organization of one or more other state associations of similar purposes to further the purposes and to administer the powers and duties of the association.
(15)
Every insured or claimant seeking the protection of this article shall cooperate with the association to the same extent the person or entity would have been required to cooperate with the impaired or insolvent insurer. The association has no cause of action against the insured of the impaired or insolvent insurer for any sums the association has paid out except those causes of action the impaired or insolvent insurer would have had if the sums had been paid by the impaired or insolvent insurer. If an impaired or insolvent insurer operates on a plan with assessment liability, payments of claims by the association do not reduce the liability of the insured to the receiver, liquidator, rehabilitator, conservator, or statutory successor for unpaid assessments.
(16)
The receiver, liquidator, rehabilitator, conservator, or statutory successor of an impaired or insolvent insurer is bound by settlements of covered claims by the association or a similar organization in another state. The association has a claim against the estate of the impaired or insolvent insurer to the extent of claims and expenses paid by the association in connection with the duties of the association as to the impaired or insolvent insurer. The court having jurisdiction shall grant these settled claims in the priority to which the claimant would have been entitled in the absence of this article against the assets of the impaired or insolvent insurer. The expenses, including legal fees of the association or similar organization in handling claims, shall be given the same priority as the expenses of the liquidator, rehabilitator, or conservator.
(17)
The association shall periodically file with the liquidator, rehabilitator, or conservator of the impaired or insolvent insurer statements of the covered claims and associated expenses paid by the association and estimates of anticipated claims against the association. This periodic filing preserves the rights of the association for claims against the assets of the impaired or insolvent insurer.
(18)
The association shall investigate claims brought against it and adjust, compromise, settle, and pay covered claims to the extent of the obligation of the association and deny all other claims.
(19)
A person who has a claim against a member insurer pursuant to a provision of a policy or contract, other than a policy or contract of an impaired or insolvent insurer, that also is a contractual obligation under this article 20, must first exhaust the person's right under that policy or contract. The amount of an approved claim under this article 20 must be reduced by the policy or contract limits of, or amount paid under, that policy or contract, whichever amount is greater. If a claimant exhausts all rights under a policy or contract, other than a policy or contract of an impaired or insolvent insurer, the member insurer issuing that policy or contract is not entitled to sue or continue a suit against the insured of the impaired or insolvent insurer to recover an amount paid to the claimant under the policy or contract; except that a person having a contractual obligation, as defined by this article 20, under a life insurance policy or an annuity contract issued by an impaired or insolvent insurer is not required to exhaust other coverage for that claim, and the amount of an approved claim under a life insurance policy or annuity contract issued by an impaired or insolvent insurer may not be reduced because of that duplicate coverage.
(20)
Where the association has arranged or offered to provide the benefits of this article to a covered person under a plan or arrangement that fulfills the association's obligations under this article, the person shall not be entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
(21)
Venue in a suit against the association arising under this article shall be in the city and county of Denver. The association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under this article.
(22)
In carrying out its duties in connection with guaranteeing, assuming, reissuing, or reinsuring policies or contracts under this section, the association may issue substitute coverage at actuarially justified rates for a policy or contract that provides for the calculation of returns or changes in value or benefits by the use of an interest rate, crediting rate, or similar factor determined by use of an index or other external reference, by issuing an alternative policy or contract in accordance with the following provisions:
(a)
In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for a fixed interest rate, payment of dividends with minimum guarantees, or a different method for calculating interest or changes in value;
(b)
There is no requirement for the evidence of insurability, a waiting period, or any other exclusion that would not have applied under the replaced policy or contact;
(c)
The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
(23)
The board has discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this article in an economical and efficient manner.
(24)
In carrying out its duties in connection with guaranteeing, assuming, reissuing, or reinsuring policies or contracts under subsection (1) or (2) of this section, the association may issue substitute coverage for a policy or contract that provides an 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 by issuing an alternative policy or contract in accordance with the following provisions:
(a)
In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for a fixed interest rate, payment of dividends with minimum guarantees, or a different method for calculating interest or changes in value;
(b)
There is no requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract; and
(c)
The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
Amended by 2023 Ch. 195,§ 8, eff. 5/15/2023.
Amended by 2013 Ch. 34, § 4, eff. 3/15/2013.
L. 91: Entire article added, p. 1262, § 1, effective July 1. L. 94: IP(3)(a) and (4) amended, p. 1650, § 93, effective May 31. L. 2000: (10), (11), (12)(a), and (12)(c) amended and (13)(g.5), (13)(g.7), (20), (21), and (22) added, p. 1020, §§ 3, 4, effective July 1. L. 2002: (13)(h) amended, p. 122, § 1, effective March 26. L. 2013: (1), (2), IP(7), (7)(b), (8), (9), (10), (12)(b), (12)(c), (13)(e), (15), (16), (17), and (19) amended, (3) and (4) repealed, and (6.5), (12)(d), (12)(e), (23), and (24) added, (SB 13-032), ch. 34, p. 87, § 4, effective March 15.