Bill Text: CT HB06509 | 2011 | General Assembly | Comm Sub

Connecticut House Bill 6509 (Prior Session Legislation)

Bill Title: An Act Concerning The Connecticut Insurance Guaranty Association Act And The Connecticut Life And Health Insurance Guaranty Association Act.

Sponsorship: Committee Bill

Status: (Introduced - Dead) 2011-05-10 - Referred by House to Committee on Finance, Revenue and Bonding [HB06509 Detail]

Download: Connecticut-2011-HB06509-Comm_Sub.html

General Assembly		*Substitute Bill No. 6509*
*January Session, 2011*		_____HB06509INS___031011____

AN ACT CONCERNING THE CONNECTICUT INSURANCE GUARANTY ASSOCIATION ACT AND THE CONNECTICUT LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION ACT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 38a-838 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

The following terms as used in sections 38a-836 to 38a-853, inclusive, as amended by this act, unless the context otherwise requires or a different meaning is specifically prescribed, shall have the following meanings:

(1) "Account" means any one of the three accounts created by section 38a-839, as amended by this act;

(2) "Affiliate" means [any affiliate, as defined in section 38a-1, of] a person who, directly or indirectly, through one or more intermediaries, controls, is controlled by or under common control with, another person on December thirty-first of the year immediately preceding the date the insurer becomes an insolvent insurer;

(3) "Association" means the Connecticut Insurance Guaranty Association created under section 38a-839, as amended by this act;

(4) "Association similar to the association" means any guaranty association, security fund or other insolvency mechanism that affords protection similar to that of the association. "Association similar to the association" includes any property and casualty insolvency mechanism that obtains assessments or other contributions from insurers on a preinsolvency basis;

(5) "Assumed claims transaction" means: (A) A transaction in which claim and insurance policy obligations are assumed by an insolvent insurer prior to the date of the entry of a final order of liquidation, by means of a merger between such insolvent insurer and another entity obligated under the policy; or (B) an assumption reinsurance transaction in which all of the following have occurred: (i) Prior to the date of the entry of a final order of liquidation, the insolvent insurer assumed the claim or insurance policy obligations of another insurer or entity; (ii) such assumption of obligations was approved by an insurance regulator having jurisdiction over such assumption; and (iii) as a result of such assumption, the claim or policy obligations became the direct obligations of the insolvent insurer through novation;

(6) "Claimant" means any person instituting a covered claim, except that no affiliate shall be a claimant;

[(4)] (7) "Commissioner" means the Insurance Commissioner;

(8) "Control" means the direct or indirect possession 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 contract for goods or nonmanagement services, or otherwise, unless such power is the result of an official position or corporate office held by the person. Control shall be presumed to exist if a person directly or indirectly owns, controls, holds with the power to vote or holds proxies representing, ten per cent or more of any voting securities of another person. Such presumption may be rebutted by a showing that control does not exist in fact;

[(5)] (9) (A) "Covered claim" means an unpaid claim, including [, but not limited to,] one submitted by a claimant for unearned premiums, [which] that arises out of and is within the coverage and subject to the applicable limits of an insurance policy to which sections 38a-836 to 38a-853, inclusive, as amended by this act, apply [issued by an insurer, if such] if the insurer becomes an insolvent insurer [after October 1, 1971] and the policy was issued by the insurer or assumed by the insurer in an assumed claims transaction, and [(A)] (i) the claimant or insured is a resident of this state at the time of the insured event, [;] or [(B)] (ii) the claim is a first party claim for damage to property with a permanent location in this state. [, provided the term "covered claim" shall] For purposes of this subparagraph, the residence of a claimant or insured that is not an individual shall be the state in which such claimant's or insured's principal place of business is located at the time of the insured event.

(B) "Covered claim" does not include: [(i) any claim by or for the benefit of any reinsurer, insurer, insurance pool, or underwriting association, as subrogation recoveries or otherwise; provided that a claim for any such amount, asserted against a person insured under a policy issued by an insurer which has become an insolvent insurer, which, if it were not a claim by or for the benefit of a reinsurer, insurer, insurance pool or underwriting association, would be a "covered claim" may be filed directly with the receiver of the insolvent insurer but in no event shall any such claim be asserted against the insured of such insolvent insurer, (ii) any claim by or on behalf of an individual who is neither a citizen of the United States nor an alien legally resident in the United States at the time of the insured event, or an entity other than an individual whose principal place of business is not in the United States at the time of the insured event, and it arises out of an accident, occurrence, offense, act, error or omission that takes place outside of the United States, or a loss to property normally located outside of the United States or, if a workers' compensation claim, it arises out of employment outside of the United States, (iii) any claim by or on behalf of a person who is not a resident of this state, other than a claim for compensation or any other benefit which arises out of and is within the coverage of a workers' compensation policy, against an insured whose net worth at the time the policy was issued or at any time thereafter exceeded twenty-five million dollars, provided that an insured's net worth for purposes of this section and section 38a-844 shall be deemed to include the aggregate net worth of the insured and all of its subsidiaries as calculated on a consolidated basis, (iv) any claim by or on behalf of an affiliate of the insolvent insurer at the time the policy was issued or at the time of the insured event, or (v) any claim arising out of a policy issued by an insurer which was not licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred] (i) Any amount awarded as punitive or exemplary damages; (ii) any amount sought as a return of premium under any retrospective rating plan; (iii) any amount due as subrogation recoveries, reinsurance recoveries, contribution or indemnification to any insurer, reinsurer, insurance pool, underwriting association, health care center, hospital service corporation, medical service corporation or self-insurer; (iv) any first party claims by an insured that is an affiliate of the insolvent insurer; (v) any fee or other expense relating to goods or services sought by or on behalf of any attorney or other provider of goods or services retained by the insolvent insurer or an insured prior to the date such insurer was determined to be insolvent by a court of competent jurisdiction; (vi) any fee or other expense relating to goods or services sought by or on behalf of any attorney or other provider of goods or services retained by an insured or claimant in connection with the assertion or prosecution of a claim, covered or otherwise, against the association; (vii) any claims for interest; or (viii) any claim filed with the association or a liquidator for protection afforded under the insured's policy for losses incurred but not reported;

[(6)] (10) (A) "Insolvent insurer" means an insurer:

[(A) (i) licensed] (i) (I) Licensed to transact insurance in this state [either] at the time the policy was issued, when the obligation with respect to the covered claim was assumed under an assumed claims transaction or when the insured event occurred, and [(ii)] (II) determined to be insolvent by a court of competent jurisdiction;

[(B) which] (ii) That is [(i)] (I) the legal successor of an insurer that was licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, by reason of a merger, provided such merger [is] was approved by an insurance regulator having jurisdiction over such merger, and [(ii)] (II) determined to be insolvent by a court of competent jurisdiction; or

[(C) which (i)] (iii) That (I) succeeds to the policy obligations of an insurer that was licensed to transact insurance in this state either at the time the policy was issued or when the insured event occurred, by reason of a division whereby policies issued by such licensed insurer are transferred to an insurer, and [(ii)] (II) is determined to be insolvent by a court of competent jurisdiction, provided such division is approved [(I)] in a jurisdiction that allows such division [,] and [(II)] by an insurance regulator having jurisdiction over such division.

(B) "Insolvent insurer" [shall] does not [be construed to] mean any insurer with respect to which an order, decree, judgment or finding of insolvency, whether permanent or temporary in nature, or order of rehabilitation or conservation [has been] was issued by a court of competent jurisdiction prior to October 1, 1971;

(11) "Insured" means any named insured, additional insured, vendor, lessor or other party identified as an insured under the policy;

[(7)] (12) "Member insurer" means any person who (A) writes any kind of insurance to which sections 38a-836 to 38a-853, inclusive, as amended by this act, apply under section 38a-837, including, but not limited to, the exchange of reciprocal or interinsurance contracts, and (B) is licensed to transact insurance in this state. An insurer shall cease to be a member insurer effective on the day following the termination or expiration of its license to transact the kinds of insurance to which [said] sections 38a-836 to 38a-853, inclusive, as amended by this act, apply, [however] except that such insurer shall remain liable as a member insurer for (i) any obligations, including obligations for assessments levied prior to the termination or expiration of the insurer's license, and [for] (ii) assessments levied after the termination or expiration [which] that relate to any insurer [which] that became an insolvent insurer prior to the termination or expiration of such insurer's license. In the case of such insurer, the average of its net direct written premium for the five calendar years prior to expiration or termination of its license, whether or not the insurer has net direct written premium in the year preceding such expiration or termination, shall be used as its assessment base for any year following such expiration or termination in which the insurer has no direct written premium;

[(8)] (13) "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which sections 38a-836 to 38a-853, inclusive, as amended by this act, apply, including policy and membership fees, less return premiums, [thereon] premiums on policies not taken and dividends paid or credited to policyholders on such direct business. [, provided the term "net] "Net direct written premiums" [shall] does not include premiums on any contract between insurers or reinsurers;

(14) "Novation" means the assumption of claim or insurance policy obligations by an insolvent insurer as direct obligations through consent of the policyholder, whether express or implied based upon the circumstances, the notice provided and the conduct of the parties, whereby the ceding insurer or entity initially obligated under the claim or policy is released by the policyholder from fulfilling the claim or policy obligation;

[(9)] (15) "Person" means an individual, aggregation of individuals, corporation, partnership, association, joint stock company, business trust, limited liability company, unincorporated organization, voluntary organization, governmental entity or other legal entity;

[(10) "Residence" means, when used in reference to a corporation, its principal place of business;

(11) "United States" has the meaning assigned to it by section 38a-1.]

(16) "Self-insurer" means a person that covers its liability through a qualified individual or group self-insurance program or any other formal program created for the specific purpose of covering liabilities typically covered by insurance.

Sec. 2. Section 38a-839 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

There is created a nonprofit unincorporated legal entity to be known as the Connecticut Insurance Guaranty Association. All insurers defined as member insurers in [subdivision (8) of] section 38a-838, as amended by this act, shall be members of said association as a condition of their authority to transact insurance in this state. Said association shall perform its functions under a plan of operation established and approved under section 38a-842, as amended by this act, and shall exercise its powers through a board of directors established under section 38a-840, as amended by this act. For the purposes of administration and assessment, said association shall be divided into three separate accounts: (1) The workers' compensation insurance account; (2) the automobile insurance account; and (3) an account for all other insurance to which sections 38a-836 to 38a-853, inclusive, as amended by this act, apply.

Sec. 3. Section 38a-840 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) The board of directors of said association shall consist of not less than five [nor] or more than nine persons, two of which shall be persons representing the public and the remainder which shall be persons representing insurers, serving terms as established in the plan of operation under section 38a-842, as amended by this act.

(1) (A) The [members of the board of] directors of said board who represent insurers shall be selected by member insurers and subject to the approval of the commissioner. Vacancies on the board for such directors shall be filled for the remaining period of the term by a majority vote of the remaining [members] directors, subject to the approval of the commissioner. [If no members are selected within sixty days after October 1, 1971, the commissioner may appoint the initial members of the board of directors.]

[(b)] In approving selections to said board, the commissioner shall consider, among other things, whether all member insurers are fairly represented.

(B) Any director of said board who represents an insurer shall be terminated as a director if such insurer enters receivership. Such termination shall be effective as of the date of the entry of the order of receivership.

(2) The directors of said board who represent the public shall be appointed by the commissioner. Vacancies on the board for such directors shall be filled for the remaining period of the term by the commissioner. No officer, director or employee of an insurer or any person engaged in the business of insurance shall be eligible to serve as a director of said board who represents the public.

[(c) Members] (b) The directors of said board shall receive no compensation as such but shall be reimbursed from the assets of said association for actual and necessary expenses incurred by them in carrying out their official duties as members of the board of directors.

(c) If a director fails to attend three consecutive board meetings, the board of directors may declare a vacancy, which shall be filled in accordance with subsection (a) of this section.

(d) The commissioner may suspend a director from said board, pending the outcome of an investigation or hearing by the commissioner or the conclusion of a criminal proceeding, if the commissioner has reasonable cause to believe such director failed to disclose a known conflict of interest with respect to such director's duties on said board, failed to take appropriate action based on a known conflict of interest with respect to such director's duties on said board, or has been indicted or charged with a felony. The insurer that such director represents may replace such director prior to the conclusion of such investigation, hearing or criminal proceeding. The commissioner shall declare a vacancy if the investigation, hearing or criminal proceeding substantiates the allegations or charges. Such vacancy shall be filled in accordance with subsection (a) of this section.

Sec. 4. Section 38a-841 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) Said association shall:

(1) Be obligated to the extent of the covered claims existing prior to the determination of insolvency and arising within thirty days after the determination of insolvency, or before the policy expiration date if less than thirty days after the determination, or before the insured replaces the policy or causes its cancellation, if [he] the insured does so within thirty days of such determination, provided such obligation shall be limited as follows: (A) With respect to covered claims for unearned premiums, [to one-half of the unearned premium on any policy, subject to] a maximum of [two] ten thousand dollars per policy; (B) with respect to covered claims other than for unearned premiums, such obligation shall include only that amount of each such claim [which] that is in excess of one hundred dollars and is less than (i) three hundred thousand dollars for claims arising under policies of insurers determined to be insolvent prior to October 1, 2007, [and] (ii) four hundred thousand dollars for claims arising under policies of insurers determined to be insolvent on or after October 1, 2007, but prior to October 1, 2011, and (iii) five hundred thousand dollars for claims arising under policies of insurers determined to be insolvent on or after October 1, 2011, except that said association shall pay the full amount of any such claim arising out of a workers' compensation policy, provided in no event shall said association be obligated [(i)] (I) to any claimant in an amount in excess of the obligation of the insolvent insurer under the policy form or coverage from which the claim arises, [or (ii)] (II) for any claim filed with the association after the expiration of two years from the date of the declaration of insolvency unless such claim arose out of a workers' compensation policy and was timely filed in accordance with section 31-294c, or (III) to defend an insured subsequent to the association's payment or tender of the association's covered claim obligation limit or the applicable insurance policy limit, whichever is less;

(2) [be] Be deemed the insurer to the extent of its obligations, subject to the limitations under sections 38a-836 to 38a-853, inclusive, as amended by this act, 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, including, but not limited to, the right to pursue and retain salvage and subrogation recoverable on covered claim obligations to the extent paid by the association. The association shall not be deemed the insolvent insurer for purposes of conferring jurisdiction;

(3) [allocate] Allocate claims paid and expenses incurred among the three accounts, created by section 38a-839, as amended by this act, separately, and assess member insurers separately (A) [in] with respect [of] to each such account for such amounts as shall be necessary to pay the obligations of said association under subdivision (1) of this subsection [(a) of this section] subsequent to an insolvency; (B) the expenses of handling covered claims subsequent to an insolvency; (C) the cost of examinations under section 38a-846; and (D) such other expenses as are authorized by sections 38a-836 to 38a-853, inclusive, as amended by this act. The assessments of each member insurer shall be in the proportion that the net direct written premiums of such member insurer for the calendar year preceding the assessment on the kinds of insurance in such account bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment on the kinds of insurance in such account. Each member insurer shall be notified of its assessment not later than thirty days before it is due. No member insurer may be assessed in any year on any account an amount greater than two per cent of that member insurer's net direct written premiums for the calendar year preceding the assessment on the kinds of insurance in said account. [, provided if, at the time an assessment is levied on the "all other insurance" account, as defined in subdivision (3) of section 38a-839, the board of directors finds that at least fifty per cent of the total net direct written premiums of a member insurer and all its affiliates, for the year on which such assessment is based, were from policies issued or delivered in Connecticut, on risks located in this state, such member insurer shall be assessed only on such member insurer's net direct written premium that is attributable to the kind of insurance that gives rise to each covered claim.] If the maximum assessment, together with the other assets of said association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available may be prorated and the unpaid portion shall be paid as soon thereafter as funds become available. Said association may defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer's 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 provided that during the period of deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall be paid when such payment will not reduce capital or surplus below the minimum amounts required for a certificate of authority. Such payments shall be refunded to those insurers receiving greater assessments because of such deferment or, at the election of the insurer, be credited against future assessments. Each member insurer serving as a servicing facility may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of such claims by such member insurer if they are chargeable to the account in respect of which the assessment is made;

(4) [investigate] Investigate claims brought against said association, [and] appoint and direct legal counsel retained under liability insurance policies for the defense of covered claims, adjust, compromise, settle [,] and pay covered claims to the extent of said association's obligations, and deny all other claims. The association shall pay claims in any order it deems reasonable [,] including, but not limited to, payment in the order of receipt or by classification; [. It 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] Notify such persons as the commissioner may direct under subdivision (1) of subsection (b) of section 38a-843;

(6) [handle] Handle claims through its employees or through one or more insurers or other persons designated by said association as servicing facilities, provided such designation of a servicing facility shall be subject to the approval of the commissioner, and may be declined by a member insurer;

(7) [reimburse] Reimburse each such servicing facility for obligations of said association paid by such facility and for expenses incurred by such facility while handling claims on behalf of said association and shall pay such other expenses of said association as are authorized by sections 38a-836 to 38a-853, inclusive, as amended by this act;

(8) Have the right to review and contest, as set forth in subsection (d) of this section, settlements, releases, compromises, waivers and judgments to which the insolvent insurer or its insureds were parties prior to the date of the entry of the order of liquidation; and

(9) Make all reasonable efforts, in cooperation with other obligated or potentially obligated associations similar to the association or their authorized representatives, to coordinate and cooperate with receivers or authorized representatives of insolvent insurers in a uniform manner, including, but not limited to, through the use of Uniform Data Standards promulgated or approved by the National Association of Insurance Commissioners.

(b) Said association may: (1) Employ or retain such persons as are necessary to handle claims and perform other duties of said association; (2) borrow such funds as may be necessary from time to time to effect the purposes of sections 38a-836 to 38a-853, inclusive, as amended by this act, in accord with the plan of operation under section 38a-842, as amended by this act; (3) sue or be sued; (4) intervene as a matter of right as a party in any proceeding before any court in this state that has jurisdiction over an insolvent insurer, as defined in section 38a-838, as amended by this act; (5) negotiate and become a party to such contracts as are necessary to carry out the purpose of [said] sections 38a-836 to 38a-853, inclusive, as amended by this act; (6) perform such other acts as are necessary or proper to effectuate the purpose of said sections; (7) refund to the member insurers in proportion to the contribution of each such 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 said association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year; and (8) join one or more organizations comprised of other states' associations similar to the association and designate such organization to act as a liaison for said association and, to the extent said association authorizes such organization, to bind said association to agreements or settlements with receivers or authorized representatives of insolvent insurers.

(c) (1) Each insurer paying an assessment under [sections 38a-836 to 38a-853, inclusive,] this section may offset, for an assessment paid in the income year commencing prior to January 1, 2012, one hundred per cent and for an assessment paid in income years commencing on or after January 1, 2012, fifty per cent of the amount of such assessment against its premium tax liability to this state under chapter 207. Such offset shall be taken over a period of the five successive tax years following the year of payment of the assessment, at the rate of twenty per cent per year of [the assessment paid to the association] such offset. Each insurer to which has been refunded by the association, pursuant to subsection (b) of this section, all or a portion of an assessment previously paid to the association by the insurer shall be required to pay to the Department of Revenue Services an amount equal to the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns, as the case may be, filed by such insurer and that is attributable to such refunded assessment, provided the amount required to be paid to said department shall not exceed the amount of the refunded assessment. If the amount of the refunded assessment exceeds the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns filed by such insurer and that is attributable to such refunded assessment, such excess may not be claimed as an offset against the premiums tax liability on a premiums tax return or returns filed by such insurer or, if the offset has been transferred to another person pursuant to subdivision (2) of this subsection, by such other person. For purposes of this subparagraph, if the offset has been transferred to another person pursuant to subdivision (2) of this subsection, the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns filed by such insurer includes the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns filed by such other person. The association shall promptly notify the Commissioner of Revenue Services of the name and address of the insurers to which such refunds have been made, the amount of such refunds and the date on which such refunds were mailed to such insurer. If the amount that an insurer is required to pay to the Department of Revenue Services has not been so paid on or before the forty-fifth day after the date of mailing of such refunds, the insurer shall be liable for interest on such amount at the rate of one per cent per month or fraction thereof from such forty-fifth day to the date of payment.

(2) An insurer, in this subparagraph called "the transferor", may transfer any offset provided under subdivision (1) of this subsection to an affiliate, as defined in section 38a-1, of the transferor. Any such transfer of the offset by the transferor and any subsequent transfer or transfers of the same offset shall not affect the obligation of the transferor to pay to the Department of Revenue Services any sums which are acquired by refund from the association pursuant to subsection (b) of this section and which are required to be paid to the Department of Revenue Services pursuant to subdivision (1) of this subsection. Such offset may be taken by any transferee only against the transferee's premium tax liability to this state under chapter 207. The Commissioner of Revenue Services shall not allow such offset to a transferee against its premium tax liability unless the transferor, the affiliate to which the offset was originally transferred, each subsequent transferor and each subsequent transferee have filed such information as may be required on forms provided by said commissioner with respect to any such transfer or transfers on or before the due date of the premium tax return on which such offset would have been taken by the transferor if no transfer had been made by the transferor.

(3) A member insurer shall include in rates and premiums charged for insurance policies to which sections 38a-836 to 38a-853, inclusive, as amended by this act, apply, an amount sufficient to recoup a sum equal to the assessment paid under this section by such insurer to said association, less any amount (A) returned to such insurer by said association, or (B) subject to an offset as set forth in subdivision (1) of this subsection. Such rates and premiums shall not be deemed excessive solely because they contain an additional amount reasonably calculated to recoup all assessments paid by the member insurer to said association.

(d) (1) In an action to enforce a settlement, release, compromise, waiver or judgment to which the insolvent insurer or its insured was a party prior to the date of the entry of the order of liquidation, the association shall have the right to assert the following defenses in addition to any defenses available to the insurer:

(A) The association is not bound by a settlement, release, compromise or waiver executed by the insolvent insurer or its insured, or any judgment entered against the insurer or its insured by consent or through failure to exhaust all appeals, if the settlement, release, compromise, waiver or judgment was: (i) Executed or entered within one hundred twenty days prior to the date of the entry of the order of liquidation and the insurer or insured did not use reasonable care in executing or entering into the settlement, release, compromise or waiver or did not pursue all reasonable appeals of an adverse judgment; or (ii) executed by or entered against an insurer or its insured based on default, fraud, collusion or the insurer's failure to defend; and

(B) Any statutory defenses or rights of offset against any settlement, release, compromise, waiver or judgment executed by or entered against the insured or its insured.

(2) If a court of competent jurisdiction finds the association is not bound by a settlement, release, compromise, waiver or judgment for any of the reasons set forth in subparagraph (A) of subdivision (1) of this subsection, such settlement, release, compromise, waiver or judgment shall be set aside and the association shall be permitted to defend any covered claim on its merits. Such settlement, release, compromise, waiver or judgment shall not be considered as evidence of liability or damages in connection with any claim brought against the association or any other party under sections 38a-836 to 38a-853, inclusive, as amended by this act;

(3) With respect to a judgment regarding any covered claim under any decision, order, verdict or finding based on the default of the insolvent insurer or its failure to defend, the association, on its own behalf or on behalf of an insured under an insurance policy issued by the insolvent insurer, may apply to set aside or make a motion to open such judgment, decision, order, verdict or finding with the same court or administrator that entered such judgment, decision, order, verdict or finding, and shall be permitted to defend the covered claim on its merits.

Sec. 5. Section 38a-842 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) (1) Said 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 said association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the commissioner.

(2) If said association fails to submit a suitable plan of operation within ninety days following October 1, 1971, or if at any time thereafter said association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate such reasonable regulations as are necessary or advisable to effectuate the provisions of sections 38a-836 to 38a-853, inclusive, as amended by this act. Such regulations shall continue in force until modified by the commissioner or superseded by a plan submitted by said association and approved by the commissioner.

(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 said association under section 38a-841, as amended by this act, shall be performed; (2) establish procedures for handling the assets of said association; (3) establish the number, the terms of office and the amount and method of reimbursing members of the board of directors under section 38a-840, as amended by this act; (4) establish procedures by which claims may be filed with said 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 said association or its agent and a list of such claims shall be periodically submitted to said association or similar organization having a like function to that of said association 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 said association, its agents, and the board of directors; (7) provide that any member insurer aggrieved by any final action or decision of said association may appeal to the commissioner within thirty days after such action or decision; (8) establish the procedures whereby selections for the board of directors shall be submitted to the commissioner; (9) contain such additional provisions as may be necessary or proper for the execution of the powers and duties of said association under sections 38a-836 to 38a-853, inclusive, as amended by this act.

(d) The plan of operation may delegate any or all powers and duties of said association, except those under subdivision (3) of subsection (a) of section 38a-841, as amended by this act, and subdivision (2) of subsection (b) of section 38a-841, as amended by this act, to a corporation, association similar to the association, or other organization [which] that performs or will perform functions similar to those of said association, or its equivalent having a like function to that of said association, in two or more states. Such a corporation, association similar to the association or organization shall be reimbursed by said association as a servicing facility would be reimbursed and shall be paid by said association for its performance of any other functions of said association. Any 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] that extends protection not substantially less favorable and effective than that provided by sections 38a-836 to 38a-853, inclusive, as amended by this act.

Sec. 6. Section 38a-844 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) Any person recovering any moneys under sections 38a-836 to 38a-853, inclusive, as amended by this act, shall be deemed to have assigned [his] such person's rights under the policy to said association to the extent of [his] such person's recovery from said association. Every insured or claimant seeking the protection of said sections shall cooperate with said association to the same extent as such person would have been required to cooperate with the insolvent insurer. Said association shall have no cause of action against any insured of the insolvent insurer for any sums it has paid out to such insured 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 said 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 determinations of covered claim eligibility under sections 38a-836 to 38a-853, inclusive, and by settlements of claims made by said association or any similar organization having a like function to that of said association in another state. The court having jurisdiction shall grant such claims priority equal to that to which the claimant would have been entitled in the absence of said sections 38a-836 to 38a-853, inclusive, against the assets of the insolvent insurer. The expenses of said association or any similar organization having a like function to that of said association in handling claims shall be accorded the same priority as the receiver's or liquidator's expenses.]

(b) A reinsurer, insurer, insurance pool, underwriting association, health care center, hospital service corporation, medical service corporation or self-insurer shall have no cause of action against any insured of the insolvent insurer for any amount due such reinsurer, insurer, insurance pool, underwriting association, health care center, hospital service corporation, medical service corporation or self-insurer except to the extent such amount exceeds the association's obligation limits set forth in section 38a-841, as amended by this act.

(c) Said association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by said association, the expenses paid for the processing of covered claims paid or contested and estimates of anticipated claims on said association, and expenses of processing such claims which shall preserve the rights of said association against the assets of the insolvent insurer.

(d) [(1) Except as provided in subdivision (2) of this subsection, the] The association shall have the right to recover from the following persons the amount of any covered claim paid on behalf of such person pursuant to sections 38a-836 to 38a-853, inclusive, as amended by this act: [(A)] (1) Any person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter; and [(B)] (2) any insured whose net worth on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer exceeds fifty million dollars and whose liability obligations to other persons are satisfied in whole or in part by payments made under said sections. For purposes of this [subdivision] subsection, "insured" does not include a [municipality, as defined in section 7-148,] governmental entity or the Second Injury Fund, established in section 31-354.

[(2) The association shall have no right to recover pursuant to subdivision (1) of this subsection from any nonprofit corporation organized to deliver health services and social services to meet the needs of the elderly, that is incorporated in this state and qualified as a Section 501(c)(3) organization under the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, for any amount of covered claims paid on behalf of such corporation on or after December 1, 2001, provided the insolvent insurer was declared insolvent prior to May 27, 2008. Any amounts recovered by the association prior to May 27, 2008, from any such nonprofit corporation or affiliate of such nonprofit corporation shall not be required to be reimbursed to such nonprofit corporation or affiliate of such nonprofit corporation.]

Sec. 7. Section 38a-845 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) (1) Any person having a claim against an insurer under any provision in an insurance policy [, other than a policy of an insolvent insurer, which is also a covered claim under sections 38a-836 to 38a-853, inclusive,] shall first exhaust [first his rights under such policy] all coverage, including the right to a defense, provided by any other insurance policy, regardless of whether such policy was issued by a member insurer, if the claim arises from the same facts, injury or loss that gave rise to a covered claim against the association. A claim arising from the same facts, injury or loss shall be considered to have occurred if a claim has arisen under a policy that provides liability coverage to a person who may be jointly and severally liable as a tortfeasor with a person insured under an insurance policy issued by the insolvent insurer. This subdivision shall not apply to any right an insured has under an insurance policy of an insolvent insurer or under a life insurance policy.

(2) (A) Any amount payable on a covered claim under [said] sections 38a-836 to 38a-853, inclusive, as amended by this act, shall be reduced by the [amount recoverable under the claimant's insurance policy or chapter 568.] full applicable limits stated in the other insurance policy or by the amount of the recovery under the other insurance policy as provided herein:

(i) The association shall receive a full credit for the stated limits, unless the claimant demonstrates that the claimant used reasonable efforts to exhaust all coverage and limits applicable under the other insurance policy; or

(ii) The association shall receive a full credit for the amount of the recovery if the claimant demonstrates that the claimant used reasonable efforts to exhaust all coverage and limits applicable under the other insurance policy.

(B) Any such credit shall be deducted from the lesser of (i) the association's covered claim limit, (ii) the amount of the judgment or settlement of the claim, or (iii) the full applicable limit stated in the policy of the insolvent insurer. The association's obligation shall not exceed the covered claim limits set forth in section 38a-841, as amended by this act.

(C) No insured under an insurance policy issued by the insolvent insurer shall be liable for any amount of the reduction made by the association pursuant to this subdivision to any amount paid to a third-party claimant.

(3) Except to the extent the claimant has a contractual right to a defense under an insurance policy issued by another insurer and except as otherwise limited under the provisions of sections 38a-836 to 38a-853, inclusive, as amended by this act, nothing in this section shall relieve the association of its duty to defend under the policy issued by the insolvent insurer.

(4) For purposes of this section, a claim under an insurance policy other than a life insurance policy shall include, but not be limited to, (A) a claim against a health care center, hospital service corporation, medical service corporation or disability insurance company, and (B) any amount payable by or on behalf of a self-insurer.

(b) Any person having a claim [which] that may be recovered under more than one insurance guaranty association or [its equivalent having a like function to that of said] association similar to the association shall seek recovery first from the association operating in the area of the residence of the insured, except that (1) if it is a first party claim for damage to property with a permanent location, such person shall seek recovery first from the association operating in the location of the property, and (2) if it is a workers' compensation claim, such person shall seek recovery first from the association operating in the area of residence of the claimant. Any recovery under sections 38a-836 to 38a-853, inclusive, as amended by this act, shall be reduced by the amount recoverable from any other insurance guaranty association or [its equivalent having a like function to that of said] association similar to the association.

[(c) Any person having a claim under any governmental insurance or guaranty program which such claim is also a covered claim shall be required to first exhaust his rights under such program. Any amount payable on a covered claim under sections 38a-836 to 38a-853, inclusive, shall be reduced by any amount recoverable under such program.]

Sec. 8. Section 38a-851 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) All proceedings in which an insolvent insurer is a party or is obligated to defend an insured as a party in any court in this state shall be stayed for up to six months and for such additional time thereafter as may be determined by the court from the date of declaration of insolvency or from the time an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by said association of all pending causes of action in the case. [Whenever any covered claims arise from a judgment under any decision, verdict or finding based on the default of an insolvent insurer or based on such insolvent insurer's failure to defend an insured, said 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 said association may defend against any such claim on the merits of the case.]

(b) The receiver, liquidator [, receiver] or statutory successor of an insolvent insurer covered by sections 38a-836 to 38a-853, inclusive, as amended by this act, shall permit access by the board or its authorized representative to such of the insolvent insurer's records [which] that the board determines are necessary for the board to carry out its functions under said sections 38a-836 to 38a-853, inclusive, as amended by this act, with regard to covered claims. The receiver, liquidator [, receiver] or statutory successor shall provide the board or its representative with copies of such records upon the request and at the expense of the board.

Sec. 9. Section 38a-860 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) Sections 38a-858 to 38a-875, inclusive, as amended by this act, shall provide coverage for the policies and contracts specified in subsection [(f)] (d) of this section to:

(1) [To] For a policy or certificate other than an unallocated annuity contract or a structured settlement annuity, (A) any person, except for a nonresident certificate holder under a group policy or contract, who is the beneficiary, assignee or payee of the person covered under [subdivision (2)] subparagraph (B) of this [subsection] subdivision, regardless of where the person resides, and [(2)] (B) any person who is the owner of, or certificate holder under, such policy or contract and in each case who [(A)] (i) is a resident, or [(B)] (ii) is not a resident, provided [(i)] (I) the insurer that issued such policy or contract is domiciled in this state, [(ii)] (II) the state in which the person resides has an association similar to the association created by this section and sections 38a-837, 38a-838, as amended by this act, 38a-845, as amended by this act, 38a-853, 38a-862, 38a-863, as amended by this act, 38a-865, as amended by this act, and 38a-866, as amended by this act, and [(iii)] (III) the person is not eligible for coverage by an association in any other state because the insurer was not licensed in the state at the time specified in the state's guaranty association law; [.]

[(b)] (2) For unallocated annuity contracts, [specified in subsection (f) of this section, subdivisions (1) and (2) of subsection (a) of this section shall not apply, and] except as provided in subsections [(d)] (b) and [(e)] (c) of this section, [sections 38a-858 to 38a-875, inclusive, shall apply to: (1) Any] (A) any person who is the owner of the unallocated annuity contract if the contract is issued to, or in connection with, a specific benefit plan whose plan sponsor has its principal place of business in this state, [;] and [(2)] (B) any person who is the owner of an unallocated annuity contract issued to, or in connection with, government lotteries if the owners are residents; [.]

[(c)] (3) For structured settlement annuities, [specified in subsection (f) of this section, subdivisions (1) and (2) of subsection (a) of this section shall not apply, and] except as provided in subsections [(d)] (b) and [(e)] (c) of this section, [sections 38a-858 to 38a-875, inclusive, shall apply to] a person who is a payee under a structured settlement annuity, or to a beneficiary of a payee if the payee is deceased, if the payee: [(1)] (A) Is a resident, regardless of where the contract owner resides, or [(2)] (B) is not a resident, provided [: (A) (i) The] (i) (I) the contract owner of the structured settlement annuity is a resident, or [(ii)] (II) 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 sections 38a-858 to 38a-875, inclusive, as amended by this act, [;] and [(B)] (ii) neither the payee, beneficiary or contract owner is eligible for coverage by the association of the state in which the payee, beneficiary or contract owner resides.

[(d)] (b) Sections 38a-858 to 38a-875, inclusive, as amended by this act, shall not provide coverage to: (1) A person who is a payee or beneficiary of a contract owner resident of this state, if the payee or beneficiary is afforded any coverage by the association of another state; or (2) a person covered under subdivision (2) of subsection [(b)] (a) of this section, if any coverage is provided by the association of another state to the person.

[(e)] (c) Sections 38a-858 to 38a-875, inclusive, as amended by this act, shall provide coverage to a person who is a resident and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under sections 38a-858 to 38a-875, inclusive, as amended by this act, is provided coverage under the laws of any other state, the person shall not be provided coverage under sections 38a-858 to 38a-875, inclusive, as amended by this act. In determining the application of the provisions of this subsection in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary or assignee, sections 38a-858 to 38a-875, inclusive, as amended by this act, shall be construed in conjunction with the laws of other states to result in coverage by only one association.

[(f)] (d) (1) Sections 38a-858 to 38a-875, inclusive, as amended by this act, shall provide coverage to the persons specified in [subsections (a) to (d), inclusive,] subsections (a) and (b) of this section for direct, nongroup life, health or annuity policies or contracts and supplemental contracts to such policies or contracts, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers, except as limited by said sections. Annuity contracts and certificates under group annuity contracts include, but are not limited to, guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries and any immediate or deferred annuity contracts.

(2) [Said sections] Sections 38a-858 to 38a-875, inclusive, as amended by this act, 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 pursuant to the reinsurance policy or contract; (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 member insurer becomes an impaired or insolvent insurer under sections 38a-858 to 38a-875, inclusive, as amended by this act, exceeds the 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 member insurer becomes an impaired or insolvent insurer under sections 38a-858 to 38a-875, inclusive, as amended by this act, whichever is earlier; and (ii) on and after the date on which the member insurer becomes an impaired or insolvent insurer under sections 38a-858 to 38a-875, inclusive, as amended by this act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available; (D) a portion of a policy or contract issued to 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, but not limited to, benefits payable by an employer, association or similar entity under (i) a multiple employer welfare arrangement as defined in Section 514 of the federal Employee Retirement Income Security Act of 1974, as amended from time to time; (ii) a minimum premium group insurance plan; or (iii) an administrative services only contract; (E) any stop-loss or excess loss insurance policy or contract providing for the indemnification of or payment to a policy owner, a contract owner, a plan or another person obligated to pay life, health or annuity benefits; (F) any portion of a policy or contract to the extent that it provides dividends, experience rating credits, voting rights or provides that any fees or allowances be paid to any person, including, but not limited to, the policy or contract holder, in connection with the service to or administration of such policy or contract; (G) 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; (H) any unallocated annuity contract issued to an employee benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan; (I) any portion of an unallocated annuity contract that is not issued to, or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery; (J) any subscriber contract issued by a health care center; (K) a contractual agreement that establishes the insurer's obligation by reference to a portfolio of assets that is not owned or possessed by the insurance company; (L) an obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including, but not limited to: (i) A claim based on marketing materials; (ii) a claim based on side letters, riders or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements; (iii) a misrepresentation of or regarding policy benefits; (iv) an extra-contractual claim; or (v) a claim for penalties or consequential or incidental damages; (M) a 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 the benefit plan or its trustee, which in each case is not an affiliate of the member insurer; [and] (N) a 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 have not been credited to the policy or contract, or as to which 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 sections 38a-858 to 38a-875, inclusive, as amended by this act, whichever is earlier. 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 subparagraph, 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 impairment or insolvency, whichever is earlier, and shall not be subject to forfeiture; and (O) a policy or contract providing any hospital, medical, prescription drugs or other health care benefits pursuant to Part C or Part D of Subchapter XVIII of 42 USC 7, as amended from time to time, commonly known as Medicare Parts C and D, or any regulations issued thereunder.

[(g)] (e) The benefits for which the association may become liable shall in no event exceed the lesser of:

(1) The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer, or

(2) (A) [with] With respect to any one life, regardless of the number of policies or contracts: (i) Five hundred thousand dollars in life insurance death benefits, but no more than five hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance; (ii) five hundred thousand dollars in health insurance benefits, including, but not limited to, any net cash surrender and net cash withdrawal values; (iii) five hundred thousand dollars in the present value of annuity benefits, including, but not limited to, net cash surrender and net cash withdrawal values;

(B) [with] With respect to each individual participating in a governmental retirement plan established under Section 401, 403(b) or 457 of the United States Internal Revenue Code of 1986, or any subsequent internal revenue code of the United States, as amended from time to time, covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, five hundred thousand dollars in present value annuity benefits, including, but not limited to, net cash surrender and net cash withdrawal values;

(C) [with] With respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if deceased, five hundred thousand dollars in present value annuity benefits, in the aggregate, including, but not limited to, net cash surrender and net cash withdrawal values, if any, provided in no event shall the association be liable to expend (i) more than the five hundred thousand dollars in the aggregate with respect to any one individual under this subparagraph and subparagraphs (A) [,] and (B) [and (C)] of this subdivision, and (ii) with respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, more than five million dollars in benefits, regardless of the number of policies and contracts held by the owner;

(D) [with] With respect to either (i) one contract owner provided coverage under subparagraph (B) of subdivision (2) of subsection [(b)] (a) of this section, or (ii) one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in subparagraph (B) of this subdivision, [(2) of this subsection,] five million dollars in benefits regardless of the number of contracts with respect to the contract owner or plan sponsor, except that in the case where one or more unallocated annuity contracts are covered contracts under sections 38a-858 to 38a-875, inclusive, as amended by this act, and are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be afforded by the association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this state and in no event shall the association be obligated to cover more than five million dollars in benefits with respect to all such unallocated contracts.

[(h)] (f) The limits set forth in subsection [(g)] (e) of this section are limits on the benefits for which the association is obligated before taking into account either the association's subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer that are attributable to covered policies. The costs of the association's obligations under sections 38a-858 to 38a-875, inclusive, as amended by this act, may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to the association's subrogation and assignment rights.

[(i)] (g) In performing its obligation to provide coverage under section 38a-865, as amended by this act, the association shall not be required to guarantee, assume, reinsure or perform, or cause to be guaranteed, assumed, reinsured or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that does not materially affect the economic value or economic benefit of the covered policy or contract.

Sec. 10. Section 38a-863 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) There is created a nonprofit legal entity to be known as the Connecticut 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 38a-867, as amended by this act, and shall exercise its powers through a board of directors established under section 38a-864, as amended by this act. For purposes of administration and assessment, the association shall maintain two accounts: (1) The life insurance and annuity account which includes the following subaccounts: (A) Life insurance account; (B) annuity account which shall include, but is not limited to, annuity contracts owned by a governmental retirement plan, or its trustee, established under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, but shall otherwise exclude unallocated annuities; and (C) unallocated annuity account which shall exclude contracts owned by a governmental retirement benefit plan, or its trustee, established under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended; and (2) the health insurance account.

(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. Meetings or records of the association may be opened to the public upon a majority vote of the board of directors of the association.

Sec. 11. Section 38a-864 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) The board of directors of the association shall consist of not less than five [nor] or more than nine members, two of which shall be persons representing the public and the remainder which shall be persons representing insurers, serving terms as established in the plan of operation under section 38a-867, as amended by this act.

(1) The [members of the board] directors of said board who represent insurers shall be selected by member insurers and subject to the approval of the commissioner. Vacancies on the board for such directors shall be filled for the remaining period of the term [in the manner described in the plan of operation] by a majority vote of the remaining directors, subject to the approval of the commissioner. [To select the initial board of directors, and initially organize the association, the commissioner shall give notice to all member insurers of the time and place of the organizational meeting. In determining voting rights at the organizational meeting each member insurer shall be entitled to one vote in person or by proxy. If the board of directors is not selected within sixty days after notice of the organizational meeting, the commissioner may appoint the initial members.]

[(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] (b) The directors 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] the directors shall not otherwise be compensated by the association for their services.

Sec. 12. Subsection (d) of section 38a-865 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(d) 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, and the association shall be liable for unearned premiums due to policy or contract owners arising after the date of the entry of the order. Upon request by the liquidator of an insolvent insurer, the association shall provide to such liquidator a report regarding such premiums that the association has collected.

Sec. 13. Subsection (n) of section 38a-865 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(n) (1) (A) At any time within [one year after the date on which the association becomes responsible for the obligations of a member insurer, which date shall be deemed the coverage date] one hundred eighty days after the date of the entry of the order of liquidation, the association may elect to [succeed to] assume the rights and obligations of the [member] insolvent insurer [that accrue on or after the coverage date and] that relate to [contracts] policies or annuities covered, in whole or in part, by the association, in each case under any one or more [indemnity] reinsurance [agreements] contracts entered into by the [member] insolvent insurer [as a ceding insurer] and its reinsurers and selected by the association. [, except that the association may not exercise an election with respect to a reinsurance agreement if the receiver, rehabilitator or liquidator of a member insurer has previously and expressly disaffirmed the reinsurance agreement.] Any such assumption shall be effective as of the date of the entry of the order of liquidation. The election shall be effected by a notice to the receiver [, rehabilitator or liquidator] and to the affected reinsurers.

(B) To facilitate the earliest practicable decision by the association whether to assume any reinsurance contracts entered into by the insolvent insurer and to protect the financial position of the estate of the insolvent insurer, upon request by the association, the receiver and each reinsurer of the insolvent insurer shall make available as soon as possible after the commencement of formal delinquency proceedings (i) copies of reinsurance contracts in force and all related files and records relevant to the determination of whether such contracts should be assumed, and (ii) notices of any defaults under such reinsurance contracts or any known event or condition that, with the passage of time, could become a default under such reinsurance contracts.

(C) [If the association makes an election, then subparagraphs (A) to (D), inclusive, of this subdivision shall apply with respect to the agreements selected] For reinsurance contracts assumed by the association pursuant to this subsection:

[(A)] (i) The association shall be responsible for all unpaid premiums due under the [agreements] reinsurance contracts for periods before, on and after the [coverage] date [,] of the entry of the order of liquidation and shall be responsible for the performance of all other obligations to be performed after the [coverage] date [,] of the entry of the order of liquidation, that relate in each case [which relate] to [contracts] policies or annuities covered, in whole or in part, by the association. The association may charge [contracts] 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, [. (B)] and shall provide notice and an accounting of such charges to the receiver;

(ii) The association shall be entitled to any amounts payable by the reinsurer under the [agreements] reinsurance contracts with respect to losses or events that occur in periods after the [coverage] date of the entry of the order of liquidation and that relate to [contracts] policies or annuities covered, [by the association] in whole or in part, [and] by the association, provided upon the association's receipt of any such [amount] amounts, the association shall pay any beneficiary of a policy or [contract under] annuity on account of which [the association] an amount was paid, [only] a portion of the [policy or contract] amount equal to the lesser of: [(i)] (I) The amount received by the association; [that exceeds the benefits paid the beneficiary under the policy, less (ii)] or (II) the amount received by the association that exceeds the benefits paid by the association on account of the policy or [contract] annuity, less the retention of the [impaired or insolvent member] insurer applicable to the loss or event; [.]

[(C)] (iii) Not later than thirty days after the association's election, the association and each [indemnity] reinsurer under contracts assumed by the association shall calculate the net balance due to or from the association under each reinsurance [agreement] contract as of the date of the association's election [, giving] 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 [member] insurer or its receiver [, rehabilitator or liquidator or the indemnity reinsurer during the period between the coverage date and] or the reinsurer prior to the date of the association's election. [Either the association or indemnity] The reinsurer shall pay the [net] receiver any amounts due for losses or events that occurred in periods prior to the date of the entry of the order of liquidation, subject to any set off for premiums unpaid for periods prior to such date, and the association or the reinsurer shall pay any remaining balance due the other, in each case not later than five days after the completion of the calculation. [If the receiver, rehabilitator or liquidator] Any dispute over the amount due to either the association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contract, 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 subparagraph [(B)] (C)(ii) of this subdivision, the receiver [, rehabilitator or liquidator] shall remit the same to the association as promptly as practicable; [.]

[(D)] (iv) If the association or the receiver on the association's behalf pays, not later than sixty days after the election, [pays] the premiums due for periods before, on and after the [coverage] election date that relate to [contracts] policies or annuities covered, [by the association] in whole or in part, by the association, the reinsurer shall not [be entitled to] terminate the reinsurance [agreements] contracts for nonpayment of premium insofar as the [agreements] reinsurance contracts relate to [contracts] policies or annuities covered, [by the association] in whole or in part, by the association and shall not [be entitled to] set off any unpaid [premium] amounts due [for periods prior to the coverage date] under other contracts or unpaid amounts due from parties other than the association against amounts due the association.

(2) [If the association transfers its obligations to another insurer, and if the association and the other insurer agree, the other insurer shall succeed to the rights and obligations of the association under subdivision (1) of this subsection, provided: (A) The indemnity reinsurance agreements shall automatically terminate for new reinsurance unless the indemnity reinsurer and the other insurer agree to the contrary; and (B) the association's obligation to pay the beneficiary pursuant to subparagraph (B) of subdivision (1) of this subsection shall no longer apply on or after the date the indemnity reinsurance agreement is transferred to the third party insurer. This subdivision shall not apply if the association has previously expressly determined in writing that it will not exercise the election referred to in subdivision (1) of this subsection.] (A) During the period from the date of the entry of the order of liquidation until the election date, or if there is no election, until one hundred eighty days after the date of the entry of the order of liquidation, (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 (1) of this subsection, and (ii) the association, the receiver and the reinsurer shall, to the extent practicable, provide to each other data and records reasonably requested by each. Upon the election by the association to assume a reinsurance contract, the rights and obligations of the association and the reinsurer shall be governed by subdivision (1) of this subsection.

(B) If the association does not elect to assume a reinsurance contract by the election date set forth in subdivision (1) of this subsection, the association shall have no rights or obligations with respect to such contract.

(C) When the receiver transfers policies or annuities or covered obligations thereto to an assuming insurer, the association may transfer to such insurer any reinsurance contract it assumed on such policies or annuities pursuant to subdivision (1) of this section, subject to the following: (i) The reinsurance contract shall not cover any new policies or annuities in addition to those transferred unless otherwise agreed by the reinsurer and the assuming insurer; (ii) the association shall not be obligated under subdivision (1) of this subsection with respect to losses or events arising on or after the effective date of the transfer of the reinsurance contract; and (iii) the association provides written notice, return receipt requested, to the affected reinsurer not less than thirty days prior to the effective date of the transfer of the reinsurance contract.

(3) The provisions of this subsection shall supersede the provisions of any law of this state or of any affected reinsurance [agreement] contract that provides for or requires any payment of reinsurance proceeds on account of losses or events that occur in periods on and after the [coverage] date of the entry of the order of liquidation to the receiver [, liquidator or rehabilitator] of the insolvent [member] insurer or to any other person. The receiver [, rehabilitator or liquidator] shall remain entitled to any amount payable by the reinsurer under the reinsurance [agreement] contract with respect to losses or events that occur in periods prior to the [coverage] date of the entry of the order of liquidation, subject to applicable [setoff] set off provisions.

(4) Except as otherwise expressly provided in this [subsection] section, nothing in this [section] subsection shall alter or modify the terms and conditions of [the indemnity] any reinsurance [agreements of the insolvent member insurer] contract. Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance [agreement] contract. Nothing in this section shall (A) give a policy owner or beneficiary an independent cause of action against [an indemnity] a reinsurer that is not otherwise set forth in the [indemnity] reinsurance [agreement] contract, (B) limit or affect the association's right as a creditor of the estate of the insolvent insurer, or (C) apply to reinsurance contracts covering property or casualty risks.

Sec. 14. Subsections (a) to (c), inclusive, of section 38a-866 of the general statutes are repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(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 association shall establish a due date for each assessment which shall be at least thirty days after the association has provided the member notice of the assessment. Each member insurer shall pay interest on any late payment at the rate of one per cent per month, or any portion thereof, from the due date to the date of payment.

(b) There shall be two classes of assessments, as follows: (1) Class A assessments shall be [made] authorized and called for the purpose of meeting administrative and legal costs and other general expenses not related to a particular impaired or insolvent insurer; (2) Class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the association under section 38a-865 with regard to an impaired or insolvent insurer.

(c) (1) The amount of any Class A assessment shall be determined by the board and may be authorized and called on a pro-rata or non-pro-rata basis. If an assessment is made on a pro-rata basis, the board may provide that the assessment be credited against future Class B assessments. On and after January 1, 2012, the total of all non-pro-rata assessments shall not exceed three hundred dollars per member insurer per calendar year. The amount of any Class B assessment shall be allocated for assessment purposes among the accounts pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any other standard that the board, in its sole discretion, deems as being fair and reasonable under the circumstances.

(2) Class B assessments against member insurers for each account and subaccount shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the insurer became insolvent or, in the case of an assessment with respect to an impaired insurer, the three most recent calendar years for which information is available preceding the year in which the insurer became impaired bear to such premiums received on business in this state for those calendar years by all assessed member insurers.

(3) Assessments for funds to meet the requirements of the association with respect to an impaired or insolvent insurer shall not be authorized or called until necessary to implement the purposes of sections 38a-858 to 38a-875, inclusive. Classification of assessments under subsection (b) of this section and computation of assessments under this subsection shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The association shall notify each member insurer of its anticipated pro-rata share of an authorized assessment that is not yet called not later than one hundred eighty days after the association authorizes the assessment.

Sec. 15. Subsection (h) of section 38a-866 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(h) (1) Each insurer paying an assessment under [sections 38a-858 to 38a-875, inclusive,] this section may offset, for an assessment paid in the income year commencing prior to January 1, 2012, one hundred per cent and for an assessment paid in income years commencing on or after January 1, 2012, fifty per cent of the amount of such assessment against its premium tax liability to this state under chapter 207. Such offset shall be taken over a period of the five successive tax years following the year of payment of the assessment, at the rate of twenty per cent per year of [the assessment paid to the association] such offset. Each insurer to which has been refunded by the association, pursuant to subsection (f) of this section, all or a portion of an assessment previously paid to the association by the insurer shall be required to pay to the Department of Revenue Services an amount equal to the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns, as the case may be, filed by such insurer and that is attributable to such refunded assessment, provided the amount required to be paid to said department shall not exceed the amount of the refunded assessment. If the amount of the refunded assessment exceeds the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns filed by such insurer and that is attributable to such refunded assessment, such excess may not be claimed as an offset against the premiums tax liability on a premiums tax return or returns filed by such insurer or, if the offset has been transferred to another person pursuant to subdivision (2) of this subsection, by such other person. For purposes of this subdivision, if the offset has been transferred to another person pursuant to subdivision (2) of this subsection, the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns filed by such insurer includes the total amount that has been claimed as an offset against the premiums tax liability on the premiums tax return or returns filed by such other person. The association shall promptly notify the Commissioner of Revenue Services of the name and address of the insurers to which such refunds have been made, the amount of such refunds, and the date on which such refunds were mailed to each such insurer. If the amount that an insurer is required to pay to the Department of Revenue Services has not been so paid on or before the forty-fifth day after the date of mailing of such refunds, the insurer shall be liable for interest on such amount at the rate of one per cent per month, or fraction thereof, from such forty-fifth day to the date of payment.

(2) An insurer, in this subdivision called "the transferor", may transfer any offset provided under subdivision (1) of this subsection to an affiliate, as defined in section 38a-1, of the transferor. Any such transfer of the offset by the transferor, and any subsequent transfer or transfers of the same offset, shall not affect the obligation of the transferor to pay to the Department of Revenue Services any sums which are acquired by refund from the association pursuant to subsection (f) of this section and which are required to be paid to the Department of Revenue Services pursuant to subdivision (1) of this subsection. Such offset may be taken by any transferee only against the transferee's premium tax liability to this state under chapter 207. The Commissioner of Revenue Services shall not allow such offset to a transferee against its premium tax liability unless the transferor, the affiliate to which the offset was originally transferred, each subsequent transferor and each subsequent transferee have filed such information as may be required on forms provided by said commissioner with respect to any such transfer or transfers on or before the due date of the premium tax return on which such offset would have been taken by the transferor, if no transfer had been made by the transferor.

Sec. 16. Subsection (c) of section 38a-867 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(c) The plan of operation shall, in addition to requirements enumerated elsewhere in sections 38a-858 to 38a-875, inclusive, as amended by this act: (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 38a-864, as amended by this act; (3) establish regular places and times for meetings including telephone conference calls 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 38a-866, as amended by this act; (7) contain additional provisions necessary or proper for the execution of the powers and duties of the association.

Sec. 17. Section 38a-868 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) In addition to the duties and powers enumerated elsewhere in sections 38a-858 to 38a-875, inclusive, as amended by this act, [: (a) The] the commissioner shall: (1) Notify the board of directors of the existence of an impaired insurer not later than three days after a determination of impairment is made or he receives notice of impairment; (2) upon request of the board of directors, provide the association with a statement of the premiums in the appropriate states for each member insurer; and (3) when an impairment is declared and the amount of the impairment is determined, serve a demand upon the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired 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 sections 38a-858 to 38a-875, inclusive, as amended by this act. [; (4) 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.]

(b) The commissioner may suspend or revoke, after notice and hearing, the certificate of authority issued by this state to any member insurer that 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 that fails to pay an assessment when due. Such forfeiture shall not exceed five per cent of the unpaid assessment per month, but no forfeiture shall be less than five hundred dollars per month.

(c) Any final 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 thirty days of the final action being appealed. Any final action or order of the commissioner shall be subject to judicial review in the superior court for the judicial district of Hartford.

(d) The liquidator, rehabilitator or conservator of any impaired or insolvent insurer may notify all interested persons of the effect of sections 38a-858 to 38a-875, inclusive, as amended by this act.

Sec. 18. Section 38a-871 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(a) Nothing in sections 38a-858 to 38a-875, inclusive, as amended by this act, 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 38a-865, as amended by this act. 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 38a-872.

(c) For the purpose of carrying out its obligations under sections 38a-858 to 38a-875, inclusive, as amended by this act, 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 [(i)] (k) of section 38a-865. 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 sections 38a-858 to 38a-875, inclusive, as amended by this act. 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 reserve that should have been established for all policies of insurance written by the impaired or insolvent insurer.

(d) As a creditor of the impaired or insolvent insurer pursuant to subsection (c) of this section, the association shall be entitled to receive from time to time a disbursement of assets, as such assets become available, from the marshaled assets of the impaired or insolvent insurer, as credits against the contractual obligations of the association under sections 38a-858 to 38a-875, inclusive, as amended by this act. If the liquidator has not made an application to the receivership court, within one hundred twenty days after a final determination of insolvency of a member insurer, for the approval of a proposal to disburse assets to the association, the association may make an application to such court for the approval of its own proposal to disburse such assets.

[(d)] (e) (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] policy owners 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 given to the welfare of the [policyholders] policy owners 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] valid claims of the association for funds expended by the association to carry out its duties under section 38a-865, as amended by this act, with respect to such insurer, plus interest at a rate to be determined by the liquidator, has been fully recovered by the [commission] association.

[(e) It shall be a prohibited unfair trade practice and a violation of section 38a-815 for any person to make use in any manner of the protection afforded by sections 38a-858 to 38a-875, inclusive, in the solicitation, negotiation, procurement or effectuation of insurance provided, this subsection shall not apply to the distribution of any publication approved by the commissioner and describing the general purposes and current limitations of sections 38a-858 to 38a-874, inclusive. Violations of this section shall be subject to the provisions of section 38a-817.]

(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, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of subdivisions (2) to (4), inclusive. (2) No such dividend 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 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 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 of the impaired insurer to pay the contractual obligations of the impaired 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.] No person, including an insurer, agent or affiliate of an insurer, shall make, publish, disseminate or place before the public, or cause directly or indirectly to be made, published, disseminated or placed before the public, in any form, manner or method any written or oral advertisement, announcement or statement that uses the existence of the association to sell, solicit or induce the purchase of any insurance covered by the association pursuant to sections 38a-858 to 38a-875, inclusive, as amended by this act.

(2) (A) Not later than April 1, 2012, the association shall prepare and submit to the commissioner for the commissioner's approval a summary document that complies with subdivision (3) of this subsection and describes the general purposes of and restrictions imposed by sections 38a-858 to 38a-875, inclusive, as amended by this act. Upon the commissioner's approval of such document, the association shall notify its member insurers of the availability of such document and the requirements set forth in subparagraph (B) of this subdivision. The association shall revise such document as necessary to maintain accuracy.

(B) Beginning sixty days after the date the commissioner approves the summary document, no member insurer shall deliver a policy or contract unless such document accompanies such policy or contract at the time of delivery to the policy or contract owner. Such document shall also be available upon request by a policy or contract owner. Such document shall not be a guarantee that the policy, contract or policy or contract owner is covered in the event of the impairment of insolvency of a member insurer. The failure of an insurer to provide such document shall not afford any rights to a policy or contract owner greater than those specified in sections 38a-858 to 38a-875, inclusive, as amended by this act.

(3) The summary document set forth in subdivision (2) of this subsection shall contain a clear and conspicuous disclaimer on its face. The commissioner shall establish the form and content of such disclaimer, which shall include: (A) The name and address of the association and the Insurance Department; (B) a prominent warning that the association may not cover the policy or contract and if the association does cover the policy or contract, such coverage will be subject to substantial limitations and exclusions and conditioned on the policy or contract owner's continued residence in this state; (C) a statement of the types of coverage for which the association provides coverage; (D) a statement that the insurer and its agents are prohibited by law from using the existence of the association to sell, solicit or induce the purchase of any insurance; (E) a statement that the policy or contract owners should not rely on coverage under the association when selecting an insurer; (F) an explanation of the rights available to the policy or contract owner and the procedures for filing a complaint alleging a violation of any provision of sections 38a-858 to 38a-875, inclusive, as amended by this act; and (G) any other information as directed by the commissioner, including, but not limited to, sources for information about the financial condition of insurers, provided such information is not proprietary and is subject to disclosure pursuant to section 1-210.

(4) A member insurer shall retain evidence of compliance, as established by the commissioner, with subdivision (2) of this subsection for as long as the policy or contract for which the summary document was delivered remains in effect.

Sec. 19. Subparagraph (J) of subdivision (2) of section 38a-865 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(J) When proceeding under this subdivision 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 subparagraph (C) of subdivision (2) of subsection [(f)] (d) of section 38a-860, as amended by this act.

Sec. 20. Subdivision (16) of section 38a-862 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2011):

(16) "Premiums" means amounts or considerations, by whatever name called, received on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. "Premiums" does not include (A) any amounts or considerations received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection [(f)] (d) of section 38a-860, as amended by this act, except that assessable premium shall not be reduced on account of subparagraph (C) of subdivision (2) of subsection [(f)] (d) of section 38a-860, as amended by this act, relating to interest limitations, and subdivision (2) of subsection [(g)] (e) of section 38a-860, as amended by this act, relating to limitations with respect to any one individual, any one participant and any one contract owner; provided that "premiums" shall not include any premiums in excess of five million dollars on any unallocated annuity contract not issued under a governmental retirement benefit plan established under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended, or (B) with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, premiums in excess of five million dollars with respect to such policies or contracts, regardless of the number of policies or contracts held by the owner;


This act shall take effect as follows and shall amend the following sections:
Section 1	October 1, 2011	38a-838
Sec. 2	October 1, 2011	38a-839
Sec. 3	October 1, 2011	38a-840
Sec. 4	October 1, 2011	38a-841
Sec. 5	October 1, 2011	38a-842
Sec. 6	October 1, 2011	38a-844
Sec. 7	October 1, 2011	38a-845
Sec. 8	October 1, 2011	38a-851
Sec. 9	October 1, 2011	38a-860
Sec. 10	October 1, 2011	38a-863
Sec. 11	October 1, 2011	38a-864
Sec. 12	October 1, 2011	38a-865(d)
Sec. 13	October 1, 2011	38a-865(n)
Sec. 14	October 1, 2011	38a-866(a) to (c)
Sec. 15	October 1, 2011	38a-866(h)
Sec. 16	October 1, 2011	38a-867(c)
Sec. 17	October 1, 2011	38a-868
Sec. 18	October 1, 2011	38a-871
Sec. 19	October 1, 2011	38a-865(2)(J)
Sec. 20	October 1, 2011	38a-862(16)