44-2719.02 Insurer under court order; provisions applicable.

44-2720 Act, how cited.

44-2701
Purpose of act.

The purpose of the Nebraska Life and Health Insurance Guaranty Association Act  is  to  protect   resident policyowners, insureds, including certificate holders under group insurance   policies  or  contracts,  beneficiaries,  annuitants, payees,  and  assignees  of  life  insurance   policies,   health insurance policies, annuity contracts, and supplemental contracts of  member  insurers,  subject  to  certain  limitations, against failure in the  performance of contractual obligations due to  the impairment  or  insolvency  of  the  member  insurer issuing such policies  or  contracts  and  to  assist  in  the  detection  and prevention of insurer insolvencies.  To provide this protection, (1) an association of insurers is created to enable the guaranty of payment of benefits and of continuation of coverages, as limited in the act, and (2) members of the association are made subject to assessment to provide funds to carry out the purposes of the act.

Source:

Laws 1975, LB 217, § 1; Laws 1986, LB 593, § 3.  

44-2702
Terms, defined.

As used in the Nebraska Life and Health Insurance Guaranty Association Act, unless the context otherwise requires:

        (1)  Account  means  any  of the three accounts created pursuant to section 44-2705;

        (2) Association means the Nebraska Life and Health Insurance Guaranty Association created by section 44-2705;

        (3) Director means the Director of Insurance;

        (4) Contractual obligation means any obligation under a policy or contract or portion of such policy or contract for which coverage is provided under section 44-2703;

         (5) Covered policy means any policy or contract or portion of such policy or contract which is not subject to assessment and for which coverage is provided under section 44-2703;

          (6) Impaired  insurer  means  a  member insurer which, after August 24, 1975, (a)  is  deemed  by  the  director  to  be potentially  unable to fulfill its contractual obligations and is not an insolvent insurer or (b)  is  placed  under  an  order  of rehabilitation   or   conservation   by   a  court  of  competent jurisdiction;

          (7) Insolvent insurer means a member insurer which after August 24, 1975, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency;

          (8) Member insurer means any person authorized to transact in this state any kind of insurance provided for under section 44-2703.    Member insurer includes any person whose license or certificate of authority may have been suspended or revoked. Member insurer does not include:

          (a) A nonprofit   hospital   or   medical   service organization;

          (b) A  health  maintenance  organization  unless  such organization  is  controlled  by an insurance company licensed by the Department of Insurance under Chapter 44;

          (c) A fraternal benefit society;

          (d) A mandatory state pooling plan;

          (e) An unincorporated mutual association;

          (f) An assessment association operating under Chapter44 which issues only policies or contracts subject to assessment;or

          (g) A reciprocal or interinsurance exchange  which issues only policies or contracts subject to assessment;

          (9) Moody's corporate bond yield average means the monthly average of corporate bond yields published by Moody's Investment Service, Incorporated, or any successor to Moody's Investment Service, Incorporated;

          (10) Person means  any  individual, corporation, partnership, limited liability company, association, or voluntary organization;

          (11) Premiums means amounts or considerations received on covered  policies or  contracts  less  returned  premiums, considerations,  and  deposits,  less  dividends  and  experience credits.    Premiums does not include amounts or considerations received for  policies  or  contracts  or  for  the  portions  of policies  or  contracts  for which coverage is not provided under subsection  (2)  of  section  44-2703,  except  that   assessable premiums   shall   not  be  reduced  on  account  of  subdivision (2)(b)(iii) of section 44-2703 relating to  interest  limitations and subdivision (3)(b) of section 44-2703 relating to limitations with respect to one individual, one participant, and one contract owner.  Premiums does not include:

          (a) Premiums on an unallocated annuity contract; or

          (b) With  respect  to multiple nongroup life insurance policies owned by one owner,  whether  the  policy  owner  is  an individual,  firm,  corporation,  or other person and whether the persons insured  are  officers,  managers,  employees,  or  other persons,  premiums exceeding five million dollars with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner;

          (12)(a) Principal place of business of a plan sponsor or a person other than a natural person means the single 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.   The association shall determine the principal  place  of  business  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 similar governing person or persons of the entity conducts the majority of meetings;

          (iv) The state in which the executive or management committee of the board of directors or similar governing person or persons of the entity conducts the majority of its meetings;

          (v) The state from which the management of the overall operations of the entity is directed; and

          (vi) In the case of 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 in subdivisions  (12)(a)(i)  through (v) of this section, except that in the case of a plan sponsor, if more than fifty percent of the participants in the benefit plan are  employed  in  a  single state,  that  state  shall be deemed to be the principal place of business of the plan sponsor.

          (b) The principal place of business of a plan sponsor of a benefit plan shall be deemed to be the principal place of business of the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the benefit plan that, in lieu of a specific or clear designation of a principal place of business, shall be deemed to be the principal place of business of the employer or employee organization that has the largest investment in the benefit plan in question;

          (13) Resident means any person to whom a contractual obligation is owed who resides in this state at the date of entry of a court order that determines that a member insurer is an impaired or insolvent insurer, whichever occurs first.  A person may be a resident of only one state.  A person other than a natural person shall be a resident of its principal place of business.  Citizens of the United States that are residents of foreign countries, or are residents of a United States possession that does not have an association similar to the association created by the act, shall be deemed residents of the state of domicile of the insurer that issued the policies or contracts;

          (14) State means a state, the District of Columbia, Puerto Rico, and any United States possession, territory, or protectorate;

          (15) Supplemental contract means any agreement entered into for the distribution of policy or contract proceeds; and

          (16) 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 of any annuity benefits guaranteed to an individual by an insurer under the contract or certificate.

Source:

Laws 1975, LB 217, § 2; Laws 1986, LB 593, § 4; Laws 1993, LB 121, § 244;

Laws 2001, LB 360, § 14.

Effective date September 1, 2001.    

44-2703
Coverages authorized.  

(1)  (a)  The  Nebraska  Life  and  Health Insurance Guaranty Association Act shall provide coverage for the policies and  contracts  specified  in  subsection  (2)  of  this section:

          (i) 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 subdivision (1)(a)(ii) of this section; and

          (ii) To persons who are owners of or certificate holders under the policies or contracts, other than structured settlement annuities, and in each case who:

          (A) Are residents; or

          (B) Are not residents and all of the following conditions apply:

          (I) The insurer that issued the policies or contracts is domiciled in this state;

          (II) The states in which the persons reside have associations similar to the association created by the act; and          

(III) The persons are not eligible for coverage by an association in any other state due to the fact that the insurer was not licensed in the state at the time specified in the state's guaranty association law.

          (b) For structured settlement annuities specified in subsection  (2) of this section, subdivisions (1)(a)(i) and (ii) of this section do not apply.  The act shall, except as provided in subdivisions (1)(c) and (d) of this section, provide coverage to a person who is a payee under a structured settlement annuity, or beneficiary of a payee if the payee is deceased, if the payee:

          (i) Is a resident, regardless of where the contract owner resides; or

          (ii) Is not a resident, but only under the following conditions:

          (A)(I) The contract owner of the structured settlement annuity is a resident; or

          (II) The contract owner of the structured settlement annuity is not a resident, but the insurer that issued the structured settlement annuity is domiciled in this state and the state in which the contract owner resides has an association similar to the association created by the act; and

          (B) The payee or beneficiary and the contract owner are not eligible for coverage by the association of the state in which the payee or contract owner resides.

          (c) The act shall not provide coverage to a person who is a payee or beneficiary of a contract owner resident of this state if the payee or beneficiary is afforded any coverage by the association of another state.

          (d) The act is intended to provide coverage to a person who is a resident of this state and, in special circumstances, to a nonresident.   To avoid duplicate coverage, if a person who would otherwise receive coverage under the act is provided coverage under the laws of any other state, the person shall not be   provided coverage under the act.    In determining the application of the provisions of this subdivision in situations in  which  a  person  could be covered by the association of more than one  state, whether  as  an  owner, payee, beneficiary, or assignee, the act shall be construed in  conjunction  with  other state laws to result in coverage by only one association.

          (2)(a) The act shall provide coverage to the persons specified in subsection (1) of this section for direct nongroup life, health, or annuity policies or contracts and supplemental contracts to any of these and for certificates under direct group policies and contracts, except as limited by the act.    Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.

          (b) The act shall not apply to:

          (i) Any portion of any policy or contract not guaranteed by the insurer or under which the risk is borne by the policy or contract holder;

          (ii) A policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract;

          (iii) A portion of a policy or contract to the extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by use of an index  or  other  external  reference  stated  in  the  policy or contract employed in calculating returns or changes in value:

          (A) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under the act, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody's corporate bond yield average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under the act, whichever is earlier; and

          (B) On and after the date on which the member insurer becomes an impaired or insolvent insurer under the act, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available;

          (iv) A portion of a policy or contract issued to a plan or program of an employer, association, or  other person to provide life, health,  or  annuity  benefits  to  its  employees, members,  or  others,  to  the extent that the plan or program is self-funded  or  uninsured,  including  benefits  payable  by  an employer, association, or other person under:

          (A)  A   multiple   employer  welfare  arrangement  as described in 29 U.S.C. 1144;

          (B) A minimum premium group insurance plan;

          (C) A stop-loss group insurance plan; or

          (D) An administrative services only contract;

          (v) A portion of a policy or contract to the extent that it provides for:

          (A) Dividends or experience rating credits;

          (B) Voting rights; or

          (C) Payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract;

          (vi) A 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 the policy or contract in this state;

          (vii) A portion of a policy or contract to the extent that the assessments required by section 44-2708 with respect to the policy or contract are preempted by federal or state law;

          (viii) An obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including:

          (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 form, filing, or approval requirements;

          (C) Misrepresentations of or regarding policy benefits;

          (D) Extra-contractual claims; or

          (E) A claim for penalties or consequential or incidental damages;

          (ix) A contractual agreement that establishes the member insurer's obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer;

          (x) A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract or as to which the policy or contract owner's rights are subject to forfeiture as of the date the member insurer becomes an impaired or insolvent insurer under the act, whichever is earlier.  If a policy's or contract's interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture;

          (xi) An unallocated annuity contract;

          (xii) Any such policy or contract issued by:

          (A) A nonprofit hospital or medical service organization;

          (B) A health maintenance organization unless such organization is controlled by an insurance company licensed by the Department of Insurance under Chapter 44;

          (C) A fraternal benefit society;

          (D) A mandatory state pooling plan;

          (E) An unincorporated mutual association;

          (F) An assessment association operating under Chapter 44 which issues only policies or contracts subject to assessment; or

          (G) A reciprocal or interinsurance exchange which issues only policies or contracts subject to assessment; or

          (xiii) Any policy or contract issued by any person, corporation, or organization which is not licensed by the Department of Insurance under Chapter 44.

          (3) The benefits that the association may become obligated to cover shall in no event exceed the lesser of:

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

          (b)(i) With respect to one life, regardless of the number of policies or contracts:

          (A) Three hundred thousand dollars in life insurance death benefits, but not more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance;

          (B) Five hundred thousand dollars in health insurance benefits; or

          (C) One hundred thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values;

          (ii) With respect to each payee of a structured settlement annuity or beneficiary or beneficiaries of the payee if deceased, one hundred thousand dollars in the present value of annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any;

          (iii) The association shall not be obligated to cover more than:

          (A) An aggregate of three hundred thousand dollars in benefits with respect to any  one life under subdivisions (3)(b)(i)(A) and (C) of this section, except that with respect to benefits for health insurance under subdivision  (3)(b)(i)(B)  of this  section,  in  which  case  the  aggregate  liability of the association shall not exceed five hundred thousand  dollars  with respect to any one individual; or

          (B) With respect to one owner of multiple nongroup policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person and whether the persons insured are officers, managers, employees, or other persons, more than five million dollars in benefits regardless of the number of policies and contracts held by the owner;

          (iv) The limitations set forth in this subsection 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 the act may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights.

          (4) In performing its obligations to provide coverage under section 44-2707, the association shall not be required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed, reinsured, or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract. 

Source:

Laws 1975, LB 217, § 3; Laws 1986, LB 593, § 5;

Laws 2001, LB 360, § 15.

Effective date September 1, 2001.  

44-2704
Act; liberally construed.

The Nebraska Life and Health Insurance Guaranty Association Act shall be liberally construed to effect the purposes enumerated in section 44-2701 which shall constitute an aid and guide to interpretation.  

Source:

Laws 1975, LB 217, § 4; Laws 1986, LB 593, § 6.    

44-2705
Nebraska Life and Health Insurance Guaranty Association; created; members; board of directors; accounts; supervision.

(1) There is hereby created a nonprofit unincorporated legal entity to be known as the Nebraska Life and Health Insurance Guaranty Association.  All member insurers shall be members of the association as a condition of their authority to transact the business of insurance in this state.  The association shall perform its functions under the plan of operation established and approved according to section 44-2709 and shall exercise its powers through a board of directors established pursuant to the provisions of section 44-2706.    For purposes of administration and assessment, the association shall maintain three accounts:  (a) A health insurance account;  (b) a life insurance account; and (c) an annuity account.

(2) The association shall be under the direct supervision of the director and shall be subject to the applicable provisions of the insurance laws of this state.  

Source:

Laws 1975, LB 217, § 5; Laws 1989, LB 92, § 216.  

44-2706
Board of directors; members; how selected; voting rights; represent insurers; expenses.

         (1) The board of directors of the association shall consist of not less than five nor more than nine members 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.  Vacancies on the board shall be filled for the remaining period of the term in the manner described in the plan of operation.  To select the initial board of directors and initially organize the association, the director shall give notice to all member insurers of the time and place of the organizational meeting.  In determining voting rights at the organizational meeting each member insurer shall be entitled to one vote in person or by proxy.  If the board of directors is not selected within sixty days after notice of the organizational meeting, the director may appoint the initial members.

          (2) In approving selections or in appointing members to the board, the director shall consider whether all member insurers are fairly represented.

          (3) Members of the board may be reimbursed from the assets  of  the  association  for  expenses  incurred  by them as members of the board as provided in sections 81-1174  to  81-1177 for state employees but shall not otherwise be compensated by the association for their services.  

Source:

Laws 1975, LB 217, § 6; Laws 1981, LB 204, § 72. 

44-2707
Association; powers and duties; enumerated.

In addition to the powers and duties enumerated in the Nebraska Life and Health Insurance Guaranty Association Act:

          (1) If a member insurer is an impaired insurer, the association may, at its discretion and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer and that are approved by the director:

          (a) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, all the covered policies of the impaired insurer; and

          (b) Provide   such   money, pledges, loans, notes, guarantees, or other means as are   proper  to  effectuate subdivision  (1)(a)  of  this  section  and assure payment of the contractual obligations of the impaired  insurer  pending  action under subdivision (1)(a) of this section;

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

          (a)(i)(A) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insolvent insurer; or

          (B) Assure payment of the contractual obligations of the insolvent insurer; and

          (ii) Provide such money, pledges, notes, guarantees, or other means as are reasonably necessary to discharge the association's duties; or

          (b) Provide benefits in accordance with the following provisions:

          (i) With respect to life and health insurance policies and annuities, 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 or contracts of the insolvent insurer for claims incurred:

          (A) With respect to group policies and contracts, not later than the earlier of  the  next  renewal  date  under  these policies or contracts or forty-five days but not less than thirty days  after  the  date on which the association becomes obligated with respect to the policies and contracts;

          (B) With respect to nongroup policies, contracts, and annuities, not later than the earlier of the next renewal date under the policies or contracts or one year  but  not  less  than thirty  days  after  the  date  on  which the association becomes obligated with respect to the policies or contracts;

          (ii) Make diligent efforts  to  provide  all   known insureds  or  annuitants  for nongroup policies and contracts, or group policy owners with respect to group policies and contracts, thirty  days' notice of  the  termination  made  pursuant  to subdivision (2)(b)(i) of this section of the benefits provided;

          (iii) With  respect  to  nongroup  life  and  health insurance policies and annuities covered by the association, make available to each known insured or annuitant, or owner  if  other than  the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant 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 subdivision (2)(b)(iv) of  this section  if  the  insureds or annuitants had a right under law or the  terminated  policy  or  annuity  to  convert   coverage   to individual  coverage  or  to  continue  an  individual  policy or annuity in force until a specified age or for a  specified  time, during  which  the  insurer  had  no  right  unilaterally to make changes in any provision of the policy or annuity or had a  right only to make changes in premium by class;

          (iv)(A) In  providing the substitute coverage required under subdivision (2)(b)(iii) of this  section,  the  association may  offer  either to reissue the terminated coverage or to issue an alternative policy.

          (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;

          (v)(A) Alternative policies adopted by the association shall be subject to the approval of the domiciliary insurance commissioner and the receivership court.  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 that it shall adopt.  The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured but shall not reflect any changes in the health of the insured after the original policy 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;

          (vi) 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 domiciliary insurance commissioner and the receivership court;

          (vii) 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 the coverage or policy is replaced by another similar  policy  by the policy owner, the insured, or the association; and

          (viii) When proceeding under subdivision (2)(b) of this section with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with subdivision (2)(b)(iii) of section 44-2703;

          (3) Nonpayment of premiums within thirty-one days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or   substitute coverage terminates the association's obligations under the policy or coverage under the act 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 the provisions of the act;

          (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.   The association shall be liable for unearned premiums due to policy or contract owners arising after the entry of the order;

          (5) The protection provided by the act shall not apply if 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;

          (6) In carrying out its duties under subdivision (2) of this section, the association may, subject to approval by a court in this state:

          (a) Impose permanent policy or contract liens in connection with a guarantee, assumption, or reinsurance agreement if:

          (i) The association finds that the amounts which can be assessed under the act are less than the amounts needed to assure full and prompt performance of the association's duties under the act; or

          (ii) 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; and

          (b) Impose temporary moratoriums or liens on payments of cash values and policy loans or any other right to withdraw funds held in conjunction with policies or contracts in addition to any contractual provisions for deferral of cash or policy loan value.

          If the receivership court imposes a temporary moratorium or moratorium charge on payment of cash values or policy loans 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 loans, or other rights by the association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the association to  be  paid  in  accordance  with  a  hardship procedure established by  the  liquidator  or  rehabilitator  and approved by the receivership court;

          (7) A deposit in this state which is held pursuant to law or required by the director for the benefit of creditors and policy owners and not turned over to the domiciliary liquidator upon the entry of a final order of liquidation or order approving a rehabilitation plan of an insurer domiciled in this state or in a reciprocal state, pursuant to section 44-4852,  shall  be promptly  paid  to  the  association.    The association shall be entitled to retain a portion of such amount equal to the percentage determined by dividing the aggregate amount of policy owners' claims related to that insolvency for which   the association has provided statutory benefits by the aggregate amount of all policy owners' claims in this state related to that insolvency.   The association shall remit to the domiciliary receiver the amount so paid to the association and not retained pursuant to this subdivision.  Any amount paid to the association less the amount not retained by it shall be treated as a distribution of estate assets pursuant to section 44-4834 or similar provision of the state of domicile of the impaired or insolvent insurer;

          (8) If the association fails to act within a reasonable period of time with respect to an insolvent insurer, as provided in subdivision  (2) of this section, the director shall have the powers and duties of the association under the act with respect to the insolvent insurer;

          (9) At the request of the director, the association may give   assistance   and   advice   to   the director concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer;

          (10) The association shall have standing to appear before any court or administrative agency in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under the act or with jurisdiction over any person or property against which the association may have rights through subrogation or other basis. Such standing shall extend to all matters germane to the powers and duties of the association, including, but not limited to, proposals   for   reinsuring or guaranteeing the policies or contracts and contractual obligations of the   impaired   or insolvent insurer and the determination of the covered policies and contractual obligations.  The association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over any person against whom the association may have rights through subrogation or otherwise;

          (11)(a) Any person receiving benefits under the act shall be deemed to have assigned his or her rights under and any causes of action against any person for losses arising under the covered policy to the association to the extent of the benefits received because of the act whether the benefits are payments of contractual obligations or continuation of coverage or provision of substitute or alternative coverage.  The association may require an assignment to it of such rights by any payee, policy or contract owner, certificate holder, beneficiary, insured, or annuitant as a condition precedent to the receipt of any rights or benefits conferred by such act upon such person.

          (b) 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 such act.

          (c) In addition to subdivisions (11)(a) and (b) of this section, the association shall have all common-law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract with respect to the policy or contracts.  Such common-law rights and equitable or legal remedies include, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of benefits received pursuant to the act, against a person originally or by succession responsible for  the losses  arising  from the personal injury relating to the annuity or payment therefor.  Nothing in this subdivision shall include any such person responsible solely by reason of serving as an assignee in respect of a qualified assignment under section 30 of the Internal Revenue Code.

          (d) If the provisions of this subdivision are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies or portion of such amount covered by the association.

          (e) If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights as described in subdivision(11) of this section, the person shall pay to the association the portion  of  the  recovery  attributable  to  the policies or any portion of such recovery covered by the association;

          (12) The association may:

          (a) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of the act;

          (b) Sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under section 44-2708;

          (c) Borrow money to effect the purposes of the act. 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;

          (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 the act;

          (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 the act and to the extent approved by the director, the powers of a domestic life or health insurer, but in no case may the association issue insurance policies or annuity contracts other that those issued to perform the contractual obligations of the impaired or insolvent insurer;

          (h) Organize itself as a corporation or in other legal form permitted by the laws of the state;

          (i) Request information from a person seeking coverage from the association in  order  to  aid  the  association  in determining its obligations under the act  with  respect  to  the person, and the person shall promptly comply with the request;

          (j) Take other necessary or appropriate action to discharge its duties and obligations under the act or to exercise its powers under the act; and

          (k) Join an organization of one or more other state associations of similar purposes to further the purposes and administer the powers and duties of the association;

          (13)(a) At any time within one year after the coverage date, the association may elect to succeed to the rights and obligations of the member insurer that accrue  on  or  after the coverage  date  and that relate to contracts covered, in whole or in part, by the association  under  any  one  or  more  indemnity reinsurance  agreements  entered  into by the member insurer as a ceding insurer and selected by the association, except  that  the association  may  not  exercise  an  election  with  respect to a reinsurance  agreement  if  the  receiver,  rehabilitator,  or liquidator  of  the  member  insurer has previously and expressly disaffirmed the reinsurance agreement.    For purposes of this section, coverage date means the date on which the association becomes responsible for the obligations of a member insurer.  The election shall be effected by a notice to the   receiver, rehabilitator, or liquidator and to the affected reinsurers.  If the association makes an election, subdivisions (13)(a)(i) through  (iv) of this section apply to the agreements selected by the association:

          (i) The association shall be responsible for all unpaid premiums due under the agreements for periods both before and after the coverage date and shall be responsible for the performance of all other obligations to be performed after the coverage date in each case that relates to contracts covered, either in whole or in part, by the association.  The association may charge contracts covered in part by the association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the association;

          (ii) The association shall be entitled to any amounts payable by the reinsurer under the agreements with respect to losses or events that occur in periods after the coverage date and that relate to contracts covered by the association, in whole or in part, except that on receiving such amounts, the association shall pay to the beneficiary under the policy or contract on account of which the amounts were paid a portion of the amount equal to the excess of: (A) The amount received by the association,  over  (B)  the  benefits paid by the association on account of the policy or  contract  less  the  retention  of  the impaired  or  insolvent  member insurer applicable to the loss or event;

          (iii) Within thirty days after the association's election, the association and each indemnity reinsurer shall calculate the net balance due to or from the association under each reinsurance agreement as of the date of the association's election, giving full credit to all items paid by either the member insurer, or its receiver, rehabilitator, or liquidator, or the indemnity reinsurer during the period between the coverage date and the date of the association's election.  The association or indemnity reinsurer shall pay the net balance due the other within five days after the completion of such calculation.    If the receiver,  rehabilitator,  or  liquidator  has  received any amounts due the association pursuant to  subdivision  (13)(a)(ii) of  this  section,  the  receiver,  rehabilitator,  or liquidator shall, as promptly  as  practicable,  pay  such  amounts  to  the association; and

          (iv) If the association, within sixty days after the election, pays the premiums due for periods both before and after the coverage date that relate to contracts covered by the association in whole or in part, the reinsurer shall not be entitled to terminate the reinsurance agreements to the extent that the agreements relate to contracts covered by the association either wholly or partially and may not set off any unpaid premium due for periods prior to the coverage date against amounts due the association;

          (b) If the association transfers its obligations to another insurer and if the association and the other insurer agree, such insurer shall succeed to the rights and obligations of the association under subdivision  (13)(a) of this section effective as of the date agreed upon by the association and such insurer and regardless of whether the association has made the election referred to in subdivision  (13)(a) of this section except that:

          (i) The indemnity reinsurance agreements shall automatically terminate for new reinsurance unless the indemnity reinsurer and the other insurer agree to the contrary;

          (ii) The obligations described in the exception set forth in subdivision (13)(a)(ii) shall not apply on and after the date the indemnity reinsurance agreement is transferred to the third party insurer; and

          (iii) Subdivision (13)(b) of this section shall not apply if the association has previously stated in writing that it will not exercise the election referred to in subdivision (13)(a) of this section;

          (c) The provisions of subdivision (13) of this section shall supersede the provisions of any law of this state or of any affected reinsurance agreement that provides for or requires any payment of reinsurance proceeds on account of losses or events that occur in periods after the coverage date to the receiver, liquidator, or rehabilitator of the insolvent member insurer. The receiver, rehabilitator, or liquidator shall remain entitled to  any  amounts  payable  by the reinsurer under the reinsurance agreement with respect to losses or events that occur in  periods prior   to  the  coverage  date,  subject  to  applicable  setoff provisions; and

          (d) Except as otherwise expressly set forth in subdivision  (13) of this section, nothing in such subdivision shall alter or modify the terms and conditions of the indemnity reinsurance agreements of the insolvent member insurer.  Nothing in the subdivision shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance agreement.   Nothing in such subdivision shall give a policyowner or  beneficiary  an  independent  cause  of  action  against  an indemnity  reinsurer  that  is  not  otherwise  set  forth in the indemnity reinsurance agreement;

          (14) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of the act in an economical and efficient manner;

          (15) If the association has arranged or offered to provide the benefits of the act to a covered person under a plan or arrangement that fulfills the association's obligations under the act, such person shall not be entitled to benefits from the association in addition to or other than those provided under the plan or arrangement; and

          (16) Venue in an action against the association arising under the act shall be in the district court of Lancaster County. The association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under the act.  

Source:

Laws 1975, LB 217, § 7; Laws 1986, LB 593, § 7;

Laws 2001, LB 360, § 16.

Effective date September 1, 2001.  

44-2708
Assessments  against  member insurers; procedure; effect; protest or appeal.

          (1) For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board of directors shall assess the member   insurers, separately for each account, at such times and for such amounts as the board finds necessary.    The board shall collect the assessments after thirty days' written notice to the member insurers before payment is due, and the assessments shall accrue interest at the rate calculated pursuant to section 45-103 on and after the due date.

          (2) There shall be two classes of assessments as follows:

          (a) Class A assessments shall be made for the purpose of meeting administrative costs and other general expenses, including expenses for examinations conducted under the authority of subdivision (2) of section 44-2711.  Class A assessments may be made whether or not related to a particular impaired or insolvent insurer; and

          (b) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the association under section 44-2707 with regard to an impaired or insolvent domestic insurer.

          (3)(a) The amount of any Class A assessment for each account shall be determined by the board and may be authorized and called on a pro rata or non-pro-rata basis.  If pro rata, the board may provide that it be credited against future Class B assessments.  The total of all non-pro-rata assessments shall not exceed one hundred fifty dollars per member insurer in any one calendar year.  The amount of any Class B assessment shall be