CHAPTER 89 - INSURANCE DEPARTMENT - FRATERNAL BENEFIT SOCIETIES

AN ACT DEFINING FRATERNAL BENEFIT SOCIETIES, PROVIDING FOR THE MANNER IN WHICH SUCH SOCIETIES MAY BE INCORPORATED AND REGULATING THEIR AUTHORITY, POWERS AND DUTIES.

Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met (two-thirds of all the members elected to each branch thereof concurring therein):

Section 1. Fraternal Benefit Society Defined:--Any corporation, society order or association, without capital stock, organized and carried on solely for the mutual benefit of its members and their beneficiaries, and not for profit, and having a lodge system with ritualistic form of work, and representative form of government, and which shall make provision for the payment of benefits, is hereby declared to be a Fraternal Benefit Society.

Section 2. Lodge System Defined:--Any association having a supreme governing or legislative body and subordinate lodges or branches, by whatever name known, into which members shall be elected, initiated and admitted in accordance with its constitution, laws, rules and regulations, which subordinate lodges or branches shall be required by the laws of such association to hold periodical meetings, shall be deemed to be operating on the lodge system.

Section 3. Representative Form of Government Defined:--Any such society shall be deemed to have a representative form of government when it shall provide in its constitution and laws for a supreme legislative or governing body, composed of representatives elected either directly or indirectly by the members, together with such other members as may be prescribed by its constitution and laws; provided, that the elective members shall constitute a majority in number and not have less than two-thirds of the votes, nor less than the votes required to amend its constitution and laws; and providing further, that the meetings of the supreme or governing body, and the election of officers, representatives or delegates, shall be held as often as once in four years. The members, officers, representatives or delegates of a Fraternal Benefit Society shall .not vote by proxy. Except as herein provided, such society shall be governed by this Act and shall be exempt from all provisions of the Insurance Laws of this State, not only in its governmental relations with the State but for every other purpose, and no law hereafter enacted shall apply to them unless they be expressly designated therein.

Section 4. Benefits:--Every society transacting business under this Act shall provide for the payment of death benefits, and may provide for the payment of benefits in case of temporary or permanent physical disability, either as a result of disease, accident or old age; provided, the period of life at which the payment of benefits for disability on account of old age shall commence, shall not be more than seventy years; and may provide for monuments or tombstones to the memory of its deceased members and for the payment of funeral benefits. Such society shall have the power to give a member, when permanently disabled or on attaining the age of seventy, all or such portion of the face value of his certificate, as the laws of the society may provide; provided, however, that nothing in this Act contained shall be so construed as to prevent the issuing of benefit certificates for a term of years less than the whole or life which are payable upon the death or disability of the member occurring within the term for which the benefit certificate may be issued.

Any society which shall show by the annual valuation hereinafter provided for that it is accumulating and maintaining the reserve necessary to enable it to do so, under a table of mortality not lower than the American Experience Table with four per centum interest may issue to its members upon such showing of eligibility as its laws may require certificates of membership in such forms, granting such benefits payable to such beneficiaries as its laws may authorize. Members under the age of sixteen years shall have no voice or vote. Such society shall be governed by this law and shall be exempt from the provisions of the Insurance Laws of this State. No law hereafter enacted shall apply to such societies unless they are specifically designated therein.

Section 5. Fraternal Benefit Societies now operating in this State whether domestic or foreign, shall be permitted to value their certificates and contracts now outstanding or hereafter issued, on the basis of the National Fraternal Congress Table of Mortality with an interest, assumption of not higher than four per centum per annum or at the option of the association any higher table, or, at its option it may use a table based upon the association's own experience of at least twenty years and covering not less than one hundred thousand lives with an interest assumption of not more than four per centum per annum.

Section 6. The Secretary of State shall not file a Certificate of Incorporation for any Fraternal Benefit Society unless such certificate shall be accompanied by a certificate from the Insurance Commissioner of this State setting forth that a deposit of Ten Thousand Dollars ($10,000.00) has been made with him in cash or approved securities and that the Articles of Incorporation so presented for filing are in substantial compliance with the provisions of this Act and the General Corporation Laws of the State of Delaware.

When such' Certificate of Incorporation shall have been filed, the Insurance Commissioner shall require such Fraternal Benefit Society to file with him copies of the certificates or contracts proposed to be issued and copies of the application forms proposed to be used by its members in applying for membership. If such certificate forms, contracts and applications shall appear to be in substantial compliance with this Act the Insurance Commissioner shall issue to such Fraternal Benefit Society a temporary license. Upon receipt of such temporary license the society may solicit members for the purpose of completing its organization and may collect from each applicant an amount not less than one regular monthly installment, in accordance with its tables of rates.

Upon presentation of satisfactory evidence to the Insurance Commissioner that applications for benefit certificates upon at least five hundred lives have been received and that the regular monthly installments or other required payments thereon have been paid and that all of the other requirements of this Section have been complied with, he shall issue to such society a license as a domestic Fraternal Benefit Society and refund to such Society the amount deposited by it and such Society shall maintain an office in this State. For each such license the Society shall pay the Insurance Commissioner Twenty-five Dollars ($25.00).

When any domestic society shall have discontinued business for a period of two years or has a total membership of less than four hundred members, its charter shall become null and void.

Section 7. No such society shall incur any liability other than for advance payments made to it by applicants for benefit certificates until bona fide applications have been secured upon at least five hundred lives for at least One Thousand Dollars ($1,000.00) each.

Every Fraternal Benefit Society organized or licensed under this Act is hereby declared to be a charitable and benevolent institution and all of its funds shall be exempt from all and every state, county, district, municipal and school tax, other than taxes on real estate.

Section 8. Any Fraternal Benefit Society incorporated under the laws of any other State and licensed to do business in this State which has assets in excess of the required reserve liability when its outstanding certificates or contracts are valued on the American Experience Table of Mortality with an interest assumption of not more than four per centum per annum may become a Fraternal Benefit Society incorporated under the laws of this State with a continuation without intermission or cessation of all of its powers, rights, and privileges and of all mutual existing corporate rights, obligations, liabilities, powers, contracts, liens, privileges and duties at the time existing between said corporation and its members. Its officers shall be continued in office for the terms for which they were elected, with the same rights, responsibilities, liabilities, duties, powers and privileges as at the time enjoyed by and imposed upon them, it being the purpose of this Section to extend and continue such society or association as such corporation of this State, the same as if it had in all respects originally been incorporated under the laws of this State.

In order to become such a corporation of this State, the officers of such society or association such as the Board of Control, Trustees, Directors, Council, Executive Council, or by whatever name known, when thereunto duly authorized by its supreme legislative or governing body, by whatever name known, shall file with the Secretary of State a copy of its Articles of Incorporation, which shall not be inconsistent with this Act. The Secretary of State shall not file a Certificate of Incorporation for such Fraternal Benefit Society or association unless such Articles of Incorporation shall be accompanied by a certificate of the Insurance Commissioner of this State to the effect that such Fraternal Benefit Society or association has assets in excess of the required reserve liability when its outstanding certificates or contracts are valued on the American Experience Table of Mortality, with an interest assumption of not more than four per centum per annum. When such Articles of Incorporation shall have been filed with the Secretary of State and a fee of One Thousand Dollars ($1,000.00) paid therefor and said Certificate of Incorporation shall have been duly recorded in the Office of the Recorder of Deeds as provided in Chapter I, Section 6 of the General Corporation Law, such Fraternal Benefit. Society or association shall immediately thereby become incorporated as a Fraternal Benefit Society of this State and the Insurance Commissioner shall issue to it a license as a Fraternal Benefit Society or association of this State to have the same rights, responsibilities and privileges that are accorded to domestic Fraternal Benefit Societies under this Act, it being the purpose of this Section to establish and continue such society or association as such corporation of this State, the same as if it had in all respects originally been incorporated under the Laws of this State. Such Fraternal Benefit Society so incorporated under the laws of this State as a domestic Fraternal Benefit Society shall maintain an office in this State, together with an agent or representative.

Section 9. The accumulated funds of a Fraternal Benefit Society, over and above the amount required to maintain the reserves on its outstanding benefit certificates, shall be available for expense of operation, maintenance of homes, sanatoriums, recreation centers, and for the payment of dividends or refunds to its members.

Section 10. Every such society shall have the power to make' a constitution and laws for the government of the society, the admission of its members, and the management of its affairs. It shall have the power to change, alter, add to or amend such constitution and laws and shall have such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society. Such society may create, maintain, invest and disburse such funds as are necessary for the conduct of its business.

Section 11. Any society now engaged in transacting business in this State may exercise, after the passage of this Act, all of the rights conferred thereby and all of the rights, powers and privileges now exercised or possessed by it under its Charter or Articles of Incorporation, not inconsistent with this Act.

Domestic Societies may insure, reinsure, merge with or accept the transfer of membership or funds of any other Fraternal Benefit Society; providing, that the agreement of insurance, reinsurance, merger or transfer be approved by the Insurance Commissioner of this State and the Secretary of State.

Section 12. Societies which are now authorized to transact business in this State may continue such business until the first day of April next succeeding the passage of this Act, and the authority of such societies may thereafter be renewed annually, but in all cases to terminate on the first day of the succeeding April; provided, however, the license shall continue in full force and effect until the new license be issued or specifically refused. For each such license or renewal the society shall pay the Insurance Commissioner Twenty-five Dollars ($25.00). A duly certified copy or duplicate of such license shall be prima facie evidence that the licensee is a Fraternal Benefit Society within the meaning of this Act.

Section 13. Any foreign Fraternal Benefit Society now transacting business or organized prior to the passage of this Act, and which is not now authorized to transact business in this State, may be licensed to transact business therein hereafter upon complying with the requirements of this Act applicable to domestic societies.

Section 14. Every society, whether domestic or foreign, now transacting business in this State shall, within thirty days after the passage of this act, and every such society hereafter applying for admission shall, before being licensed, appoint in writing the Insurance Commissioner and his successors in office to be its true and lawful attorney, upon whom all legal process in any action or proceeding against it shall be served, and in such writing shall agree that any lawful process against it which is served upon such attorney shall be of the same legal force and validity as if served upon the society and that the authority shall continue in force so long as any liability remains outstanding in this State.

Service shall be made in duplicate upon the Insurance Commissioner and in his absence such service shall be made upon the person in charge of his office, and shall be deemed sufficient service upon such society; provided, however, that no such service shall be valid or binding against any such society when it is required thereunder to file its answer, pleading or defense in less than thirty days from the date of mailing the copy of such service to such society. When legal process against any such society is served upon said Insurance Commissioner he shall forthwith forward by registered mail one of the duplicate copies prepaid and directed to the secretary or corresponding officer. Legal process shall not be served upon any such society except in the manner provided herein.

Section 15. Any domestic society may provide that the meetings of its legislative or governing body may be held in any state, district, province or territory wherein such society has subordinate lodges, branches, or by whatever name known, and all business transacted at such meetings shall be as valid in all respects as if such meetings were held in this State.

Section 16. Officers and members of the supreme, grand or any subordinate body of any such incorporated society shall not be individually liable for the payment of any claims against such society.

Section 17. No officer or member shall have the power or authority to waive any of the provisions of the laws of the society, and the same shall be binding on the society and each and every member thereof and on all beneficiaries or members.

Section 18. The beneficiary certificate, the application therefor, the Articles of Incorporation and the constitution and laws of the Fraternal Benefit Society and all amendments to such Articles of Incorporation and the constitution and laws shall constitute the agreement between the Fraternal Benefit Society and the members.

Section 19. Every Society transacting business under this Act shall file with the Insurance Commissioner a duly certified copy of all amendments of or additions to its constitution and laws within ninety days after the enactment of the same. Copies of the Articles of Incorporation and of the constitution and laws and the amendments to either thereof and copies of the original application for membership and copies of the records pertaining thereto certified to by the secretary or corresponding officer of the Fraternal Benefit Society shall be prima facie evidence of the terms thereof and as to the Articles of Incorporation and the constitution and laws prima facie evidence of the legal adoption thereof.

Section 20. Every such society transacting business in this State shall annually, on or before the first day of March, file with the Insurance Commissioner, in such form as he may require, a statement under oath of its president and secretary or corresponding officers, of its condition and standing on the thirty-first day of December next preceding, and of its transactions for the year ending on that date. There shall also be filed with the Insurance Commissioner on or before the first day of May each year a valuation report certified to by a competent actuary.

Section 21. The Insurance Commissioner, or any person he may appoint, shall have the power of visitation and examination into the affairs of any domestic or foreign society, and he, or any person he may appoint, shall have free access to all the books, papers and documents that relate to the business of the society and may summon and qualify as witnesses under oath and examine its officers, agents and employees or other persons in relation to the affairs, transactions and conditions of the society. The expense of such examination shall be paid by the society examined.

When after examination the Insurance Commissioner is satisfied that any domestic or foreign society has failed to comply with any provisions of this Act, or is exceeding its powers, or is not carrying out its contracts in good faith he may present the facts relating thereto to the Attorney General for action.

No proceedings shall be commenced by the Attorney General against any such society until after notice has been sent by registered mail to the chief executive officers of the society at their last known post office address and a reasonable opportunity given to it, on a date to be named in said notice, to show cause why such proceedings should not be commenced. Pending, during or after an examination or investigation of any such society, either domestic or foreign, the Insurance Commissioner shall make public no financial statement, report or finding, nor shall he permit to become public any financial statement, report or finding affecting the status, standing or rights of any such society, until a copy thereof shall have been served upon such society, at its home office, nor until such society shall have been afforded a reasonable opportunity to answer any such financial statement, report or finding and to make such showing in connection therewith as it may desire.

Section 22. No application for injunction against or proceedings for the dissolution of or the appointment of a receiver for any such domestic society or branch thereof shall be entertained by any Court in this State unless the same is made by the Attorney General.

Section 23. Nothing contained in this Act shall be construed to affect or apply to grand or subordinate lodges of Masons, Odd Fellows or Knights of Pythias (exclusive of the Insurance Department of the supreme lodge, Knights of Pythias), Knights of Columbus exclusive of the insurance branch thereof, and the Junior Order of United American Mechanics (exclusive of the beneficiary degree or insurance branch of the National Council Junior Order United American Mechanics), Brotherhood of Railway Trainmen, Polish National Alliance of the United States of North America, Mutual Aid Society of St. Stanislaus, B. M., Society of Mater Admirabilis, and all other societies of like Character now in existence and operating in the State of Delaware, or societies which limit their membership to any one hazardous occupation, nor to similar societies which do not issue insurance certificates, nor to an association of local lodges of a society now doing business in this State which provides death benefits hot exceeding One Thousand Dollars ($1,000.00) to any one person, or disability benefits not exceeding Five Hundred Dollars ($500.00) in any one year to any one person, or both, nor to any contracts for reinsurance on such plan in this State, nor to domestic societies, which limit their membership to the employees of a particular city or town, designated form, business house or corporation, nor to domestic lodges, orders or associations of a purely religious, charitable and benevolent description, which do not provide for a death benefit of more than One Hundred Dollars ($100.00) or for disability benefits of more than One Hundred and Fifty Dollars ($150.00) to any one person in any one year.

Any Fraternal Benefit Society heretofore organized and incorporated and operating within the definition set forth in this Act, providing for benefits in case of death or disability resulting solely from accidents, or which obligates itself to pay sick benefits, may be licensed under the provisions of this Act, and shall have all the privileges and shall be subject to all the provisions and regulations of this Act.

Section 24. Any person who shall solicit membership for, or in any manner assist in procuring membership in any Fraternal Benefit Society not licensed to do business in this State, or who shall solicit membership for, or in any manner assist in procuring membership in any society not authorized as herein provided, to do business as herein defined in this State shall be guilty of a misdemeanor and upon conviction thereof shall be punished by a fine of not less than Fifty Dollars ($50.00) nor more than Two Hundred Dollars ($200.00).

Any society, or any officer, agent or employee thereof, neglecting or refusing to comply with or violating any of the provisions of this Act, the penalty for which neglect, refusal or violation is not specified in this Section, shall be fined not exceeding Two Hundred Dollars ($200.00) upon conviction thereof.

Section 25. If any clause, sentence, paragraph, or part of this act shall for any reason be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder of this act but shall be confined in its operation to the clause, sentence, paragraph or part thereof directly involved in the controversy in which such judgment shall have been rendered.

Section 26. All Acts and parts of Acts inconsistent with the provisions of this Act shall be and the same are hereby repealed.

Approved April 12, 1935.