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 10-20-104 - Coverage and limitations - coordination of benefits

(1)
This article 20 provides coverage for the policies and contracts specified in subsection (2) of this section and to persons:
(a)
Who are owners of, certificate holders under, or enrollees in such policies or contracts, other than structured settlement annuities, and who:
(I)
Are residents; or
(II)
Are not residents, but only under all of the following conditions:
(A)
The member insurer that issued the policies or contracts is domiciled in this state;
(B)
The member insurer never held a license or certificate of authority in the states in which such persons reside;
(C)
Such states have associations similar to the association created by this article; and
(D)
Such persons are not eligible for any amount of coverage by such associations;
(b)
Regardless of where they reside, except for nonresident certificate holders under group policies or contracts, who are the beneficiaries, assignees, or payees, including health-care providers rendering services under a health insurance or health maintenance organization policy, contract, or certificate, of the persons covered under subsection (1)(a) of this section.
(1.3)
Subsection (1) of this section shall not apply to structured settlement annuities. Except as otherwise provided in subsections (1.5) and (1.7) of this section, this article shall provide coverage to a person who is a payee under a structured settlement annuity or to a beneficiary of a deceased payee if the payee:
(a)
Is a resident, regardless of where the contract owner resides; or
(b)
Is not a resident, but only under both of the following conditions:
(I)
Either:
(A)
The contract owner of the structured settlement annuity is a resident; or
(B)
The contract owner of the structured settlement annuity is not a resident, but the insurer that issued the structured settlement annuity is domiciled in this state and the state in which the contract owner resides has an association similar to the association created by this article; and
(II)
Neither the payee, the beneficiary, nor the contract owner is eligible for coverage by the association of the state in which the payee or contract owner resides.
(1.5)
This article 20 does not provide coverage to a person that:
(a)
Is a payee or beneficiary of an owner or enrollee who is a resident of this state if the payee or beneficiary is afforded any coverage by the association of another state; or
(b)
Acquires rights to receive payments through a structured settlement factoring transaction, as defined in
26 U.S.C. sec. 5891 (c)(3)(A)
, regardless of whether the transaction occurred before, on, or after the effective date of
26 U.S.C. sec. 5891(c)(3)(A)
.
(1.7)
This article 20 is intended to provide coverage to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this article 20 is provided coverage under the laws of any other state, the person shall not be provided coverage under this article 20. In determining the application of the provisions of this subsection (1.7) in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, enrollee, or assignee, this article 20 shall be construed in conjunction with other state laws to result in coverage by only one association.
(2)
(a)
This article 20 provides coverage to the persons specified in subsections (1) and (1.3) of this section for direct, nongroup life insurance, health insurance, health maintenance organization, annuity, and supplemental policies or contracts and for certificates under direct group life insurance, health insurance, health maintenance organization, or annuity policies or contracts, and for supplemental contracts to any of these, issued by member insurers pursuant to article 7 and parts 1, 2, and 4 of article
16
of this title 10, except as limited by this article 20. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.
(b)
Except as otherwise provided in subsection (2)(c) of this section, this article 20 does not provide coverage for:
(I)
Any portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner;
(II)
Any policy or contract of reinsurance, unless assumption certificates have been issued under the reinsurance policy or contract;
(III)
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 other factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns and changes in value:
(A)
When averaged over the period of four years prior to the date on which the association became obligated with respect to the policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody's 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
(B)
On and after the date on which the association became obligated with respect to the policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available;
(IV)
Any portion of a policy, contract, plan, or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others, to the extent that such plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under:
(A)
A multiple employer welfare arrangement, as defined in section 1002 of title 29 of the United States Code;
(B)
A minimum premium group insurance plan;
(C)
A stop-loss group insurance plan; or
(D)
An administrative services only contract;
(V)
Any portion of a policy or contract to the extent that it provides dividends or experience rating credits, voting rights, or 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;
(VI)
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;
(VII)
Any unallocated annuity contract;
(VIII)
Any annuity contract or group annuity certificate which is used by a nonprofit insurance company exclusively for the benefit of nonprofit educational institutions and their employees for the purpose of providing retirement benefits;
(IX)
Any policy, contract, certificate, or subscriber agreement issued by a prepaid dental care plan as defined in parts 1 and 5 of article
16
of this title;
(X)
Services covered under a policy of sickness and accident insurance as defined in section
10-16-102 (50)
when written by a property and casualty insurer as part of an automobile insurance contract;
(XI)
Repealed.
(XII)
Any member insurer that was insolvent or unable to fulfill its contractual obligations as of July 1, 1991; except that an annuity contract issued or assumed by such a member insurer shall be covered under this article 20 if the member insurer was ordered into liquidation between July 1, 1991, and August 31, 1991;
(XIII)
Repealed.
(XIV)
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 such changes have not been credited to the policy or contract, or to the extent the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this article. If a policy's or contract's 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 section, the interest or change in value determined by using the procedures defined in the policy or contract shall be credited as if the contractual date of crediting interest or changing values was the date of insolvency, and such interest or changes shall not be subject to forfeiture.
(XV)
Repealed.
(XVI)
Any policy or contract providing hospital, medical, prescription drug, or other health-care benefits under:
(A)
Part C or part D of subchapter XVIII, chapter 7 of title 42, United States Code, or any regulation issued under those parts C or D; or
(B)
Subchapter XIX, chapter 7 of title 42, United States Code, or any regulation issued under Subchapter XIX;
(XVII)
Any portion of a policy or contract to the extent that the assessment required by this article with respect to the policy or contract are preempted or otherwise not allowed by federal or state law;
(XVIII)
Any obligation that does not arise under the expressed written terms of the policy or contract issued by the member insurer to the owner, certificate holder, or enrollee, including:
(A)
Claims based on marketing materials, brochures, illustrations, advertisements, or oral statements by agents, brokers, or others used or made in connection with the sale of covered policies and contracts;
(B)
Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements;
(C)
Misrepresentations of, or regarding, policy or contract benefits;
(D)
Extracontractual claims; and
(E)
Claims for penalties, interest, or consequential or incidental damages;
(XIX)
Any contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by a benefit plan or trustee that is not an affiliate of the member insurer;
(XX)
Structured settlement annuity benefits to which a payee or beneficiary has transferred the payee's or beneficiary's rights in a structured settlement factoring transaction, as defined in
26 U.S.C. sec. 5891 (c)(3)(A)
, regardless of whether the transaction occurred before, on, or after the effective date of
26 U.S.C. sec. 5891(c)(3)(A)
.
(c)
The exclusions from coverage specified in subsection (2)(b)(III) of this section do not apply to any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefits.
(3)
The benefits for which the association may become liable must not exceed the lesser of:
(a)
The contractual obligations for which the member 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 with that member insurer:
(A)
Three hundred thousand dollars in net life insurance death benefits, and no more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance;
(B)
For health insurance benefits or coverage received under health maintenance organization contracts: One hundred thousand dollars for coverages not defined as disability, coverage or services under health benefit plans, or long-term care insurance, including any net cash surrender and net cash withdrawal values; three hundred thousand dollars for disability insurance; three hundred thousand dollars for long-term care insurance; or five hundred thousand dollars for coverage or services under health benefit plans;
(C)
Two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or
(D)
With respect to each payee of a structured settlement annuity, two hundred fifty thousand dollars in present-value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values.
(E)
(Deleted by amendment, L. 2013.)
(II)
The association is not obligated to cover:
(A)
More than three hundred thousand dollars in benefits, in the aggregate, with respect to any one life under subsection (3)(b)(I) of this section; except that, with respect to benefits for coverage or services under health benefit plans under subsection (3)(b)(I)(B) of this section, the aggregate liability of the association must not exceed five hundred thousand dollars with respect to any one life; or
(B)
More than five million dollars in benefits with respect to an owner of multiple nongroup policies of life insurance, regardless of whether the policy owner is an individual, firm, corporation, or other person; whether the persons insured are officers, managers, employees, or other persons; or the number of policies and contracts held by the owner.
(c)
The limitations set forth in this subsection (3) are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association's obligations under this subsection (3) may be met by the use of assets attributable to covered policies or reimbursed to the association under its subrogation and assignment rights.
(3.5)
For purposes of this article 20, benefits provided by a long-term care rider to a life insurance policy or annuity are considered the same type of benefits as the benefits provided by the underlying life insurance policy or annuity contract to which the rider relates.
(4)
In performing its obligations to provide coverage under section
10-20-108
, the association is not required to guarantee, assume, reinsure, reissue, or perform, or cause to be guaranteed, assumed, reinsured, reissued, or performed, the contractual obligations of the impaired or insolvent insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
Amended by 2023 Ch. 195,§ 5, eff. 5/15/2023.
Amended by 2013 Ch. 217, § 56, eff. 5/13/2013.
Amended by 2013 Ch. 34, § 2, eff. 3/15/2013.
L. 91: Entire article added, p. 1258, § 1, effective July 1. L. 92: (2)(a), (2)(b)(IX), and (2)(b)(X) amended, p. 1725, § 11, effective July 1. L. 94: (2)(b)(XII) amended, p. 614, § 1, effective April 13. L. 2000: IP(1)(a), (2)(b)(III), (2)(b)(VII), (2)(b)(XIII), (2)(b)(XIV), and (3)(b) amended and (1.3), (1.5), and (1.7) added, p. 1018, § 2, effective July 1. L. 2010: (3)(b)(I)(C), (3)(b)(I)(D), and (3)(b)(II) amended and (3)(b)(I)(E) added, (SB 10 -049), ch. 15, p. 75, § 1, effective March 5. L. 2013: (2)(a), IP(2)(b), (2)(b)(I), (2)(b)(II), (2)(b)(III), IP(2)(b)(IV), (2)(b)(IV)(A), (2)(b)(V), (2)(b)(XIV), (3), and (4) amended, (2)(b)(XI), (2)(b)(XIII), and (2)(b)(XV) repealed, and (2)(b)(XVI) to (2)(b)(XIX) added (SB 13-032), ch. 34, p. 83, § 2, effective March 15; (2)(b)(X) amended, (HB 13-1266), ch. 217, p. 990, § 56, effective May 13.