1066.

 This article shall be known and may be cited as the Robbins-Seastrand Health Insurance Guaranty Association Act.

1066.1.

 (a)  The purpose of this article is to protect, subject to certain limitations, the persons specified in subdivision (a) of Section 1066.2, against failure in the performance of contractual obligations, under health insurance policies and contracts, because of the impairment or insolvency of the member insurer that issued the policies or contracts.

(b)  To provide this protection, an association of insurers is hereby created to pay benefits and to continue coverages as limited in this article, and members of the association are subject to assessment to provide funds to carry out the purposes of this article.

1066.2.

 (a)  This article shall provide coverage for the policies specified in subdivision (b):

(1)  To persons who, regardless of where they reside (except for nonresident certificate holders under group policies or contracts), are the beneficiaries, assignees or payees of the persons covered under paragraph (2).

(2)  To persons who are owners of or certificate holders under those policies or contracts, and who either:

(A)  Are residents.

(B)  Are not residents, but only under all of the following conditions:

(i)  The insurers which issued the policies are domiciled in this state.

(ii)  The insurers have never held a license or certificate of authority in the states in which those persons reside.

(iii)  Those states have associations similar to the association created by this article.

(iv)  Those persons are not eligible for coverage by those associations.

(b)  (1)  This article shall provide coverage for direct, nongroup health policies or contracts, and for certificates under direct group policies and contracts.

(2)  This article shall not provide coverage for the following:

(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.

(C)  Any plan or program of any employer, association, or similar entity to provide health benefits to its employees or members to the extent that the plan or program is self-funded or insured, including, but not limited to, benefits payable to any employer, association, or similar entity under the following:

(i)  A Multiple Employer Welfare Arrangement as defined in Section 514 of the Employee Retirement Income Security Act of 1974, as amended.

(ii)  A minimum premium group insurance plan.

(iii)  A stop-loss group insurance plan.

(iv)  An administrative-services-only contract.

(D)  Any portion of a policy or contract to the extent that it provides dividends or experience rating credits, or provides that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of that policy or contract.

(E)  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 that policy or contract in this state.

(c)  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 for which the insurer would have been liable if it were not an impaired or insolvent insurer, or (2) $200,000 in health insurance benefits, an amount that shall annually increase or decrease based upon the health care cost component of the consumer price index.

1066.3.

 This article shall be liberally construed to effect the purpose under Section 1066.1 which shall constitute an aid and guide to interpretation.

1066.4.

 As used in this article:

(a)  “Account” means any of the two accounts created under Section 1066.5.

(b)  “Association” means the Robbins-Seastrand California Health Insurance Guaranty Association created under Section 1066.5.

(c)  “Commissioner” means the Insurance Commissioner.

(d)  “Contractual obligation” means any obligation under a policy or contract or certificate under a group policy or contract, or portion thereof, for which coverage is provided under Section 1066.2.

(e)  “Covered policy” means any policy or contract under Section 1066.2.

(f)  “Impaired insurer” means a member insurer which, after January 1, 1991, is not an insolvent insurer, and (1) is deemed by the commissioner to be potentially unable to fulfill its contractual obligations or (2) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

(g)  “Insolvent insurer” means a member insurer which, after January 1, 1991, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

(h)  “Member insurer” means any insurer licensed or which holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under Section 1066.2 and includes any insurer whose license or certificate of authority may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include the following:

(1)  A mandatory state pooling plan.

(2)  A mutual assessment company or any entity that operates on an assessment basis.

(3)  An insurance exchange.

(4)  A nonprofit hospital service plan.

(5)  A health care service plan.

(6)  A fraternal benefit society.

(i)  “Person” means any individual, corporation, partnership, association, or voluntary organization.

(j)  “Premiums” means amounts received on covered policies or contracts less premiums, considerations, and deposits returned thereon, and less dividends and experience credits thereon. “Premiums” does not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subdivision (b) of Section 1066.2.

(k)  “Resident” means any person who resides in this state at the time a member insurer is determined to be an impaired or insolvent insurer and to whom a contractual obligation is owed. 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.

( l)  “Supplemental contract” means any agreement entered into for the distribution of policy or contract proceeds.

1066.5.

 (a)  There is hereby created a nonprofit legal entity to be known as the Robbins-Seastrand California 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 1066.9 and shall exercise its powers through a board of directors established under Section 1066.6. For purposes of administration and assessment the association shall maintain a health insurance account.

The health insurance account shall be known as the Robbins-Seastrand Health Insurance Account.

(b)  The association shall come under the immediate supervision of the commissioner and shall be subject to the applicable provisions of this code. Meetings or records of the association may be opened to the public upon majority vote of the board of directors of the association.

1066.6.

 (a)  The board of directors of the association shall consist of not less than five nor more than nine 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 commissioner. 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 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 60 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 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 shall not otherwise be compensated by the association for their services.

1066.7.

 (a)  If a member insurer is an impaired domestic insurer, the association may, in its discretion, and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer that are approved by the commissioner, and that are, except in cases of court-ordered conservation or rehabilitation, also approved by the impaired insurer:

(1)  Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies or contracts of the impaired insurer.

(2)  Provide moneys, pledges, notes, guarantees, or other means proper to effectuate paragraph (1) and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (1).

(3)  Loan money to the impaired insurer.

(b)  (1)  If a member insurer is an impaired insurer, whether domestic, foreign, or alien, and the insurer is not paying claims timely, then subject to the preconditions specified in paragraph (2), the association shall, in its discretion, either:

(A)  Take any of the actions specified in subdivision (a), subject to the conditions therein.

(B)  Provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, and supplemental benefits for policy or contract owners who petition therefor under claims of emergency or hardship in accordance with standards proposed by the association and approved by the commissioner.

(2)  The association shall be subject to the requirements of paragraph (1) only if all of the following is applicable:

(A)  The laws of the state of domicile provide that until all payments of or on account of the impaired insurer’s contractual obligations by all guaranty associations, along with all expenses, shall have been repaid to the guaranty associations or a plan of repayment by the impaired insurer shall have been approved by the guaranty associations:

(i)  The delinquency proceeding shall not be dismissed.

(ii)  Neither the impaired insurer nor its assets shall be returned to the control of its shareholders or private management.

(iii)  It shall not be permitted to solicit or accept new business or have any suspended or revoked license restored.

(B)  (i)  If the impaired insurer is a domestic insurer, it has been placed under an order of rehabilitation by a court of competent jurisdiction in this state.

(ii)  If the impaired insurer is a foreign or alien insurer:

(I)  It has been prohibited from soliciting or accepting new business in this state.

(II)  Its certificate of authority has been suspended or revoked in this state.

(III)  A petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of the state.

(c)  If a member insurer is an insolvent insurer, the association shall, in its discretion, either:

(1)  (A)  Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insolvent insurer, (B) assure payment of the contractual obligations of the insolvent insurer, (C) provide moneys, pledges, guarantees, or other means reasonably necessary to discharge those duties.

(2)  With respect only to those health insurance policies, provide benefits and coverages in accordance with subdivision (d).

(d)  When proceeding under subdivision (b) or (c), the association shall, with respect to those health insurance policies do the following:

(1)  Assure payment of benefits for premiums identical to the premiums and benefits (except for terms of conversion and renewability) that would have been payable under the policies of the insolvent insurer, for claims incurred:

(A)  With respect to group policies, not later than the earlier of the next renewal date under the 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 those policies.

(B)  With respect to individual policies, not later than the earlier of the next renewal date, if any, under those policies or one year, but in no event less than 30 days, from the date on which the association becomes obligated with respect to those policies.

(2)  Make diligent efforts to provide all known insureds or group policyholders with respect to group policies 30 days’ notice of the termination of the benefits provided.

(3)  With respect to individual policies, make available to each known insured, or owner if other than the insured, and with respect to an individual formerly insured under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of paragraph (4), if the insureds had a right under law or the terminated policy to convert coverage to individual coverage or to continue an individual policy in force until a specified age or for a specified time, during which time the insurer had no right unilaterally to make changes in any provision of the policy or had a right only to make changes in premium by class.

(4)  (A)  In providing the substitute coverage required under paragraph (3), the association (i) may offer either to reissue the terminated coverage or to issue an alternative policy, and (ii) shall consider obtaining coverage for a medically uninsurable person from the program established under Part 6.5 (commencing with Section 12700) of Division 2.

(B)  Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy.

(C)  The association may reinsure any alternative or reissued policy.

(5)  (A)  Alternative policies adopted by the association shall be subject to the approval of the commissioner. The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency.

(B)  Alternative policies shall contain at least the minimum statutory provisions required in this state and provide benefits that shall not be unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates which it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten.

(C)  Any alternative policy issued by the association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association.

(6)  If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the commissioner or by a court of competent jurisdiction.

(7)  The association’s obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date that coverage or policy is replaced by another similar policy by the policyholder, the insured, or the association.

(e)  Nonpayment of premiums within 31 days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall terminate the association’s obligations under the policy or coverage with respect to the policy or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with this article.

(f)  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 entry of the order.

(g)  The protection provided by this article shall 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.

(h)  In carrying out its duties under subdivisions (b) and (c), the association may, subject to court approval, impose permanent policy or contract liens in connection with any guarantee, assumption, or reinsurance agreement, if the association finds that the amounts which can be assessed under this article are less than the amounts needed to assure full and prompt performance of the association’s duties under this article, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens to be in the public interest.

(i)  If the association fails to act within a reasonable period of time as provided in subdivisions (b), (c) and (d), the commissioner shall have the powers and duties of the association under this article with respect to impaired or insolvent insurers.

(j)  The association may render assistance and advice to the commissioner, upon his or her request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.

(k)  The association shall have standing to appear before any court in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this article. The 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 policies or contracts of the impaired or insolvent insurer and the determination of the policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court 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 against whom the association may have rights through subrogation of the insurer’s policyholders.

( l)  (1)  Any person receiving benefits under this article shall be deemed to have assigned the rights under, and any causes of action relating to, the covered policy or contract to the association to the extent of the benefits received because of this article, whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or provisions of substitute or alternative coverages. The association may require an assignment to it of those rights and cause of action by any payee, policy or contract beneficiary, or insured as a condition precedent to the receipt of any right or benefits conferred by this article upon that person.

(2)  The subrogation rights of the association under this subdivision shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this article.

(3)  In addition to paragraphs (1) and (2), the association shall have all common law rights of subrogation and any other equitable or legal remedy which would have been available to the impaired or insolvent insurer or holder of a policy or contract with respect to such policy or contracts.

(m)  The association may do all of the following:

(1)  Enter into contracts necessary or proper to carry out the provisions and purposes of this article.

(2)  Sue or be sued, including taking any legal actions necessary or proper to recover any unpaid assessments under Section 1066.8 and to settle claims or potential claims against it.

(3)  Borrow money to effect the purposes of this article. Any notes or other evidence of indebtedness of the association not in default shall be legal investments for domestic insurers and may be carried as admitted assets.

(4)  Employ or retain persons necessary to handle the financial transactions of the association, and to perform those other functions that become necessary or proper under this article.

(5)  Take legal action necessary to avoid payment of improper claims.

(6)  Exercise, for the purposes of this article and to the extent approved by the commissioner, the powers of a health insurer, but in no case may the association issue policies or contracts other than those issued to perform its obligations under this article.

(n)  The association may join an organization of one or more other state associations of similar purposes to further the purpose and administer the powers and duties of the association.

1066.8.

 (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 at the time and for the amounts that the board finds necessary. Assessments shall be due not less than 30 days after prior written notice to the member insurers and shall accrue interest at the rate set forth in 28 U.S.C. Sec. 1961 on and after the due date.

(b)  There shall be two assessments, as follows:

(1)  Class A assessments shall be made for the purpose of meeting administrative and legal costs and other expenses and examinations conducted under the authority of subdivision (e) of Section 1066.11. Class A assessments may be made whether or not related to a particular impaired or insolvent insurer.

(2)  Class B assessments shall be made to the extent necessary to carry out the powers and duties of the association under Section 1066.7 with regard to an impaired or an insolvent insurer.

(c)  (1)  The amount of any Class A assessment shall be determined by the board and may be made on a pro rata or nonpro rata basis. If pro rata, the board may provide that it be credited against future Class B assessments. A nonpro rata assessment shall not exceed one hundred fifty dollars ($150) per member insurer in any one 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 premimums or reserves of the impaired or insolvent insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable under the circumstances.

(2)  Class B assessments against member insurers shall be in the proportion that the premiums received on business in this state by each assessed member insurer or 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 impaired or insolvent, as the case may be, bears to the 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 made until necessary to implement the purposes of this article. Classification of assessments under subdivision (b) and computation of assessments under this paragraph shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.

(d)  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 the assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section.

(e)  (1)  The total of all Class B assessments upon a member insurer shall not in any one calendar year exceed 1 percent of the insurer’s average premiums received in this state on the policies and contracts covered by the account during the three calendar years preceding the year in which an insurer became an impaired or insolvent insurer. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in the account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as permitted by this article.

(2)  The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.

(f)  The board may, by any equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each insurer to the 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 the account to provide funds for the continuing expenses of the association and for future losses.

(g)  It shall be proper for any member insurer, in determining its premium rates as to any kind of insurance within the scope of this article, to consider the amount reasonably necessary to meet its assessment obligations under this article.

(h)  The association shall issue to each insurer paying an assessment under this article, other than Class A assessment, a certification of contribution, in a form prescribed by the commissioner, for the amount of the assessment 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 the form and for the amount, if any, and period of time that the commissioner may approve.

(i)  (1)  The plan of operation adopted pursuant to Section 1066.9 shall contain provisions whereby each member insurer is required to recoup over a reasonable length of time a sum reasonably calculated to recoup the assessments paid by the member insurer under this article by way of a surcharge on premiums charged for insurance policies to which this article applies. Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax or agent’s commission.

(2)  Member insurers who collect surcharges in excess of premiums paid pursuant to this section for a insolvent insurer shall remit the excess to the association as an additional premium within 120 days after the end of the collection period as determined by the association. The excess shall be applied to reduce future premium charges for that insurer in the appropriate category.

(3)  The plan of operation may permit a member insurer to omit the collection of the surcharge from its insureds when the expense of collecting the surcharge would exceed the amount of the surcharge. However, nothing in this paragraph shall relieve the member insurer of its obligation to recoup the amount of the surcharge otherwise collectible.

(j)  Any statement of the amount of surcharge required to be provided by the association shall include a description of, and purpose for, the Robbins-Seastrand California Health Insurance Guaranty Association, as follows:

“Companies writing health insurance business in California are required to participate in the Robbins-Seastrand California Insurance Health Guaranty Association. If a company becomes insolvent, the Robbins-Seastrand California Health Insurance Guaranty Association settles unpaid claims and assesses each insurance company for its fair share.”

“California law requires all companies to surcharge policies to recover these assessments. If your policy is surcharged, “CA Surcharge” with an amount will be displayed on your premium notice.”

1066.9.

 (a)  (1)  The 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 the association. The plan of operation and any amendments thereto shall become effective upon the commissioner’s written approval or unless he or she has not disapproved it within 30 days.

(2)  If the association fails to submit a suitable plan of operation on or before April 30, 1991, or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate reasonable rules necessary or advisable to effectuate this article. Those rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.

(b)  All member insurers shall comply with the plan of operation.

(c)  The plan of operation shall, in addition to requirements of this article do all of the following:

(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 1066.6.

(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 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 1066.8.

(7)  Contain additional provisions necessary or proper for the execution of the powers and duties of the association.

(d)  The plan of operation may provide that any or all powers and duties of the association, except those under paragraph (3) of subdivision (m) of Section 1066.7 and Section 1066.8, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a 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 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 extends protection not substantially less favorable and effective than that provided in this article.

1066.10.

 (a)  In addition to the duties and powers enumerated elsewhere in this article, the commissioner shall do all of the following:

(1)  Upon request of the board of directors, provide the association with a statement of the premiums in this and any other appropriate states for each member insurer.

(2)  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 this article.

(3)  In any liquidation or rehabilitation proceeding involving a domestic insurer, be appointed as the liquidator or rehabilitator.

(b)  The commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer which 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 which fails to pay an assessment when due. The forfeiture shall not exceed 5 percent of the unpaid assessment per month, but not forfeiture shall be less than one hundred dollars ($100) per month.

(c)  Any action of the board of directors or the association may be appealed to the commissioner by any member insurer if that appeal is taken within 60 days of the final action being appealed. If a member company is appealing an assessment, the amount assessed shall be paid to the association and available to meet association obligations during the pendency of an appeal. If the appeal on the assessment is upheld, the amount paid in error or excess shall be returned to the member company. Any final action or order of the commissioner shall be subject to judicial review in a court of competent jurisdiction.

(d)  The liquidator, rehabilitator, or conservator of any impaired insurer may notify all interested persons of the effect of this article.

1066.11.

 (a)  To aid in the detection and prevention of insurer insolvencies or impairments, it shall be the duty of the commissioner to do all of the following:

(1)  To notify the commissioners of all the other states, territories of the United States and the District of Columbia when he or she takes any of the following actions against a member insurer:

(A)  Revocation of a license.

(B)  Suspension of license.

(C)  Makes any formal order that such company restrict its premium writing, obtain additional contributions to surplus, withdraw from the state, reinsure all or any part of its business, or increase capital, surplus, or any other account for the security of policyholders or creditors.

The notice shall be mailed to all commissioners within 30 days following the action taken or the date on which the action occurs.

(2)  To report to the board of directors, the Legislature, and the Governor when he or she has taken any of the actions set forth in paragraph (1) or has received a report from any other commissioner indicating that any action has been taken in another state. The report to the board of directors, the Legislature, and the Governor shall contain all significant details of the action taken on the report received from another commissioner.

(3)  To report to the board of directors when he or she has reasonable cause to believe from any examination, whether completed or in process, of any member company that company may be an impaired or insolvent insurer.

(4)  To furnish to the board of directors the National Association of Insurance Commissioners (NAIC) Insurance Regulatory Information System (IRIS) ratios and listings of companies not included in the ratios developed by the NAIC, and the board may use the information contained therein to carrying out its duties and responsibilities under this section. That report and the information contained therein shall be kept confidential by the board of directors until such time as made public by the commissioner or other lawful authority.

(b)  The commissioner may seek the advice and recommendation of the board of directors concerning any matter affecting his or her duties and responsibilities regarding the financial condition of member insurers and companies seeking admission to transact insurance business in this state.

(c)  The board of directors may, upon majority vote, make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer or germane to the solvency of any company seeking to do an insurance business in this state. Those reports and recommendations shall not be considered public documents.

(d)  It shall be the duty of the board of directors, upon majority vote, to notify the commissioner of any information indicating any member insurer may be an impaired or insolvent insurer.

(e)  The board of directors may, upon majority vote, request that the commissioner order an examination of any member insurer which the board in good faith believes may be an impaired or insolvent insurer. Within 30 days of the receipt of that request, the commissioner shall begin the examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by persons the commissioner designates. The cost of the examination report shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall the examination report be released to the board of directors prior to its release to the public, but this shall not preclude the commissioner from complying with subdivision (a).

The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it shall not be open to public inspection prior to the release of the examination report to the public.

(f)  The board of directors may, upon majority vote, make recommendations to the commissioner for the detection and prevention of insurer insolvencies.

(g)  The board of directors shall, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, prepare a report to the commissioner containing information it may have in its possession bearing on the history and causes of the insolvency. The board shall cooperate with the boards of guaranty associations in other states in preparing a report on the history and causes of insolvency of a particular insurer, and may adopt by reference any report prepared by those other associations.

1066.12.

 (a)  Nothing in this article 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 1066.7. 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 subdivision shall limit the duty of the association to render a report of its activities under Section 1066.13.

(c)  For the purpose of carrying out is obligations under this article, 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 (m) of Section 1066.7. 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 this article. Assets attributable to covered policies are that proportion of the assets which the reserves that should have been established for those policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer.

(d)  (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 of the insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of that insolvent insurer. In such a determination, consideration shall be given to the welfare of the policyholders 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 valid claims of the association with interest thereon for funds expended in carrying out its powers and duties under Section 1066.7 with respect to that insurer have been fully recovered by the association.

(e)  (1)  If an order for liquidation or rehabilitation of an insurer domiciled in this state has been entered, the receiver appointed under that order shall have a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of the 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 (2) to (4), inclusive.

(2)  No distribution 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 as 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 or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.

(4)  The maximum amount recoverable under this subdivision 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.

(5)  If any person liable under paragraph (3) is insolvent, all its affiliates that controlled it at the time the distribution was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.

1066.13.

 The association shall be subject to examination and regulation by the commissioner. The board of directors shall submit to the commissioner and the Legislature each year, not later than 120 days after the association’s fiscal year, a financial report in a form approved by the commissioner and a report of its activities during the preceding fiscal year.

1066.14.

 The association shall be exempt from payment of all fees and all taxes levied by this state or any of its subdivisions, except taxes levied on real property.

1066.15.

 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 association or its agents or employees, members of the board of directors, or the commissioner or his or her representatives, for any action or omission by them in the performance of their powers and duties under this article. Such immunity 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.

1066.16.

 All proceedings in which the insolvent insurer is a party in any court of this state shall be stayed 60 days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the 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 that judgment set aside by the same court that made the judgment and shall be permitted to defend against the suit on the merits.

1066.17.

 (a)  No person, including an insurer, agent, or affiliate of an insurer shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in any newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the Health Insurance Guaranty Association of this state for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by the Robbins-Seastrand Health Insurance Guaranty Association Act. However, this subdivision shall not apply to the Robbins-Seastrand California Health Insurance Guaranty Association or any other entity which does not sell or solicit insurance.

(b)  On or before June 1, 1991, the association shall prepare a summary document describing the general purposes and current limitations of this article in compliance with subdivision (c). The document shall be submitted to the commissioner for approval. Sixty days after receiving approval, no insurer may deliver a policy or contract described in Section 1066.2, to a policy or contract holder unless the document is delivered to the policy or contract holder prior to or at the time of delivery of the policy or contract except if subdivision (d) applies. The document should also be available upon request by a policyholder. The distribution, delivery, or contents or interpretation of the document shall not mean that either the policy or the contract or the holder thereof will be covered in the event of the impairment or insolvency of a member insurer. The description document shall be revised by the association as amendments to this article may require. Failure to receive the document shall not give the policyholder, contractholder, certificate holder, or insured any greater rights than those stated in this article.

(c)  The document prepared under subdivision (b) shall contain a clear and conspicuous disclaimer on its face. The commissioner shall promulgate a rule establishing the form and content of the disclaimer. The disclaimer shall do all of the following:

(1)  State the name and address of the health insurance guaranty association and insurance department.

(2)  Prominently warn the policy or contract holder that the Robbins-Seastrand California Health Insurance Guaranty Association may not cover the policy or, if coverage is available, it will be subject to substantial limitations and exclusions and conditioned on continued residence in the state.

(3)  State that the insurer and its agents are prohibited by law from using the existence of the Robbins-Seastrand California Health Insurance Guaranty Association for the purpose of sales, solicitation or inducement to purchase any form of insurance.

(4)  Emphasize that the policy or contract holder should not rely on coverage under the Robbins-Seastrand California Health Insurance Guaranty Association when selecting an insurer.

(5)  Provide other information as directed by the commissioner.

(d)  No insurer or agent may deliver a policy or contract described in paragraph (1) of subdivision (b) of Section 1066.2, and excluded under subparagraph (A) of paragraph (2) of subdivision (b) of Section 1066.2 from coverage under this article unless the insurer or agent, prior to or at the time of delivery, gives the policy or contract holder a separate written notice which clearly and conspicuously discloses that the policy or contract is not covered by the Robbins-Seastrand California Health Insurance Guaranty Association. The commissioner shall by rule specify the form and content of the notice, however the following form for the disclaimer notice is suggested:

ROBBINS-SEASTRAND CALIFORNIA HEALTH INSURANCE GUARANTY ASSOCIATION DISCLAIMER

“The Robbins-Seastrand California Health Insurance Guaranty Association provides coverage of claims under some types of policies if the insurer becomes impaired or insolvent. COVERAGE MAY NOT BE AVAILABLE FOR YOUR POLICY. Even if coverage is provided, there are significant limits and exclusions. Coverage is always conditioned on residence in this state. Other conditions may also preclude coverage.

The Robbins-Seastrand California Health Insurance Guaranty Association or the Department of Insurance will respond to any questions you may have which are not answered by this document. Your insurer and agent are prohibited by law from using the existence or its coverage to sell you an insurance policy.

You should not rely on availability of coverage under the Robbins-Seastrand California Health Insurance Guaranty Association when selecting an insurer. (Insert addresses of the association and department.)”

Insurers and agents shall deliver the document and disclaimer described under subdivisions (b) and (c) when a customer is solicited if a “free look” period is not required by state law.

1066.18.

 This article shall not apply to any insurer which is insolvent or unable to fulfill its contractual obligations on January 1, 1991.