2023 Louisiana Laws › Revised Statutes › Title 22 - Insurance › §22:2087. Powers and duties of the association

RS 22:2087 - Powers and duties of the association
A. If a member insurer is an impaired insurer, the association may, in its discretion, subject to any conditions imposed by the association, take any of the following actions that do not impair the contractual obligations of the impaired insurer and that are approved by the commissioner:
(1) 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.
(2) Provide such monies, pledges, notes, loans, guarantees, or other means as are proper to effectuate Paragraph (1) of this Subsection and assure payment of the contractual obligations of the impaired insurer pending action under Paragraph (1) of this Subsection.
B. If a member insurer is an insolvent insurer, the association shall, in its discretion, do any of the following:
(1) Guarantee, assume, reissue, or reinsure, or cause to be guaranteed, assumed, reissued, or reinsured, the policies or contracts of the insolvent insurer.
(2) Assure payment of the contractual obligations of the insolvent insurer.
(3) Provide such monies, pledges, notes, loans, guarantees, or other means as are reasonably necessary to discharge such duties.
(4) Provide benefits and coverages in accordance with Subsection C of this Section.
C. With respect to policies and contracts, the association shall do all of the following:
(1) 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 and contracts.
(b) With respect to non-group policies, contracts, and annuities, not later than the earlier of the next renewal date, if any, under the policies or one year, but in no event less than thirty days, from the date on which the association becomes obligated with respect to the policies or contracts.
(2) Make reasonable and diligent efforts to provide all known insureds, enrollees, or annuitants for non-group policies and contracts, or group policy or contract owners with respect to group policies and contracts, thirty days prior notice of the termination of the benefits provided.
(3) With respect to non-group policies and contracts covered by the association, make available to each known insured, enrollee, or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly an insured, enrollee, or annuitant under a group policy or contract who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of Paragraph (4) of this Subsection, 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 alter any provision of the policy, contract, or annuity or had a right to undertake alterations only in premium by class.
(4)(a) In providing the substitute coverage required pursuant to Paragraph (3) of this Subsection, the association may offer either to reissue the terminated coverage or to issue an alternative policy or contract at actuarially justified rates, subject to the prior approval of the commissioner.
(b) Alternative or reissued policies or contracts 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 or contract.
(c) The association may reinsure any alternative or reissued policy or contract.
(5)(a) Alternative policies adopted by the association shall be 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 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 or contract was last underwritten.
(c) Any alternative policy or contract issued by the association shall 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.
(6) If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy or contract, the premium shall be actuarially justified and set by the association in accordance with the amount of insurance or coverage provided and the age and class of risk, subject to the prior approval of the commissioner.
(7) The association's obligations with respect to coverage under any policy or contract of the impaired or insolvent insurer or under any reissued or alternative policy or contract shall cease on the date the coverage or policy is replaced by another similar policy or contract by the policy or contract owner, the insured, the enrollee, or the association.
(8) When proceeding pursuant to this Subsection with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with R.S. 22:2083(B)(2)(c).
D. Repealed by Acts 2014, No. 374, §2.
E. Repealed by Acts 2014, No. 374, §2.
F. Nonpayment of premiums within thirty-one days after the date required by the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall terminate the association's obligations under such policy, contract, or coverage under this Part with respect to such policy, contract, or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this Part.
G. Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the association. If the liquidator of an insolvent insurer requests, the association shall provide a report to the liquidator regarding such premiums collected by the association. The association shall be liable for unearned premiums due to policy or contract owners arising after the entry of such order.
H. The protection provided by this Part shall not apply if any 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.
I. In carrying out its duties under Subsections B and C of this Section, the association may, subject to approval by the court:
(1) 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 Part are less than the amounts needed to assure full and prompt performance of this association's duties under this Part, 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.
(2) Impose temporary restraining orders 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.
J. If the association fails to act within a reasonable period as provided in Subsections B and C of this Section, the commissioner shall have the powers and duties of the association under this Part with respect to impaired or insolvent insurers.
K. The association may render assistance and advice to the commissioner, upon his request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
L. The association shall have standing to appear or intervene before any court in this state or state agency with jurisdiction over an impaired or insolvent insurer and concerning which the association shall become obligated under this Part or with jurisdiction over any other person or property against which the association may have benefit through subrogation or otherwise. The standing shall extend to all matters germane to the powers and duties of the association, including but not limited to proposals for reinsuring, reissuing, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over any person or property for which the association shall become obligated or with jurisdiction over a third party against whom the association may have rights through subrogation or otherwise.
M.(1) Any person receiving benefits under this Part shall be deemed to have assigned the rights under, and any causes of action relating to, the covered policy or contract to the association to the extent of the benefits received because of this Part, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provision of substitute or alternative policies, contracts, or coverages. The association may require an assignment of such rights and cause of action by any enrollee, payee, policy or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any right or benefits conferred by this Part upon such person.
(2) The subrogation rights of the association under this Subsection 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 Part.
(3) In addition to Paragraphs (1) and (2) of this Subsection, the association shall have all rights of subrogation and any other equitable or legal remedy which would have been available to the impaired or insolvent insurer or holder of a policy or contract with respect to such policy or contracts.
(4) If the provisions of this Subsection are determined to be 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 shall be reduced by the amount realized by any other person or claim that is attributable to the policies or contracts, or portion thereof, covered by the association.
(5) 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 Paragraph (4) of this Subsection, the person shall pay to the association the portion of the recovery attributable to the policies or contracts, or the portion thereof, covered by the association.
N. The association may do any of the following:
(1) Enter into any contracts necessary or proper to implement the provisions and purposes of this Part.
(2) Sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments pursuant to R.S. 22:2088 and to settle claims or potential claims against it.
(3) Borrow money to effect the purposes of this Part. Any notes or other evidence of indebtedness of the association not in default shall be legal investments for domestic member insurers and may be carried as admitted assets.
(4) Employ or retain any persons necessary to handle the financial and legal transactions of the association, and to perform other functions necessary or proper in accordance with this Part.
(5) Take any legal action necessary to avoid payment or recover payment of improper claims.
(6) Exercise, for the purposes of this Part and to the extent approved by the commissioner, the powers of a domestic life insurer, health insurer, or health maintenance organization, but in no case may the association issue policies or contracts other than those issued to perform its obligations under this Part.
(7) Unless prohibited by law, in accordance with the terms and conditions of the policy or contract, file for actuarially justified rate or premium increases for any policy or contract for which it provides coverage pursuant to this Part.
O. The association may join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association.
P.(1) Venue in a suit against the association arising under this Part shall be in the Nineteenth Judicial District.
(2) The association shall not be required to furnish an appeal bond that relates to a cause of action arising under this Part.
Q. 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 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 that meets the following requirements:
(1) In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for one of the following:
(a) A fixed interest rate.
(b) Payment of dividends with minimum guarantees.
(c) A different method for calculating interest or changes in value.
(2) There is no requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract.
(3) The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
Acts 1991, No. 998, §1, eff. Sept. 30, 1991; Acts 2012, No. 271, §1; Acts 2014, No. 374, §§1, 2; Acts 2018, No. 97, §1.