Bill Text: OR HB2087 | 2011 | Regular Session | Enrolled
Bill Title: Relating to the Oregon Life and Health Insurance Guaranty Association; and declaring an emergency.
Spectrum: Unknown
Status: (Passed) 2011-05-27 - Chapter 142, (2011 Laws): Effective date May 27, 2011. [HB2087 Detail]
Download: Oregon-2011-HB2087-Enrolled.html
76th OREGON LEGISLATIVE ASSEMBLY--2011 Regular Session
Enrolled
House Bill 2087
Introduced and printed pursuant to House Rule 12.00. Presession
filed (at the request of Governor John A. Kitzhaber for
Department of Consumer and Business Services)
CHAPTER ................
AN ACT
Relating to the Oregon Life and Health Insurance Guaranty
Association; creating new provisions; amending ORS 734.760,
734.790, 734.800, 734.805, 734.810, 734.815, 734.820, 734.840,
734.870 and 734.880; and declaring an emergency.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 734.760 is amended to read:
734.760. As used in ORS 734.750 to 734.890, unless the context
requires otherwise:
(1) 'Account' means { - any - } { + one + } of the three
accounts created under ORS 734.800.
(2) 'Association' means the Oregon Life and Health Insurance
Guaranty Association created under ORS 734.800.
(3) 'Contractual obligation' means any obligation under
{ + a + } covered { - policies - } { + policy or contract or
a certificate under a group policy or contract + }.
(4) 'Covered policy' means any policy or contract { + or a
certificate under a group policy or contract + } to which ORS
734.750 to 734.890 apply.
{ + (5) 'Disability insurance' means health insurance that
provides income payments to an insured wage earner whose income
is interrupted due to an accident or illness. 'Disability
insurance' does not include workers' compensation insurance. + }
{ - (5) - } { + (6) + } 'Impaired insurer' means a member
insurer { - deemed by the Director of the Department of
Consumer and Business Services - } { + that is subject to an
order of rehabilitation under ORS 734.063 or an order of
conservation under ORS 734.200 + } after September 13, 1975
{ - , to be potentially unable to fulfill its contractual
obligations, excluding - } { + . 'Impaired insurer' does not
include an + } insolvent { - insurers - } { + insurer + }.
{ - (6) - } { + (7) + } 'Insolvent insurer' means { - an
insurer: - }
{ - (a) That was a member insurer either at the time the
policy was issued or when the insured event occurred, or any
insurer that has acquired direct policy obligations from a member
insurer through purchase, merger, consolidation, reinsurance or
otherwise, whether or not the acquiring insurer held a
certificate of authority to transact insurance in this state at
the time the policy was issued or when the insured event
occurred; and - }
Enrolled House Bill 2087 (HB 2087-A) Page 1
{ - (b) - } { + a member insurer + } that, after September
13, 1975,
{ - becomes insolvent and - } is placed under { - a
final - } { + an + } order of liquidation { - , rehabilitation
or conservation - } by a court of competent jurisdiction { +
with a finding of insolvency + }.
{ + (8) 'Long term care insurance' has the meaning given that
term in ORS 743.652. + }
{ - (7) - } { + (9)(a) + } 'Member insurer' means any
insurer { + currently + } authorized to transact in this state
any kind of insurance to which ORS 734.750 to 734.890 apply
{ - . - } { + , regardless of whether the insurer's
authorization to transact insurance was, in the past, suspended,
revoked, not renewed or voluntarily withdrawn.
(b) 'Member insurer' does not include:
(A) A hospital or medical service organization, whether
for-profit or nonprofit;
(B) A health maintenance organization;
(C) A fraternal benefit society;
(D) A mandatory state pooling plan;
(E) A mutual assessment company or other person that operates
on an assessment basis;
(F) An insurance exchange; or
(G) An organization that has a certificate of authority limited
to the issuance of charitable gift annuities under ORS
731.038. + }
{ - (8) - } { + (10) + } 'Premiums' means direct gross
insurance, including annuity, premiums written on covered
policies, less return premiums thereon and dividends paid or
credited to policyholders on such direct business. 'Premiums'
does not include premiums on contracts between insurers and
reinsurers or any premiums on policies or contracts excluded
under ORS 734.790.
{ + (11)(a) 'Principal place of business' means:
(A) For a plan sponsor or a person other than a natural person,
the state in which the natural persons who establish policy for
the direction, control and coordination of the operations of the
entity as a whole primarily exercise that function, as determined
by the association after considering the following factors:
(i) The state in which the primary executive and administrative
headquarters of the entity is located;
(ii) The state in which the principal office of the chief
executive officer of the entity is located;
(iii) The state in which the board of directors or governing
body of the entity conducts the majority of its meetings;
(iv) The state in which the executive or management committee
of the board of directors of the entity conducts the majority of
its meetings; and
(v) The state from which the management of the overall
operations of the entity is directed.
(B) For a benefit plan sponsored by affiliated companies
comprising a consolidated corporation, the state in which the
holding company or controlling affiliate has its principal place
of business as determined using the factors set forth in
subparagraph (A) of this paragraph.
(C) For a plan sponsor of a benefit plan for which more than 50
percent of the participants in the benefit plan are employed in a
single state, the state in which those participants are employed.
(D) Absent a specific or clear designation of a principal place
of business for a plan sponsor of a benefit plan established or
Enrolled House Bill 2087 (HB 2087-A) Page 2
maintained by two or more employers or jointly by one or more
employers and one or more employee organizations, the principal
place of business of the association, committee, joint board of
trustees or other governing body of the employer or employee
organization that has the largest investment in the benefit plan.
(b) As used in this subsection, 'plan sponsor' means:
(A) The employer for a benefit plan established or maintained
by a single employer.
(B) The employee organization for a benefit plan established or
maintained by an employee organization.
(C) For a benefit plan established or maintained by two or more
employers or jointly by one or more employers and one or more
employee organizations, the association, committee, joint board
of trustees or other governing bodies of the parties that
establish or maintain the benefit plan. + }
{ - (9) - } { + (12) + } 'Resident' means a person to whom
contractual obligations are owed by a member insurer { - which
is determined to be an impaired or insolvent insurer at a time
when the person is a resident of this state. - } { + and who
resides in this state on the date a court order is entered that
determines the member insurer to be an impaired insurer or an
insolvent insurer. A person may be a resident of only one state,
which in the case of a person other than a natural person shall
be its principal place of business. A citizen of the United
States who resides in a foreign country, or resides in a United
States possession, territory or protectorate that does not have
an association similar to the association created under ORS
734.800, shall be considered a resident of the state of domicile
of the insurer that issued the policies or contracts. If a person
could be covered by the association of another state, whether as
an owner, payee, beneficiary or assignee, ORS 734.750 to 734.890
shall be construed with the laws of the other state to result in
coverage by only one association.
(13) 'Structured settlement annuity' means an annuity purchased
to fund periodic payments for a plaintiff or other claimant in
payment for or with respect to personal injury suffered by the
plaintiff or other claimant.
(14) 'Supplemental contract' means a written agreement entered
into for the distribution of proceeds under a life or health
insurance policy or an annuity contract.
(15) 'Unallocated annuity contract' means an annuity contract
or group annuity certificate that is not issued to and owned by
an individual, except to the extent that any annuity benefits may
be guaranteed to an individual under the contract or
certificate. + }
SECTION 2. ORS 734.790 is amended to read:
734.790. (1) ORS 734.750 to 734.890 provide coverage { - to
the following persons - } for policies and contracts specified
in subsection (2) of this section { + to the following persons
who are not provided coverage under the laws of another
state + }:
(a) To a person who is a resident, if the person is an owner of
or a certificate holder under the policy or contract { + other
than a structured settlement annuity + } or, in the case of an
unallocated annuity contract, an employee participating in a
governmental retirement plan established under section 401,
403(b) or 457 of the United States Internal Revenue Code or the
beneficiaries of each such individual if deceased.
(b) To a person who is not a resident, if the person is an
owner of or a certificate holder under the policy or contract
Enrolled House Bill 2087 (HB 2087-A) Page 3
{ + other than a structured settlement annuity + } or, in the
case of an unallocated annuity contract, an employee
participating in a governmental retirement plan established under
section 401, 403(b) or 457 of the United States Internal Revenue
Code or the beneficiaries of each such individual if deceased.
This paragraph applies to a person who is not a resident only if
all of the following conditions are met:
(A) The insurer that issued the policy or contract must be a
{ - domestic - } { + member + } insurer.
{ - (B) The insurer must never have held a license or
certificate of authority in the state in which the person
resides. - }
{ - (C) - } { + (B) + } The state in which the person
resides must have an association similar to the Oregon Life and
Health Insurance Guaranty Association.
{ - (D) - } { + (C) + } The person must not be eligible for
coverage by
{ - the - } { + an + } association in the state in which the
person resides, as described in subparagraph { - (C) - }
{ + (B) + } of this paragraph { + , due to the fact that the
insurer was not authorized to transact insurance or licensed in
that state at the time specified in the state's guaranty
association law + }.
(c) To a person who, regardless of where the person resides, is
a beneficiary, assignee or payee of the persons covered under
paragraph (a) or (b) of this subsection. This paragraph does not
include a nonresident certificate holder under a group policy or
contract.
{ + (d) To a person who is a payee under a structured
settlement annuity, or to the beneficiary of a payee if the payee
is deceased, if the payee:
(A) Is a resident, regardless of where the contract owner
resides; or
(B) Is not a resident, but only under both of the following
conditions:
(i) The contract owner of the structured settlement annuity is
a resident and is not afforded any coverage by an association in
another state that is similar to the association created under
ORS 734.800, or 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 under ORS 734.800; and
(ii) Neither the payee or beneficiary nor the contract owner of
the structured settlement annuity is eligible for coverage by the
association of the state in which the payee or contract owner
resides. + }
(2) { + Except as limited by + } ORS 734.750 to 734.890 { + ,
the association shall + } provide coverage to the persons
specified in subsection (1) of this section for direct { - life
insurance, including annuity, policies, health insurance
policies, and contracts supplemental to life and health insurance
policies, issued by authorized insurers - } { + nongroup life
or health insurance policies or annuity contracts, for
certificates under direct group policies or contracts, and for
supplemental contracts to any of these, in each case issued by
member insurers + }.
(3) ORS 734.750 to 734.890 do not provide coverage for:
{ - (a) That portion or part of a variable life insurance or
variable annuity policy not guaranteed by an insurer. - }
Enrolled House Bill 2087 (HB 2087-A) Page 4
{ - (b) - } { + (a) + } That portion { - or part - } of
any policy or contract { + not guaranteed by the member insurer
or + } under which the risk is borne by the policyholder { + or
contract owner + }.
{ - (c) - } { + (b) + } Any policy or contract or part
thereof assumed by the impaired or insolvent insurer under a
contract of reinsurance, other than reinsurance for which
assumption certificates have been issued.
{ - (d) - } { + (c) + } Any policy or contract issued by a
health care service contractor complying with ORS 750.005 to
750.095.
{ - (e) - } { + (d) + } Any policy or contract issued by a
fraternal benefit society.
{ - (f) - } { + (e) + } Any portion of a policy or contract
to the extent that the { + interest + } rate { - of
interest - } on which { - it - } { + the policy or
contract + } is based { + , or to the extent that the interest
rate, crediting rate or similar factor determined by use of an
index or other external reference stated in the policy or
contract for the purpose of calculating returns or changes in
value + }:
(A) Exceeds, when averaged over the period of four years prior
to the date on which the { - association becomes obligated with
respect to the policy or contract - } { + member insurer
becomes either an impaired or insolvent insurer under ORS 734.750
to 734.890, whichever occurs first + }, a rate of interest
determined by subtracting four percentage points from Moody's
Corporate Bond Yield Average averaged for that same four-year
period or for a lesser period if the policy or contract was
issued less than four years before the { - association became
obligated - } { + member insurer becomes either an impaired or
insolvent insurer under ORS 734.750 to 734.890, whichever
occurred first + }; and
(B) Exceeds, on and after the date on which the
{ - association becomes obligated with respect to the policy or
contract, - } { + member insurer becomes either an impaired or
insolvent insurer under ORS 734.750 to 734.890, whichever occurs
first, + } the rate of interest determined by subtracting three
percentage points from Moody's Corporate Bond Yield Average as
most recently available.
{ - (g) - } { + (f) + } Any { + portion of a policy or
contract issued to a + } plan or program of an employer,
association or similar entity to provide life { + insurance + },
health { + insurance + } or annuity benefits to its employees or
members to the extent that the plan or program is self-funded or
uninsured, including benefits payable by an employer, association
or similar entity under any of the following:
(A) A multiple employer welfare arrangement as defined in
section { - 514 - } { + 3(40) (29 U.S.C. 1002(40)) + } of the
Employee Retirement Income Security Act of 1974, as amended.
(B) A minimum premium group insurance plan.
(C) A stop-loss group insurance plan.
(D) An administrative services only contract.
{ - (h) - } { + (g) + } Any portion of a policy or contract
to the extent that it provides dividends or experience rating
credits { + or voting rights + }, or provides that any fees or
allowances be paid to any person, including the { - policy or
contract holder - } { + policyholder or contract owner + }, in
connection with the service to or administration of the policy or
contract.
Enrolled House Bill 2087 (HB 2087-A) Page 5
{ - (i) - } { + (h) + } Any policy or contract issued in
this state by a member insurer at a time that { - it - }
{ + the insurer + } did not have a certificate of authority to
issue the policy or contract in this state.
{ - (j) - } { + (i) + } Any unallocated annuity contract
issued to { + or in connection with + } 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 + }.
{ - (k) - } { + (j) + } Any portion of any unallocated
annuity contract that is { + not + } issued to or in connection
with { - a specific employee, union or association of natural
persons benefit plan, other than - } a government retirement plan
referred to in subsection (1) of this section, or a government
lottery.
{ - (L) - } { + (k) + } Any coverage issued by the Oregon
Medical Insurance Pool.
{ + (L) Any portion of a policy or contract to the extent
that the assessments required by ORS 734.815 with respect to the
policy or contract are preempted by federal or state law.
(m) An obligation that does not arise under the express written
terms of the policy or contract issued by the insurer to the
policyholder or contract owner, including but not limited to:
(A) Claims based on marketing materials;
(B) Claims based on side letters, riders or other documents
that were issued by the insurer without meeting applicable policy
or contract form filing or approval requirements;
(C) Misrepresentations of, or regarding, policy or contract
benefits;
(D) Extracontractual claims, including but not limited to
claims related to bad faith in the payment of claims, punitive or
exemplary damages or attorney fees or costs; or
(E) A claim for penalties or consequential or incidental
damages.
(n) 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 that in either case is not an affiliate of the member
insurer.
(o) Any portion of a policy or contract to the extent that
portion 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 the changes in value have
not been credited to the policy or contract, or as to which the
policyholder's or contract owner's rights are subject to
forfeiture, as of the date on which the member insurer becomes
either an impaired or insolvent insurer, whichever occurs first.
If the interest or changes in value in a policy or contract are
credited less frequently than annually, for purposes of
determining the values that have been credited and are not
subject to forfeiture under this paragraph, the interest or
change in value that is determined by using the procedures
specified in the policy or contract shall be credited as if the
contractual date of crediting interest or changing value was the
date of the impairment or insolvency, whichever is earlier, and
may not be subject to forfeiture.
(p) Any policy or contract providing any hospital, medical,
prescription drug or other health care benefits under Part C or
Enrolled House Bill 2087 (HB 2087-A) Page 6
Part D of subchapter XVIII, chapter 7, Title 42 of the United
States Code, or any regulations issued under those
provisions. + }
(4) As used in this section, 'Moody's Corporate Bond Yield
Average' means the Monthly Average Corporates as published by
Moody's Investors Service, Inc., or any successor thereto.
SECTION 3. ORS 734.800 is amended to read:
734.800. (1) There is created a nonprofit legal entity to be
known as the Oregon 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 ORS 734.820, and shall exercise its powers through a board
of directors established under ORS 734.805. For purposes of
administration and assessment, the association shall maintain
three accounts:
(a) The health insurance account { - ; - } { + , composed of
the following subaccounts:
(A) The disability insurance subaccount;
(B) The long term care insurance subaccount; and
(C) The major medical and all other health insurance
subaccount; + }
(b) The life insurance account; and
(c) The annuity account.
(2) The association shall come under the immediate supervision
of the Director of the Department of Consumer and Business
Services and shall be subject to the applicable provisions of the
insurance laws of this state.
SECTION 4. ORS 734.805 is amended to read:
734.805. (1) The board of directors of the Oregon Life and
Health Insurance Guaranty Association shall consist of not less
than five nor more than nine { + members who represent + }
member insurers, serving terms as established in the plan of
operation. The members of the board shall be selected by member
insurers, subject to the approval of the Director of the
Department of Consumer and Business Services. Vacancies on the
board shall be filled for the remaining period of the term by a
majority vote of the remaining board members, subject to the
approval of the Director { + of the Department of Consumer and
Business Services + }. To select the initial board of directors,
and initially organize the association, the Director { + of the
Department of Consumer and Business Services + } 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 60 days after notice of the organizational
meeting, the Director { + of the Department of Consumer and
Business Services + } may appoint the initial members.
(2) In approving selections or in appointing members to the
board, the Director { + of the Department of Consumer and
Business Services + } shall consider, among other things, whether
all member insurers are fairly represented.
(3) Members of the board of directors may be reimbursed from
the assets of the association for expenses incurred by them as
members of the board, but members of the board { - shall - }
{ + may + } not otherwise be compensated by the association for
their services.
Enrolled House Bill 2087 (HB 2087-A) Page 7
SECTION 5. ORS 734.810, as amended by section 1, chapter 26,
Oregon Laws 2010, is amended to read:
734.810. { - In addition to the other powers and duties
enumerated in ORS 734.750 to 734.890: - }
(1) If a { - domestic - } { + member + } insurer is an
impaired insurer, the Oregon Life and Health Insurance Guaranty
Association { - may - } , { + in its discretion and + }
subject to any conditions imposed by the association and approved
by { - the impaired insurer and - } the Director of the
Department of Consumer and Business Services, other than those
which impair the contractual obligations of the impaired
insurer { + , may + }:
(a) Guarantee { + , assume + } or reinsure, or cause to be
guaranteed, assumed { - , - } or reinsured, any or all of the
covered policies of the impaired insurer.
(b) Provide such { - money - } { + moneys + }, pledges,
notes, { + loans, + } guarantees or other means as are proper to
implement paragraph (a) of this subsection and { - assure - }
{ + ensure + } payment of the contractual obligations of the
impaired insurer pending action under paragraph (a) of this
subsection.
{ - (c) Loan money to the impaired insurer. - }
(2) If a member insurer is an insolvent insurer, the
association { - shall - } , { + in its discretion and + }
subject to the approval of the director { + , shall take either
of the following steps + }:
(a) { + (A) + } Guarantee, assume { - , - } or reinsure, or
cause to be guaranteed, assumed { - , - } or reinsured, the
covered policies of the insolvent insurer;
{ - (b) - } { + (B) + } { - Assure - } { + Ensure + }
payment of the contractual obligations of the insolvent insurer;
and
{ - (c) - } { + (C) + } Provide such { - money - } { +
moneys + }, pledges, notes, { + loans, + } guarantees or other
means as are reasonably necessary to discharge such duties.
{ + (b) Provide benefits and coverages in accordance with the
following provisions:
(A) For life and health insurance policies and annuity
contracts, the association shall ensure that the payment of
benefits for premiums, except for terms of conversion and
renewability, under the replacement coverage provided by the
association is identical to the payment of benefits for premiums
that would have been payable under the policies or contracts of
the insolvent insurer, for claims incurred:
(i) With respect to group policies and contracts, not later
than the earlier of the next renewal date under those policies or
contracts or 45 days, but in no event less than 30 days, after
the date on which the association becomes obligated with respect
to the policies or contracts.
(ii) With respect to nongroup policies and contracts, if any,
not later than the earlier of the next renewal date under those
policies or contracts or one year, but in no event less than 30
days, after the date on which the association becomes obligated
with respect to the policies or contracts.
(B) The association shall make diligent efforts to provide a
30-day notice of the termination of the benefits provided under
subparagraph (A) of this paragraph to all known insureds or
annuitants for nongroup policies and contracts, or to group
policyholders or contract owners with respect to group policies
and contracts.
Enrolled House Bill 2087 (HB 2087-A) Page 8
(C) For nongroup life and health insurance policies and
annuities covered by the association, the association shall make
substitute coverage available to each known insured or annuitant,
or owner if other than the insured or annuitant. For an
individual formerly insured or formerly an annuitant under a
group policy who is not eligible for replacement group coverage,
the association shall make available substitute coverage on an
individual basis in accordance with the provisions of
subparagraph (D) of this paragraph, if the insureds or annuitants
had a right under law or under the terminated policy or annuity
to convert coverage to individual coverage or to continue an
individual policy or annuity that was already in force until a
specified age or for a specified time, during which the insurer
had no right to make changes unilaterally in any provision of the
policy or annuity or had a right to make changes only to premiums
or to classes of risk.
(D) In providing the substitute coverage required under
subparagraph (C) of this paragraph, the association:
(i) May offer either to reissue the terminated coverage or to
issue an alternative policy.
(ii) Shall offer alternative or reissued policies without
requiring evidence of insurability.
(iii) May not impose any waiting period or exclusion that would
not have applied under the terminated policy.
(iv) May reinsure any alternative or reissued policy.
(E) Any alternative policy adopted by the association must:
(i) Be approved by the Director of the Department of Consumer
and Business Services and the court. The association may adopt
alternative policies of various types for future issuance without
regard to any particular impairment or insolvency.
(ii) Contain at least the minimum statutory provisions required
in this state and provide benefits that are not unreasonable in
relation to the premium charged. The association shall set the
premium in accordance with a table of rates adopted by the
association. The premium shall reflect the amount of insurance to
be provided and the age and class of risk of each insured, but
may not reflect any changes in the health of the insured after
the original policy was last underwritten.
(iii) Provide coverage of a type similar to that of the policy
issued by the insolvent insurer, as determined by the
association.
(F) If the association elects to reissue terminated coverage at
a premium rate that is different from the premium rate that was
charged under the terminated policy, the premium rate shall be
set by the association, in accordance with the amount of
insurance provided and the age and class of risk, and be subject
to approval by the Director of the Department of Consumer and
Business Services and the court.
(G) The association's obligations with respect to coverage
under any policy of the insolvent insurer or under any reissued
or alternative policy shall cease on the date on which the
coverage or policy is replaced by another similar policy by the
policyholder, the insured or the association.
(H) When proceeding under this subsection with respect to a
policy or contract that carries a guaranteed minimum interest
rate, the association shall ensure the payment or crediting of a
rate of interest consistent with the provisions of ORS 734.790
(3).
(3) Nonpayment of premiums within 31 days after the date
required under the terms of any guaranteed, assumed, alternative
Enrolled House Bill 2087 (HB 2087-A) Page 9
or reissued policy or contract or substitute coverage shall
terminate the association's obligations under the policy,
contract or substitute coverage under ORS 734.750 to 734.890 with
respect to the policy, contract or substitute coverage, except
with respect to any claims incurred or any net cash surrender
value or net cash withdrawal value that may be due in accordance
with the provisions of ORS 734.750 to 734.890.
(4) 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. At the request of
the liquidator of an insolvent insurer, the association shall
provide a report to the liquidator regarding any premium
collected by the association. The association is liable for
unearned premiums due to policyholders or contract owners arising
after the entry of the order.
(5) The protection provided by ORS 734.750 to 734.890 does not
apply where any guaranty protection is provided to residents of
this state by the laws of the domiciliary state or jurisdiction
of the impaired or insolvent insurer other than this state. + }
{ - (3)(a) - } { + (6)(a) + } In carrying out its duties
under subsection (2) of this section, the association may impose
permanent policy liens or contract liens in connection with any
guaranteed, assumption or reinsurance agreement, if the court
considering the lien finds that the amounts { - which - }
{ + that + } can be assessed under ORS 734.750 to 734.890 are
less than the amounts needed to { - assure - } { + ensure + }
full and prompt performance of the insolvent insurer's
contractual obligations or that the economic or financial
conditions affecting member insurers are sufficiently adverse to
render the imposition of policy or contract liens to be in the
public interest, and approves the specific policy liens or
contract liens to be used.
(b) { - Before being obligated - } { + In carrying out its
duties + } under subsection (2) of this section { + , + } the
association may request that there be imposed temporary
moratoriums or liens on payments of cash values and policy
loans { + or temporary moratoriums on the right to withdraw
funds held in conjunction with the policies or contracts + }, in
addition to any contractual provisions for deferral of cash or
policy loan values, and such temporary moratoriums and liens may
be imposed if they are approved by the court. { + In addition,
in the event of a temporary moratorium or moratorium charge
imposed by the court on payment of cash values or policy loan
values, or on any other right to withdraw funds held in
conjunction with policies or contracts, out of the assets of the
impaired or insolvent insurer, the association may defer the
payment of cash values, policy loan values and other rights by
the association for the period of the temporary moratorium or
moratorium charge that is imposed by the court, except for claims
that are covered by the association to be paid in accordance with
a hardship procedure that is established by the liquidator or
rehabilitator and approved by the court. + }
{ - (4) - } { + (7) + } If the association fails to act as
required in subsection (2) of this section within a reasonable
time, the director shall have the powers and duties of the
association under ORS 734.750 to 734.890 with respect to
insolvent insurers.
{ - (5) - } { + (8) + } The association may render
assistance and advice to the director, upon request of the
director, concerning rehabilitation, payment of claims,
Enrolled House Bill 2087 (HB 2087-A) Page 10
continuance of coverage or the performance of other contractual
obligations of any impaired or insolvent insurer.
{ - (6) - } { + (9) + } The association shall have standing
to { + intervene or + } appear before any court { + or
agency + } in this state having jurisdiction over an impaired or
insolvent insurer concerning which the association is or may
become obligated under ORS 734.750 to 734.890 { + or with
jurisdiction over any person or property against which the
association has rights through subrogation or otherwise + }. Such
standing shall extend to all matters germane to the powers and
duties of the association including, but not limited to,
proposals for reinsuring { + , modifying + } or guaranteeing the
covered policies of the impaired or insolvent insurer and the
determination of the covered policies and contractual
obligations. The association may also appear or intervene before
a court { + or agency + } in another state with jurisdiction
over an impaired or insolvent insurer for which the association
is or may become obligated or with jurisdiction over { - a
third party - } { + any person or property + } against whom the
association may have rights through subrogation { - of the
policyholders of the insurer - } { + or otherwise + }.
{ - (7)(a) - } { + (10)(a) + } Any person receiving
benefits under ORS 734.750 to 734.890 shall be considered to have
assigned the rights under, and any causes of action { + against
any person for losses arising under, resulting from or
otherwise + } relating to, the covered policy to the association
to the extent of the benefits received because of ORS 734.750 to
734.890, whether the benefits are payments of or on account of
contractual obligations or continuation of coverage. The
association may require an assignment to { - it - } { + the
association + } of such rights by any payee,
{ - policy or - } { + policyholder, + } contract owner,
beneficiary, insured or annuitant as a condition precedent to the
receipt of any rights or benefits conferred by ORS 734.750 to
734.890 upon such person. The association shall be subrogated to
these rights against the assets of any { + impaired or + }
insolvent insurer.
(b) The subrogation rights of the association under this
subsection shall have the same priority against the assets of the
{ + impaired or + } insolvent insurer as that possessed by the
person entitled to receive benefits under ORS 734.750 to 734.890.
{ + (c) In addition to the rights set forth in paragraphs (a)
and (b) of this subsection, the association may exercise any
common law rights of subrogation or any other equitable or legal
remedy that would have been available to the impaired or
insolvent insurer or to the policyholder or contract owner,
beneficiary or payee of a policy or contract with respect to the
policy or contract. In the case of a structured settlement
annuity, these rights include but are not limited to any rights
of the policyholder or contract owner, beneficiary or payee of
the annuity, to the extent of benefits received under ORS 734.750
to 734.890, against a person originally or by succession
responsible for the losses arising from the personal injury
relating to the annuity or payment therefor, with the exception
of a person responsible solely by reason of serving as an
assignee in respect of a qualified assignment under section 130
of the federal Internal Revenue Code.
(d) If the provisions of this subsection are determined by a
court to be invalid or ineffective with respect to any person or
claim for any reason, the association shall reduce the amount
Enrolled House Bill 2087 (HB 2087-A) Page 11
payable by the association with respect to the related covered
obligations by the amount realized by any other person with
respect to the person or claim that is attributable to the
policies or contracts covered by the association.
(e) If the association provides benefits with respect to a
covered obligation and a person recovers amounts to which the
association has rights as described in this subsection, the
person shall pay to the association the portion of the recovery
attributable to the policies or contracts covered by the
association. + }
{ - (8) - } { + (11) + } The contractual obligations of the
{ + impaired or + } insolvent insurer for which the association
becomes or may become liable { - shall - } { + may + } not
exceed the lesser of:
(a) The contractual obligations for which the { + impaired or
insolvent + } insurer is liable or would have been liable if it
were not an { + impaired or + } insolvent insurer, unless such
obligations are reduced as permitted by subsection { - (3) - }
{ + (6) + } of this section; { - or - }
(b) { - The applicable following benefits, subject to
subsection (9) of this section - } { + With respect to any one
life, regardless of the number of policies or contracts + }:
(A) $300,000 in life insurance death benefits, but not more
than $100,000 in net cash surrender and net cash withdrawal
values for life insurance { - , with respect to any one life,
regardless of the number of policies or contracts - } .
(B) $100,000 in health insurance benefits { + other than basic
hospital, medical and surgical insurance, major medical
insurance, disability insurance or long term care insurance + },
including any net cash surrender and net cash withdrawal values
{ - , with respect to any one life, regardless of the number of
policies or contracts - } .
{ + (C) $300,000 in disability insurance benefits.
(D) $300,000 in long term care insurance benefits.
(E) $500,000 in basic hospital, medical and surgical insurance
or major medical insurance. + }
{ - (C) - } { + (F) + } $250,000 in the present value of
annuity benefits, including { + any + } net cash surrender and
net cash withdrawal values { - , with respect to any one life,
regardless of the number of policies or contracts. - } { + ;
(c) With respect to each payee of a structured settlement
annuity or the beneficiary of the payee if deceased, $250,000 in
the present value of annuity benefits, in the aggregate,
including any net cash surrender and net cash withdrawal values;
or + }
{ - (D) - } { + (d) + } $250,000 in { + the + } present
value { + of + } annuity benefits, in the aggregate, including
{ + any + } net cash surrender and net cash withdrawal values,
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 covered by an unallocated
annuity contract or the beneficiaries of each such individual if
deceased.
{ - (9) The association shall not be liable for more than
$300,000 in the aggregate with respect to any one individual
under subsection (8)(b) of this section. - }
{ - (10) Subject to the applicable limitation with respect to
any one individual under subsections (8) and (9) of this section,
the benefits for which the association may become liable with
respect to any one owner of policies or contracts other than an
Enrolled House Bill 2087 (HB 2087-A) Page 12
unallocated annuity contract to which subsection (8)(b)(D) of
this section applies, whether the owner is an individual,
corporation or other person, shall not exceed $5 million in
benefits in the aggregate for all persons covered by such
policies or contracts, regardless of the number of the policies
and contracts held by the owner. - }
{ + (12) The association may not be liable for more than:
(a) $300,000 in benefits, in the aggregate, with respect to any
one life under subsection (11)(b), (c) and (d) of this section,
with the exception of benefits under subsection (11)(b)(E) of
this section, in which case the aggregate liability of the
association may not exceed $500,000 with respect to any one life.
(b) With respect to one policyholder of multiple nongroup
policies of life insurance, regardless of whether the
policyholder is an individual, firm, corporation or other person,
and whether the persons insured are officers, managers, employees
or other persons, $5 million in benefits, regardless of the
number of policies and contracts held by the policyholder.
(13) The limitations set forth in subsections (11) and (12) of
this section are limitations on the benefits for which the
association is obligated before taking into account either its
subrogation and assignment rights or the extent to which those
benefits could be provided out of the assets of the impaired or
insolvent insurer attributable to covered policies. The costs of
the association's obligations under ORS 734.750 to 734.890 may be
met by the use of assets attributable to covered policies or
reimbursed to the association under its subrogation and
assignment rights.
(14) In performing its obligations to provide coverage under
ORS 734.750 to 734.890, the association is not required to
guarantee, assume, reinsure or perform, or cause to be
guaranteed, assumed, reinsured or performed, any contractual
obligation of the impaired or insolvent insurer or contract owner
under a covered policy that does not materially affect the
economic values or economic benefits of the covered policy or
contract. + }
{ - (11) - } { + (15) + } The association may:
(a) Enter into such contracts as are necessary or proper to
carry out the provisions and purposes of ORS 734.750 to 734.890.
(b) Sue or be sued, including taking any legal actions
necessary or proper for recovery of any unpaid assessments under
ORS 734.815 { + and to settle claims or potential claims against
the association + }.
(c) Borrow money to effect the purposes of ORS 734.750 to
734.890. Any notes or other evidence of indebtedness of the
association not in default shall be legal investments for
{ - domestic - } { + member + } insurers and may be carried
as admitted assets.
(d) Employ or retain such persons as are necessary to handle
the financial transactions of the association, and to perform
such other functions as become necessary or proper under ORS
734.750 to 734.890.
(e) Negotiate and contract with any liquidator, rehabilitator,
conservator or ancillary receiver to carry out the powers and
duties of the association.
(f) Take such legal action as may be necessary to avoid payment
of improper claims.
(g) Exercise, for the purposes of ORS 734.750 to 734.890 and to
the extent approved by the director, the powers of a
{ - domestic - } { + member + } life or health insurer, but in
Enrolled House Bill 2087 (HB 2087-A) Page 13
no case may the association issue policies other than those
issued to perform the contractual obligations of the impaired or
insolvent insurer.
{ + (h) Organize itself as a corporation or other legal form
permitted by the laws of this state.
(i) Request information from a person seeking coverage from the
association to aid the association in determining its obligations
under ORS 734.750 to 734.890 with respect to that person.
(j) Take any other necessary or appropriate action to discharge
its duties and obligations and to exercise its powers under ORS
734.750 to 734.890.
(16) The duties and powers of the association described in this
section are in addition to any other duties and powers of the
association described in ORS 734.750 to 734.890.
(17)(a) Within 180 days after the date of the order of
liquidation, the association may succeed to the rights and
obligations of the ceding member insurer that relate to policies
or annuities covered, in whole or in part, by the association, in
each case under any one or more reinsurance contracts entered
into by the insolvent insurer and its reinsurers and selected by
the association. Any such assumption shall be effective as of the
date of the order of liquidation. The election shall be effected
by the association sending written notice, return receipt
requested, to the affected reinsurers.
(b) To facilitate the earliest practicable decision about
whether to assume any of the contracts of reinsurance, and in
order to protect the financial position of the estate, the
receiver and each reinsurer of the ceding member insurer shall
make available upon request to the association as soon as
possible after commencement of formal delinquency proceedings
copies of in-force contracts of reinsurance and all related files
and records relevant to the determination of whether such
contracts should be assumed, and notices of any defaults under
the reinsurance contracts or any known event or condition which
with the passage of time could become a default under the
reinsurance contracts.
(c) For any reinsurance contracts assumed by the association
under paragraphs (a) and (b) of this subsection:
(A) The association is responsible for all unpaid premiums due
under the reinsurance contracts for periods both before and after
the date of the order of liquidation, and shall be responsible
for the performance of all other obligations to be performed
after the date of the order of liquidation, related to policies
or annuities covered by the reinsurance contract, in whole or in
part, by the association. The association may charge 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 and shall provide notice and an
accounting of those charges to the liquidator.
(B) The association is entitled to any amounts payable by the
reinsurer under the reinsurance contracts with respect to losses
or events that occur in periods after the date of the order of
liquidation and that relate to policies or annuities covered, in
whole or in part, by the association. Upon receipt of any such
amounts, the association shall pay the beneficiary under the
policy or annuity on account of which the amounts were paid a
portion of the amount equal to the lesser of:
(i) The amount received by the association; or
(ii) The amount received by the association that is in excess
of the amount equal to the benefits paid by the association on
Enrolled House Bill 2087 (HB 2087-A) Page 14
account of the policy or annuity minus the amount retained by the
insurer applicable to the loss or event.
(C) Within 30 days following the association's election, the
association and each reinsurer shall calculate the net balance
due to or from the association under each reinsurance contract as
of the election date with respect to policies or annuities
covered, in whole or in part, by the association. The calculation
shall give full credit to all items paid by the insurer or its
receiver or by the reinsurer prior to the election date. The
reinsurer shall pay the receiver any amounts due for losses or
events prior to the date of the order of liquidation, subject to
any setoff for premiums unpaid for periods prior to that date,
and the association or the reinsurer shall pay any remaining
balance due to one another. The reinsurer and the association
shall make such payments within five days after the completion of
the calculation of the net balance due under each reinsurance
contract. Any disputes over the amounts due to the association or
the reinsurer shall be resolved by arbitration according to the
terms of the affected reinsurance contracts or, if the contract
contains no arbitration clause, as otherwise provided by law. If
the receiver has received any amounts due the association under
subparagraph (B) of this paragraph, the receiver shall remit the
amounts to the association as promptly as practicable.
(d) If the association, or the receiver on the association's
behalf, within 60 days after the election date pays the unpaid
premiums due for periods both before and after the election date
that relate to policies or annuities covered, in whole or in
part, by the association, the reinsurer may not terminate the
reinsurance contracts for failure to pay premiums insofar as the
reinsurance contracts relate to policies or annuities covered, in
whole or in part, by the association, and may not set off any
unpaid amounts due under other contracts, or unpaid amounts due
from parties other than the association, against amounts due to
the association.
(e)(A) During the period from the date of the order of
liquidation until the election date or, if the election date does
not occur, 180 days after the date 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 paragraph (a) of this
subsection, whether for periods prior to or after the date of the
order of liquidation; and
(ii) The reinsurer, the receiver and the association shall, to
the extent practicable, provide to each other data and records
that are reasonably requested.
(B) After the association has elected to assume a reinsurance
contract, the parties' rights and obligations shall be governed
by paragraph (a) of this subsection.
(f) If the association does not elect to assume a reinsurance
contract by the election date under paragraph (a) of this
subsection, the association shall have no rights or obligations,
for periods both before and after the date of the order of
liquidation, with respect to the reinsurance contract.
(g) When policies or annuities, or covered obligations related
to policies or annuities, are transferred to an assuming insurer,
the association may also transfer reinsurance on the policies or
annuities for contracts assumed under paragraph (a) of this
subsection, subject to the following:
(A) Unless the reinsurer and the assuming insurer agree
otherwise, the reinsurance contract transferred may not cover any
Enrolled House Bill 2087 (HB 2087-A) Page 15
new policies of insurance or annuities in addition to those
transferred;
(B) The obligations described in paragraph (a) of this
subsection shall no longer apply with respect to matters arising
after the effective date of the transfer; and
(C) The transferring party shall give notice in writing, return
receipt requested, to the affected reinsurer not less than 30
days before the effective date of the transfer.
(h) The provisions of this subsection shall supersede any other
provision of law or any affected reinsurance contract that
provides for or requires any payment of reinsurance proceeds, on
account of losses or events that occur in periods after the date
of the order of liquidation, to the receiver or any other person.
The receiver shall remain entitled to any amounts payable by the
reinsurer under the reinsurance contract with respect to losses
or events that occur in periods prior to the date of the order of
liquidation, subject to applicable setoff provisions.
(i) Except as otherwise provided in this subsection, nothing in
this section shall:
(A) Alter or modify the terms and conditions of any reinsurance
contract;
(B) Abrogate or limit any rights of any reinsurer to claim that
the reinsurer is entitled to rescind a reinsurance contract;
(C) Grant a policyholder, contract owner or beneficiary an
independent cause of action against a reinsurer that is not
otherwise set forth in the reinsurance contract;
(D) Limit or affect the association's rights as a creditor of
the estate against the assets of the estate; or
(E) Apply to reinsurance agreements covering property or
casualty risks.
(18) The board of directors of the association may exercise
reasonable business judgment to determine the means by which the
association is to provide the benefits under ORS 734.750 to
734.890 in an economical and efficient manner.
(19) If the association has arranged or offered to provide the
benefits of ORS 734.750 to 734.890 to a covered person under a
plan or arrangement that fulfills the association's obligations
under this section, the person is not entitled to benefits from
the association in addition to or other than those provided under
the plan or arrangement.
(20) Venue in a suit against the association arising under ORS
734.750 to 734.890 shall be in the Circuit Court for Marion
County.
(21) In carrying out its duties in connection with
guaranteeing, assuming or reinsuring policies or contracts under
this section, the association may, subject to approval of the
court, issue substitute coverage for a policy or contract that
provides an interest rate, crediting rate or similar factor
determined by use of an index or other external reference stated
in the policy or contract for the purpose of calculating returns
or changes in value by issuing an alternative policy or contract
in accordance with all of the following provisions:
(a) In lieu of the index or other external reference provided
for in the original policy or contract, the alternative policy or
contract provides for a fixed interest rate, payment of dividends
with minimum guarantees, or a different method for calculating
interest or changes in value.
(b) There is no requirement for evidence of insurability,
waiting period or other exclusion that would not have applied
under the original policy or contract.
Enrolled House Bill 2087 (HB 2087-A) Page 16
(c) The alternative policy or contract is substantially similar
to the original policy or contract in all other material
terms. + }
SECTION 6. ORS 734.815 is amended to read:
734.815. (1) For the purpose of providing the funds necessary
to carry out the powers and duties of the Oregon Life and Health
Insurance Guaranty Association, the board of directors shall
assess the member insurers, separately for each account, at such
time and for such amounts as the board finds necessary. The board
shall collect the assessments after 30 days' written notice to
the member insurers before payment is due.
(2) There shall be two assessments, as follows:
(a) Class A assessments shall be made for the purpose of
meeting administrative and legal costs and other general expenses
whether or not related to a particular impaired or insolvent
insurer.
(b) Class B assessments shall be made to the extent necessary
to carry out the powers and duties of the association under ORS
734.810 with regard to an impaired or insolvent insurer.
(3)(a) The amount of any class A assessment shall be determined
by the board and may be made on a pro rata or other basis. If pro
rata, the board may provide that the class A assessment be
credited against future class B assessments. An assessment on
another basis { - shall - } { + may + } not exceed
{ - $150 - } { + $300 + } per member insurer in any one
calendar year. The amount of any class B assessment shall be
allocated for assessment purposes among the accounts in the
proportion that the premiums received by the impaired or
insolvent insurer on the policies covered by each account, for
the last calendar year preceding the assessment in which the
impaired or insolvent insurer received premiums, bears to the
premiums received by such insurer for such calendar year on all
covered policies.
(b) Class B assessments for each account shall be in the
proportion that the premiums received on business in this state
by each assessed member insurer on policies covered by each
account for the three most recent calendar years for which
information is available preceding the year in which the insurer
became impaired or insolvent, as the case may be, bears to such
premiums received on business in this state for such calendar
years by all assessed member insurers.
(c) Assessments for funds to meet the requirements of the
association with respect to an impaired or insolvent insurer
{ - shall - } { + may + } not be made until necessary to
implement the purposes of ORS 734.750 to 734.890. Classification
of assessments under subsection (2) 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.
(4) The association may abate or defer, in whole or in part,
the assessment of a member insurer if, in the opinion of the
board, payment of the assessment would endanger the ability of
the member insurer to fulfill its contractual obligations. In the
event an assessment against a member insurer is abated or
deferred, in whole or in part, the amount by which such
assessment is abated or deferred shall be assessed against the
other member insurers.
(5) A member insurer { - shall - } { + may + } not be
required to pay assessments in any one calendar year exceeding
two percent of the insurer's premiums in this state on the
Enrolled House Bill 2087 (HB 2087-A) Page 17
policies covered by the account. If a member insurer's total
assessment cannot be collected in any one year because of this
limitation, the remaining amount due shall be collected from the
insurer in future years.
(6) The board may, by an equitable method as established in the
plan of operation, refund to member insurers, in proportion to
the contribution of each insurer to that account, the amount by
which the assets of the account exceed the amount the board finds
is necessary to carry out during the coming year the obligations
of the association with regard to that account, including assets
accruing from assignment, subrogation, net realized gains and
income from investments. A reasonable amount may be retained in
any account to provide funds for the continuing expenses of the
association and for future losses.
(7) It shall be proper for any member insurer, in determining
its premium rates and policyowner dividends for any kind of
insurance within the scope of ORS 734.750 to 734.890, to consider
the amount reasonably necessary to meet its assessment
obligations under ORS 734.750 to 734.890.
(8) The association shall issue to each insurer paying an
assessment under ORS 734.750 to 734.890, other than a class A
assessment, a certificate of contribution in a form prescribed by
the Director of the Department of Consumer and Business Services
for the amount so paid. All outstanding certificates shall be of
equal dignity and priority without reference to amounts or dates
of issue. A certificate of contribution may be shown by the
insurer in its financial statement as an asset in such form and
for such amount, if any, and period of time as the director may
approve.
(9) The association may assess and collect interest on the
amount of an assessment owed by a member insurer that fails to
pay the assessment when due. The annual rate that may be charged
under this subsection { - shall - } { + may + } not exceed
the rate established by the director by rule.
SECTION 7. ORS 734.820 is amended to read:
734.820. (1)(a) The Oregon Life and Health Insurance Guaranty
Association shall maintain on file with the Director of the
Department of Consumer and Business Services a plan of operation
and shall submit any amendments thereto necessary or suitable to
{ - assure - } { + ensure + } the fair, reasonable and
equitable administration of the association. Amendments to the
plan shall become effective upon approval in writing by the
director.
(b) If the association fails to submit suitable amendments to
the plan, the director shall, after notice and hearing, adopt and
promulgate such reasonable rules as are necessary or advisable to
implement the provisions of ORS 734.750 to 734.890. Such rules
shall continue in force until modified by the director or
superseded by amendments submitted by the association and
approved by the director.
(2) All member insurers shall comply with the plan of
operation.
(3) The plan of operation shall, in addition to requirements
enumerated elsewhere in ORS 734.750 to 734.890:
(a) Establish procedures for handling the assets of the
association.
(b) Establish the amount and method of reimbursing members of
the board of directors.
(c) Establish regular places and times for meetings of the
board of directors.
Enrolled House Bill 2087 (HB 2087-A) Page 18
(d) Establish procedures for records to be kept of all
financial transactions of the association, its agents, and the
board of directors.
(e) Establish the procedures whereby selections for the board
of directors will be made and submitted to the director.
(f) Establish any additional procedures for assessments under
ORS 734.815.
(g) Contain additional provisions necessary or proper for the
execution of the powers and duties of the association.
{ + (h) Establish procedures for removing a member of the
board of directors for cause, including removing a board member
who represents a member insurer when the member insurer becomes
either an impaired or insolvent insurer.
(i) Include a policy and procedures for addressing a conflict
of interest. + }
(4) The plan of operation may provide that any or all powers
and duties of the association, except those under { - of - }
ORS 734.810
{ - (11)(c) - } { + (15)(c) + } and 734.815, may be delegated
to a corporation, association or other organization which
performs or will perform functions similar to those of the
association, or its equivalent, in two or more states. Such
corporation, association or organization shall be reimbursed for
any payments made on behalf of the association and shall be paid
for its performance of any function of the association. A
delegation under this subsection shall take effect only with the
approval of both the board of directors and the director, and may
be made only to a corporation, association or organization which
extends protection not substantially less favorable and effective
than that provided by ORS 734.750 to 734.890.
SECTION 8. ORS 734.840 is amended to read:
734.840. (1) Nothing in ORS 734.750 to 734.890 shall be
construed to reduce the liability for unpaid assessments of the
insureds on an impaired or insolvent insurer operating under a
plan with assessment liability.
(2) Records shall be kept of all negotiations and meetings in
which the Oregon Life and Health Insurance Guaranty Association
or its representatives are involved to discuss the activities of
the association in carrying out its powers and duties under ORS
734.810. 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 ORS
734.850.
(3) For the purpose of carrying out its obligations under ORS
734.750 to 734.890, the association shall be considered 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 ORS
734.810 { - (7) - } { + (10) + }. 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
ORS 734.750 to 734.890. '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 reserves that should have been
Enrolled House Bill 2087 (HB 2087-A) Page 19
established for all policies of insurance written by the impaired
or insolvent insurer.
{ + (4) As a creditor of the impaired or insolvent insurer as
established in subsection (3) of this section and consistent with
the provisions of ORS 731.648, the association and other similar
associations shall be entitled to receive a disbursement of
assets out of the marshaled assets, from time to time as the
assets become available to reimburse it, as a credit against the
contractual obligations of the association as set forth in ORS
734.810. If the liquidator has not, within 120 days of a final
determination of insolvency of an insurer by the court, made an
application to the court for the approval of a proposal to
disburse assets out of marshaled assets to guaranty associations
having obligations because of the insolvency, then the
association may apply to the court for approval of the
association's own proposal to disburse those assets. + }
{ - (4)(a) - } { + (5)(a) + } 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 - } { + policyholders + } of the
insolvent insurer and any other party with a bona fide interest,
in making an equitable distribution of the ownership rights of
such insolvent insurer. In such a determination, consideration
shall be given to the welfare of the policyholders of the
continuing or successor insurer.
(b) No distribution to stockholders, if any, of an impaired or
insolvent insurer shall be made until and unless the total amount
of valid claims of the association for funds expended in carrying
out its powers and duties under ORS 734.810 with respect to such
insurer have been fully recovered by the association.
{ - (5)(a) - } { + (6)(a) + } 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 paragraphs (b),
(c) and (d) of this subsection.
(b) 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.
(c) 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 the person 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 the person 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.
(d) The maximum amount recoverable under this subsection shall
be the amount needed in excess of all other available assets of
the insolvent insurer to pay the contractual obligations of the
insolvent insurer.
(e) If any person liable under paragraph (c) 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
Enrolled House Bill 2087 (HB 2087-A) Page 20
any resulting deficiency in the amount recovered from the
insolvent affiliate.
SECTION 9. ORS 734.870 is amended to read:
734.870. There shall be no liability on the part of, and no
cause of action of any nature shall arise against, any member
insurer or its agents or employees, the Oregon Life and Health
Insurance Guaranty Association or its agents or employees,
members of the board of directors, or the Director of the
Department of Consumer and Business Services or the
representatives of the director, for any action taken by them in
the performance of their powers and duties under ORS 734.750 to
734.890. { + The immunity provided under this section shall
extend to the participation in any organization of one or more
other state associations of similar purposes and to any such
organization and its agents or employees. + }
SECTION 10. ORS 734.880 is amended to read:
734.880. All proceedings in which an insolvent insurer is a
party in any court in this state shall be stayed { - 60 - }
{ + 180 + } days from the date an order of liquidation,
rehabilitation or conservation is final to permit proper legal
action by the Oregon Life and Health Insurance Guaranty
Association on any matters germane to its powers or duties. As to
judgment under any decision, order, verdict or finding based on
default the association may apply to have such judgment set aside
by the same court that made the judgment, and shall be permitted
to defend against such suit on the merits.
SECTION 11. { + The amendments to ORS 734.760, 734.790,
734.800, 734.805, 734.810, 734.815, 734.820, 734.840, 734.870 and
734.880 by sections 1 to 10 of this 2011 Act apply to coverage
the Oregon Life and Health Insurance Guaranty Association
provides in connection with any member insurer first placed under
an order of rehabilitation, or first placed under an order of
liquidation if no order of rehabilitation was previously entered,
on or after the effective date of this 2011 Act. + }
SECTION 12. { + This 2011 Act being necessary for the
immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2011 Act takes effect on
its passage. + }
----------
Passed by House April 18, 2011
.............................................................
Ramona Kenady Line, Chief Clerk of House
.............................................................
Bruce Hanna, Speaker of House
.............................................................
Arnie Roblan, Speaker of House
Passed by Senate May 16, 2011
.............................................................
Peter Courtney, President of Senate
Enrolled House Bill 2087 (HB 2087-A) Page 21
Received by Governor:
......M.,............., 2011
Approved:
......M.,............., 2011
.............................................................
John Kitzhaber, Governor
Filed in Office of Secretary of State:
......M.,............., 2011
.............................................................
Kate Brown, Secretary of State
Enrolled House Bill 2087 (HB 2087-A) Page 22
