CHAPTER 380

AN ACT TO AMEND TITLE 18 OF THE DELAWARE CODE, ENTITLED "INSURANCE," BY A COMPREHENSIVE REVISION AND SUPPLEMENTATION OF THAT TITLE TO BE EFFECTED BY REPEALING THE PRESENT CHAPTERS 1 THROUGH 31, INCLUSIVE, IN THEIR ENTIRETY, AND SUBSTITUTING THEREFOR NEW CHAPTERS 1 THROUGH 65, INCLUSIVE.

Be it enacted by the General Assembly of the State of Delaware:

Section 1. Title 18, Delaware Code, is amended by repealing chapters 1 through 31, inclusive, in their entirety, and substituting therefor new chapters 1 through 65, inclusive to read, from beginning to end, as follows:

PART I. INSURANCE

CHAPTER 1. GENERAL DEFINITIONS AND PROVISIONS

§ 101. Short title

This Part constitutes the Delaware Insurance Code.

§ 102. Definitions

As used in this Part--

(a) "Person" means corporations, companies, associations, firms, partnerships, societies and joint stock companies, and individuals as is provided in Section 3029, Title 1. In addition, "person" also includes syndicates, organizations, business trusts, attorneys-in-fact and every natural or artificial legal entity.

(b) "Insurance" means a contract whereby one undertakes to pay or indemnify another as to loss from certain specified contingencies or perils, called "risks," or to pay or grant a specified amount or determinable benefit in connection with ascertainable risk contingencies, or to act as surety.

(c) "Insurer" includes every person engaged as principal and as indemnitor, surety, or contractor in the business of entering into contracts of insurance.

(d) "Commissioner" means the Insurance Commissioner of this State.

(e) "Department" means the Insurance Department of this State.

(f) A "domestic" insurer is one formed under the laws of this State.

(g) A "foreign" insurer is one formed under the laws of any jurisdiction other than this State.

(h) An "alien" insurer is a foreign insurer formed under the laws of any country other than the United States of America, its states, districts, commonwealths and possessions.

(i) The "domicile" of -an insurer means:

(1) As to Canadian insurers, the province in which the insurer's head office is located.

(2) As to other alien insurers authorized to transact insurance is one or more states, as provided in Section 531 (retaliatory provision) of this Title.

(3) As to alien insurers other than those referred to in (1) or (2) above, the country under the laws of which the insurer was formed.

(4) As to all other insurers, the state under the laws of which the insurer was formed.

(j) An "authorized" insurer is one duly authorized to transact insurance in this State by a subsisting certificate of authority issued by the Commissioner.

§ 103. "Transacting insurance" defined

In addition to other aspects of insurance operations to which provisions of this title by their terms apply, "transact" with respect to a business of insurance includes any of the following:

(1) Solicitation or inducement.

(2) Negotiations.

(3) Effectuation of a contract of insurance.

(4) Transaction of matters subsequent to effectuation and arising out of such a contract.

§ 111. Application of code as to particular types of insurers

No provision of this title shall apply with respect to:

(1) Domestic mutual assessment property insurers except as stated in chapter 53 (mutual assessment property insurers) of this title.

(2) Domestic mutual benefit associations, except as stated in chapter 55 (mutual benefit associations) of this title.

(3) Fraternal benefit societies, except as stated in chapter 61 (fraternal benefit societies) of this title.

§ 112. Particular provisions prevail

Provisions of this title as to a particular kind of insurance, type of insurer, or matter shall prevail over provisions relating to insurance, insurers, or matters in genera].

§ 113. General penalty

(a) Each violation of this title for which a greater penalty is not provided by a provision of this title or other applicable laws of this State, in addition to any applicable prescribed denial, suspension, or revocation of certificate of authority or license, shall upon conviction thereof subject the violator to a fine of not more than $1,000 or imprisonment of not more than one year, or both; except, that if the violator is a corporation the fine shall be not more than $3,000 as to each violation. Any director, officer, manager, employee or representative of a corporation shall be subject to fine and imprisonment as above provided.

(b) Prosecutions for any such violation shall be brought in the Superior Court of the county in which the offense occurred.

(c) At the discretion of the Commissioner and the Attorney General, any fine provided for above may be recovered on behalf of the State by a civil action brought against the violator.

CHAPTER 3. THE INSURANCE COMMISSIONER

§ 301. Department continued

There is continued a department of state government known as the Insurance Department.

§ 302. Commissioner; election, term

(a) The Insurance Commissioner shall be the chief officer of the Insurance Department.

(b) The Commissioner shall be elected by the qualified electors of the State at a general election for a term of 4 years, and shall be commissioned by the Governor.

(c) Subject to prior qualification by the oath required by section 303 of this chapter and the bond required by section 304 of this chapter, the Commissioner shall assume his office on the first Tuesday of January after his election. He shall hold office for the term for which elected; and thereafter as provided by Article XV, section 5, of the Constitution.

§ 303. Oath

Before entering upon the duties of his office the Commissioner shall take and subscribe the oath or affirmation prescribed by Article XIV of the Constitution.

§ 304. Bond

Before entering upon the duties of his office the Commissioner shall give and file with the Secretary of State a bond in the penal sum of $50,000 with corporate surety or sureties approved by the Governor. The bond shall be conditioned as follows: "that if the above named who has been duly elected (or appointed) to be Insurance Commissioner shall well and diligently execute his office of Insurance Commissioner and duly and faithfully fulfill and perform all the trusts and duties to the office appertaining, and truly and without delay deliver to his successor in office, the seal and all the books, records and paper belonging to said office, safe and undefaced, and if the said shall truly and without delay pay over to the State Treasurer all

the fees, taxes and money which it shall be his duty to collect, and which are to be paid to the State Treasurer, then this obligation shall be void and of no effect, or else shall remain in full force and virtue.

§ 305. Removal; vacancy

(a) The Commissioner may be removed from office for reasonable cause, as provided by Article HI, section 13, of the Constitution.

(b) A vacancy in the office of Commissioner shall be filled by appointment by the Governor, as provided in Article III, section 9, of the Constitution.

§ 306. Seal

The Commissioner shall have a seal of office of a suitable design and bearing the words "Insurance Commissioner of the State of Delaware."

§ 307. Compensation

The State shall pay the Commissioner salary at the rate provided by law as full compensation for all duties required of him.

§ 308. Principal office

The principal office of the Commissioner shall be in Dover.

§ 309. Deputy Commissioner

(c) The Commissioner may appoint and may remove, a Deputy. Before entering upon his duties the Deputy shall take and file the Constitutional oath of office, and give and file his bond in the penal sum of $50,000 conditioned and with sureties approved as that of the Commissioner.

(d) The Deputy may exercise such powers and discharge such duties as the Commissioner may authorize.

(e) The Deputy shall devote his full time to the department, shall not engage in any other insurance-related activity for fee or compensation, and the State shall pay him salary at the rate provided by law in full compensation for all his services.

§ 310. Staff

(a) The Commissioner may appoint and fix the compensation of such examiners, clerks, technical and professional personnel, and other necessary assistants as conduct of his office may require, and may revoke such appointments.

(b) The Commissioner may from time to time contract for and procure such additional and independent actuarial, rating, lawyer, and other technical and professional services as he may require for discharge of his duties.

§ 311. Prohibited interest; rewards

(c) The Commissioner or his deputy, or any examiner, assistant or employee of the department, shall not be connected with the management of, or have a material financial interest, directly or indirectly, in any insurer, insurance agency or broker, or insurance transaction except as policyholder or claimant under a policy; except, that as to matters wherein a conflict of interests does not exist on the part of any such individual, the Commissioner may employ or retain from time to time insurance actuaries, examiners, accountants, attorneys, or other technicians who are independently practicing their profession even though from time to time similarly employed or retained by insurers or others.

() The Commissioner, his deputy, or any examiner, assistant, employee, or technician retained by the department, shall not be given or receive, directly or indirectly, any fee, compensation, loan, gift or other thing of value in addition to the compensation and expense allowance provided by or pursuant to the law of this State, or by contract with the Commissioner, for any service rendered or to be rendered as such Commissioner, deputy, examiner, assistant, employee, or technician, or in connection therewith.

(a) Subsection (a) above shall not be deemed to prohibit receipt by any such person of fully vested commissions or fully vested retirement benefits to which entitled by reason of services performed prior to becoming Commissioner or prior to employment by the Commissioner.

(b) This section shall not be deemed to prohibit appointment and functioning of the Commissioner as process agent of insurers or of nonresident licensees as provided for in this title.

§ 312. Delegation of powers; duties

(a) The Commissioner may delegate to his deputy, examiner, or an employee of the department the exercise or discharge in the Commissioner's name of any power, duty, or function, whether ministerial, discretionary or of whatever character, vested in or imposed upon the Commissioner under this title.

(b) The official act of any such person acting in the Commissioner's name and by his authority shall be deemed an official act of the Commissioner.

§ 313. General powers; duties

(c) The Commissioner shall enforce the provisions of, and execute the duties imposed upon him by, this title.

(d) The Commissioner shall have the powers and authority expressly vested in him by or reasonably implied from the provisions of this title.

(e) With respect to enforcement of payment of fees, charges and taxes all the provisions of law conferring powers and duties upon the State Treasurer shall also apply to the Commissioner.

(f) The Commissioner shall have such additional rights, powers and duties as may be provided by other laws of this State.

§ 314. Rules and regulations; promulgation; violation

(a) The Commissioner may make reasonable rules and regulations necessary for or as an aid to the administration or effectuation of any provision of this title. No such rule or regulation shall extend, modify, or conflict with any law of this State or the reasonable implications thereof.

(b) The Commissioner shall adopt and promulgate rules and regulations only after a hearing thereon of which notice has been given to all persons subject to the Commissioner's supervision under this title who are to be affected by the proposed rule or regulation.

() Willful violation of any such rule or regulation shall subject the violator to such suspension or revocation of certificate of authority or license, or to such administrative fine in lieu

thereof, as may be applicable under this title for violation of the provision to which such rule or regulation relates; but no penalty shall apply to any act done or omitted in good faith in conformity with any such rule or regulation, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

§ 315. Orders; notices in general

(a) Orders and notices of the Commissioner shall be effective only when in writing signed by him or by his authority.

(b) Except as otherwise expressly provided by law as to particular orders, every order of the Commissioner shall state its effective date, and shall concisely state:

(1) Its intent or purpose.

(2) The grounds on which based.

(3) The provisions of this title pursuant to which action is taken or proposed to be taken; but failure to so designate a particular provision shall not deprive the Commissioner of the right to rely thereon except where expressly provided to the contrary.

(c) Except as may be provided as to particular procedures, an order or notice may be given by delivery to the person to be ordered or notified or by mailing it, postage prepaid, addressed to such person at his principal place of business or residence as last of record in the department. The order or notice shall be deemed to have been given when deposited in a mail depository of the United States post office.

§ 316. Enforcement

(a) The Commissioner may, through the Attorney General of this State, invoke the aid of the Court of Chancery through proceedings instituted in any county of this State to enforce any lawful order made or action taken by him. In such proceedings the Court of Chancery may make such orders, either preliminary or final, as it deems proper under the facts established before it.

(b) If the Commissioner has reason to believe that any person has violated any provision of this title, or of other law as applicable to insurance operations, for which criminal prosecution is provided and in his opinion would be in order, he shall give the information relative thereto to the Attorney General. The Attorney General shall promptly institute such action or proceedings against such person as in his opinion the information may require or justify.

(c) The Attorney General upon request of the Commissioner is authorized to proceed in the courts of any other State or in any federal court or agency to enforce an order or decision of any court proceeding or in any administrative proceeding before the Commissioner.

§ 317. Records; inspection; destruction

(c) The Commissioner shall carefully preserve in the department and in permanent form, all papers and records relating to the business of the department, and shall hand the same over to his successor in office.

(d) Except where he deems the same to be prejudicial to the public interest, the Commissioner shall permit inspection of the papers, records and filings in the department by persons found by him to have an identified and proper interest therein.

(e) The Commissioner may destroy unneeded or obsolete records and filings in the department in accordance with provisions and procedures applicable to administrative agencies of this State in general.

§ 318. Official documents; certified copies; use as evidence

Any instrument duly executed by the Commissioner and authenticated by his seal of office, shall be received in evidence in the courts of this State; and copies of papers and records in the department, so authenticated, shall be received as evidence with the same effect as the originals.

§ 319. Annual report

(a) The Commissioner shall report to each annual session of the General Assembly, on the first Tuesday of January, as follows:

(1) The receipts and expenses of the department for the previous year;

(2) All of his official acts whenever specially required by the General Assembly, and in the absence of any special requirement, such portion of his official acts as he deems advisable to make public;

(3) The financial condition of each insurer authorized to transact insurance in this State as shown by the most recent annual financial statement of such insurers on file in the department;

(4) Such recommendations as he deems advisable relative to the amendment or supplementation of the insurance laws of this State; and

(5) Such other information as will correctly exhibit the afairs of the department, or as he deems otherwise to be in the public interest relative to the business of insurance in this State.

(b) When the report is printed, the Commissioner shall furnish a copy upon request thereby to the insurance supervisory official of other states and to authorized insurers.

§ 320. Interstate cooperation

(a) The Commissioner shall communicate on request of the insurance supervisory official of any state, province or country, any information which it is his duty by law to ascertain respecting authorized insurers.

(b) The Commissioner may be a member of the National Association of Insurance Commissioners or any succor organization, and may participate in and support other cooperative activities of public officials having supervision of the business of insurance.

§ 321. Investigations authorized

In addition to examinations and investigations expressly authorized, the Commissioner may conduct such investigations of insurance matters as he may deem proper upon reasonable cause to determine whether any person has violated any provision of this title or to secure information useful in the lawful administration of any such provision. The cost of such investigations shall be borne by the State.

§ 322. Examination of insurers

(a) For the purpose of determining its financial condition, ability to fulfill its obligations and compliance with the law, the Commissioner shall examine the affairs, transactions, accounts, records and assets of each authorized insurer as often as he deems advisable, including the attorney-in-fact of a reciprocal insurer insofar as insurer transactions are involved. Except as otherwise expressly provided, he shall so examine each domestic insurer not less frequently than every 5 years. Examination of an alien insurer shall be limited to its insurance transactions, assets, trust deposits and affairs in the United States except as otherwise required by the Commissioner.

(b) The Commissioner shall in like manner examine each insurer applying for an initial certificate of authority to transact insurance in this State.

(c) In lieu of making his own examination, the Commissioner may, in his discretion, accept a full report of the last recent examination of a foreign or alien insurer, certified to by the insurance supervisory official of another state.

(d) As far as practical the examination of a foreign or alien insurer shall be made in cooperation with the insurance supervisory officials of other states in which the insurer transacts business.

§ 323. Examination of agents, promoters and others

For the purpose of ascertaining compliance with law, or relationships and transactions between any such person and any insurer or proposed insurer, the Commissioner may as often as he deems advisable examine the accounts, records, documents and transactions pertaining to or affecting insurance affairs or proposed insurance affairs, of:

(1) Any insurance agent, solicitor, broker, general agent, adjuster, insurer representative, or person holding himself out as any of the foregoing.

(2) Any person having a contract under which he enjoys in fact the exclusive or dominant right to manage or control an insurer.

(3) Any person holding the shares of voting stock or the policyholder proxies of a domestic insurer, for the purpose of controlling the management thereof, as voting trustee or otherwise.

(4) Any person engaged in this State in, or proposing to be engaged in this State in, or holding himself out in this State as so engaging or proposing, or in this State assisting in, the promotion, formation or financing of an insurer or insurance holding corporation, or corporation or other group to finance an insurer or the production of its business.

§ 324. Conduct of examination; access to records; correction

(a) The Commissioner shall conduct each examination in an expeditious, fair, and impartial manner.

(b) Upon any such examination the Commissioner or examiner may examine under oath any officer, agent, or other individual believed to have material information regarding the affairs under examination.

(c) Every person being examined, its officers, attorneys, employees, agents and representatives shall make freely available to the Commissioner or his examiners the accounts, records, documents, files, information, assets and matters of such person in his possession or control relating to the subject of the examination and shall facilitate the examination.

(d) If the Commissioner or examiner finds any accounts of records to be inadequate, or inadequately kept or posted, he may employ experts to reconstruct, rewrite, post or balance them at the expense of the person being examined if such person has failed to maintain, complete or correct such records or accounting after the Commissioner or examiner has given him written notice and a reasonable opportunity to do so.

(e) Neither the Commissioner nor any examiner shall remove any record, account, document, file or other property of the person being examined from the offices or place of such person except with the written consent of such person in advance of such removal or pursuant to an order of court duly obtained. This provision shall not be deemed to affect the making and removal of copies or abstracts of any such record, account, document, or file.

§ 325. Examination report

(f) The Commissioner or his examiner shall make a full and true written report of every such examination made by him, and shall therein certify under oath the report and his findings.

(g) The report shall contain only information appearing upon the books, records, documents and papers of or relating to the person or affairs being examined, or ascertained from testimony of individuals under oath concerning the affairs of such person, together with such conclusions and recommendations as may reasonably be warranted by such information.

(h) The Commissioner shall furnish a copy of the report to the person examined not less than 20 days prior to filing the same in the department, and may, in his discretion, also furnish a copy of the report to each member of the examinee's board of directors, if the person examined is a corporation. If such person so requests in writing within such 20-day period, the Commissioner shall grant a hearing as to the report and shall not so file the report until after the hearing and after such modifications have been made therein as the Commissioner deems proper.

(i) The report when so filed shall be admissible in evidence in any action or proceeding brought by the Commissioner against the person examined, or against its officers, employees or agents. In any such action or proceeding, the Commissioner or his examiners may, however, at any time testify and offer proper evidence as to information secured or matters discovered during the course of an examination, whether or not a written report of the examination has been either made, furnished or filed in the department.

() The Commissioner may withhold from public inspection any examination or investigation report for so long as he deems such withholding to be necessary for the protection of the person examined against unwarranted injury or to be in the public interest.

§ 326. Examination expense

(a) The expense of examination of an insurer, or of any person referred to in subdivision (2) (management or control of an insurer under contract) or (4) (promoters, etc.) of section 323 of this chapter, shall be borne by the person examined. Such expense shall include only the reasonable and proper expenses of the Commissioner and his examiners and assistants, including expert assistance, and a reasonable per diem as to such examiners and assistants, as necessarily incurred in the examination.

(b) Such person examined shall promptly pay the examination expense upon presentation by the Commissioner or his examiner of a reasonably detailed written account thereof.

§ 327. Administrative procedures; hearings in general

(a) The Commissioner may hold a hearing without request by others, for any purpose within the scope of this title.

(b) The Commissioner shall hold a hearing:

(1) If required by any other provision of this title, or

(2) Upon written application for a hearing by a person aggrieved by any act, threatened act, or failure of the Commissioner to act, or by any report, rule, regulation or order of the Commissioner (other than an order for the holding of a hearing, or order on a hearing, or pursuant to such order, of which hearing such person had notice). Any such application must be filed in the department within 90 days after such person knew or reasonably should have known, of such act, threatened act, failure, report, rule, regulation, or order, unless a different period is provided for by other laws applicable to the particular matter, and in which case such other law shall govern.

(c) Any such application for a hearing shall briefly state the respects in which the applicant is so aggrieved, together with the grounds to be relied upon as a basis for the relief to be sought at the hearing.

(d) If the Commissioner finds that the application is made in good faith, that the applicant would be so aggrieved if his grounds are established and that such grounds otherwise justify the hearing, he shall hold the hearing within 30 days after filing of the application, unless postponed by mutual consent. Failure to hold the hearing upon application therefor of a person entitled thereto as hereinabove provided shall constitute a denial of the relief sought, and shall be the equivalent of a final order of the Commissioner on hearing for the purpose of an appeal under section 333 of this chapter.

(e) Pending the hearing and decision thereon, the Commissioner may suspend or postpone the effective date of his previous action.

§ 328. Notice of hearing

(a) Except where a longer period is expressly provided in this title, the Commissioner shall give written notice of the hearing not less than 10 days in advance. The notice shall state the date, time and place of the hearing and specify the matters to be considered thereat. If the persons to be given notice are not specified in the provision pursuant to which the hearing is held, the Commissioner shall, give such notice to all persons whose pecuniary interest, to the Commissioner's knowledge or belief, are to be directly and immediately affected by the hearing.

(b) If any person is entitled to a hearing by any provision of this title before any proposed action is taken, the notice of the hearing may be in the form of a notice to show cause, stating that the proposed action may be taken unless such person shows cause at a hearing to be held as specified in the notice why the proposed action should not be taken, and stating the basis of the proposed action.

() If any such hearing is to be held for consideration of rules and regulations of the Commissioner, or of other matters which, under subsection (a) above, would otherwise require separate notices to more than 30 persons, in lieu of other notice the Commissioner may give notice of the hearing by publication thereof in a newspaper of general circulation in this State, at least once each week during the 4 weeks immediately preceding the week in which the hearing is to be held; except that the Commissioner shall mail such notice to all persons who have requested the same in writing in advance and have paid to the Commissioner the reasonable amount fixed by him to cover the cost thereof.

(a) All such notices, other than published notices, shall be given as provided in section 315 (c) of this chapter.

§ 329. Conduct of hearing

(a) The Commissioner may hold a hearing in Dover or any other place of convenience to parties and witnesses, as the Commissioner determines. The Commissioner, or his deputy or assistant, shall preside at the hearing, and shall expedite the hearing and all procedures involved therein.

(b) Any party to the hearing shall have the right to appear in person and by counsel, to be present during the giving of all evidence, to have a reasonable opportunity to inspect all documentary and other evidence and to examine and cross-examine witnesses, to present evidence in support of his interest and to have subpoenas issued by the Commissioner to compel attendance of witnesses and production of evidence in his behalf. Testimony may be taken orally or by deposition, and any party shall have such right of introducing evidence by interrogatories or deposition as may obtain in a Court of Chancery.

(c) Upon good cause shown the Commissioner shall permit to become a party to the hearing by intervention, if timely, only such persons, not original parties thereto, whose pecuniary interests are to be directly and immediately affected by the Commissioner's order made upon the hearing.

(d) Formal rules of pleading or evidence need not be observed at any hearing.

(e) Upon written request reasonably made by a party to the hearing and at such person's expense, the Commissioner shall cause a full stenographic or electronic record of the proceedings to be made. If transcribed, a copy of such record shall be furnished to the Commissioner without cost to the Commissioner or the State, and shall be part of the Commissioner's record of the hearing; and a copy shall likewise be furnished to any other party to the hearing, at the request and expense of such other party. If no such record is made or transcribed, the Commissioner shall prepare a summary record of the proceedings and evidence.

§ 330. Witnesses and documentary evidence

(a) As to the subject of any examination, investigation or hearing being conducted by him, the Commissioner may subpoena witnesses and administer oaths or affirmations and examine any individual under oath, or take depositions; and by subpoena duces tecum may require the production of documentary and other evidence. Any delegation by the Commissioner of power of subpoena shall be in writing.

(b) Witness fees and mileage, if claimed, shall be allowed the same as for testimony in a Court of Chancery. Witness fees, mileage and the actual expense necessarily incurred in securing attendance of witnesses and their testimony, shall be itemized and shall be a part of examination expense to be paid by the person being examined where payment of examination expense by such person is otherwise provided for in this title; or paid by the person as to whom such proceedings, other than as part of an examination, are held if in such proceedings such person is found to have been in violation of the law; or by the person, if other than the Commissioner, at whose request the hearing is held.

(c) Subpoenas of witnesses shall be served in the same manner and at the same cost as if issued by a Court of Chancery. If any individual fails to obey a subpoena issued and served hereunder with respect to any matter or evidence concerning which he may be lawfully interrogated or required to produce for examination, upon application of the Commissioner the Court of Chancery in any county in which is pending the proceeding at which such individual is so required to appear, or the Court of Chancery in the county in which such individual resides, may issue an order requiring the individual to comply with the subpoena and to appear and testify or produce the evidence subpoenaed; and any failure to obey such order of the Court may be punished by the Court as a contempt thereof.

(d) Any person knowingly testifying falsely under oath or making a false affirmation, as to any matter material to any such examination, investigation or hearing, shall upon conviction thereof be guilty of perjury.

§ 331. Testimony compelled; immunity

(a) If any individual asks to be excused from attending or testifying or from producing any books, papers, records, contracts, correspondence or other documents in connection with any examination, hearing or investigation being conducted by the Commissioner or his examiner, on the ground that the testimony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture, and shall, by the Attorney General, be directed to give such testimony or produce such evidence, he must nonetheless comply with such direction, but he shall not thereafter be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter or thing concerning which he may have so testified or produced evidence, and no testimony so given or evidence produced shall be received against him upon any criminal action, investigation or proceeding; except, however, that no such individual so testifying shall be exempt from prosecution or punishment for any perjury committed by him in such testimony, and the testimony or evidence so given or produced shall be admissible against him upon any criminal action, investigation, or proceeding concerning such perjury; nor shall such individual be exempt from the refusal, suspension or revocation of any license, permission or authority conferred, or to be conferred, pursuant to this title.

(b) Any such individual may execute, acknowledge and file in the office of the Commissioner and of the Attorney General a statement expressly waiving such immunity or privilege in respect to any transaction, matter or thing specified in such statement, and thereupon the testimony of such individual or such evidence in relation to such transaction, matter or thing may be received or produced before any judge or justice, court, tribunal, grand jury or otherwise, and if so received or produced such individual shall not be entitled to any immunity or privileges on account of any testimony he may so give or evidence so produced.

§ 332. Order on hearing

(a) In the conduct of hearings under this title and making his order thereon, the Commissioner shall act in a quasi-judicial capacity.

(b) Within 30 days after termination of a hearing, or of any rehearing thereof or reargument thereon, or within such other period as may be specified in this title as to particular proceedings, the Commissioner shall make his order on hearing covering matters involved in such hearing, and give a copy of the order to each party to the hearing in the same manner as notice of the hearing was given to such party; except, that as to hearings held with respect to merger, consolidation, bulk reinsurance, conversion, affiliation or change of control of a domestic insurer as provided in chapter 49 (organization and corporate procedures of domestic stock and mutual insurers) of this title, where notice of the hearing was given to all stockholders and/or policyholders of an insurer involved, the Commissioner is required to give a copy of the order on hearing to the corporation and insurer parties, to intervening parties, to a reasonable number of such stockholders or policyholders as representative of the class, and to other parties only upon written request of such parties.

(c) The order shall contain:

(1) A concise statement of facts found by the Commissioner upon the evidence adduced at the hearing;

(2) A concise statement of the Commissioner's conclusions from the facts so found;

(3) His order, and the effective date thereof; and

(4) Citation of the provisions of this title upon which the order is based; but failure to so designate a particular provision shall not deprive the Commissioner of the right thereafter to rely thereon.

(d) The order may affirm, modify or rescind action theretofore taken or may constitute taking of new action within the scope of the notice of the hearing.

§ 333. Appeal from the Commissioner

(a) Except as to matters arising under chapter 25 of this title (rates and rating organizations), an appeal from the Commissioner shall be taken only from an order on hearing, or as to a matter on which the Commission has refused or failed to hold a hearing after application therefor under section 327 of this chapter, or as to a matter as to which the Commissioner has refused or failed to make his order on hearing as required by section 332 of this chapter.

(b) Any person who was a party to such hearing or whose pecuniary interests are directly and immediately affected by any such refusal or failure, and who is aggrieved by such order, refusal or failure, may appeal from such order or as to any such matter within 60 days after:

(1) The order on hearing has been mailed or delivered to the persons entitled to receive the same, or given by last publication thereof where delivery by publication is permitted; or

(2) The Commissioner has refused or failed to make his order on hearing as required under section 332 of this chapter; or

(3) The Commissioner has refused or failed to grant or hold a hearing as required under section 327 of this chapter.

(c) The appeal shall be granted as a matter of right, and shall be taken to the Court of Chancery in any county in this State.

() The appeal shall be taken by filing in the Court a verified petition stating the grounds upon which the review is sought, together with a bond with good and sufficient sureties to be approved by the Court conditioned to pay all costs which may be assessed against the appellant or petitioner in such proceedings, and by serving a copy of the petition upon the Commissioner. If the appeal is from the Commissioner's order on hearing, the petitioner shall also deliver to the Commissioner a sufficient number of copies of the petition and the Commissioner shall mail or otherwise furnish a copy thereof to the other parties to the hearing to the same extent as a copy of the Commissioner's order is required to be furnished to the hearing parties under section 332 of this chapter.

(c) Upon receiving the petition for review, the Commissioner shall cause to be prepared an official record certified by him which shall contain a copy of all proceedings and orders of the Commissioner appealed from and the transcript of testimony and evidence or summary record thereof made as provided in section 329 of this chapter. Within 30 days after the petition was served upon him the Commissioner shall file such official record with the Court in which the appeal is pending.

(d) Upon filing of the petition for review the Court shall have full jurisdiction of the proceeding. Such filing shall not stay the enforcement of the Commissioner's order or action appealed from unless so stayed by order of the Court.

(g) If the appeal is from the Commissioner's order on hearing, the review of the Court shall be limited to matters shown by the Commissioner's official record; otherwise, the review shall be de novo. The Court shall have the power, by preliminary order, to settle questions concerning the completeness and accuracy of the Commissioner's official record.

() In its discretion, the Court may remand the case to the Commissioner for further proceedings in accordance with the Court's directions; or, in advance of judgment and upon a sufficient showing, the Court may remand the case to the Commissioner for the purpose of taking additional testimony or other proceedings.

(a) From the judgment of the Court of Chancery either the Commissioner or other party to the appeal may appeal directly to the Supreme Court of the State of Delaware in the same manner as is provided in civil cases.

CHAPTER 5. AUTHORIZATION OF INSURERS AND GENERAL REQUIREMENTS

§ 501. "Stock" insurer defined

A "stock" insurer is an incorporated insurer with its capital divided into shares and owned by its stockholders.

§ 502. "Mutual" insurer defined

A "mutual" insurer is an incorporated insurer without capital stock and the governing body of which is elected by its policyholders. This definition shall not be deemed to exclude as "mutual" insurers certain foreign insurers found by the Commissioner to be organized on the mutual plan under the laws of their states of domicile, but having temporary share capital or providing for election of the insurer's governing body on a reasonable basis.

§ 503. "Reciprocal" insurer defined

A "reciprocal" insurer is an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact common to all such persons to provide reciprocal insurance among themselves.

§ 504. "Charter" defined

"Charter" means certificate of incorporation, articles of incorporation, articles of agreement, articles of association, charter granted by legislative act, or other basic constituent document of a corporation, or the power of attorney of the attorney in-fact of a reciprocal insurer.

§ 505. Certificate of authority required

(a) No person shall act as an insurer and no insurer shall transact insurance in this State by mail or otherwise, except as authorized by a subsisting certificate of authority granted to it by the Commissioner and except as to such transactions as are expressly otherwise provided for in this title.

(b) No insurer formed under the laws of this State and no insurer from offices or by personnel or facilities located in this State, shall solicit insurance applications or otherwise transact insurance in another state or country unless it holds a subsisting certificate of authority granted to it by the Commissioner authorizing it to transact the same kind or kinds of insurance in this State.

() Any willful violation of this section by a domestic corporation shall constitute misuse of its corporate powers, and the Attorney General shall proceed for the forfeiture of its charter under the provisions of section 283 of Title 8.

§ 506. Exceptions to certificate of authority requirement

A certificate of authority shall not be required of an insurer with respect to the following:

(1) Investigation, settlement, or litigation of claims under its policies lawfully written in this State, or liquidation of assets and liabilities of the insurer (other than collection of new premiums), all as resulting from its former authorized operations in this State.

(2) Transactions thereunder subsequent to issuance of a policy covering only subjects of insurance not resident, located or expressly to be performed in this State at time of issuance, and lawfully solicited, written and delivered outside this State

(3) Prosecution or defense of suits at law.

(4) Transactions pursuant to surplus lines coverages lawfully written under chapter 19 of this title.

(5) Reinsurance, except as to domestic reinsurers.

§ 507. General eligibility for certificate of authority

To qualify for and hold authority to transact insurance in this State, an insurer must be otherwise in compliance with this title and with its charter powers, and must be an incorporated stock or mutual insurer, or a reciprocal insurer, of the same general type as may be formed as a domestic insurer under this title; except that:

(1) No foreign insurer shall be authorized to transact insurance in this State which does not maintain reserves as required by chapter 11 (assets and liabilities) of this title, as applicable to the kind or kinds of insurance transacted by such insurer, wherever transacted in the United States; or which transacts business anywhere in the United States on the assessment plan, or stipulated premium plan, or any similar plan.

(2) No insurer shall be authorized to transact workmen's compensation insurance in this State unless approved by the Industrial Accident Board of this State under the provisions of Part II of Title 19.

(3) No insurer shall be authorized to transact a kind of insurance in this State unless duly authorized or qualified for authorization to transact such insurance in the state or country of its domicile.

§ 508. Same--ownership, management

(a) No foreign insurer which is directly or indirectly owned or controlled in whole or substantial part by any government or governmental agency shall be authorized to transact insurance in Delaware. Membership in a mutual insurer, or subscribership in a reciprocal insurer, or ownership of stock of an insurer by the alien property custodian or similar official of the United States, or ownership of stock or other security which does not have voting rights with respect to the management of the insurer, or supervision of an insurer by public authority, shall not be deemed to be an ownership or control of the insurer for the purposes of this provision.

(b) The Commissioner shall not grant or continue authority to transact insurance in this State as to any insurer or proposed insurer the management of which is found by him after investigation or upon reliable information to be incompetent, or dishonest, or untrustworthy, or of unfavorable business repute, or so lacking in insurance company managerial experience in operations of the kind proposed in this State as to make such operation, currently or prospectively, hazardous to, or contrary to the best interests of, the insurance-buying or investing public of this State; or which he has good reason to believe is affiliated directly or indirectly through ownership, control, reinsurance transactions or other business relations, with any person or persons of unfavorable business repute, or whose business operation are or have been marked, to the injury of insurers, stockholders, policyholders, creditors, or the public, by illegality, or by manipulation of assets, or of accounts, or of reinsurance, or by bad faith.

§ 509. Name of insurer

(a) No insurer shall be formed or authorized to transact insurance in this State which has or uses a name which is the same as or deceptively similar to that of another insurer already so authorized, without the written consent of such other insurer.

(b) No life insurer shall be so authorized which has or uses a name deceptively similar to that of another insurer authorized to transact insurance in this State within the preceding 10 years if life insurance policies originally issued by such other insurer are still outstanding in this State.

(c) No insurer shall be formed or authorized to transact insurance which has or uses a name the same as or deceptively similar to that of any foreign insurer not so authorized if such foreign insurer has within the next preceding 12 months signified its intention to secure an incorporation in this State under such name, or to do business as a foreign insurer in this State under such name, by filing notice of such intention with the Commissioner, unless the written consent to the use of such name or deceptively similar name has been given by such foreign insurer.

(d) No foreign insurer seeking admission to this State shall be authorized to transact insurance which has or uses a name the same as or deceptively similar to that of a domestic corporation which has been incorporated as an insurer but has not yet secured a certificate of authority, until expiration of 3 years from date of incorporation of such domestic corporation and of filing with the Commissioner of written notice of intent to use such name.

(e) No insurer shall be so authorized which has or uses a name which tends to deceive or mislead as to the type of organization of the insurer.

(f) In case of conflict of names between 2 insurers, or a conflict otherwise prohibited under this section, the Commissioner may permit (or shall require as a condition to the issuance of an original certificate of authority to an applicant insurer) the insurer to use in this State such supplementation or modification of its name or such business name as may reasonably be necessary to avoid the conflict.

(g) Except as provided in subsection (f) above, an insurer shall conduct its business in this State in its own corporate (if incorporated) or proper (if reciprocal insurer) name.

§ 510. Combinations of insuring powers

(a) A reciprocal insurer shall not be a life insurer.

() A title insurer shall be a stock insurer, and shall not transact any other kind of insurance. This provision shall not prohibit acceptance of reinsurance of title insurance risks by insurers not otherwise authorized to transact title insurance.

§ 511. Capital funds required

(a) To transact any one kind of insurance (as defined in chapter 9 of this title), or combinations of kinds of insurance as shown below, an insurer shall possess and thereafter maintain unimpaired paid-in capital stock (if a stock insurer) or unimpaired basic surplus (if a foreign mutual or a reciprocal insurer), and when first so authorized shall possess free surplus, all in amounts not less than a follows:

Kind or kinds of insurance Stock insurers Capital Free stock surplus Mutual Insurers Basic Free surplus surplus Reciprocal Insurers Basic Free surplus surplus
Lite $300,000 $150,000 $300,000 $150,000    
Health $300,000 $150,000 300,000 150,000 300,000 150,000
Life and health 350,000 200,000 350,000 200,000    
Properly 300,000 150,000 300,000 150,000 300,000 150,000
Casualty 400,000 200,000 400,000 200,000 400,000 200,000
Marine & transportation 350,000 175,000 350,000 175,000 350,000 175,000
Surety 300,000 150,000 300,000 150,000 300,000 150,000
Multiple line 500,000 250,000 500,000 250,000 500,000 250,000
Title 250,000 125,000        

Except: (1) A domestic insurer holding a valid certificate of authority to transact insurance in this State immediately prior to the effective date of this Act may, if otherwise qualified therefor, for a period of 5 years after such effective date continue to be so authorized while possessing paid-in capital stock (if a stock insurer) or surplus (if a mutual insurer) as required for such authority immediately prior to such effective date. The Commissioner shall not authorize such an insurer to transact any other kinds of insurance unless it then complies with the requirement as to capital and surplus, as applied to all kinds of insurance it then proposes to transact, as provided by this title as to foreign insurers applying for original certificates of authority under this title.

(2) An insurer which otherwise possesses funds as required under subsection (a) above, shall at all times maintain policyholders' surplus (combined paid-in capital stock, if any, and surplus) reasonable in amount, as determined by the Commissioner, in relation to the kinds and amount of insurance it has in force, or being written and retained by it, net of applicable reinsurance. In making any such determination the Commissioner shall give clue consideration to any applicable standards approved or adopted by the National Association of Insurance Commissioners and to the desirability of substantial uniformity as to such requirements among the respective states.

(b) Capital and surplus requirements are based upon all the kinds of insurance transacted by the insurer in any and all areas in which it operates or proposes to operate, whether or not only a portion of such kinds are to be transacted in this State.

(c) As to surplus required for authority to transact one or more kinds of insurance and thereafter to be maintained, domestic mutual insurers shall be governed by chapter 49 of this title.

§ 512. Insuring combinations without additional capital funds

Without additional capital or additional surplus, an authorized insurer is also authorized:

(1) If a life insurer, to grant annuities.

(2) If a health insurer, to insure against congenital defects, as defined in section 906 (a) (12) of this chapter.

(3) If a casualty insurer, to transact also health insurance. Except, that this provision shall not apply to a domestic insurer authorized to transact casualty insurance pursuant to section 511 (a) (1) of this chapter.

§ 513. Deposit requirements, in general

(a) The Commissioner shall not authorize a foreign insurer (other than an alien insurer) to transact insurance in this State unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner, or in another state, cash or securities eligible for such deposit under the laws of this State or of such other state of a fair market value not less than $100,000, for the protection of all its policyholders wherever located or all of its policyholders in the United States or of all its policyholders and creditors. The Commissioner shall accept the certificate in proper form of the public official having supervision over insurers in any other state to the effect that such deposit or part thereof by such insurer is being maintained in public custody or control pursuant to law in such state. The insurer shall at the time of filing its annual statement with the Commissioner as provided in section 526 of this chapter also file with the Commissioner a certificate from such public official showing the amount and character of the securities composing its deposit held in such other state.

(b) The Commissioner shall not authorize an insurer to transact surety insurance unless it makes and thereafter continuously maintains in this State through the Commissioner a special and additional deposit of cash or securities eligible therefor under section 1503 of this title, of a fair market value not less than $10,000, to answer any default of such insurer upon surety contracts issued by it in this State.

(c) No insurer shall transact workmen's compensation insurance in this State unless it makes and thereafter maintains in this State through the Commissioner a special and additional deposit of cash or securities eligible therefor under section 1503 of this title, of a fair market value of not less than $25,000 for the protection of persons in this State covered under insurance so transacted.

(d) The Commissioner shall not authorize a domestic title insurer to transact insurance unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner cash or securities eligible for such deposit under section 1503 of this title of a fair market value not less than $25,000 for the protection of its policyholders in this State.

(e) All such deposits in this State are subject to the applicable provisions of chapter 15 (administration of deposits) of this title.

§ 514. Deposit requirement, alien insurers

The Commissioner shall not authorize an alien insurer to transact insurance in this State unless it makes and thereafter continuously maintains on deposit in this State through the Commissioner, or in another state, a surplus of assets in cash or securities eligible for such deposit under the laws of this State or such other state of a value not less than the combined capital and surplus initially required of a like foreign insurer transacting like kinds of insurance in this State. The deposit shall be held in trust for the benefit and security of all the insurer's policyholders and creditors in the United States or of all the insurer's policyholders in the United States.

§ 515. Application for certificate of authority

To apply for an original certificate of authority an insurer shall file with the Commissioner its written application therefor, accompanied by the applicable fees specified in section 701 of this title, stating under the oath of the president or vice-president or other chief officer and the secretary of the insurer, or of the attorney-in-fact if the insurer is a reciprocal insurer, the insurer's name, location of its home office or principal office in the United States (if an alien insurer), the kinds of insurance to be transacted, date of organization or incorporation, form of organization, state or country of domicile and such additional information as the Commissioner may reasonably require, together with the following documents, as applicable.

(1) If a corporation, a copy of its charter or certificate or articles of incorporation, together with all amendments thereto, or as restated and amended under the laws of its state or country of domicile, currently certified by the public official with whom the originals are on file in such state or country.

(0) If an incorporated insurer, a copy of its bylaws, certified by the insurer's corporate secretary.

(1) If a reciprocal insurer, a copy of the power of attorney of its attorney-in-fact, certified by the attorney-in-fact; and if a domestic reciprocal insurer, the declaration provided for in section 5706 of this title.

(2) A complete copy of its financial statement as of not earlier than the December 31 next preceding in form as customarily used in the United States by like insurers, sworn to by at least two executive officers of the insurer or certified by the public insurance supervisory official of the insurer's state of domicile, or of entry into the United States (if an alien insurer).

(3) A copy of the report of last examination, if any, made of the insurer within not more than the 3 years next preceding, certified by the public insurance supervisory official of the insurer's state of domicile, or of entry into the United States (if an alien insurer.)

(4) Appointment of the Commissioner pursuant to section 524 of this chapter as its attorney to receive service of legal process.

(5) If a foreign or alien insurer, a certificate of the public insurance supervisory official of its state or country of domicile showing that it is authorized to transact in such state or country the kinds of insurance proposed to be transacted in this State.

(6) If a foreign insurer, certificate as to deposit if to be tendered pursuant to section 513 of this chapter.

(7) If an alien insurer, certificate as to deposit in another state if to be tendered pursuant to section 514 of this chapter.

(10) If a life or health insurer, a copy of the insurer's rate book and of each form of policy currently proposed to be issued in this State, and of the form of application therefor.

(11) If an alien insurer, a copy of the appointment and authority of its United States manager, certified by its officer having custody of its records.

(12) Designation by the insurer of its officer or representative authorized to appoint and remove its agents in this State.

§ 516. Issuance, refusal of authority; ownership of certificate

(a) If upon completion of its application the Commissioner finds that the insurer has met the requirements therefor under this title, he shall issue to the insurer a proper certificate of authority; if he does not so find, the Commissioner shall issue his order refusing such certificate. The Commissioner shall act upon an application for certificate of authority within a reasonable period after its completion.

(b) The Commissioner shall issue certificates of authority under his seal of office, showing the date of actual issuance, the kinds of insurance the insurer is authorized to transact in this State, and such other matters as the Commissioner deems necessary. At the insurer's request, the Commissioner may issue a certificate of authority limited to particular types of insurance or coverages within a kind of insurance as defined in chapter 9 of this title.

(c) Although issued and delivered to the insurer, the certificate of authority at all times shall be the property of the State of Delaware. Upon any expiration, suspension, or termination thereof the insurer shall promptly deliver the certificate to the Commissioner.

§ 517. Authority conferred; surety insurers; certificate as evidence

(a) The certificate of authority confers upon the insurer authority to transact in this State only the kind or kinds of insurance therein specified. No surety insurer shall be deemed thereby to possess power to act in capacity of executor, administrator, guardian, trustee, receiver, assignee, or agent, or in any other capacity than that of surety, notwithstanding contrary provisions in its charter.

(b) An insurer's valid and subsisting certificate of authority shall be prima facie evidence of its right to transact in this State the kind or kinds of insurance specified therein.

§ 518. Continuance, expiration, reinstatement of certificate of authority

(a) A certificate of authority shall continue in force as long as the insurer is entitled thereto under this title, and until suspended or revoked by the Commissioner or terminated at the insurer's request; subject, however, to continuance of the certificate by the insurer each year by:

(1) Payment on or before March 1 of the continuation fee provided in section 701 (fee schedule) of this title.

Due filing by the insurer of its annual statement for the next preceding calendar year as required by section 526 of this chapter and

(2) Payment by the insurer of premium taxes with respect to the preceding calendar year.

(b) If not so continued by the insurer, its certificate of authority shall expire as at midnight on the May 31 next following such failure of the insurer to continue it in force, unless earlier revoked for failure to pay taxes as provided in section 519 of this chapter. The Commissioner shall promptly notify the insurer of the occurrence of any failure resulting in impending expiration of its certificate of authority.

(c) The Commissioner may, in his discretion, upon the insurer's request made within 3 months after expiration, reinstate a certificate of authority which the insurer has inadvertently permitted to expire, after the insurer has fully cured all its failures which resulted in the expiration, and upon payment by the insurer of the fee for reinstatement specified in section 701 (1) (fee schedule) of this title. Otherwise the insurer shall be granted another certificate of authority only after filing application therefor and meeting all other requirements as for an original certificate of authority in this State.

§ 519. Suspension or revocation of certificate of authority; mandatory grounds

(a) The Commissioner shall refuse to continue or shall suspend or revoke an insurer's certificate of authority:

(1) If such action is required by any provision of this title.

(2) If a foreign insurer and it no longer meets the requirements for a certificate of authority, on account of deficiency of assets or otherwise; or

(3) If a domestic insurer and it has failed to cure an impairment of capital or surplus within the time allowed therefor by the Commissioner under this title or is otherwise no longer qualified for the certificate of authority; or

(4) If the insurer's certificate of authority to transact insurance therein is suspended or revoked by its state of domicile, or state of entry into the United States if an alien insurer.

(5) For failure of the insurer to pay taxes on its premiums as required by the laws of this State.

(b) Except in case of insolvency or impairment of required capital or surplus, or suspension or revocation by another state as referred to in subdivision (4) above, the Commissioner shall give the insurer at least 10 days notice in advance of any such refusal, suspension, or revocation under this section, and of the particulars of the reasons therefor. If the insurer requests a hearing thereon within such 10 days, such request shall automatically stay the Commissioner's proposed action until his order is made on such hearing.

§ 520. Suspension or revocation of certificate of authority; discretionary and special grounds

(a) The Commissioner may, in his discretion, refuse to continue or may suspend or revoke an insurer's certificate of authority if he finds after a hearing thereon, or upon waiver of hearing by the insurer, that the insurer has violated or failed to comply with any lawful order of the Commissioner, or has willfully violated or willfully failed to comply with any lawful regulation of the Commissioner, or has violated any provision of this title other than those for violation of which suspension or revocation is mandatory, or, in lieu of such suspension or revocation, the Commissioner may, in his discretion, levy upon the insurer, and the insurer shall pay forthwith, an administrative fine of not over $1,000.

(b) The Commissioner shall suspend or revoke an insurer's certificate of authority on any of the following grounds, if he finds after a hearing thereon that the insurer:

(6) Is in unsound condition, or is being fraudulently conducted, or is in such condition or using such methods and practices in the conduct of its business as to render its further transaction of insurance in this State currently or prospectively hazardous or injurious to policyholders or to the public.

(0) With such frequency as to indicate its general business practice in this State, has without just cause failed to pay, or delayed payment of, claims arising under its policies, whether the claim is in favor of an insured or is in favor of a third person with respect to the liability of an insured to such third person; or, with like frequency, without just cause compels insureds or claimants to accept less than the amount due them or to employ attorneys or to bring suit against the insurer or such an insured to secure full payment or settlement of such claims.

(1) Refuses to be examined, or if its directors, officers, employees, or representatives refuse to submit to examination relative to its affairs, or to produce its accounts, records and files for examination by the Commissioner when required; or refuse to perform any legal obligation relative to the examination.

(2) Has failed to pay any final judgment rendered against it in this State upon any policy, bond, recognizance, or undertaking as issued or guaranteed by it, within 30 days after the judgment became final, or within 30 days after dismissal of an appeal before final determination, whichever date is the later.

§ 521. Order and notice of suspension, revocation; effect upon agent's authority

(a) All suspensions or revocations of, or refusals to continue, an insurer's certificate of authority shall be by the Commissioner's order given to the insurer.

(b) Upon issuance of the order, the Commissioner shall forthwith give notice thereof to the insurer's agents in this State of record in the department, and shall likewise suspend or revoke the authority of such agents to represent the insurer.

§ 522. Duration of suspension; insurer's obligations during suspension period; reinstatement

(c) Suspension of an insurer's certificate of authority shall be for such period as the Commissioner specifies in the order of suspension, but not to exceed one year. During the suspension period the Commissioner may rescind or shorten the suspension by his further order.

(d) During the suspension period the insurer shall not solicit or write any new business in this State, but shall file its annual statement, pay fees, licenses and taxes as required under this title, and may service its business already in force in this State, as if the certificate of authority had continued in full force.

(e) Upon expiration of the suspension period, if within such period the certificate of authority has not terminated, the insurer's certificate of authority shall automatically reinstate unless the Commissioner finds that the causes of the suspension, being other than a past event, are continuing, or that the insurer is otherwise not in compliance with the requirements of this title, and of which the Commissioner shall give the insurer notice not less than 30 days in advance of expiration of the suspension period. If not so automatically reinstated the certificate of authority shall be deemed to have terminated as of the end of the suspension period.

(f) Upon reinstatement of the insurer's certificate of authority, the authority of its agents in this State to represent the insurer shall likewise reinstate. The Commissioner shall promptly notify the insurer and its agents in this State, of record in the department, of such reinstatement.

(e) The Commissioner may, in his discretion and without advance notice or a hearing thereon, immediately suspend the certificate of authority of any insurer as to which proceedings for receivership, conservatorship, rehabilitation, or other delinquency proceedings, have been commenced in any state by the public insurance supervisory official of such state.

§ 523. General corporation laws inapplicable to foreign insurers

The general corporation laws of this State as contained in Title 8 of the Delaware Code Annotated shall not apply as to foreign insurers holding certificates of authority to transact insurance in this State.

§ 524. Commissioner process agent for certain insurers

(g) Before the Commissioner shall authorize it to transact insurance in this State, each insurer shall appoint the Commissioner, and his successors in office, as its attorney to receive service of legal process issued against the insurer in this State. The appointment shall be made on a form as designated and furnished by the Commissioner, and shall be accompanied by a copy of a resolution of the board of directors or like governing body of the insurer, if an incorporated insurer, showing that those officers who executed the appointment were duly authorized to do so on behalf of the insurer.

(h) The appointment shall be irrevocable, shall bind the insurer and any successor in interest or to the assets or liabilities of the insurer, and shall remain in effect as long as there is in force any contract of the insurer in this State or any obligation of the insurer arising out of its transactions in this State.

(i) Service of such process against a foreign or alien insurer shall be made only by service thereof upon the Commissioner.

(j) Service of such process against a domestic insurer may be made as provided hereunder, or in any other manner provided by law.

(k) At the time of application for a certificate of authority the insurer shall file the appointment with the Commissioner, together with designation of the person to whom process against it served upon the Commissioner is to be forwarded. The insurer may change such designation by a new filing.

§ 525. Serving process

(a) Service of process against an insurer for whom the Commissioner is attorney shall be made by delivering to and leaving with the Commissioner, his deputy, or a person in apparent charge of his office during the Commissioner's absence, two copies of the process, together with fee of $2.50, taxable as costs in the action.

(b) Upon such service the Commissioner shall forthwith mail by certified mail one of the copies of such process to the person currently designated by the insurer to receive the same as provided in section 524 (e) of this chapter. Service of such process shall not be complete until 3 days after the same has been so mailed.

(c) Service of process in the manner provided by this section shall for all purposes constitute valid and binding personal service upon the insurer within this State.

(d) The Commissioner shall keep a record of the day of service upon him of all legal process.

§ 526. Annual statement

(a) Each authorized insurer shall annually on or before March 1, or within any reasonable extension of time therefor which the Commissioner for good cause may have granted, file with the Commissioner a full and true statement of its financial condition, transactions and affairs as of December 31 preceding. The statement shall be in the general form and context of, and require information as called for by, the form of annual statement as currently in general and customary use in the United States for the type of insurer and kinds of insurance to be reported upon, with any useful or necessary modification or adaptation thereof and as supplemented as to additional information required by the Commissioner. The statement shall be verified by the oath of the insurer's president or vice-president, and secretary or actuary as applicable, or in the absence of the foregoing, by two other principal officers; or if a reciprocal insurer, by the oath of the attorney-in-fact or its like officers if a corporation.

(b) The statement of an alien insurer shall be verified by its United States manager or other officer duly authorized, and shall relate only to the insurer's transactions and affairs in the United States unless the Commissioner requires otherwise. If the Commissioner requires a statement as to such an insurer's affairs throughout the world, the insurer shall file such statement with the Commissioner as soon as reasonably possible.

(c) The Commissioner may refuse to continue, or may suspend or revoke the certificate of authority of any insurer failing to file its annual statement when due.

(d) At time of filing, the insurer shall pay the fee for filing its annual statement as prescribed by section 701 of this title.

§ 527. Resident agent; countersignature law

(a) Except as provided in section 528 of this chapter, no foreign or alien insurer shall make, write, place or cause to be made, written or placed, any policy, duplicate policy, or contract of insurance of any kind or character, or any general or floating policy upon property situated or located in this State, except after the risk has been approved in writing by an agent of the insurer who is a resident of this State, regularly commissioned and licensed to transact insurance business herein, who shall countersign all policies or contracts so issued, and who shall receive the full premium paid thereon, to the end that the State shall receive the taxes required by law to be paid on the premiums collected for insurance on all property located in this State.

(b) An agent of another state duly licensed to do business in this State can countersign his own policies covering property in this State if his state has a similar reciprocal provision in favor of Delaware agents and if Delaware agents licensed to do business in that state would be entitled to the same commissions as a resident agent of that state would receive.

(c) Nothing in this section shall be construed to prevent any such insurer from issuing policies at its principal office or department offices covering property in this State, if such policies are issued upon applications procured and submitted to such insurer by licensed agents who are residents of this State, and who shall countersign all policies so issued and receive the commission thereon when paid.

§ 528. Exceptions to resident agent; countersignature law

Section 527 of this chapter shall not apply to any of the following:

(1) Life insurance or annuities;

(2) Wet marine and transportation insurance;

(3) Policies covering property in transit while in the possession or custody of any common carrier, or the rolling stock or other property of any common carrier employed by it in its business as a common carrier of freight, merchandise, or passengers;

(4) Bid bonds issued by any surety insurer in connection with any public or private contract;

(5) Reinsurance or retrocessions;

(6) Policies or endorsements issued by insurers not using agents in the general solicitation of business and on which no commission, in any form, is payable to any agent.

§ 529. (Reserved for future use)

§ 530. Emergency requirements

Whenever in his opinion a public emergency exists by reason of an abnormal disruption of economic and financial processes which affects the conduct of the business of insurance in a normal and ordinary manner, the Commissioner, with the concurrence of the Governor and the General Assembly, may declare the existence of a public emergency. During such emergency he may make, alter, amend, revise and rescind rules and regulations, imposing any condition upon the conduct of the business of any insurer which may be necessary or desirable to maintain sound methods of insurance and to safeguard the interests of policyholders, beneficiaries and the public generally during the period of such emergency which rules and regulations shall become inoperative when such emergency ceases, and an order to that effect shall be made by the Commissioner,

§ 531. Retaliatory provision

(a) When by or pursuant to the laws of any other state or foreign country or province any taxes, licenses and other fees, in the aggregate, and any fines, penalties, deposit requirements or other material requirements, obligations, prohibitions or restrictions are or would be imposed upon Delaware insures doing business or that might seek to do business in such state, country or province, or upon the agents or representatives of such insurers or upon brokers, which are in excess of such taxes, licenses and other fees, in the aggregate, or which are in excess of the fines, penalties, deposit requirements or other requirements, obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insures, or upon brokers, of such other state, country, or province under the statutes of this State, so long as such laws of such other state, country or province continue in force or are so applied, the same taxes, licenses and other fees, in the aggregate, or fines, penalties or deposit requirements or other material requirements, obligations, prohibitions, or restrictions of whatever kind shall be imposed by the Commissioner upon the insurers, or upon the agents or representatives of such insurers, or upon brokers, of such other state, country or province doing business or seeking to do business in Delaware. Any tax, license or other fee or other obligation imposed by any city, county, or other political subdivision or agency of such other state, country or province on Delaware insurers or their agents or representatives shall be deemed to be imposed by such state, country or province within the meaning of this section.

(b) This section shall not apply as to personal income taxes, or as to ad valorem taxes on real or personal property, or as to special purpose obligations or assessments imposed by another state in connection with particular kinds of insurance other than property insurance; except that deductions, from premium taxes or other taxes otherwise payable, allowed on account of real estate or personal property taxes paid shall be taken into consideration by the Commissioner in determining the propriety and extent of retaliatory action under this section.

(c) For the purposes of this section the domicile of an alien insurer, other than insurers formed under the laws of Canada or a province thereof, shall be that state designated by the insurer in writing filed with the Commissioner at time of admission to this State or within 6 months after the effective date of this title, whichever date is the later, and may be any one of the following states:

(2) That in which is located the insurer's principal place of business in the United States;

(3) That in which is held the largest deposit of trustee assets of the insurer for the protection of its policyholders in the United States.

If the insurer makes no such designation, its domicile shall be deemed to be that state in which is located its principal place of business in the United States.

(d) The domicile of an insurer formed under the laws of Canada or a province thereof shall be as provided in section 102 of this title.

CHAPTER 7. FEES AND TAXES

§ 701. Fee schedule

The Commissioner shall collect in advance, and persons so served shall pay to the Commissioner, fees, licenses and miscellaneous charges as follows;

(1) Insurer's certificate of authority.

(i) For filing application for initial certificate of authority,

including all documents submitted as part of such application $500.00

(ii) Issuance of certificate of authority 25.00

(iii) Annual continuation, including filing of annual statement 50.00

(iv) Reinstatement (section 518 of this title) 25.00

(v) Amendment 10.00

(2) Charter documents (other than those filed with application

for certificate of authority). Filing amendments to certificate of

incorporation, articles of incorporation, charter, bylaws, power of

attorney (as to reciprocal insurers), and to other constituent

documents of the insurer 5.00

(3) Annual statement of insurer. For filing annual statement,

other than included with (1) (i) and (iii) above 25,00

(4) Service of process, acceptance. Against unauthorized persons

and insurers under chapter 21 of this title 5.00

Others 2.50

(5) Agents licenses and appointments.

(vi) Application for original license and issuance

of license, if issued 5.00

(vii) Appointment of agent, each insurer 2.50

(viii) Annual continuation of appointment, each in surer 2.50

(ix) Temporary license, each period of 90 days 1.00

(x) Limited license (section 1721 of this title), each insurer,

each year 1.00

(6) Brokers.

(xi) Application for original license and issuance

of license, if issued 10.00

(xii) Annual continuation of license 10.00

(xiii) Temporary license, each period of 90 days 1.00

(7) Solicitors.

(xiv) Application for original license and issuance

of license, if issued 5.00

(xv) Annual continuation of license 2.50

(8) Vending machine, each year 5.00

(9) Surplus line brokers.

(xvi) Application for original license and issuance

of license, if issued 10.00

(xvii) Annual continuation 10.00

(10) Adjusters.

(xviii) Application for original license and issuance license, if issued 5.00

(xix) Annual continuation of license 5.00

(11) Examination for license, each examination 10.00

(12) Rating organization license.

(i) Application for original license and issuance of license,

if issued 100.00

(ii) Annual continuation 100.00

(13) Certified copy of insurer certificate of authority or of any

license issued under this title 1.00

(14) Examination of insurer, see section 326 of this title.

(15) Solicitation permit application, filing.

For initial financing 250.00

For subsequent financing 100.00

(16) Copies of documents on file in the department: 20c

per folio of one hundred words; and for certifying and

affixing official seal 1.00

§ 702. General premium tax; underwriting profits tax

(a) Each authorized insurer and each formerly authorized insurer shall file with the Commissioner on or before March 1, each year, a report in form as prescribed by the Commissioner showing, except with respect to wet marine and transportation insurance, gross direct premium income, including policy, membership and other fees, assessments, and all other considerations for insurance, received by it during the next preceding calendar year on account of insurance contracts, other than as to workmen's compensation and employer's liability, covering property, subjects, or risks located, resident, or to be performed in this State (with proper proportionate allocation of premiums as to such persons, property, subjects or risks in this State insured under policies covering persons, property, subjects, or risks located or resident in more than one state), after deducting from such total direct premium income (1) the amount of returned premiums on cancelled policies (but not including the return of cash surrender values of life insurance policies), and (2) the unabsorbed portion of any deposit premium, and the amount returned to policyholders as dividends and similar returns, whether paid in cash, or credited, or applied in reduction of premiums. The report shall be verified by the oath or affirmation of the president or secretary or other responsible officer of the insurer, duly administered by a person authorized to administer oaths. Considerations received for annuity contracts shall not be included in gross direct premium income or be subject to taxes imposed by this section or by section 708 of this chapter.

(b) For the purpose solely of the tax upon the premiums and at the rate provided under this section, a domestic insurer shall also include in the report provided for in subsection (a) above, except with respect to wet marine and transportation insurance, the gross amount of premiums and other considerations for direct insurance received by it upon insurance business written pursuant to solicitation of business by mail directed to persons located in a state, or province of Canada, in which the insurer is not admitted to transact insurance, with respect to persons, property, and subjects or risks resident, located, or to be performed in such state or province, and on which a premium tax is not paid, or surplus line tax is not payable, to such state or province, and shall deduct therefrom returned premiums, unabsorbed portion of deposit premiums, dividends, and similar returned paid or credited to policyholders as provided in such subsection.

(c) Upon the filing of such report each such insurer shall pay to the Commissioner, for the use of the State, a tax of 1 ¾ % of such net premiums.

(d) Tax on wet marine and transportation insurance underwriting profits:

(1) Each authorized insurer and formerly authorized insurer shall, with respect to all wet marine and transportation insurance written within this State, pay a tax of 5% upon its taxable underwriting profit, ascertained as hereinafter provided, from such insurance written within this State.

(2) The underwriting profit on such insurance written within this State shall be that proportion of the total underwriting profit of such insurer from such insurance written within the United States which the amount of net premiums of such insurer from such insurance written within this State bears to the amount of net premiums of such insurer from such insurance written within the United States.

(3) The underwriting profit of such insurer on such insurance written within the United States shall be determined by deducting from the net earned premiums on such wet marine and transportation insurance written within the United States during the taxable year, meaning thereby the calendar year next preceding the date on which such tax is due, the following items:

(i) Net losses incurred, meaning gross losses incurred during such calendar year under such wet marine and transportation insurance contracts written within the United States, less reinsurance claims collected or collectible and less net salvages or recoveries collected or collectible from any source applicable to the corresponding losses under such contracts;

(ii) Net expenses incurred in connection with such wet marine and transportation insurance contracts, including all state and federal taxes in connection therewith; but in no event shall the aggregate amount of such net expenses deducted exceed 40% of the net premiums on such wet marine and transportation insurance contracts, ascertained as hereinafter provided; and

() Net dividends paid or credited to policyholders on such wet marine and transportation insurance contracts.

(4) In determining the amount of such tax, net earned premiums on such wet marine and transportation insurance contracts written within the United States during the taxable year shall be arrived at as follows:

From gross premiums written on such contracts during the taxable year deduct any and all return premiums, premiums on policies not taken, premiums paid for reinsurance of such contracts and net unearned premiums on all such outstanding contracts at the end of the taxable year; and add to such amount net unearned premiums on such outstanding wet marine and transportation insurance contracts at the end of the calendar year next preceding the taxable year.

(5) In determining the amount of such tax, net expenses incurred shall be determined as the sum of the following:

(i) Specific expenses incurred on such wet marine and transportation insurance business, consisting of all commissions, agency expenses, taxes, licenses, fees, loss adjustment expenses, and all other expenses incurred directly and specifically in connection with such business, less recoveries or reimbursements on account of or in connection with such commissions or other expenses collected or collectible because of reinsurance or from any other source.

(ii) General expenses incurred on such wet marine and transportation insurance business, consisting of that proportion of general or overhead expenses incurred in connection with such business which the net premiums on such wet marine and transportation insurance written during the taxable year bear to the total net premiums written by such insurer from all classes of insurance written by it during the taxable year. Within the meaning of this paragraph, general or overhead expenses shall include salaries of officers and employees, printing and stationery, all taxes of this State and of the United States, except as included in paragraph (i) above, and all other expenses of such insurer, not included in paragraph (i) above, after deducting expenses specifically chargeable to any or all other classes of insurance business.

(6) In determining the amount of such tax, the taxable underwriting profit of such insurer on such wet marine and transportation insurance business written within this State, shall be ascertained as follows:

(i) In the case of every such insurer which has written any such business within this State during 3 calendar years immediately preceding the year in which such taxes were payable, the taxable underwriting profit shall be determined by adding or subtracting, as the case may be, the underwriting profit or loss on all such insurance written within the United States, ascertained as hereinbefore provided, for each of such 3 years, and dividing by three.

(ii) In the case of every such insurer other than as specified in paragraph (i), such taxable underwriting profit, if any, shall be the underwriting profit, if any, on such wet marine and transportation insurance business written within this State during the taxable year, ascertained as hereinbefore provided; but after such insurer has written such wet marine and transportation insurance business within this State during 3 calendar years, an adjustment shall be made on the 3 year average basis by ascertaining the amount of tax payable in accordance with paragraph (i) above; but no refunds of all or any part of such payments shall be made, except as provided in section 708.

(7) The tax hereinbefore provided shall be paid annually, on or before the first day of June, by every insurer authorized to do in this State the business of wet marine and transportation insurance during any one or more of the next preceding 3 calendar years, and the calendar year next preceding such June first shall be deemed the taxable year within the meaning of this section.

(8) Every insurer liable to pay the tax hereinbefore provided under this subsection (d) shall, on or before the first day of June of each year, file with the Commissioner a tax return in form prescribed by the Commissioner.

(9) The tax provided for in this subsection (d) shall apply to the business of the year ending December 31, 1968, and to subsequent years; and for such purpose the underwriting profits or losses of prior years' shall be taken into account, as herein-before provided. Section 2702 of Chapter 27, Title 18, Delaware Code, and in force immediately prior to the effective date of this Act, shall continue to be effective with respect to all taxes due under such section, but this provision shall not be construed as imposing any duplication of taxes for any of such years.

§ 703. Minimum tax of certain domestic insurers

A domestic insurer, other than a mutual insurer doing business on the assessment premium plan, which has been authorized to transact insurance in this State for 3 calendar years or more, shall pay to the Commissioner for the use of the State a privilege tax of $2,000 per year, due and payable at the same time as the premium tax as provided in section 702 of this chapter. Against the amount of such privilege tax the insurer may credit all licenses, fees, premium taxes, and underwriting profits taxes paid in the same year to this State under the insurance laws of this State. The tax shall accrue commencing with that calendar year in which occurs the fourth anniversary of the date of issuance of the insurer's original certificate of authority as an insurer in this State.

§ 704. Tax on workmen's compensation; employer's liability premiums

Every insurer insuring workmen's compensation or employer's liability risks in this State shall pay annually the tax upon premiums received for such insurance, as such tax, with permitted deductions therefrom, is provided for in Chapter 23, Title 19.

§ 705. Special tax on gross premiums of fire insurance companies

The Legislative Reference Bureau is authorized to re-number as section 705 of this chapter that provision heretofore codified as section 2705, Title 18.

§ 706. Distribution of proceeds of special tax on premiums of fire insurance companies

The Legislative Reference Bureau is authorized to re-number as section 706 of this chapter that provision heretofore codified as section 2706, Title 18.

§ 707. Related police pension tax provisions

The Legislative Reference Bureau is authorized to re-number as sections 707, 709, and 710 respectively of this chapter those provisions heretofore codified as sections 2710, 2712, and 2713, Title 18, and to make appropriate changes in the numbers of sections referred to in such re-numbered sections.

§ 708. Special tax on gross premiums

(a) Every insurer transacting insurance within this State, other than workmen's compensation insurance and wet marine and transportation insurance, shall, in addition to other taxes, fees and charges required by law, on the 1st day of March of each year pay to the Commissioner, for the use of the State, 14 % upon the gross premiums received and assessments collected from insurance of every kind upon persons or on the lives of persons resident in, or upon real and personal property located within, this State, or upon any other risks insured within this State, by any such insurer or the authorized agent thereof, for the calendar year immediately preceding the date herein provided for such payments.

(b) "Gross premiums" whenever used in this section in reference to premiums received by insurers on policies covering risks located in this State, shall mean all moneys collected, together with all notes, or credits allowed, as premiums on such policies including reinsurance premiums received. In computing taxable premiums there may be deducted from gross premiums dividends and similar returns paid or credited to policyholders, return premiums paid by reason of cancellation of policies, and reinsurance premiums received from other insurers.

(c) No insurer affected by provisions of this section shall increase the rate of insurance premiums upon any insurable risk affected by this section because of the tax provided for in this section, unless the Commissioner after a hearing on the matter is satisfied that an increase is necessary; and in event the Commissioner is satisfied after such hearing that an increase in the premium rate is necessary, he shall authorize such reasonable increase as he deems fair and equitable.

§ 709. (Reserved; see section 707)

§ 710. (Reserved; see section 707)

§ 711. Purpose; receipt; deposit of fees, fines and taxes

(a) All fees, charges, administrative fines, and taxes payable under this title shall be paid to and collected by the Commissioner.

(b) The Commissioner shall give the person paying the same an itemized receipt for fees, charges, administrative fines, and taxes paid under this title.

(c) Except as otherwise expressly provided, the Commissioner shall promptly deposit to the credit of the General Fund all fees, charges, administrative fines, taxes and other funds collected by him for the use of this State, and shall promptly report the same to the State Treasurer as provided in Chapter 61, Title 29.

§ 712. Refund of overpayments

(a) Any person from whom fees, charges or taxes imposed by this title have been erroneously collected may apply to the Commissioner for refund at any time within 1 year from the date such fees, charges or taxes were originally required to be paid or within 30 days from the date of payment of any additional tax, charge, or fee.

(b) If the amount of taxes, charges, or fees found due are less than the amount paid, either by examination of the return by the Commissioner or by allowance of a claim for overpayment filed by the payer with the Commissioner, the State Treasurer shall refund the excess out of the General Fund of this State upon certification by the Commissioner and approval by the Budget Director.

(c) No such refund shall be made unless the amount to be so refunded is $10 or more.

§713. In lieu, pre-emption provision

(a) The fees, charges and premium taxes imposed by the State shall be in lieu of all county and municipal license fees and taxes upon the business of insurance in this State, excepting property taxes.

(b) The State hereby preempts the field of regulating, or of imposing excise, privilege, franchise, income, license, permit, registration and similar taxes, licenses and fees upon, insurers and their general agents, agents and other representatives as such; and on the intangible property of insurers or such representatives; and all political subdivisions or agencies thereof in this State are prohibited from regulating insurers or their general agents, agents and other representatives as such, and from imposing upon them any such tax, license, or fee. Except, that this provision shall not prohibit the imposition by political subdivisions of taxes upon real and tangible personal property.

CHAPTER 9. KINDS OF INSURANCE; LIMITS OF RISK; REINSURANCE

SUBCHAPTER 1. KINDS OF INSURANCE

§ 901. Definitions not mutually exclusive

It is intended that certain insurance coverages may come within the definitions of two or more kinds of insurance as defined in this chapter, and the inclusion of such coverage within one definition shall not exclude it as to any other kind of insurance within the definition of which such coverage is likewise reasonably includable.

§ 902. "Life insurance" defined

Life insurance is insurance on human lives. The transaction of life insurance includes also the granting of endowment benefits, additional benefits in event of death or dismemberment by accident or accidental means, additional benefits in event of the insured's disability, and optional modes of settlement of proceeds of life insurance.

§ 903. "Health insurance" defined

Health insurance is insurance of human beings against bodily injury, disablement, or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness, and every insurance appertaining thereto.

§ 904. "Property insurance" defined

Property insurance is insurance on real or personal property of every kind and of every interest therein against loss or damage from any and all hazard or cause, and against loss consequential upon such loss or damage, other than non-contractual legal liability for any such loss or damage. Property insurance does not include title insurance, as defined in section 908 of this chapter.

§ 905. "Surety insurance" defined (a) Surety insurance includes:

(1) Fidelity insurance, which is insurance guaranteeing the fidelity of persons holding positions of public or private trust.

(2) Insurance guaranteeing the performance of contracts, other than insurance policies, and guaranteeing and executing bonds, undertakings, and contracts of suretyship.

(3) Insurance indemnifying banks, bankers, brokers, financial or moneyed corporations or associations against loss, resulting from any cause, of bills of exchange, notes, bonds, securities, evidences of debt, deeds, mortgages, warehouse receipts or other valuable papers, documents, money, precious metals and articles made therefrom, jewelry, watches, gems, precious and semiprecious stones, including any loss while the same are being transported in armored motor vehicles, or by messenger, but not including any other risks of transportation or navigation; also insurance against loss or damage to such an insured's premises or to his furnishings, fixtures, equipment, safes and vaults therein, caused by burglary, robbery, theft, vandalism or malicious mischief, or any attempt thereat.

(b) Transaction of surety insurance does not confer power on the insurer to guarantee titles to real estate.

§ 906. "Casualty insurance" defined (a) Casualty insurance includes:

(1) Vehicle insurance. Insurance against loss of or damage to any land vehicle or aircraft or any draft or riding animal or to property while contained therein or thereon or being loaded or unloaded therein or therefrom, from any hazard or cause, and against any loss, liability or expense resulting from or incidental to ownership, maintenance or use of any such vehicle, aircraft or animal; together with insurance against accidental injury to individuals, irrespective of legal liability of the insured, including the named insured, while in, entering, alighting from, adjusting, repairing, cranking, or caused by being struck by a vehicle, aircraft or draft or riding animal, if such insurance is issued as an incidental part of insurance on the vehicle, aircraft or draft or riding animal.

(2) Liability insurance. Insurance against legal liability for the death, injury, or disability of any human being, or for damage to property; and provision of medical, hospital, surgical, disability benefits to injured persons and funeral and death benefits to dependents, beneficiaries or personal representatives of persons killed, irrespective of legal liability of the insured, when issued as an incidental coverage with or supplemental to liability insurance.

(3) Workmen's compensation and employer's liability. Insurance of the obligations accepted by, imposed upon, or assumed by employers under law for death, disablement, or injury of employees.

(4) Burglary and theft. Insurance against loss or damage by burglary, theft, larceny, robbery, forgery, fraud, vandalism, malicious mischief, confiscation, or wrongful conversion, disposal, or concealment, or from any attempt at any of the foregoing; including supplemental coverage for medical, hospital, surgical, and funeral expense incurred by the named insured or any other person as a result of bodily injury during the commission of a burglary, robbery, or theft by another; also insurance against loss of or damage to moneys, coins, bullion, securities, notes, drafts, acceptances, or any other valuable papers and documents, resulting from any cause.

(5) Personal property floater. Insurance upon personal effects against loss or damage from any cause.

(6) Glass. Insurance against loss or damage to glass, including its lettering, ornamentation, and fittings.

(7) Boiler and machinery. Insurance against any liability and loss or damage to property or interest resulting from accidents to or explosions of boilers, pipes, pressure containers, machinery, or apparatus, and to make inspection of and issue certificates of inspection upon boilers, machinery, and apparatus of any kind, whether or not insured.

(8) Leakage and fire extinguishing equipment. Insurance against loss or damage to any property or interest caused by the breakage or leakage of sprinklers, hoses, pumps, and other fire extinguishing equipment or apparatus, water pipes or containers, or by water entering through leaks or openings in buildings, and insurance against loss or damage to such sprinklers, hoses, pumps, and other fire extinguishing equipment or apparatus.

(9) Credit. Insurance against loss or damage resulting from failure of debtors to pay their obligations to the insured.

(10) Malpractice. Insurance against legal liability of the insured, and against loss, damage, or expense incidental to a claim of such liability, and including medical, hospital, surgical, and funeral benefits to injured persons, irrespective of legal liability of the insured, arising out of the death, injury or disablement of any person, or arising out of damage to the economic interest of any person, as the result of negligence in rendering expert, fiduciary, or professional service.

(11) Elevator. Insurance against loss of or damage to any property of the insured, resulting from the ownership, maintenance or use of elevators, except loss or damage by fire, and to make inspection of and issue certificates of inspection upon elevators.

(12) Congenital defects. Insurance against congenital defects in human beings.

(13) Livestock. Insurance against loss or damage to livestock, and services of a veterinary for such animals.

(14) Entertainments. Insurance indemnifying the producer of any motion picture, television, radio, theatrical, sport, spectacle, entertainment, or similar production, event, or exhibition against loss from interruption, postponement, or cancellation thereof due to death, accidental injury, or sickness of performers, participants, directors, or other principals.

(15) Miscellaneous. Insurance against any other kind of loss, damage, or liability properly a subject of insurance and not within any other kind of insurance as defined in this subchapter, if such insurance is not disapproved by the Commissioner as being contrary to law or public policy.

(b) Provision of medical, hospital, surgical, and funeral benefits, and of coverage against accidental death or injury, as incidental to and part of other insurance as stated under subdivisions (1) (vehicle), (2) (liability), (4) (burglary), (7) (boiler and machinery), (10) (malpractice), and (11) (elevator) of subsection (a) shall for all purposes be deemed to be the same kind of insurance to which it is so incidental, and shall not be subject to provisions of this title applicable to life and health insurances.

§ 907. Marine and transportation; "wet marine" insurance defined

(a) "Marine and transportation insurance" includes: (1) Insurance against any kinds of loss or damage to:

(i) Vessels, craft, aircraft, cars, automobiles and vehicles of every kind, as well as all goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, bullion, precious stones, securities, choses in action, evidences of debt, valuable papers, bottomry and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to, or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, trans-shipment, or re-shipment incident thereto, including marine builder's risks and all personal property floater risks, and

(ii) Person or to property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to the person arising out of the ownership, maintenance or use of automobiles), and

(iii) Precious stones, jewels, jewelry, gold, silver and other precious metals, whether used in business or trade or otherwise and whether the same be in course of transportation or otherwise, and

(iv) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and/or civil commotion are the only hazards to be covered; piers, wharves, docks and slips, excluding the risks of fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and/or civil commotion; other aids to navigation and transportation, including dry docks and marine railways, against all risks.

(2) "Marine protection and indemnity insurance," meaning insurance against, or against legal liability of the insured for, loss, damage or expense arising out of, or incident to, the ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.

(b) For the purposes of this title "wet marine and transportation" insurance is that part of "marine and transportation" insurance which includes only:

(1) Insurance upon vessels, crafts, hulls and of interests therein or with relation thereto;

(2) Insurance of marine builders' risks, marine war risks and contracts of marine protection and indemnity insurance;

(3) Insurance of freights and disbursements pertaining to a subject of insurance coming within this definition; and

(4) Insurance of personal property and interests therein, in course of exportation from or importation into any country, or in course of transportation coastwise or on inland waters, including transportation by land, water or air from point of origin to final destination, in respect to, appertaining to or in connection with, any and all risks or perils of navigation, transit or transportation, and while being prepared for and while awaiting shipment, and during any delays, storage, trans-shipment or re-shipment incident thereto.

§ 908. "Title insurance" defined

Title insurance is insurance of owners of property or others having an interest therein, or liens or encumbrances thereon, against loss by encumbrance, or defective titles, or invalidity, or adverse claim to title.

SUBCHAPTER II. LIMITS OF RISK

§ 909. Limits of risk

(a) No insurer shall retain any risk on any one subject of insurance, whether located or to be performed in this State or elsewhere, in an amount exceeding 10% of its surplus to policyholders.

(b) A "subject of insurance" for the purposes of this section, as to insurance against fire and hazards other than windstorm, earthquake and other catastrophic hazards, includes all properties insured by the same insurer which are customarily considered by underwriters to be subject to loss or damage from the same fire or the same occurrence of any other hazard insured against.

(c) Reinsurance ceded as authorized by section 910 of this title shall be deducted in determining risk retained. Except, that as to surety risks reinsurance shall be allowed as a deduction only if such reinsurance is with an insurer authorized to transact such insurance in this State, and is in such form as to enable the obligee or beneficiary to maintain an action thereon against the reinsured jointly with the reinsurer, and upon recovering judgment against the reinsured to have recovery against the re-insurer for payment to the extent in which it may be liable under such reinsurance and in discharge thereof. As to surety risks, deduction shall also be made of the amount assumed by any authorized co-surety and the value of any security deposited, pledged, or held subject to the surety's consent and for the surety's protection.

(d) As to alien insurers, this section shall relate only to risks and surplus to policyholders of the insurer's United States branch.

(e) "Surplus to policyholders" for the purposes of this section, in addition to the insurer's capital and surplus, shall be deemed to include any voluntary reserves which are not required pursuant to law, and shall be determined from the last sworn statement of the insurer on file with the Commissioner, or by the last report .of examination of the insurer, whichever is the more recent at time of assumption of risk.

(f) This section shall not apply to life or health insurance, annuities, title insurance, insurance of wet marine and transportation risks, workmen's compensation insurance, employers' liability coverages, nor to any policy or type of coverage as to which the maximum possible loss to the insurer is not readily ascertainable on issuance of the policy.

(g) Limits of risk as to newly formed domestic mutual insurers shall be as provided in section 4905 of this title.

SUBCHAPTER III. REINSURANCE

§ 910. Reinsurance

(a) Any authorized insurer may reinsure all or any part of an individual risk or of a particular class of risks in any other insurer, or accept such reinsurance from any other insurer; and, with the Commissioner's consent, may reinsure all of its risks in any other authorized insurer, or reinsure all of the risks of any other insurer.

(b) No credit shall be taken for the reserve or unearned premium liability on account of any such reinsurance, unless the insurer accepting the reinsurance is authorized to transact insurance in this State or in another state conforming to the same standards of solvency which would be required of such insurer if, at the time such reinsurance is effected, it was authorized in this State; or, in the case of a group of individual, unincorporated alien insurers, has assets held in trust for the benefit of its United States policyholders in a sum not less than $50,000,000, and is authorized to transact insurance in at least one state.

() Credit shall be allowed as an asset or as a deduction from liability, to any ceding insurer for reinsurance ceded to an assuming insurer qualified therefor under subsection (b) above; except that no such credit shall be allowed unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contracts reinsured without diminution because of the insolvency of the ceding insurer.

(a) Except, that a domestic insurer may, with the Commissioner's consent, reinsure or transfer all or any part of its risks in any country other than the United States of America, its states, commonwealths, districts, and jurisdictions, in or to any solvent insurer authorized to transact insurance in any part of the world. The domestic insurer may thereafter take credit in its liabilities to the extent that reserves are maintained by the reinsurer on risk so reinsured or transferred.

(b) Upon request of the Commissioner an insurer shall Promptly inform the Commissioner in writing of the cancellation or any other material change of any of its reinsurance treaties or arrangements.

(c) This section shall not apply to wet marine and transportation insurance.

CHAPTER 11. ASSETS AND LIABILITIES SUBCHAPTER L ASSETS

§ 1101. "Assets" defined

In any determination of the financial condition of an insurer, there shall be allowed as assets only such assets as are owned by the insurer and which consist of:

(1) Cash in the possession of the insurer, or in transit under its control, and including the true balance of any deposit in a solvent bank or trust company.

(2) Investments, securities, properties and loans acquired or held in accordance with this title, and in connection therewith the following items:

(i) Interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest.

() Declared and unpaid dividends on stock and shares, unless such amount has otherwise been allowed as an asset.

(i) Interest due or accrued upon a collateral loan in an amount not to exceed one year's interest thereon.

(ii) Interest due or accrued on deposits in solvent banks and trust companies, and interest due or accrued on other assets, if such interest is in the judgment of the Commissioner a collectible asset.

(iii) Interest due or accrued on a mortgage loan, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal; but in no event shall interest accrued for a period in excess of 18 months be allowed as an asset.

(iv) Rent due or accrued on real property if such rent is not in arrears for more than 3 months, and rent more than 3 months in arrears if the payment of such rent be adequately secured by property held in the name of the tenant and conveyed to the insurer as collateral.

(v) The unaccrued portion of taxes paid prior to the due date on real property.

(3) Premium notes, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest thereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy.

(4) The net amount of uncollected and deferred premiums and annuity considerations in the case of a life insurer.

(5) Premiums in the course of collection, other than for life insurance, not more than 3 months past due, less commissions payable thereon. The foregoing limitation shall not apply to premiums payable directly or indirectly by the United States government or by any of its instrumentalities.

(6) Installment premiums other than life insurance premiums to the extent of the unearned premium reserve carried on the policy to which premiums apply.

(7) Notes and like written obligations not past due, taken for premiums other than life insurance premiums, on policies permitted to be issued on such basis, to the extent of the unearned premium reserves carried thereon.

(8) The full amount of reinsurance recoverable by a ceding insurer from a solvent reinsurer and which reinsurance is authorized under section 910 of this title.

(0) Amounts receivable by an assuming insurer representing funds withheld by a solvent ceding insurer under a reinsurance treaty.

(5) Deposits or equities recoverable from underwriting associations, syndicates and reinsurance funds, or from any suspended banking institution, to the extent deemed by the Commissioner available for the payment of losses and claims and at values to be determined by him.

(6) All assets, whether or not consistent with the provisions of this section, as may be allowed pursuant to the annual statement form approved by the Commissioner for the kinds of insurance to be reported upon therein.

(7) As to a title insurer, its title plant and equipment reasonably necessary for conduct of its abstract or title insurance business, at not to exceed the cost thereof.

(8) Electronic and mechanical machines and related equipment constituting a data processing, recordkeeping, or accounting system or systems if the cost of each such system is at least $25,000, which cost shall be amortized in full over a period not to exceed 10 years. The aggregate amount invested in all such systems shall not exceed 5% of the insurer's assets.

(9) Other assets, not inconsistent with the provisions of this section, deemed by the Commissioner to be available for the payment of losses and claims at values to be determined by him.

§ 1102. Assets not allowed

In addition to assets impliedly excluded by the provisions of section 1101 of this chapter, the following expressly shall not be allowed as assets in any determination of the financial condition of an insurer:

(1) Goodwill, trade names and other like intangible assets.

(2) Advances to officers (other than policy loans) whether secured or not, and advances to employees, agents and other persons on personal security only.

(3) Stock of such insurer, owned by it, or any equity therein or loans secured thereby, or any proportionate interest in such stock acquired or held through the ownership by such insurer of an interest in another firm, corporation or business unit.

(4) Furniture, fixtures, furnishings, safes, vehicles, libraries, stationery, literature and supplies (other than data processing, recordkeeping and accounting systems authorized under section 1101 (13) of this chapter) and except in the case of title insurers such materials and plants as the insurer is expressly authorized to invest in under section 1323 of this title; and except, in the case of any insurer, such personal property as the insurer is permitted to hold pursuant to chapter 13 of this title, or which is reasonably necessary for the maintenance and operation of real estate lawfully acquired and held by the insurer other than real estate used by it for home office, branch office and similar purposes.

(5) The amount, if any, by which the aggregate book value of investments as carried in the ledger assets of the insurer exceeds the aggregate value thereof as determined under this title.

SUBCHAPTER II. LIABILITIES AND RESERVES

§ 1103. Liabilities, in general

In any determination of the financial condition of an insurer, capital stock and liabilities to be charged against its assets shall include:

(1) The amount of its capital stock outstanding, if any.

(2) The amount, estimated consistent with the provisions of this title, necessary to pay all of its unpaid losses and claims incurred on or prior to the date of statement, whether reported or unreported, together with the expenses of adjustment or settlement thereof.

(3) With reference to life insurance policies and annuity contracts, and disability and accidental death benefits in or supplemental thereto:

(i) The amount of reserves on life insurance policies and annuity contracts in force, value according to the tables of mortality, rates of interest, and methods adopted pursuant to this title which are applicable thereto.

(ii) Reserves for disability benefits, for both active and disabled lives.

() Reserves for accidental death benefits.

() Any additional reserves which may be required by the Commissioner consistent with applicable customary and general practice in insurance accounting.

(4) As to health insurance policies, the reserves required under section 1108 of this chapter.

(5) With reference to insurance other than specified in subdivisions (3) and (4) above, and other than title insurance, the amount of the unearned premium reserves computed in accordance with this subchapter.

(6) Taxes, expenses and other obligations due or accrued at the date of the statement.

§ 1104. Reserves of domestic insurers transacting business in foreign countries only

A domestic insurer transacting insurance in foreign countries only, and not transacting insurance in any state as defined in section 107 of this title, may calculate its reserves on insurance written in each foreign jurisdiction in accordance with the reserve standards required by such jurisdiction; and negotiation and issuance of insurance on subjects of insurance resident, located, or to be performed in such foreign jurisdiction, and changes in, communications concerning, and collection of premiums on, insurance so issued, shall not be deemed to constitute the transaction of insurance in any such state.

§ 1105. Disallowance of "wash" transactions

(a) The Commissioner shall disallow as an asset or as a credit against liabilities any reinsurance found by him after a hearing thereon to have been arranged for the purpose principally of deception as to the ceding insurer's financial condition as at the date of any financial statement of the insurer. Without limiting the general purport of the foregoing provision, reinsurance of any substantial part of the insurer's outstanding risks contracted for in fact within 4 months prior to the date of any such financial statement and cancelled in fact with 4 months after the date of such statement, or reinsurance under which the reinsurer bears no substantial insurance risk or chance of net loss to itself, shall prima facie be deemed to have been arranged principally for the purpose of deception.

(b) The Commissioner shall disallow as an asset any deposit, funds or other assets of the insurer found by him after a hearing thereon:

(1) Not to be in good faith the property of the insurer; and

(2) Not freely subject to withdrawal or liquidation by the insurer at any time for the payment or discharge of claims or other obligations arising under its policies; and

(3) To be resulting from arrangements made principally for the purpose of deception as to the insurer's financial condition as at the date of any financial statement of the insurer.

(c) The Commissioner may suspend or revoke the certificate of authority of any insurer which has knowingly been a party to any such deception or attempt thereat.

§ 1106. Unearned premium reserve

(a) As to property, casualty and surety insurance the insurer shall maintain an unearned premium reserve on all policies in force.

(b) Except as provided in section 1107 of this chapter as to marine and transportation risks, the unearned premium shall be equal to the unearned portion of gross premiums in force (after deduction of applicable reinsurance in solvent insurers) computed on an annual, monthly or more frequently pro rata basis.

§ 1107. Unearned premium reserve for marine and transportation insurance

As to marine and transportation insurance, the entire amount of premiums on trip risks not terminated shall be deemed unearned; and the Commissioner may require the insurer to carry a reserve equal to 100% of premiums on trip risks written during the month ended as of the date of statement.

§ 1108. Health insurance policy reserves

For all health insurance policies the insurer shall maintain an active life reserve which shall place a sound value on its liabilities under such policies and be not less than the reserve according to appropriate standards set forth in regulations issued by the Commissioner and, in no event, less in the aggregate than the pro rata gross unearned premiums for such policies,

§ 1109. Title insurance reserves

In addition to an adequate reserve as to outstanding losses as required under section 1102 of this chapter, a title insurer shall maintain a guaranty fund or unearned premium reserve of not less than an amount computed as follows:

(4) Ten percent of the total amount of the risk portion of premiums written in the calendar year for title insurance contracts shall be assigned originally to the reserve.

(5) During each of the 20 years next following the year in which the title insurance contract was issued, the reserve applicable to the contract may be reduced by 5% of the original amount of such reserve.

§ 1110. Mortgage guaranty contingency reserve

(a) Casualty or surety insurers insuring real property mortgage lenders against loss by reason of nonpayment of the mortgage indebtedness by the borrower, shall maintain a contingency reserve for the protection of policyholders against the effects of adverse economic cycles.

(b) The insurer shall contribute to such contingency reserve 50% of net premiums (gross premiums less premiums returned to policyholders) written on such insurance remaining after establishment of the unearned premium reserve.

(c) Subject to the Commissioner's approval, the contingency reserve shall be available for payment of losses only when the insurer's incurred losses in any one calendar year exceed the rate formula expected losses by 10% of the related earned premiums.

SUBCHAPTER III. LIFE INSURANCE RESERVES

§ 1111. Valuation for reserves

(a) The Commissioner shall annually value, or cause to be valued, the reserve liabilities (hereinafter called reserves) for all outstanding life insurance policies and annuity and pure endowment' contracts of every life insurer doing business in this State, except that in the case of an alien insurer such valuation shall be limited to its insurance transactions in the United States, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest and methods (net level premium method or other) used in the calculation of such reserves. In calculating such reserves, he may use group methods and approximate averages for fractions of a year or otherwise.

(b) In lieu of the valuation of the reserves herein required of any foreign or alien insurer, the Commissioner may accept any valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard provided in this subchapter and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the Commissioner when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.

(c) The Commissioner may vary the standards of interest and mortality in particular cases of invalid lives and other extra hazards.

(d) Any insurer which at any time has adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the Commissioner, adopt any lower standard of valuation, but not lower than the minimum herein provided.

(e) This section shall not apply to domestic insurers operating on the assessment plan.

§ 1112. Minimum valuation standards for policies issued prior to operative date of the Standard Nonforfeiture Law

(a) The provisions of this section shall apply to only those policies and contracts issued before the operative date of the Standard Nonforfeiture Law, section 2929 of this title.

(b) The legal minimum standard for the valuation of life insurance contracts issued before January 1, 1932, shall be the method and basis of valuation applied by this State prior to March 30, 1943, in the valuation of such contracts, and for life insurance contracts issued on and after January 1, 1932, shall be the one year preliminary term method of valuation, except as hereinafter modified, on the basis of the American Experience Table of Mortality with interest at 31/2 % per annum.

() If the premium charged for term insurance under a limited payment life preliminary term policy providing for the payment of all premiums thereon in less than 20 years from the date of the policy, or under an endowment preliminary term policy, exceeds that charged for like insurance under 20 payment life preliminary term policies of the same insurer, the reserve thereon at the end of any year, including the first, shall not be less than the reserve on a 20 payment life preliminary term policy issued in the same year and at the same age, together with an amount which shall be equivalent to the accumulation of a net level premium sufficient to provide for a pure endowment at the end of the premium payment period, equal to the difference between the value at the end of such period of such a 20 payment life preliminary term policy and the full net level premium reserve at such time of such a limited payment life or endowment policy. The premium payment period is the period during which premiums are concurrently payable, under such 20 payment life preliminary term policy and such limited payment life or endowment policy.

(d) Policies issued on the preliminary term method shall contain a clause specifying that the reserve thereon shall be computed in accordance with the modified preliminary term method of valuation provided for herein.

(e) The legal minimum standard for the valuation of annuities issued on and after January 1, 1932, shall be McClintock's Table of Mortality Among Annuitants with interest at 4% per annum, but annuities deferred 10 or more years and written in connection with life insurance shall be valued on the same basis as that used in computing the consideration or premiums therefor, or upon any higher standard at the option of the insurer.

(f) Reserves for all such policies and contracts may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by this section.

§ 1113. Minimum valuation standards for policies issued after operative date of the Standard Nonforfeiture Law

(a) The provisions of this section shall apply to only those policies and contracts issued on or after the operative date of the Standard Nonforfeiture Law, section 2929 of this title.

(b) The minimum standard for the valuation of all policies and contracts to which this section applies shall be the Commissioners reserve valuation method defined in subsection (c) of this section, 31/2% interest, and the following tables:

(1) For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies,--the Commissioners 1941 Standard Ordinary Mortality Table for such policies issued prior to the operative date of section 2929 (d-1) of this title, and the Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after such operative date; provided that for any category of such policies issued on female risks all modified net premiums and present values referred to in this section may be calculated according to an age not more than 3 years younger than the actual age of the insured;

(2) For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies,--the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date of section 2929 (d-2) of this title, and the Commissioners 1961 Standard Industrial Mortality Table for such policies issued on or after such operative date;

(3) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies--the 1937 Standard Annuity Mortality Table or, at the option of the insurer, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Commissioner;

(4) For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies--the Group Annuity Mortality Table for 1951, any modification of such table approved by the Commissioner, or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts;

(5) For total and permanent disability benefits in or supplementary to ordinary policies or contracts--for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the insurer, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies;

(6) For accidental death benefits in or supplementary to policies--for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table; for policies issued on or after January 1, 1961, and prior to January 1, 1966, either such table or, at the option of the insurer, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies;

(7) For group life insurance, life insurance issued on the substandard basis and other special benefits--such tables as may be approved by the Commissioner.

(c) Reserves according to the Commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (A) over (B), as follows:

(A) A net level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue; of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls clue; provided, however, that such net level annual premium shall not exceed the net level annual premium on the nineteen year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy.

(B) A net one year term premium for such benefits provided for in the first policy year.

Reserves according to the Commissioners reserve valuation method for (i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, (ii) annuity and pure endowment contracts, (iii) disability and accidental death benefits in all policies and contracts, and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies, shall be calculated by a method consistent with the principles of this subsection, except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.

(d) In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, be less than the aggregate reserves calculated in accordance with the method set forth in subsection (c) of this section and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

() Reserves for any category of policies, contracts or benefits as established by the Commissioner, may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein. Reserves for participating life insurance policies may, with the consent of the Commissioner, be calculated according to a rate of interest lower than the rate of interest used in calculating the nonforfeiture benefits in such policies, with the further proviso that if such lower rate differs from the rate used in the calculation of the nonforfeiture benefits by more than 1/2% the insurer issuing such policies shall file with the Commissioner a plan providing for such equitable increases, if any, in the cash surrender values and nonforfeiture benefits in such policies as the Commissioner shall approve.

(a) If the gross premium charged by any life insurer on any policy or contract is less than the net premium for the policy or contract according to the mortality table, rate of interest and method used in calculating the reserve thereon, there shall be maintained on such policy or contract a deficiency reserve in addition to all other reserves required by law. For each such policy or contract the deficiency reserve shall be the present value, according to such standard, of an annuity of the difference between such net premium and the premium charged for such policy or contract, running for the remainder of the premium-paying period.

SUBCHAPTER IV. VALUATION OF ASSETS

§ 1114. Valuation of bonds

(a) All bonds or other evidences of debt having a fixed term and rate of interest held by an insurer may, if amply secured and not in default as to principal or interest, be value as follows:

(1) If purchased at par, at the par value.

(2) If purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made, or in lieu of such method, according to such accepted method of valuation as is approved by the Commissioner.

(3) Purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase, plus actual brokerage, transfer, postage or express charges paid in the acquisition of such securities.

(4) Unless otherwise provided by valuation established or approved by the Commissioner, no such security shall be carried at above the call price for the entire issue during any period within which the security may be so called.

(b) The Commissioner shall have full discretion in determining the method of calculating values according to the rules set forth in this section.

§ 1115. Valuation of other securities

(a) Securities, other than those referred to in section 1114 of this chapter, held by an insurer shall be valued, in the discretion of the Commissioner, at their market value, or at their appraised value, or at prices determined by him as representing their fair market value.

(b) Preferred or guaranteed stocks or shares while paying full dividends may be carried at a fixed value in lieu of market value, at the discretion of the Commissioner and in accordance with such method of computation as he may approve.

(c) The stock of a subsidiary of an insurer shall be valued on the basis of the value of only such of the assets of such subsidiary as would constitute lawful investments of the insurer if acquired or held directly by the insurer.

§ 1116. Valuation of property

(a) Real property acquired pursuant to a mortgage loan or contract for sale, in the absence of a recent appraisal deemed by the Commissioner to be reliable, shall not be value at an amount greater than the unpaid principal of the defaulted loan or contract plus interest due and accrued at the date of such acquisition, together with any taxes and expenses paid or incurred in connection with such acquisition, and the cost of improvements thereafter made by the insurer and any amounts thereafter paid by the insurer on assessments levied for improvements in connection with the property.

(b) Other real property held by an insurer shall not be valued at an amount in excess of fair value as determined by recent appraisal. If valuation is based on an appraisal more than 3 years old, the Commissioner may at his discretion call for and require a new appraisal in order to determine fair value.

§ 1117. Valuation of purchase money mortgages

Purchase money mortgages on real property referred to in section 1116 (a) of this subchapter shall be valued in an amount not exceeding the acquisition cost of the real property covered thereby or 90% of the fair value of such real property, whichever is less.

CHAPTER 13. INVESTMENTS

§ 1301. Scope of chapter

Except as to section 1330 of this chapter, this chapter applies to domestic insurers only.

§ 1302. Eligible investments

(c) Insurers shall invest in or lend their funds on the security of, and shall hold as invested assets, only eligible investments as prescribed in this chapter.

(d) Any particular investment held by an insurer on the effective date of this act, which was a legal investment at the time it was made, and which the insurer was legally entitled to possess immediately prior to such effective date, shall be deemed to be an eligible investment.

(e) Eligibility of an investment shall be determined as of the date of its making or acquisition, except as stated in subsection (b) above.

(f) Any investment limitation based upon the amount of the insurer's assets or particular funds shall relate to such assets or funds as shown by the insurer's annual statement as of the December 31 next preceding date of acquisition of the investment by the insurer, or as shown by a current financial statement resulting from merger of another insurer, bulk reinsuance, or change in capitalization.

§ 1303. General qualifications

(g) No security or investment, (other than real and personal property acquired under section 1325 (real estate) of this chapter), shall be eligible for acquisition unless it is interest bearing or interest accruing or entitled to dividends or is otherwise income-earning, is not then in default in any respect, and the insurer is entitled to receive for its exclusive account and benefit the interest or income accruing thereon.

(h) No security or investment shall be eligible for purchase at a price above its fair value or market value.

(i) No provision of this chapter shall prohibit the acquisition by an insurer of other or additional securities or property if received as a dividend or as a lawful distribution of assets, or upon a debt or judgment, or under a lawful and bona fide agreement of bulk reinsurance, merger, or consolidation. Any security or property so acquired which is not otherwise an eligible investment under this chapter shall be disposed of pursuant to section 1326 of this chapter if real estate, or pursuant to section 1327 of this chapter if personal property or securities.


§ 1304. Authorization, record of investments

(a) An insurer shall not make any investment or loan (other than policy loans or annuity contract loans of a life insurer) unless the same is authorized or approved by the insurer's board of directors or by a committee thereof charged with supervision of investments and loans.

(b) The insurer shall maintain a full record of each investment, showing, among other pertinent information, the name of any officer, director or principal stockholder of the insurer having any direct, indirect, or contingent interest in the securities, loan, or property constituting the investment, or in the person in whose behalf the investment is made, and the nature of such interest.

§ 1305. Diversification

An insurer shall invest in or hold as admitted assets categories of investments within applicable limits as follows only:

(1) One person. An insurer shall not at any one time have any combination of investments in or loans upon the security of obligations, property, or securities of any one person (other than its lawful subsidiary) aggregating over 5% of the insurer's assets. This shall not apply as to general obligations of the United States or of any state, or of Canada or any province thereof, or include policy loans made under section 1317 of this chapter.

(2) Voting stock. An insurer shall not invest in or hold at any one time more than 10% of the outstanding voting stock of any corporation, except as to voting rights of preferred stock during default of dividends. This does not apply as to stock of a subsidiary of the insurer acquired under section 1313 of this chapter, or to controlling stock of an insurer acquired under section 1312(b) of this chapter.

(3) Stocks. A life insurer shall invest and have invested at any one time in aggregate amount not more than 125% of its policyholders' surplus (as defined in section 511 (2) of this title), in all stocks under sections 1310 (preferred and guaranteed stocks), 1311 (common stocks), 1312 (insurance stocks) and 1314 (common trust funds, mutual funds) of this chapter.

This provision shall not apply as to stock of controlled or subsidiary corporation under sections 1312 (b) and 1313, or as to investments made pursuant to section 1322 (special investments of pension, profit sharing, or annuity funds) of this chapter.

(4) Mortgages. An insurer shall not at any one time have more than 50% of its assets invested in obligations secured by mortgages of real property, exclusive of that portion of such obligations guaranteed or insured by an agency of the United States government.

(5) Other specific limits. Limits as to investments in the category of real estate shall be as provided in section 1325 of this chapter; and other specific limits, if any, shall apply as stated in sections dealing with other respective kinds of investments.

§ 1306. Public obligations

An insurer may invest in bonds or other evidences of indebtedness, not in default as to principal or interest, which are valid and legally authorized obligations issued, assumed, or guaranteed by the United States or by any state thereof, or by Canada or any of the provinces thereof, or by any county, city, town, village, municipality or district therein or by any political subdivision thereof or by a public instrumentality of one or more of the foregoing, if, by statutory or other legal requirements applicable thereto, such obligations are payable, as to both principal and interest, from (1) taxes levied or required to be levied upon all taxable property or all taxable income within the jurisdiction of such governmental unit, or from (2) adequate special revenues pledged or otherwise appropriated or by law required to be provided for the purpose of such payment; but not including any obligation payable solely out of special assessments on properties benefited by local improvements unless adequate security is evidenced by the ratio of assessment to the value of the property or the obligation is additionally secured by an adequate guaranty fund required by law.

§ 1307. Obligations, stock of certain federal and international agencies

An insurer may invest in the obligations, and/or stock where stated, issued, assumed or guaranteed by the following agencies of the government of the United States of America, or in which such government is a participant, whether or not such obligations are guaranteed by such government:

(1) Farm Loan Bank.

(2) Commodity Credit Corporation.

(3) Federal Intermediate Credit Banks.

(4) Federal Land Banks.

(5) Central Bank for Cooperatives.

(6) Federal Home Loan Banks, and stocks thereof.

(7) Federal National Mortgage Association, and stock thereof when acquired in connection with sale of mortgage loans to such Association.

(8) International Bank for Reconstruction and Development.

(9) Inter-American Development Bank.

(10) Any other similar agency of, or participated in by, the government of the United States of America and of similar financial quality.

§ 1308. Corporate obligations

An insurer may invest any of its funds in obligations other than those eligible for investment under section 1324 (real estate mortgages) of this chapter if they are issued, assumed, or guaranteed by any solvent institution created or existing under the laws of the United States or Canada or of any state, district, province or territory thereof, and are qualified under any of the following:

(1) Obligations which are secured by adequate collateral security and bear fixed interest if during each of any 3, including the last 2, of the 5 fiscal years next preceding the date of acquisition by the insurer, the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges, as defined in section 1309, have been not less than one and one-fourth times the total of its fixed charges for such year. In determining the adequacy of collateral security not more than one-third of the total value of such required collateral shall consist of stock other than stock meeting the requirements of section 1310 herein (preferred or guaranteed stock) of this chapter.

(2) Fixed interest-bearing obligations, other than those described in subdivision (1) of this section, if the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by the insurer have averaged per year not less than one and one-half times its average annual fixed charges applicable to such period and if during the last year of such period such net earnings have been not less than one and one-half times its fixed charges for such year.

(3) Adjustment, income or other contingent interest obligations if the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges for a period of 5 fiscal years next preceding the date of acquisition by the insurer have averaged per year not less than one and one-half times the sum of its average annual fixed charges and its average annual maximum contingent interest applicable to such period and if during each of the last 2 years of such period such net earnings have not been less than one and one-half times the sum of its fixed charges and maximum contingent interest for such year.

§ 1309. Corporate obligations--Terms defined

(a) Certain terms used are defined for the purposes of this chapter as follows:

(1) "Obligation" includes bonds, debentures, notes or other evidences of indebtedness.

(2) "Institution" includes corporations, joint-stock associations, and business trusts.

"Net earnings available for fixed charges" means net income after deducting operating and maintenance expenses, taxes, other than federal and state income taxes, depreciation and depletion, but excluding extraordinary nonrecurring items of income or expense appearing in the regular financial statements of such institutions.

(3) "Fixed charges" includes interest on funded and unfunded debt, amortization of debt discount, and rentals for leased properties.

(b) If net earnings are determined in reliance upon consolidated earnings statements of parent and subsidiary institutions, such net earnings shall be determined after provision for income taxes of subsidiaries and after proper allowance for minority stock interest if any; and the required coverage of fixed charges shall be computed on a basis including fixed charges and preferred dividends of subsidiaries other than those payable by such subsidiaries to the parent corporation or to any other of such subsidiaries, except that if the minority common stock interest in the subsidiary corporation is substantial, the fixed charges and preferred dividends may be apportioned in accordance with regulations prescribed by the Commissioner.

§ 1310. Preferred or guaranteed stock

An insurer may invest in preferred or guaranteed stocks or shares of any solvent institution existing under the laws of the United States or of Canada, or of any state or province thereof, if all of the prior obligations and prior preferred stocks, if any, of such institution at the date of acquisition of the investment by the insurer are eligible as investments under this chapter and if the net earnings of such institution available for its fixed charges during either of the last 2 years have been, and during each of the last 5 years have averaged, not less than one and one-half times the sum of its average annual fixed charges, if any, its average annual maximum contingent interest, if any, and its average annual preferred dividend requirements. For the purposes of this section such computation shall refer to the fiscal years immediately preceding the date of acquisition of the investment by the insurer, and the term "preferred dividend requirement" shall be deemed to mean cumulative or noncumulative dividends, whether paid or not.

§ 1311. Common stocks

An insurer may invest in nonassessable (except as to bank or trust company stocks, and except for taxes) common stocks, other than insurance stocks, of any solvent corporation organized and existing under the laws of the United States or Canada, or of any state or province thereof, if such corporation has had net earnings available for dividends on such stock in each of the 5 fiscal years next preceding acquisition by the insurer. If the issuing corporation has not been in legal existence for the whole of such 5 fiscal years but was formed as a consolidation or merger of 2 or more businesses of which at least one was in operation on a date 5 years prior to the investment, the test of eligibility of its common stock under this section shall be based upon consolidated proforma statements of the predecessor or constituent institutions.

§ 1312. Insurance stocks

(a) An insurer may invest in the stocks of other solvent insurers formed under the laws of this or another state, which stocks meet the applicable requirements of sections 1310 (preferred or guaranteed stock) and 1311 (common stocks) of this chapter.

(b) With the Commissioner's advance written consent an insurer may acquire and hold the controlling interest in the outstanding voting stock of another stock insurer formed under the laws of this or another state. All stocks under this subsection shall be subject to the limitation as to amount as provided in section 1313 of this chapter. The Commissioner shall not give his consent to any such acquisition if he finds that it would not be in the best interests of the insurers involved, or of their respective policyholders or stockholders, or that such acquisition would materially tend to lessen competition or to result in any monopoly in the insurance business.

§ 1313. Stocks of subsidiaries

An insurer may invest in the stock of its subsidiary insurance corporation formed or acquired by it; or in the stock of its wholly-owned subsidiary business corporation formed under the laws of this State and necessary and incidental to the convenient operation of the insurer's insurance business or to the administration of any of its affairs. All of the insurer's investments under this section, together with its investments in insurance stocks under section 1312 (b) of this chapter shall not at any time exceed the amount of the investing insurer's surplus, if a life insurer, or its policyholders' surplus (as defined in section 511 (2) of this chapter) if other than a life insurer.

§ 1314. Common trust funds; mutual funds

An insurer may invest in:

(1) A bank's common trust fund as defined in section 584 of the United States Internal Revenue Code of 1954; and

(2) The securities of any open-end management type investment company or investment trust registered with the federal Securities and Exchange Commission under the Investment Company Act of 1940 as from time to time amended, if such investment company or trust has assets of not less than $25,000,000 as at date of investment by the insurer.

§ 1315. Bankers' acceptances; bills of exchange

An insurer may invest in bankers' acceptances and bills of exchange of the kinds and maturities made eligible by law for rediscount with Federal Reserve Banks, and generally accepted by banks or trust companies which are members of the Federal Reserve system.

§ 1316. Equipment trust certificates

An insurer may invest in equipment trust obligations or certificates adequately secured and evidencing an interest in transportation equipment, wholly or in part within the United States of America, which obligations or certificates carry the right to receive determined portions of rental, purchase, or other fixed obligatory payments to be made for the use or purchase of such transportation equipment.

§ 1317. Policy loans

A life insurer may lend to its policyholder upon pledge of the policy as collateral security, any sum not exceeding the cash surrender value of the policy; or may lend against pledge or assignment of any of its supplementary contracts or other contracts or obligations, so long as the loan is adequately secured by such pledge or assignment. Loans so made are eligible investments of the insurer.

§ 1318. Collateral loans

An insurer may lend and thereby invest its funds upon the pledge of securities eligible for investment under this chapter.

As at date made, no such loan shall exceed in amount 90% of the market value of such collateral pledged. The amount so loaned shall be included pro rata in determining the maximum percentage of funds permitted under this chapter to be invested in the respective categories of securities so pledged.

§ 1319. Savings and share accounts

An insurer may invest in share or savings accounts of savings and loan or building and loan associations, or in savings accounts of banks; and in any one such institution only to the extent that the investment is insured by the federal savings and loan insurance corporation or the federal deposit insurance corporation.

§ 1320. Miscellaneous investments

(a) An insurer may make loans or investments not otherwise expressly permitted under this chapter, in aggregate amount not over 5% of the insurer's assets and not over 1% such assets as to any one such loan or investment, if such loan or investment fulfills the requirements of section 1303 of this chapter and otherwise qualifies as a sound investment. No such loan or investment shall be represented by:

(1) Any item described in section 1102 (assets not allowed) of this title, or any loan or investment otherwise expressly prohibited.

(2) Agents' balances, or amounts advanced to or owing by agents; except as to policy loans, mortgage loans, and collateral loans otherwise authorized under this chapter.

(3) Any category of loans or investments expressly eligible under any other provision of this chapter.

(4) Any asset theretofore acquired or held by the insurer under any other category of loans or investments eligible under this chapter.

(b) The insurer shall keep a separate record of all loans and investments made under this section.

§ 1321. Investments in foreign countries

(a) An insurer transacting insurance in a foreign country may invest funds required to meet its obligations in such country and in conformity with the laws thereof in the same kinds of securities and investments of or in such country as the insurer is authorized to invest in or acquire under other provisions of this chapter; other insurers (except as provided in subsection (b) below) may have not over 5% of assets invested in such securities and investments of foreign countries.

(b) If such an insurer is not doing business in any state of the United States of America, it may invest its funds as permitted by the laws of any jurisdiction where it does business. Negotiation and issuance of insurance on risks situated outside every such state, and changes in, communications concerning, and collection of premiums on, insurance so issued, shall not be deemed hereunder to be doing business in any such state.

§ 1322. Special investments of pension; profit sharing or annuity funds

The amounts allocated to each separate account established by the insurer in connection with a pension, retirement or profit-sharing plan or annuity pursuant to section 2933 (pension, profit-sharing, annuity agreements-separate accounts) of this title, together with accumulations thereon may be invested and reinvested in any class of investments which may be authorized in the written contract or agreement without regard to any requirements or limitations prescribed by this chapter; except, that to the extent that the insurer's reserve liability with regard to (1) benefits guaranteed as to amount and duration, and (2) funds guaranteed as to principal amount or stated rate of interest, is maintained in any separate account, a portion of the assets of such separate account at least equal to such reserve liability shall be invested in accordance with the applicable provisions of this chapter. The investments in such separate account or accounts shall not be taken into account in applying the investment limitations applicable to other investments of the insurer.

§ 1323. Special investments of title insurers

(a) A title insurer may also have invested funds in an amount not exceeding 50% of its paid-in capital stock and its surplus, in its abstract plant and equipment and in stocks of abstract companies.

(b) Investments authorized under subsection (a) shall not be credited against required reserves.

§ 1324. Real estate mortgages

(a) An insurer may invest in bonds or notes secured by mortgages or deeds of trust representing first liens upon unencumbered real estate, perpetual leases thereon or leasehold estates when the remaining term of such leasehold and enforceable renewals is not less than 20 years greater than the term of the first lien, in the United States or Canada, subject to the following conditions:

(1) The amount loaned, or the aggregate amount of bonds issued upon the security of a mortgage or deed of trust, shall not at the time of the investment exceed 75% of the fair market value of the real estate, as such value has been determined by a qualified appraiser for the purposes of the investment or at the time of issuance of the bonds.

(2) In applying the limitation under (1) above, there may be excluded from the amount invested that portion of the investment which is guaranteed by the Administrator of Veterans' Affairs pursuant to the Servicemen's Readjustment Act of 1944, as amended, or insured by the Federal Housing Administrator or other United States or Canadian government agency.

(3) Insurance not less comprehensive than fire and extended coverage must be carried on the improvements, if any, on the real estate, in an amount not less than 75% of the insurable value of the improvements or the unpaid balance of the investment, whichever is the lesser amount, and the policy or policies evidencing such insurance shall be endorsed to show the interest of the lender.

(b) For the purposes of this section real estate shall not be deemed to be encumbered by reason of the existence of taxes or assessments which are not delinquent, instruments creating or reserving mineral, oil or timber rights, rights-of-way, joint driveways, sewer rights, rights in walls, or by reason of building restrictions or other restrictive covenants, or when such real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner.

§ 1325. Real estate

(a) A domestic insurer may invest in real estate only if used for the purposes or acquired in the manners, and within the limits, as follows:

(4) The building in which it has its principal office, the land upon which the building stands, and such other real estate as may be requisite for the insurer's convenient accommodation in the transaction of its business. The amount so invested, and apportioned as to space actually so occupied or used, shall not aggregate more than 10% of the insurer's assets.

(5) Real estate acquired in satisfaction of loans, mortgages, liens, judgments, decrees or debts previously owing to the insurer in the due course of its business.

(6) Real estate acquired in part payment of the consideration on the sale of other real estate owned by it, if such transaction shall have effected a net reduction in the insurer's investments in real estate.

(7) Real estate acquired by gift or devise, or through merger, consolidation, or bulk reinsurance of another insurer under this title.

(8) The seller's interest in real estate subject to an agreement of purchase or sale, but the sum invested in any such interest shall not exceed two-thirds of the fair value of such parcel.

(9) Additional real estate and equipment incident thereto, if necessary or convenient for the purpose of enhancing the sale or other value of real estate previously acquired or held under this section. Such real estate and equipment, together with the real estate for the enhancement of which it was acquired, shall be included, for the purpose of applicable investment limits, and shall be subject to disposal under section 1326 at the same time and under the same conditions as apply to such enhanced real estate.

(0) Real estate, or any interest therein, acquired or held by purchase, lease, or otherwise, other than real estate to be used primarily for agricultural ranch, mining, development of oil or mineral resources, recreational, amusement, hotel, motel, or club purposes, acquired as an investment for production of income, or acquired to be improved or developed for such investment purposes pursuant to an existing program therefor. The insurer may hold, mortgage, improve, develop, maintain, manage, lease, sell, convey, and otherwise dispose of real estate acquired by it under this provision. An insurer shall not have at any one time invested in real estate under this subdivision more than 15% of its assets.

(b) All real estate owned by a domestic insurer under this section, other than as to seller's interest specified in subdivision (5), shall not at any one time exceed 25% of the insurer's assets.

§ 1326. Time limit for disposal of real estate

(a) Except as stated in subsection (b) of this section, or unless the insurer elects to hold the real estate as an investment under section 1325(a) (7) of this chapter:

(1) An insurer shall dispose of real estate acquired under section 1325 (a) (1) of this chapter within 5 years after it has ceased to be necessary for the convenient accommodation of the insurer in the transaction of its business.

(2) An insurer shall dispose of real estate acquired under section 1325(a) (2), (3) and (4) of this chapter within 5 years after the date of acquisition, unless used or to be used for the insurer's accommodation under section 1325(a) (1) of this chapter.

(b) Upon proof satisfactory to him that the interests of the insurer will suffer materially by the forced sale thereof, the Commissioner may by order grant a reasonable extension of the period, as specified in such order, within which the insurer shall dispose of any particular parcel of such real estate.

§ 1327. Time limit for disposal of other ineligible property and securities

Any personal property or securities lawfully acquired by an insurer which it could not otherwise have invested in or loaned its funds upon at the time of such acquisition, shall be disposed of within 3 years from date of acquisition unless within such period the security has attained to the standard of eligibility; except, that any security or personal property acquired under any agreement of bulk reinsurance, merger, or consolidation, may be retained for a longer period is so provided in the plan for such reinsurance, merger, or consolidation as approved by the Commissioner under chapter 49 of this title. Upon application by the insurer and proof that forced sale of any such property or security would materially injure the interests of the insurer, the Commissioner may extend the disposal period for an additional reasonable time.

§ 1328. Failure to dispose of real estate or securities--Effect; penalty

(a) Any real estate, personal property, or securities lawfully acquired, and held by an insurer after expiration of the period for disposal thereof or any extension of such period granted by the Commissioner as provided in sections 1326 and 1327 of this chapter, shall not be allowed as an asset of the insurer.

(b) The insurer shall forthwith dispose of any ineligible investment unlawfully acquired by it, and the Commissioner shall suspend or revoke the insurer's certificate of authority if the insurer fails to dispose of the investment within such reasonable time as the Commissioner may, by his order, specify.

§ 1329. Prohibited investments and investment underwriting

(a) In addition to investments excluded pursuant to other provisions of this title, an insurer shall not invest in or lend its funds upon the security of:

(1) Issued shares of its own capital stock, except (1) for the purpose of mutualization under section 4928 of this title, and (ii) where the insurer has first submitted a plan for such investment or loan to the Commissioner and the Commissioner has not, within 20 days after such submission or within such additional reasonable period as the Commissioner may request, disapproved such plan as unfair or inequitable to the insurer's policyholders or stockholders.

(2) Securities issued by any corporation or enterprise the controlling interest of which is, or will after such acquisition by combination of the insurer and the insurer's directors, officers, subsidiaries, or controlling stockholders (other than a parent corporation), and the spouses and children of any of the foregoing individuals. Investments in controlled insurance corporations or subsidiaries under sections 1312(b) and 1313 of this chapter are not subject to this provision.

(3) Any note or other evidence of indebtedness of any director, officer, employee or controlling stock holder of the insurer or of the spouse, or child of any of the foregoing individuals, except as to policy loans authorized under section 1317 of this chapter.

(b) No insurer shall underwrite or participate in the underwriting of an offering of securities or property of any other person.

(c) Na insurer shall enter into any agreement to withhold from sale any of its securities or property, and the disposition of its assets shall at all times be within the control of the insurer.

§ 1330. Investments of foreign insurers

The investment portfolio of a foreign or alien insurer shall be as permitted by the laws of its domicile if of a quality substantially equal to that required under this chapter for similar funds of like domestic insurers.

CHAPTER 15. ADMINISTRATION OF DEPOSITS

§ 1501. Authorized deposits of insurers

The following deposits of insurers when made through the Commissioner shall be accepted and held by him in trust, subject to the provisions of this chapter:

(a) Deposits required under this title for authority to transact insurance in this State.

(b) Deposits of domestic insurers when made pursuant to the laws of other states, provinces, and countries as requirement for authority to transact insurance in such state, province, or country.

(c) Deposits in such additional amounts as are permitted to be made under section 1509 of this chapter.

§ 1502. Purpose of deposit

(a) Deposits made in this State under section 513 (deposit requirements, in general) of this title shall be held in trust for the respective purposes stated in that section,

(b) A deposit made in this State by a domestic insurer transacting insurance in another state, province, or country, and as required by the laws of such other state, province, or country, shall be held for the protection of all the insurer's policyholders or all its policyholders and creditors or for such other purpose or purposes as may be specified pursuant to such laws.

(c) Deposits made by domestic life insurers in connection with registered policies and bonds shall be made and held for the special protection of the holders of such policies and bonds.

(d) Deposits required under the retaliatory law, section 531 of this title, shall be held for such purposes as is required by such law, and as specified by the Commissioner's order requiring such deposit to be made.

§ 1503. Securities eligible for deposit

(e) All such deposits required under section 513 of this title for authority to transact insurance in this State shall consist of good interest-bearing or dividend-paying securities of kinds eligible for investment of the funds of domestic insurers under chapter 13 of this title.

(f) All other deposits of a domestic insurer held in this State pursuant to the laws of another state, province, or country shall be comprised of securities of the kinds described in subsection (a), above, and of such additional kind or kinds of securities required or permitted by the laws of such state, province, or country.

() Deposits of foreign insurers made in this State under the retaliatory law, section 531 of this title, shall consist of such assets as are required by the Commissioner pursuant to such law.

§ 1504. Depository; access; costs

(a) Deposits made in this State under this title shall be made through the Commissioner and kept in safe deposit with an established bank or trust company located in this State and selected by the Commissioner.

(b) Wherever reasonably possible all deposited securities shall be registered in the name of the Insurance Commissioner, State of Delaware, in trust for the depositing insurer, or registered in the insurer's name and be accompanied by a duly executed power of attorney in favor of the Commissioner. The State shall be responsible for the safekeeping of all securities deposited under this subsection, and shall bear the costs of the depository.

(c) If securities for deposit are submitted in form other than as provided in subsection (b) above, or in connection with "registered" policies or bonds, the Commissioner of his representative shall forthwith deposit the same in the presence of the president, vice-president or authorized agent of the insurer, in a strong metal box, which shall require two distinct and different keys to unlock the same, one key to be kept by the Commissioner and the other by the insurer. The box shall not be opened except in the presence of the Commissioner or duly authorized representative, and the president, vice-president or authorized agent of the insurer. The insurer shall bear the costs of the depository.

1505. Record of deposits

(a) The Commissioner shall give to the depositing insurer vouchers as to all assets and securities so deposited with him.

(b) The Commissioner shall keep a record of the assets and securities comprising each deposit, showing as far as practical the amount and market value of each item, and all his transactions relative thereto.

§ 1506. (Reserved for future use)

§ 1507. Assignment; transfer of securities

All securities deposited by an insurer and not negotiable by delivery shall be duly registered in the name of the Commissioner and his successors in office, or with power of attorney as provided in section 1504 of this chapter. Upon release of any such security to the insurer, the Commissioner shall reassign or surrender the power of attorney to the insurer.

§ 1508. Appraisal

The Commissioner may, in his discretion, prior to acceptance for deposit of any particular asset or security, or at any time thereafter while so deposited, have the same appraised or valued by competent appraisers. The reasonable costs of any such appraisal or valuation shall be borne by the insurer.

§ 1509. Excess deposits

(c) If assets deposited by an insurer under this chapter are subject to material fluctuations in market value, the Commissioner may, in his discretion, require the insurer to deposit and maintain on deposit additional assets in amount reasonably necessary to assure that the deposit at all times has a market value of not less than the amount specified under the law by which the deposit is required.

(d) An insurer may otherwise at its option deposit assets in amount exceeding its deposit required or otherwise permitted under this title by not more than 20% of such required or permitted deposit, or $20,000, whichever is the larger amount, for the purpose of absorbing fluctuations in the value of assets deposited and to facilitate exchange and substitution of such assets. During the solvency of the insurer any such excess shall be released to the insurer upon its request. During the insolvency of the insurer, such excess deposit shall be released only as provided in section 1513(e) of this chapter.

§ 1510. Rights of insurer during solvency

So long as the insurer remains solvent and is in compliance with this title it may:

(1) Demand, receive, sue for and recover the income from the assets deposited;

(2) Exchange and substitute for the deposited assets, assets of equivalent or greater fair market value; and

(3) At any reasonable time inspect any such deposit. § 1511. Levy upon deposit

(a) Except as provided in subsection (b) below, no judgment creditor or other claimant of an insurer shall have the right to levy upon any of the assets held in this State as a deposit for the protection of the insurer's policyholders or policyholders and creditors. As to deposits made pursuant to the retaliatory provision, section 531 of this title, levy thereupon shall be permitted if so provided in the Commissioner's order under which the deposit is required.

(b) Securities comprising the special deposit of a surety insurer required under section 513 (b) of this title shall not be subject to levy under any writ of attachment, but shall be subject to process against the insurer, by final judgment and execution issued against the insurer on account of its default upon any surety contract issued by it in this State, upon 30 days' written notice to the insurer specifying the time, place, and manner of sale and the process under which and purposes for which the securities are to be sold and accompanied by a copy of such process.

§ 1512. Deficiency of deposit

If for any reason the market value of assets of an insurer held on deposit in this State as required under this title falls below the required amount, the insurer shall promptly deposit other or additional assets eligible for deposit sufficient to cure the deficiency. If the insurer has failed to cure the deficiency within 20 days after receipt of notice thereof by registered mail from the Commissioner, the Commissioner shall forthwith revoke the insurer's certificate of authority.

§ 1513. Duration and release of deposit, in general

(a) Every deposit made in this State by an insurer pursuant to the retaliatory law, section 531 of this title, shall be held for so long as the basis of such retaliation exists.

(b) When an insurer determines to discontinue business in this State, whether through merger, bulk reinsurance, or otherwise, and desires to withdraw its deposit, upon the insurer's application and at its expense the Commissioner shall publish notice of such intention in a newspaper of general circulation in the State once a week for four weeks. After such publication the Commissioner shall deliver the securities remaining on deposit to the insurer or its assigns when he is satisfied, upon examination and the oaths of the president and secretary or other chief officers of the insurer, that all debts and liabilities of every kind due or to become due which the deposit was made to secure are paid, or extinguished, or otherwise adequately provided for.

(c) If the insurer has reinsured all its outstanding risks in another insurer or insurers, the Commissioner shall deliver such assets and securities to such insurer or insurers so assuming such 'risks, after publication of the notice required under subsection (b) above, and upon proof to his satisfaction that (1) the assuming insurer has assumed and agreed to discharge all liabilities of every kind due and to become due which the deposit was to secure, (2) the assuming insurer has on deposit in this State or with a State official in the United States, securities of a quality and in an amount and value not less than the deposit required of the reinsured insurer under this title and which will subsist for the security of the obligations of the reinsured insurer so assumed, and (3) such assets and securities have been duly assigned, transferred and set over to such assuming insurer or insurers.

() If such a withdrawal of deposit is desired by a foreign insurer, in addition to other requirements therefor the insurer shall notify its domiciliary state or province of the intended withdrawal and furnish to the Commissioner written acknowledgment by such state of such notification, in form satisfactory to him.

(a) If the insurer is subject to delinquency proceedings as defined in section 5901 of this title, upon the order of a court of competent jurisdiction, the Commissioner shall yield the insurer's assets held on deposit to the receiver, conservator, rehabilitator, or liquidator of the insurer, or to any other properly designated official or officials who succeed to the management and control of the insurer's assets.

(b) No release of deposited assets shall be made except upon application to and the written order of the Commissioner. The Commissioner shall have no personal liability for any release of any such deposit or part thereof so made by him in good faith.

§ 1514. Deposit for "registered" life insurance policies and bonds

(a) Deposits made with the Commissioner in connection with "registered" policies and bonds heretofore issued in this State by a life insurer shall be held as long as the policy or contract with respect to which such deposit was made continues in force.

(b) Deposits held with respect to policies and bonds still in force shall not be released, whether or not such policies and bonds have been reinsured or the entire liability thereunder assumed by another insurer, or the issuing insurer has become insolvent, subject to delinquency proceedings, or dissolved.

(c) Upon proof satisfactory to him that certain of such policies or bonds have lapsed, been surrendered for cash value, matured, or otherwise terminated, and that all liabilities of the insurer to policyholders and beneficiaries or bond holders with respect thereto have been fully paid and discharged, the Commission may release any applicable portion of the deposit if the deposit is then in excess of the amount otherwise required. The Commissioner may accept and rely upon the records of the insurer, as kept, summarized, and reported to him in regular course of its business, as to any such payment and discharge.

§ 1515. Commissioner's liability

If the Commissioner willfully fails faithfully to require, deposit, keep, account, and receipt for, or surrender in the manner by law authorized or required any assets as provided in this title, he shall be responsible upon his official bond therefor and suit may be brought upon his bond by any person injured by such failure; and the Commissioner so offending shall be guilty of a felony, and fined not more than $10,000 and imprisoned not less than 2 years or more than 10 years.

CHAPTER 17. AGENTS, BROKERS, SOLICITORS AND ADJUSTERS

§ 1701. Scope of chapter

This chapter applies as to all insurance agents, brokers, solicitors, adjusters and service representatives, and as to surplus line brokers to the extent in this chapter provided.

§ 1702. "Agent" defined

An "agent" is an individual, firm or corporation appointed by an insurer to solicit applications for insurance or annuity contracts or to negotiate for such contracts on its behalf, and, if authorized to do so by the insurer, to effectuate and countersign insurance contracts.

§ 1703. "General lines" agent, "life" agent, "health" agent defined

(a) A "general lines" agent is an agent who transacts any one or more of the following kinds of insurance:

(1) Property insurance.

(2) Casualty insurance.

(3) Surety insurance.

(4) Marine and transportation insurance.

(5) Health insurance, when transacted for an insurer also represented by the same agent as to property or casualty insurance.

(b) A "life" agent is an agent who transacts life insurance or annuity business, and includes also the transaction of health insurance on behalf of an insurer for whom the agent is also licensed as to life insurance.

(c) A "health" agent is one appointed by an insurer as to health insurance only.

§ 1704. "Broker" defined

A "broker" is an individual, firm or corporation who, not being an agent of the insurer, as an independent contractor and on behalf of the insured solicits, negotiates or procures insurance or annuity contracts or the renewal or continuance thereof for insured's or prospective insured's, other than himself.

§ 1705. "Solicitor" defined

A "solicitor" is an individual employed by an agent or a broker to solicit applications for insurance, other than life and health insurances, as a representative of such agent or broker.

§ 1706. "Service representative" defined; requirements

(a) A "service representative" is an individual employed on salary by an insurer or managing general agent to work with agents in soliciting, negotiating and effectuating insurance in such insurer or in insurers ' represented by the managing general agent.

(b) Officers and salaried nonresident traveling representatives of property and casualty insurers not in general using resident agents for the solicitation of business, who inspect risks or solicit insurance in this State and receive no commissions thereon shall be deemed also to be service representatives.

(c) A service representative is not required to be licensed as such.

§ 1707. "Adjuster" defined

(a) An "adjuster" is an individual, firm or corporation who, for compensation as an independent contractor, or as the employee of such independent contractor or of an insurer or managing general agent, on behalf of the insurer investigates and negotiates settlement of claims arising under insurance contracts.

(b) None of the following shall be deemed to be an adjuster:

(1) An attorney at law licensed to practice law in this State.

(2) Employees who administer claims in the office of the employer.

(0) A licensed agent or broker who adjusts or assists in adjustment of losses arising under policies issued through or serviced by such agent or broker.

§ 1708. License required; forms

(a) No person shall in this State be, act as, or hold himself out to be an agent, broker, solicitor, or adjuster unless then licensed as such agent, broker, solicitor, or adjuster under this chapter.

(b) No agent, broker or solicitor shall solicit or take application for, procure or place for others any kind of insurance as to which he is not then licensed.

(c) Except as provided in section 1736 (excess or rejected risks) of this chapter, no agent shall place any insurance with any insurer as to which he does not then hold a license and appointment as agent under this chapter.

(d) The Commissioner shall prescribe and furnish all forms required under this chapter as to licenses and appointments.

§ 1709. Exceptions to agent, broker, solicitor license requirement

In addition to persons otherwise excluded therefrom, the definition of agent, broker or solicitor shall not be deemed to include:

(1) Persons performing clerical or administrative services; and including, if a salaried employee of an agent or broker, incidental taking of insurance applications in the office of the employer if the employee does not receive commission on such applications and his compensation is not varied thereby.

(2) Any regular salaried officer or employee of an insurer rendering assistance to or on behalf of a licensed agent, and receiving no commission or other compensation directly dependent upon the amount of business transacted.

§ 1710. Purpose of license; "controlled business"

(a) The purpose of a license issued under this chapter to an agent, broker or solicitor is to authorize and enable the licensee actively and in good faith to engage in the insurance business with respect to the general public, and to facilitate the public supervision of such activities in the public interest; and not for the purpose of enabling the licensee to receive a rebate of premium in the form of "commission" or other compensation upon insurance solicited or procured by or through him upon his own interests or upon those of other persons with whom he is closely associated in capacities other than as an insurance agent, broker or solicitor.

(b) The Commissioner shall not grant, renew, continue, or permit to exist any license as agent, broker, or solicitor as to any applicant therefor or licensee thereunder if he finds that the license has been or is being or will probably be used by the applicant or licensee materially for the purpose of writing "controlled business," that is:

(1) Insurance on his own interests or those of his family or of his employer; or

(2) Insurance or annuity contracts covering himself or members of his family, or the officers, directors, stockholders, partners, or employees of a partnership, association, or corporation of which he or a member of his family is an officer, director, stockholder, partner, associate or employee.

(c) Such a license shall be deemed to have been, or intended to be, used materially for the purpose of writing controlled business if the Commissioner finds that during any 12 months' period the aggregate commissions earned from such controlled business have exceeded or probably will exceed 40% of the aggregate commissions earned or to be earned on all business written or probably to be written by such applicant or licensee during the same period.

(d) Receipt by the licensee of compensation on his controlled business in a calendar year in excess of 40% of all compensation earned by him in the same year on all insurance transacted by him, shall constitute receipt of an unlawful rebate; and any person who knowingly pays such excess compensation shall be deemed to have made such a rebate.

(e) This section shall not apply as to:

(1) Insurance of the interest of a sales or financing agency in a motor vehicle sold or financed by it.

(2) Insurance of the interest of a real property mortgagee in the mortgaged property.

(3) Credit life and credit health insurance.

§ 1711. General qualifications for agent, broker, or solicitor license

(a) For the protection of the people of this State, the Commissioner shall not issue, continue, or permit to exist any agent, broker, or solicitor license except in compliance with this chapter, or as to any individual unless qualified therefor as follows:

(1) Must reside in, or be both principally employed and office in, this State and not hold an insurance license as a resident of another state, except as provided in section 1739 hereof as to nonresident licensees.

(2) Must be of age 21 years or more, except as to solicitors or life agents of age 18, 19, or 20 years under direct supervision of a licensee of age 21 years or more.

(3) If for agent's license, must have been appointed agent by an authorized insurer, subject to issuance of the license.

(4) If for solicitor's license, must be regularly employed by a licensed resident agent or resident broker as a full-time employee, or be so employed subject to issuance of the license.

(5) If for broker's license, must have had experience either as an agent, solicitor, service representative, adjuster, managing general agent, or broker, or other special experience, education or training, all of sufficient content and duration reasonably necessary for competence in fulfilling the responsibilities of a broker.

(6) Subject to subsection (b), below, if for license as general lines agent or broker, must make the transaction of business under his license or licenses his principal business occupation, deriving therefrom on an annual basis not less than 50% of his entire income from his personal services.

(7) Must be competent, trustworthy, financially responsible, and of good reputation.

(8) Must pass any written examination required for the license under this chapter.

(9) Subject to subsection (b), below, must not seek or use the license principally for the purpose of writing controlled business, as referred to in section 1710 of this chapter.

(b) Subdivisions (6) and (9) above shall not apply as to persons resident in this State and holding subsisting license as agent or broker under laws of this State in force immediately prior to the effective date of this Act.

§ 1712. Licensing of firms, corporations

(a) A firm or corporation shall be licensed only as agent, broker or adjuster. Each general partner of a firm, and each other individual to act for the firm or corporation under the license, shall be named in or registered with the Commissioner as to the license, and shall qualify as though an individual licensee. A full additional licensee fee shall be paid as to each respective individual in excess of one named in or registered as to the license.

(b) One not a Delaware resident or qualified under section 1711 (a) (1) hereof shall not be so named in or registered as to such an agent or broker license and shall not exercise the license powers.

(c) The Commissioner shall not license a firm or corporation as agent or broker unless it is organized under the laws of this State, maintains its principal office in this State, and the license is within purposes stated in the partnership agreement or certificate of incorporation.

(d) All such licenses shall be subject to the applicable standards of section 508(b) (management) of this title.

(e) The licensee shall promptly notify the Commissioner of all changes among its members, directors and officers, and of other individuals designated in or registered as to the license.

§ 1713. Application for agent, broker, or solicitor license

(a) Written application for an agent, broker, or solicitor license shall be made to the Commissioner by the applicant, accompanied by the applicable fee shown in section 701 of this title. The application form shall require full answers to questions reasonably necessary to determine the applicant's identity, residence, business record, financial responsibility, insurance experience, purpose for which the license is to be used, and other facts as required by the Commissioner relative to the applicant's qualifications for license. At the Commissioner's discretion the application may also require imprint of the applicant's fingerprints.

(b) If for agent's license the application shall state the kinds of insurance proposed to be transacted, and be accompanied by written appointment by an authorized insurer of the applicant as agent for such kinds of insurance, subject to issuance of the license.

(c) If for solicitor's license, the application shall be accompanied by written appointment of the applicant as solicitor by a licensed resident agent or broker, subject to issuance of the license.

(d) If the applicant for agent or broker license is a firm or corporation, the application shall show, in addition, the names of all members, officers and directors, and shall designate each individual who is to exercise the license powers; and each such individual shall furnish information with respect to himself as though for an individual license.

(e) The application shall show whether the applicant was ever previously licensed anywhere as to insurance; whether any such license was ever refused, suspended, revoked or renewal or continuance refused; whether any insurer, general agent, agent or broker claims applicant to be indebted to it, and if so, the details thereof; whether applicant has ever had an agency contract cancelled, and the facts thereof; and, if applicant is a married woman, like information with respect to her husband.

(f) No applicant for license under this chapter shall willfully misrepresent or withhold any fact or information called for in the application form or in connection therewith.

§ 1714. Examination for license; application for examination

(a) After completion and filing of application with the Commissioner as required by section 1713 of this chapter the Commissioner shall subject each applicant for license as agent, broker, or solicitor, unless exempted therefrom under section 1715 of this chapter, to a written examination as to his competence to act as such agent, broker, or solicitor.

(b) If the applicant is a firm or corporation, the examination shall be so taken by each individual who is to be named in or registered as to the license, as provided in section 1712 of this chapter.

(c) Examination of an applicant for an agent's license shall cover any one or more of the following classifications of insurance, to be transacted under the license:

(1) Vehicle insurance;

(2) Life insurance and annuity contracts;

(3) Health insurance;

(4) Credit life and credit health insurance;

(5) Title insurance; and

(6) General lines, including casualty, property, and surety insurances.

(d) In the case of life insurers authorized to issue variable annuities in this State, the Commissioner shall require applicants appointed by such insurers to solicit such contracts in this State, in addition to completing examinations required for a life agent's license, to pass successfully a supplemental examination covering the subject of variable annuities.

(e) Examination of an applicant for a broker's license shall cover all kinds of insurance, except life insurance if such insurance is to be excluded from the license pursuant to section 1727 of this chapter.

(f) A solicitor's license examination shall cover all kinds of insurance, other than life or health insurance, as to which the appointing agent or broker is licensed.

(g) Written application for the examination shall be filed with the Commissioner by or on behalf of the applicant not less than 10 clays prior to the date fixed for the examination, as provided in section 1717 of this chapter, and shall be accompanied by the fee for such application as specified in section 701 (fee schedule) of this title.

§ 1715. Exemption from examination

Section 1714 of this chapter shall not apply and no such examination shall be required of:

(1) Any applicant for license covering the same kind or kinds of insurance as to which the applicant was licensed under a similar license in this State, other than a temporary license, within 3 years next preceding date of application, unless such previous license was revoked, suspended, or continuation thereof refused by the Commissioner, and if the Commissioner deems the applicant to be fully qualified for the license.

(2) An applicant for an agent's license who is currently licensed as a broker as to the same kind or kinds of insurance, or has been so licensed within 12 months next preceding date of application unless such previous license was revoked, suspended, or continuation thereof refused by the Commissioner.

(3) An applicant for a solicitor's license who has been licensed as an agent or broker in this State as to the same kinds of insurance within 12 months next preceding date of application, unless such previous license was revoked, suspended or continuation thereof refused by the Commissioner.

(4) In the Commissioner's discretion, any applicant who has been licensed under a similar license in another state within 12 months next preceding date of application, and upon filing with the Commissioner the certificate of the public official having supervision of insurance in such other state as to applicant's license and good conduct in such state.

(5) Persons representing public carriers who, in the course of such representation, solicit or sell insurance incidental to the transportation of persons or to the storage or transportation of property, and as to insurance so transacted.

(6) Applicants for license as title insurance agent, who are attorneys at law duly licensed to practice law in this State.

(7) An applicant for license as a general lines agent or as a broker, exclusive of life insurance, who has qualified for and received designation as a Chartered Property Casualty Underwriter.

(8) An applicant for license as a life and/or health agent, or as a broker limited to life and health insurances, who has qualified for and received designation as a Chartered Life Underwriter.

§ 1716. Scope of examination; reference material

(a) Each examination for license as agent, broker, solicitor, or adjuster shall reasonably test the applicant's competence and knowledge of the kinds of insurance, policies and transactions to be handled under the license applied for, of the duties and responsibilities of such a licensee, and of the pertinent laws of this State with which the applicant reasonably should be familiar.

(b) The Commissioner shall prepare and make available to applicants printed information as to the general scope of, and particular subjects to be covered by, the examination for a particular license, together with information as to published books and other reference sources which may be studied by the applicant in preparation for the examination.

§ 1717. Conduct of examinations

(c) All examinations of license applicants shall be conducted by the Commissioner or by an agency designated by him.

(d) The Commissioner shall cause examinations to be held not less frequently than monthly, at a place in this State reasonably accessible to applicants.

(e) All the kinds of insurance the applicant proposes to transact under the license applied for shall be included in the same examination.

(f) The Commissioner shall cause all examinations to be conducted, given, and graded in a fair and impartial manner and without unfair discrimination as between individuals examined.

(g) Applicants must earn a grade of not less than 70, based upon an examination evaluation scale running from zero to 100, in order to pass the examination.

(h) The Commissioner may require a reasonable waiting period not exceeding 6 months before re-examination of an applicant who has previously failed twice to pass an examination covering the same kind or kinds of insurance.

(i) Within 30 days after the examination the Commissioner shall inform the applicant as to whether or not he had passed.

§ 1718. Issuance, refusal of license; refundability of fees

(a) If the Commissioner finds that the application is complete, that the applicant has passed any required examination and is otherwise qualified for the license applied for, he shall promptly issue the license; otherwise, the Commissioner shall refuse to issue the license and promptly notify the applicant and the appointing insurer (if application is for an agent's license) or agent or broker (if application is for a solicitor's license) of such refusal, stating the grounds thereof.

(b) If the license is refused, the Commissioner shall promptly refund to the appointing insurer, in case of applications for agent's license, the appointment fee tendered with the license application. All other fees for application for agent, broker, solicitor, or adjuster license shall be deemed earned when paid and shall not be refundable.

§ 1719. License contents; number of licenses required

(j) The license shall state the name and address of the licensee, date of issue, general conditions relative to expiration or termination, the kind or kinds of insurance covered by the license, if applicable, and such other conditions as the Commissioner deems proper for inclusion in the license certificate. No license shall be issued in a trade name unless the name has been duly registered or filed as required by law.

(k) The license of an agent shall not specify the name of any particular insurer by which the licensee is appointed as agent, except as provided in (d), below, as to limited licenses, and the licensee may, subject to section 1720 of this chapter as to life agents, represent as such agent under the one license as many insurers as may appoint him therefor in accordance with this chapter.

(l) The license of a solicitor shall also show the name and address of the employer agent or broker.

(m) Each limited license issued pursuant to section 1721 of this chapter shall show also the name of the insurer so represented, and a separate license shall be required as to each such insurer.

§ 1720. Multiple licensing, life or health insurance agents

(n) A life or health insurance agent may concurrently be licensed as to as many life insurers as duly file appointments of the licensee with the Commissioner and pay the appointment fee, except as provided hereinbelow.

(o) Upon the filing of each appointment of the licensee or proposed licensee by a life or health insurer the Commissioner shall promptly give written notice of the pending appointment to all other life or health insurers, as the case may be, as to whom the licensee has been licensed in this State within the 24 months next preceding, and shall allow such other insurers a reasonable period as specified in the notice within which to respond. If the Commissioner finds that the applicant or licensee has a debit balance with any such other insurer which is not adequately secured or otherwise provided for to the obligee insurer's satisfaction, and that such indebtedness is either acknowledged by the applicant or licensee or the insurer has secured a judgment therefor, the Commissioner shall not effectuate the new appointment until after such debit balance has been adequately secured, or otherwise so provided for.

§ 1721. Limited licenses

(a) The Commissioner may issue to an applicant qualified therefor under this chapter a limited agent's license as follows:

(1) Covering motor vehicle insurance only; or

(2) To persons representing public carriers, as provided in section 1715(5) of this chapter; or

(3) Covering only credit life and credit health insurance.

(b) No person so licensed shall concurrently hold license as an agent, broker or solicitor as to any other or additional kind of insurance.

(c) The fee for limited licenses is as specified in section 701 (fee schedule) of this title.

§ 1722. Continuation; expiration of licenses

(a) Each broker, solicitor, adjuster, nonresident broker and surplus line broker license issued under this title shall continue in force until expired, suspended, revoked or otherwise terminated, but subject to payment to the Commissioner at his office in Dover annually on or before March 1st of the applicable continuation fee as stated in section 701 (fee schedule) of this title, accompanied by written request for such continuation. Request for continuation shall be made as follows:

(1) As to broker, adjuster, nonresident broker and surplus line broker licenses, request made and signed by the licensee.

(2) As to solicitor licenses, request made and signed by the employer agent or broker.

(3) As to limited licenses issued under section 1721 of this chapter, request made and signed by the insurer so represented.

(b) Any license referred to in subsection (a) above not so continued on or before March 1st shall be deemed to have expired at midnight on such March 1st; except that the Commissioner may effectuate a request for continuation received by him within 30 days after such March 1st if accompanied by an annual continuation fee of 150% of the fee otherwise required.

() An agent license shall continue in force while there is in effect as to the licensee, as shown by the Commissioner's records, an appointment or appointments as agent of authorized insurers covering collectively all the kinds of insurance included in the agent's license. Upon termination of all the licensee's agency appointments as to a particular kind of insurance and failure to replace such appointment within 60 days thereafter, the license shall thereupon expire and terminate as to such kind of insurance, and the licensee shall promptly deliver his license to the Commissioner for reissuance, without fee or charge, as to the kinds of insurance, if any, covered by the licensee's remaining agency appointments. Upon termination of all the licensee's agency appointments the license shall forthwith terminate.

(a) As a condition to or in connection with the continuation of any agent, broker, or solicitor license the Commissioner may require the licensee to file with him information as for application for the license, or as to the use made of the license during the next preceding calendar year.

§ 1723. Appointment of agents; continuation

(a) Each insurer appointing an agent hi this State shall file with the Commissioner the appointment in writing, specifying the kinds of insurance to be transacted by the agent for the insurer, and pay the appointment fee, or license fee in the case of limited licenses, as specified in section 701 (fee schedule) of this title.

(b) Subject to annual continuation by the insurer as provided in subsection (c) below, each appointment shall remain in effect until the agent's license is revoked or otherwise terminated, unless the insurer earlier terminates the appointment as provided in section 1724 of this chapter.

(c) Annually on or before March 1st each insurer shall file with the Commissioner an alphabetical list of the names and addresses of all its agents in this State whose appointments, or licenses in the case of limited licenses, are to remain in effect as to the kinds of insurance for which the respective agents are currently so appointed, accompanied by payment of the annual continuation of appointment fee, or license fee in the case of limited licenses, as specified in section 701 (fee schedule) of this chapter. At the same time, the insurer shall also file with the Commissioner an alphabetical list of the names and addresses of all its agents whose appointments in this State are not to remain in effect, or whose appointments as to certain kinds of insurance are not to remain in effect and as designated in such list. Any appointment or license not so continued and not otherwise expressly terminated shall be deemed to have expired at midnight on March 1st.

§ 1724. Termination of appointment--agents, solicitors

(c) Subject to the agent's contract obligations and rights, if any, an insurer or agent may terminate an agency appointment at any time. If termination is by the insurer, the insurer shall promptly give written notice of termination and the effective date thereof to the Commissioner, and to the agent where reasonably possible. The list of appointments not being continued referred to in section 1723 (c) of this chapter shall constitute such notice to the Commissioner as to the terminations so listed. The Commissioner may require of the insurer reasonable proof that the insurer has given such notice to the agent where reasonably possible.

() Accompanying the notice of termination given the Commissioner the insurer shall file with him a statement of the cause, if any, for termination.

(a) An agent or broker terminating the employment as solicitor of a licensed solicitor shall give like notice of such termination to the Commissioner, and like information as to the reasons for such termination.

§ 1725. Temporary license as agent or broker

(a) The Commissioner, in his discretion, may issue a temporary license as agent or broker, as the case may be, to or with respect to an individual otherwise qualified therefor but without requiring such individual to take an examination, in the following cases:

(1) To the surviving spouse or next of kin, or to the administrator or executor or employee thereof, of a licensed agent or broker becoming deceased, or to the spouse, next of kin, employee or legal guardian or employee thereof, of a licensed agent or broker disabled because of sickness, insanity or injury, if in either case the Commissioner deems that such temporary license is necessary for the winding up or continuation of the agent's or broker's business;

(2) To a member or employee of a firm, or officer or employee or a corporation, licensed as agent or broker, upon the death or disablement of an individual designated in the license to exercise the powers thereof; or

(3) To the designee of a licensed agent or broker entering upon active service in the armed forces of the United States of America; or

(4) To an applicant for license as a life insurance agent, while taking a course of study, instruction and field training under the supervision of the insurer and acceptable to the Commissioner. The applicant shall apply for a like permanent license and take the examination therefor within 90 days after date of issuance of the temporary license.

(5) To an individual appointed by a life insurer as an agent to collect premiums on an established debit of the insurer.

(b) A temporary license issued under subdivisions (1), (2) or (3) above, shall be for a term of not over 90 days; except that upon receipt of the license fee specified in section 701 (fee schedule) of this title, the Commissioner may renew the license for an additional term or terms of 90 days each, not exceeding in the aggregate 15 months for the entire temporary license period. A temporary license issued under subdivision (4) above, shall continue in force until the applicant has been informed of the result of the examination; or, if the examination was not taken within the 90 days specified, then the license shall expire upon expiration of such 90 day period. A license issued under subdivision (5) above, shall be for 90 days, without right of extension or renewal.

(c) The fee paid for a temporary license may be applied upon the fee required for any permanent similar license issued to the licensee upon or prior to expiration of the temporary license and covering the same kinds of insurance.

§1726. Temporary licenses--Rights, limitations

(a) The temporary license may cover the same kinds of insurance for which the agent or broker thereby being replaced was licensed.

(b) The temporary licensee may represent under the license all insurers last represented by the replaced agent, and without the necessity of new appointments of the licensee; but the licensee shall not be appointed as to any additional insurer or additional kind of insurance under such a temporary license. This provision shall not be deemed to prohibit termination of its appointment by any insurer.

(c) A temporary licensee shall have the same license powers and duties as under a permanent license.

§ 1727. Broker's license--Scope

A license as broker shall cover all kinds of insurance, and the Commissioner shall not issue a broker's license limited to particular kinds of insurance; except, that a broker's license need not include life insurance and a broker may be separately licensed as to life insurance as either a broker or agent.

§ 1728. Broker's bond

(a) Every applicant for a broker's license shall file with the application and shall thereafter maintain in force while so licensed, a bond in favor of the people of the State of Delaware executed by an authorized surety insurer. The bond may be continuous in form and total aggregate liability on the bond shall be limited to payment of not less than $2,500. The bond shall be conditioned upon full accounting and due payment to the person entitled thereto, of funds coming into the broker's possession through insurance transactions under the license.

(b) The bond shall remain in force until released by the Commissioner, or until cancelled by the surety. Without prejudice to any liability previously incurred thereunder, the surety may cancel the bond upon 30 days advance written notice to both the broker and the Commissioner.

§ 1729. Broker's authority; commissions

(a) A broker as such is not an agent or other representative of an insurer and does not have power by his own acts to obligate the insurer upon any risk or with reference to any insurance transaction.

(b) An insurer or agent shall have the right to pay to a broker licensed under this chapter the customary commissions upon insurance placed through the broker.

§ 1730. Broker, agent license combinations

A licensed agent may be licensed also as a broker and be a broker as to insurers for which he is not then licensed as agent. The sole relationship between a broker and an insurer as to which he is then licensed as an agent, as to transactions arising during the existence of such agency appointment, shall be that of insurer and agent, and not that of insurer and broker.

§ 1731. Solicitors--Special requirements

(c) A solicitor shall not concurrently be employed or licensed as to more than one agent or one broker.

(d) The solicitor's license shall cover all the kinds of insurance for which the employer agent or broker is licensed.

(e) A solicitor shall not concurrently be licensed as agent or broker.

(f) A solicitor shall not have authority to bind risks or to countersign policies.

(g) The transactions of a solicitor under his license shall be in the name of the employer agent or broker, and the agent or broker shall be responsible for the acts or omissions of the solicitor within the scope of his employment.

(f) The solicitor shall maintain his office with that of the employer agent or broker, and records of his transactions under the license shall be maintained as a part of the records of the agent or broker.

(g) The solicitor's license shall remain in the custody of the employer agent or broker. Upon termination of such employment as solicitor, the agent or broker shall give written notice thereof to the Commissioner, as provided in section 1724 of this chapter, and deliver the license to the Commissioner for cancellation.

§ 1732. Insurance vending machines

(a) A licensed resident agency may solicit and issue personal travel accident insurance policies by means of mechanical vending machines supervised by the agency and placed at airports and similar places of convenience to the traveling public, if the Commissioner finds:

(1) That the policy to be so sold provides reasonable coverage and benefits, is reasonably suited for sale and issuance through vending machines, and that use of such a machine in a proposed location would be of material convenience to the public;

(2) That the type of vending machine proposed to be used is reasonably suitable and practical for the purpose;

(3) That reasonable means are provided for informing prospective purchasers of policy coverage's and restrictions; and

(4) That reasonable means are provided for refund of money inserted in defective machines and for which no insurance, or a less amount than that paid for, is actually received.

(b) As to each such machine to be used, the Commissioner shall issue to the agent a special vending machine license. The license shall specify the name and address of the insurer and agent, the name of the policy to be sold, the serial number of the machine, and the place where the machine is to be in operation. The license shall be subject to annual continuation, to expiration, suspension, or revocation coincidentally with that of the agent.

The Commissioner shall also revoke the license as to any machine as to which he finds that the license qualifications no longer exist. The license fee shall be as stated in section 701 (fee schedule) of this title for each license year or part thereof for each respective vending machine. Proof of the existence of a subsisting license shall be displayed on or about each such machine in use in such manner as the Commissioner reasonably requires.

§ 1733. Place of business; display of licenses; records

(a) Every resident general lines agent and resident broker shall have and maintain in this State a place of business accessible to the public and wherein the licensee principally conducts transactions under his license. The address of such place shall appear upon the license, and the licensee shall promptly notify the Commissioner in writing of any change thereof. Nothing in this section shall prohibit maintenance of such a place in the licensee's residence in this State.

() The licenses of the licensee, and those of solicitors employed by him, shall be conspicuously displayed in such place of business in a part thereof customarily open to the public.

(a) The agent or broker shall keep at his place of business complete records of transactions under his license and those of his solicitors. Such record shall show, as to each insurance policy or contract placed or countersigned by or through the licensee, not less than the names of the insurer and insured, the number and expiration date of, and premium payable as to, the policy or contract, and such other information as the Commissioner may reasonably require. The record shall be kept available for inspection by the Commissioner for a period of at least 3 years after completion of the respective such transactions.

(b) This section shall not apply as to life and health insurances.

§ 1734. Reporting and accounting for premiums; fiduciary fund

(a) All premiums and return premiums received by an agent, broker, or solicitor are trust funds so received by the licensee in a fiduciary capacity, and the licensee shall in the applicable regular course of business account for and pay the same to the insured, insurer, or person entitled thereto.

(b) Every general lines agent and every broker shall establish and maintain in a commercial bank in this State one or more trust accounts, separate from accounts holding his personal, firm, or corporate funds, and shall forthwith deposit and shall retain therein pending due transmittal to such insured or insurer, all such premiums and return premiums. The licensee may deposit and commingle in the same such trust account all such funds belonging to others so long as the amount so held for each respective other person is reasonably ascertainable from the records of the licensee.

(c) Any agent, broker, or solicitor who, not being lawfully entitled thereto, diverts or appropriates such funds or any portion thereof to his own use, shall upon conviction be guilty of embezzlement and shall be punished as provided by law.

§ 1735. Life agent deemed agent of insurer

In any controversy between the insured or his beneficiary and the insurer issuing a policy upon such application, whoever solicits an application for insurance upon the life of another shall be deemed the agent of the insurer and not of the insured.

§ 1736. Excess or rejected risks

A life or health agent may place with another insurer as to which he is not licensed as agent, a particular risk or portion thereof which has been rejected by the insurers as to which the agent is licensed or is known to the agent to be unacceptable to such insurers, and without then being licensed as to such other insurer.

§ 1737. Commissions--Payment, acceptance

(a) No insurer shall pay or allow to any person, either directly or indirectly, any commission or compensation for soliciting, negotiating or effecting a contract of insurance or of annuity within this State unless at the time of such solicitation, negotiation or effectuation such person was duly licensed by this State as an agent or broker as to the kind or kinds of insurance involved, and, if an agent, was duly appointed as an agent of the insurer as provided in section 1723 of this chapter. This provision shall not apply as to business placed pursuant to section 1736 of this chapter or pursuant to any assigned risk plan.

(b) No person other than one entitled to the same as provided in subsection (a) above, shall accept any such commission or compensation.

§ 1738. Sharing commissions

No agent, broker or solicitor shall directly or indirectly share his commission or other compensation for a transaction under his license with any person not also licensed as agent, broker or solicitor under this chapter as to the kinds of insurance involved in the transaction; and no such person shall accept any such share. This provision shall not affect personal use of such commissions or compensation, or payment of the regular salaries due employees of an agent or broker, or distribution in regular course of business of compensation and profits among members or stockholders of licensee firms or corporations.

§ 1739. Nonresident agents, brokers

(a) The Commissioner may license as agent or broker a resident of another state or province of Canada otherwise qualified therefor, if a similar privilege is extended by such other state or province to residents of Delaware. This section does not apply to nonresidents qualified under section 1711 (a) (1) hereof.

(b) The Commissioner may waive the taking of a written examination by the nonresident applicant for such a license, if a similar privilege is extended by the other state or province to Delaware residents and if he finds that the applicant has already met qualification requirements and standards in the applicant's state or province substantially as high as those applicable under this chapter to Delaware residents applying for a similar license.

(c) Such a nonresident licensee shall have the same rights, duties and obligations and pay the same fees, as apply under this title to a Delaware resident holding similar license; except that the nonresident licensee may maintain the separate trust account referred to in section 1734 (b) of this chapter in a commercial bank, whether located within or outside this State, and under reasonable terms all as approved by the Commissioner and designed to effectuate the purposes of section 1734 of this chapter.

§ 1740. Nonresident agents, brokers--Service of process

(a) Every nonresident licensed in this State as an agent or broker under section 1739 of this chapter shall appoint the Commissioner in writing as his attorney upon whom may be served all legal process issued in connection with any action g proceeding brought or pending in this State against or involving the licensee and relating to transactions under his Delaware license. The appointment shall be irrevocable and shall continue in force for so long as any such action or proceeding could arise or exist. The Commissioner shall prescribe and furnish the form for such appointment.

(b) Duplicate copies of process shall be served upon the Commissioner or other person in apparent charge of his office during his absence, accompanied by payment of $2.50 as a process fee. Upon receiving such service the Commissioner shall promptly forward a copy thereof by registered or certified mail (with return receipt requested) to the nonresident licensee at his business address last of record with the Commissioner.

(c) Process served and copy thereof forwarded as in this section provided shall for all purposes constitute personal service thereof upon the licensee.

§ 1741. Adjuster's license; qualifications; catastrophe adjustments

(a) Application for adjuster's license shall be made in writing by the applicant to the Commissioner, upon a form as prescribed and furnished by the Commissioner, accompanied by the fee specified in section 701 (fee schedule) of this title.

() Subject to section 1742 hereof, an individual to be licensed, or named as to a firm or corporation license, as an adjuster shall be qualified as follows:

(1) Must be age 21 years or over; or of age 18 years or over if an apprentice adjuster under section 1742 hereof;

(0) Must reside, or be both principally employed and office, in this State; or be resident of another state which grants adjuster licenses to residents of this State.

(1) Must be a full-time salaried employee of a licensed adjuster, or insurer or managing general agent, or be a graduate of a recognized law school, or must have had experience or special education or training as to the handling of loss claims under insurance contracts of scope and duration reasonably sufficient to make the applicant competent to fulfill the responsibilities of an adjuster.

(4) Must pass any written examination which the Commissioner, in his discretion, may reasonably require as to the applicant's knowledge of insurance claim adjustment matters; but no examination shall be required of an adjuster actively engaged as such, with an office in this State, on the effective date of this Act.

(5) Must be trustworthy, financially responsible, and of good reputation.

(6) Must have and maintain in this State an office accessible to the public, and keep therein the usual and customary records pertaining to transactions under the license. This provision shall not be deemed to prohibit maintenance of the office in the office of the employer or in the home of the licensee in this State.

(c) Except, that no such adjuster's license is required as to any adjuster sent into this State on behalf of an insurer for the investigation or adjustment of a particular unusual or extraordinary loss, or of a series of losses resulting from a catastrophe common to all such losses.

§ 1742. Apprentice adjusters

(a) The Commissioner may, in his discretion, issue a temporary license as adjuster to applicants qualified for license as provided in section 1741(b) of this chapter, except as to experience, education or training, if the applicant is to be the full-time employee of a licensed adjuster, or of an adjustment firm or corporation, or of an insurer or general agent, and is to engage in adjuster transactions under the direct supervision and instruction of a licensed adjuster.

(b) The license shall not extend beyond expiration of 12 months, or (subject to annual continuation) until the licensee attains age 21 years, whichever last occurs, that a basis for the license no longer exists.

§ 1743. Suspension; revocation; refusal of license

(a) The Commissioner may suspend for not more than 12 months, or may revoke or refuse to continue any license issued under this chapter or any surplus line broker license if, after notice to the licensee and to the insurer represented (as to an agent) or to the employer (as to a solicitor, or employee adjuster), and hearing, he finds that as to the licensee any one or more of the following causes exist:

(1) For any cause for which issuance of the license could have been refused had it then existed and been known to the Commissioner.

(2) For violation of or noncompliance with any applicable provision of this title, or for willful violation of any lawful rules, regulation, or order of the Commissioner.

(3) For obtaining or attempting to obtain any such license through misrepresentation or fraud.

(4) For misappropriation or conversion to his own use, or illegal withholding, of moneys belonging to policyholders, or insurers, or beneficiaries, or others and received in conduct of business under the license.

(5) For material misrepresentation of the terms of any actual or proposed insurance contract.

(6) Conviction, by final judgment, of a felony involving moral turpitude.

(7) If in the conduct of his affairs under the license the licensee has used fraudulent, coercive, or dishonest practices, or has shown himself to be incompetent, untrustworthy, financially irresponsible, or a source of injury and loss to the public.

(b) The license of a firm or corporation may be suspended, revoked or refused also for any of such causes as relate to any individual designated in or registered as to the license to exercise its powers.

(c) In lieu of such suspension, revocation, or refusal to continue, the Commissioner may levy an administrative fine upon the licensee of not less than $25 and not more than $500. The order levying the fine shall specify the date before which the fine shall be paid. Upon failure to pay the fine when due, the Commissioner shall revoke the licenses of the licensee and the fine may be recovered in a civil action brought in behalf of the Commissioner by the Attorney General. Fines so collected shall be paid by the Commissioner forthwith to the State Treasurer for the account of the general fund.

§ 1744. Procedure following suspension, revocation

(a) Upon suspension or revocation of any such license the Commissioner shall forthwith notify the licensee thereof either in person or by mail addressed to the licensee at his address last of record with the Commissioner. Notice by mail shall be deemed effectuated when so mailed. The Commissioner shall give like notice to the insurers represented by the agent, in the case of an agent's license, and to the employer in the case of a solicitor's or employee adjuster's license.

(b) Suspension or revocation of the license of an agent or broker shall automatically suspend or terminate the appointments of all solicitors employed by him.

(c) The Commissioner shall not again issue license under this title to or as to any person whose license has been revoked, until after expiration of one year and thereafter not until such person again qualifies therefor in accordance with the applicable provisions of this title. A person whose license has been revoked twice shall not again be eligible for any license under this title.

(d) If the license of a firm or corporation is so suspended or revoked, no member of such firm, or officer, or director of such corporation, shall be licensed or be designated in or as to any license to exercise the powers thereof during the period of such suspension or revocation, unless the Commissioner determines upon substantial evidence that such member, officer, or director was not personally at fault and did not acquiesce in the matter on account of which the license was suspended or revoked.

1745. Return of license to Commissioner

(a) All licenses issued under this title, although issued and delivered to the licensee or his employer, shall at all times be the property of the State of Delaware. Upon any expiration, termination, suspension, or revocation of the license, the licensee or other person having possession or custody of the license shall forthwith deliver it to the Commissioner either by personal delivery or by mail.

(b) As to any license lost, stolen, or destroyed while in the possession of any such licensee or person, the Commissioner may accept in lieu of return of the license, the affidavit of the licensee or other person responsible for or involved in the safekeeping of such license, concerning the facts of such loss, theft, or destruction.

§ 1746. Conservation of agent or broker business

(e) If the Commissioner finds that the business of any licensed general lines agent or broker in this State has become financially impaired or insolvent, or has been abandoned by the licensee, or has been conducted in such a manner as to require or justify revocation of the licenses of the licensee, that such licenses have been revoked, and that conservation and administration of the insurance business of the licensee would be in the public interest, he shall file in the Court of Chancery in the county in which the agent or broker business is located a petition for the appointment of the Commissioner as conservator or receiver of such agent or broker business.

(f) The petition shall be verified by the Commissioner, and shall set forth facts and circumstances from which the existence of one or more of the grounds required under subsection (a), above, may be determined; and may request that the licensee be required to show cause on a date certain why the prayer of the petition should not be granted.

(g) A copy of the petition, and of the order to show cause, if issued, shall be served upon the licensee in the same manner as provided by law of this State for service of other legal process.

(h) Upon the filing of the petition and pending the hearing upon the order to show cause, the Court, without notice to other parties and for good cause shown, may appoint the Commissioner temporary conservator or temporary receiver of the agent or broker business.

(i) As conservator or receiver the Commissioner shall have the power and duty to conduct and administer the affairs of the agent or broker business so that the business shall expeditiously be wound up and that to the extent reasonably possible, persons theretofore insuring and insurers theretofore doing business through such agent or broker shall receive service and an accounting for funds to which entitled. Subject to orders of Court, the Commissioner as conservator or receiver shall have power to collect funds owing to the agent or broker on account of insurance business transacted by the licensee, and to account for and make payment thereof to persons entitled thereto.

(f) The Commissioner may delegate the actual conduct and administration of the business of the agent or broker to a deputy or other regular employee of the department, and no charge for services so rendered shall be made against the funds or assets of the agent or broker business.

(g) In respects other than as expressly hereinabove provided, such a conservatorship or receivership shall be subject to the applicable laws of this State applying to receivers.

Chapter 19. Surplus Lines

§ 1901. Short title

This chapter constitutes and may be cited as the "surplus lines" law.

§ 1902. Exemptions

This surplus line law shall not apply to life insurance, health insurance, or reinsurance; or to the following insurances when so placed by licensed general lines agents or brokers or surplus line brokers of this State:

(1) Wet marine and transportation insurance.

(2) Insurance on subjects located, resident, or to be performed wholly outside of this State, or on vehicles or aircraft owned and principally garaged outside this State.

(3) Insurance on operations of railroads engaged in transportation in interstate commerce and their property used in such operations.

(4) Insurance of aircraft owned or operated by manufacturers of aircraft, or of aircraft operated in commercial interstate flight, or cargo of such aircraft, or against liability, other than workmen's compensation and employer's liability, arising out of the ownership, maintenance or use of such aircraft.

§ 1903. Definitions--"Broker," "export"

(a) "Broker" as used in this chapter and unless context otherwise requires, means a surplus line broker duly licensed as such under this chapter.

(b) To "export" means to place in an unauthorized insurer under this surplus line law insurance covering a subject of insurance resident, located, or to be performed in Delaware.

§ 1904. Conditions for export

If certain insurance coverage's cannot be procured from authorized insurers, such coverage's, hereinafter designated "surplus lines," may be procured from unauthorized insurers, subject to the following conditions:

(1) The insurance must be procured through a licensed surplus line broker.

(2) The full amount of insurance required must not be procurable, after diligent effort has been made to do so, from among the insurers authorized to transact and actually writing that kind and class of insurance in this State, and the amount of insurance exported shall be only the excess over or other than the amount procurable from authorized insurers.

(3) The insurance must not be so exported for the purpose of securing advantages either as to:

(i) A lower premium rate than would be accepted by an authorized insurer; or

(ii) Terms of the insurance contract. § 1905. Broker's affidavit

At the time of effecting any such surplus line insurance the broker shall execute an affidavit, in form prescribed or accepted by the Commissioner, setting forth facts from which it can be determined whether such insurance was eligible for export under section 1904 of this chapter. The broker shall file this affidavit with the Commissioner within 30 days after the insurance was so effected.

§ 1906. Open lines for export

(a) The Commissioner may by order declare eligible for export generally and without compliance with the provisions of sections 1904(2), 1904(3), and 1905 of this chapter, any class or classes of insurance coverage or risk for which he finds, after a hearing of which notice was given to each insurer authorized to transact such class or classes in this State, that there is not a reasonable or adequate market among authorized insurers either as to acceptance of the risk, contract terms, or premium or premium rate. Any such order shall continue in effect during the existence of the conditions upon which predicated, but subject to earlier termination by the Commissioner.

(b) The broker shall file with or as directed by the Commissioner a memorandum as to each such coverage placed by him in an unauthorized insurer, in such form and context as the Commissioner may reasonably require for the identification of the coverage and determination of the tax payable to the State relative thereto.

(c) The broker, or a licensed Delaware agent of the authorized insurer or a general lines broker, may also place with authorized insurers any insurance coverage made eligible for export generally under subsection (a) above, and without regard to rate or form filings which may otherwise be applicable as to the authorized insurer. As to coverage's so placed in an authorized insurer the premium tax thereon shall be reported and paid by the insurer as required generally under Chapter 7 of this title.

§ 1907. Eligible surplus line insurers

(a) A broker shall not knowingly place surplus line insurance with an insurer that is unsound financially, or that is ineligible under this section.

(b) The Commissioner shall from time to time publish a list of all surplus lines insurers deemed by him to be eligible currently, and shall mail a copy of such list to each broker at his office last of record with the Commissioner. This subsection shall not be deemed to require the Commissioner to determine the actual financial condition or claims practices of any unauthorized insurer; and the status of eligibility, if granted by the Commissioner, shall indicate only that the insurer appears to be sound financially and to have satisfactory claims practices, and that the Commissioner has no credible evidence to the contrary. While any such list is in effect, the broker shall restrict to the insurers so listed all surplus line business placed by him.

§ 1908. Evidence of the insurance; changes; penalty

(a) Upon placing a surplus line coverage, the broker shall promptly issue and deliver to the insured evidence of the insurance consisting either of the policy as issued by the insurer, or, if such policy is not then available, the surplus line broker's certificate. Such a certificate shall be executed by the broker and shall show the description and location of the subject of the insurance, coverage, conditions and term of the insurance, the premium and rate charged and taxes collected from the insured, and the name and address of the insured and insurer. If the direct risk is assumed by more than one insurer, the certificate shall state the name and address and proportion of the entire direct risk assumed by each such insurer.

(b) No broker shall issue any such certificate or any cover note, or purport to insure or represent that insurance will be or has been granted by any unauthorized insurer, unless he has prior written authority from the insurer from the insurance, or has received information from the insurer in the regular course of business that such insurance has been granted, or an insurance policy providing the insurance actually has been issued by the insurer and delivered to the insured.

(c) If after the issuance and delivery of any such certificate there is any change as to the identity of the insurers, or the proportion of the direct risk assumed by an insurer as stated in the broker's original certificate, or in any other material respect as to the insurance evidenced by the certificate, the broker shall promptly issue and deliver to the insured a substitute certificate accurately showing the current status of the coverage and the insurers responsible thereunder.

(d) If a policy issued by the insurer is not available upon placement of the insurance and the broker has issued and delivered his certificate as hereinabove provided, upon request therefor by the insured the broker shall as soon as reasonably possible procure from the insurer its policy evidencing such insurance and deliver such policy to the insured in replacement of the broker's certificate theretofore issued.

(e) Any surplus line broker who knowingly or negligently issues a false certificate of insurance or who fails promptly to notify the insured of any material change with respect to such insurance by delivery to the insured of a substitute certificate as provided in subsection (e), shall upon conviction, be subject to the penalty provided by section 113 of this title or to any greater applicable penalty otherwise provided by law.

§ 1909. Endorsement of contract

Every insurance contract procured and delivered as a surplus line coverage pursuant to this law shall have stamped upon it, initialed by or bearing the name of the surplus line broker who procured it, the following:

"This insurance contract is issued pursuant to the Delaware Insurance Laws by an insurer neither licensed by nor under the jurisdiction of the Delaware Insurance Department."

§ 1910. Surplus line insurance valid

Insurance contracts procured as surplus line coverage from unauthorized insurers in accordance with this law shall be fully valid and enforceable as to all parties, and shall be given recognition in all matters and respects to the same effect as like contracts issued by authorized insurers.

§ 1911. Liability of insurer

(a) As to a surplus line risk which has been assumed by an unauthorized insurer pursuant to this surplus line insurance law, and if the premium thereon has been received by the surplus line broker who placed such insurance, in all questions thereafter arising under the coverage as between the insurer and the insured the insurer shall be deemed to have received the premium due to it for such coverage; and the insurer shall be liable to the insured as to losses covered by such insurance, and for unearned premiums which may become payable to the insured upon cancellation of such insurance, whether or not in fact the broker is indebted to the insurer with respect to such insurance or for any other cause.

(b) Each unauthorized insurer assuming a surplus line risk under this surplus lines insurance law shall be deemed thereby to have subjected itself to the terms of this section.

§ 1912. Surplus line brokers--Licensing

(e) Any person while licensed in this State as a resident general lines agent or as a general lines broker, who is deemed by the Commissioner to be competent and trustworthy with respect to the handling of surplus lines, and while maintaining an office at a designated location in this State, may be licensed as a surplus line broker.

(f) Application for the license shall be made to the Commissioner on forms as designated and furnished by the Commissioner.

(g) The license fee shall be as specified in section 701 (fee schedule) of this title.

(h) The license and licensee shall be subject to the applicable provisions of chapter 17 (agents, brokers, solicitors and adjusters) of this title.

§ 1913. Suspension; revocation of broker's license

(a) Subject to section 1743 (suspension, revocation, refusal of license) of this title, the Commissioner may also suspend or revoke any surplus line broker's license:

(1) If the broker fails to file the annual statement or to remit the tax as required by sections 1916 and 1917 of this chapter; or

(2) If the broker fails to maintain an office in this State, or to keep records, or to allow the Commissioner to examine his records as required by this taw, or if he removes his records from the State; or

(3) If the broker places a surplus line coverage in an insurer other than as authorized under section 1907 of this chapter.

(b) The procedures provided by chapter 17 of this title for suspension or revocation of licenses shall apply to suspension or revocation of a surplus line broker's license.

(c) Upon suspending or revoking the broker's surplus line license the Commissioner shall also suspend or revoke all other licenses of or as to the same individual under this title.

§ 1914. Broker may compensate agents and brokers

A licensed surplus line broker may accept and place surplus line business for any insurance agent or broker licensed in this State for the kind of insurance involved, and may compensate the agent or broker therefor.

§ 1915. Records of broker

(a) Each broker shall keep in his office in this State a full and true record of each surplus line coverage procured by him, including a copy of each daily report, if any, a copy of each certificate of insurance issued by him, and such of the following items as may be applicable.

(4) Amount of the insurance;

(5) Gross premium charged;

(6) Return premium paid, if any;

(7) Rate of premium charged upon the several items of property;

(8) Effective date of the contract, and the terms thereof;

(9) Name and address of each insurer on the direct risk and the proportion of the entire risk assumed by such insurer if less than the entire risk;

(10) Name and address of the insured;

(11) Brief general description of the property or risk insured and where located or to be performed; and

(12) Other information as may be required by the Commissioner.

(b) The record shall not be removed from this State and shall be open to examination by the Commissioner at all times within 5 years after issuance of the coverage to which it relates.

§ 1916. Annual statement of broker

(a) Each broker shall on or before the first day of March of each year file with the Commissioner a statement verified by the broker of all:

Gross surplus line insurance transacted by him during the preceding calendar year.

(1) (b) The statement shall be on forms as prescribed and furnished by the Commissioner and shall show amount of each kind of insurance transacted;

(2) Aggregate gross premiums charged;

(3) Aggregate of returned premiums paid to insured's;

(4) Aggregate of net premiums; and

(5) Additional information as required by the Commissioner.

§ 1917. Tax on surplus lines

(a) On or before the first day of March of each year each broker shall remit to the State Treasurer through the Commissioner a tax on surplus line insurance subject to tax transacted by him with unauthorized insurers during the next preceding calendar year as shown by his annual statement filed with the Commissioner. The tax shall be computed on premiums received, exclusive of sums collected to cover federal and state taxes and examination fees, if any, and at the same rate as applies to premiums for like kinds of insurance written in authorized insurers under this title.

(b) If a surplus line policy covers risks or exposures only partially in this State the tax so payable shall be computed upon the proportion of the premium which is properly allocable to the risks or exposures located in this State.

§ 1918. Failure to file statement or remit tax--Penalty

If any broker fails to file his annual statement, or fails to remit the tax provided by section 1917 of this chapter, prior to the first day of April after the tax is due, and if in the Commissioner's opinion such failure is without just cause, he shall be liable for a fine of $25.00 for each day of delinquency commencing with the first day of April. The tax may be collected by distraint, or the tax and fine may be recovered by an action instituted by the Commissioner in any court of competent jurisdiction. Any fine collected by the Commissioner shall be paid to the State Treasurer and credited to the general fund.

§ 1919. Legal process against surplus line insurer

(a) An unauthorized insurer shall be sued, upon any cause of action arising in the State under any contract issued by it as a surplus line contract pursuant to this law, in the Superior Court of the State of Delaware.

(b) Service of legal process against the insurer may be made in any such action by service of two copies thereof upon the Commissioner, and payment of the service of process fee specified in section 701 (fee schedule) of this title. The Commissioner shall forthwith mail a copy of the process served to the person designated by the insurer in the policy for the purpose, by prepaid registered or certified mail with return receipt requested. If no such person is so designated in the policy, the Commissioner shall in like manner mail a copy of the process to the broker through whom such insurance was procured, or to the insurer at its principal place of business, addressed to the address of the broker or insurer, as the case may be, last of record with the Commissioner. Upon service of process upon the Commissioner and mailing of the same in accordance with this provision, the court shall be deemed to have jurisdiction in personam of the insurer.

() An unauthorized insurer issuing such policy shall be deemed thereby to have authorized service of process against it in the manner and to the effect as provided in this section. Any such policy shall contain a provision stating the substance of this section, and designating the person to whom the Commissioner shall mail process as provided in subsection (b) of this section.

CHAPTER 21. UNAUTHORIZED INSURERS--PROHIBITIONS, PROCESS AND ADVERTISING

§ 2101. Representing or aiding unauthorized insurer prohibited

(a) No person shall in this State directly or indirectly act as agent for, or otherwise represent or aid on behalf of another, any insurer not then authorized to transact such business in this State, in the solicitation, negotiation, procurement or effectuation of insurance or annuity contracts, or renewal thereof, or forwarding of applications for insurance or annuities, or the dissemination of information as to coverage or rates, or inspection of risks, or fixing of rates, or investigation or adjustment of claims or losses, or collection or forwarding of premiums, or in any other manner represent or assist such an insurer in the transaction of insurance with respect to subjects of insurance resident, located or to be performed in this State.

(b) This section does not apply to:

(1) Matters authorized to be done by the Commissioner under the unauthorized insurers process act, sections 2104 through 2108 of this chapter.

(2) Transactions as to which the insurer is not required to have a certificate of authority pursuant to section 506 (exceptions to certificate of authority requirement) of this title.

(3) A licensed adjuster or attorney at law representing such an insurer from time to time in his professional capacity.

(4) Persons in this State who secure and furnish information for the purposes of group life insurance, group or blanket health insurance or annuity coverage's, or for enrolling individuals under such plans or issuing certificates thereunder or otherwise assisting in administering such plans where no commission is paid for such services and the master policy or contract was lawfully solicited, issued and delivered in and pursuant to the laws of a state in which the insurer was then authorized to transact insurance.

(5) The employee, compensated on salary only, of a Delaware employer who on behalf of the employer assists in the procurement or administration of insurance coverage's on the property, risks and insurable interests of the employer.

§ 2102. Purpose of unauthorized insurers process act and unauthorized insurers false advertising act

The purpose of sections 2103 through 2108 (unauthorized insurers process act) and sections 2109 through 2111 (unauthorized insurers false advertising process act) of this chapter is to subject certain insurers to the jurisdiction of the Commissioner and the courts of this State in suits and disciplinary proceedings as provided therein, by or on behalf of insured's or beneficiaries under insurance contracts or the Commissioner. The General Assembly declares its concern that many Delaware residents hold insurance policies delivered in this State by unauthorized insurers, other than as to surplus line coverage's written pursuant to chapter 19 of this title, thus presenting to such residents the often insuperable obstacle of resort to distant courts for the assertion of legal rights under their policies; and that such insurers may induce residents to purchase insurance through false advertising sent into this State. In furtherance of such state interest, the General Assembly herein provides a method of substituted service of process upon such insurers, declares that in so doing it exercises its power to protect Delaware residents, to define, for the purposes of this chapter, what constitutes doing business in this State, and also exercises powers and privileges available to the State under Public Law 15, 79th Congress of the United States, chapter 20, 1st Session, S. 340, as amended, which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states.

§ 2103. Unauthorized insurers process act; title; interpretation

(a) Sections 2104 through 2108 of this chapter constitute and may be cited as the unauthorized insurers process act.

(b) The act shall be so interpreted as to effectuate its general purpose to make uniform the laws of those states which enact it.

§ 2104. Commissioner process agent

Solicitation, effectuation, or delivery of any insurance contract, by mail or otherwise, within this State by an unauthorized insurer, or the performance within this State of any other service or transaction connected with such insurance by or on behalf of such insurer, shall be deemed to constitute an appointment by such insurer of the Commissioner and his successors in office as its attorney, upon whom may be served all lawful process is-tied within this State in any action or proceeding against such insurer arising out of any such contract or transaction; and shall be deemed to signify the insurer's agreement that any such service of process shall have the same legal effect and validity as personal service of process upon it in this State.

§ 2105. Service of process

(a) Service of process upon any such insurer pursuant to section 2104 of this chapter shall be made by delivering to and leaving with the Commissioner or some person in apparent charge of his office 2 copies thereof and the payment to him of the fees as prescribed by section 701 of this title. The Commissioner shall forthwith mail by registered or certified mail one of the copies of such process to the defendant at its principal place of business last known to the Commissioner, and shall keep a record of all process so served upon him. Such service of process is sufficient, provided notice of such service and a copy of the process are sent within 10 days thereafter by registered or certified mail by plaintiff's attorney to the defendant at its last known principal place of business, and the defendant's receipt or receipt issued by the post office with which the letter is registered or certified, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff's attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow.

(b) Service of process in any such action, suit or proceeding shall in addition to the manner provided in subsection (a) above be valid if served upon any person within this State, who in this State on behalf of such insurer, is:

(1) Soliciting insurance; or

(0) Making any contract of insurance or issuing or delivering any policies or written contracts of insurance; or

(1) Collecting or receiving any premium for insurance; and a copy of such process is sent within 10 days thereafter by registered or certified mail by the plaintiff's attorney to the defendant at the last known principal place of business of the defendant, and the defendant's receipt, or the receipt issued by the post office with which the letter is registered or certified, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, and the affidavit of the plaintiff's attorney showing a compliance herewith are filed with the clerk of the court in which such action is pending on or before the date the defendant is required to appear, or within such further time as the court may allow.

(c) No plaintiff or complainant shall be entitled to a judgment by default under this section until the expiration of 30 days from the date of the filing of the affidavit of compliance.

(d) Nothing in this section shall limit or abridge the right to serve any process, notice or demand upon any insurer in any other manner now or hereafter permitted by law.

§ 2106. Exemptions from service or process provisions

Sections 2104 and 2105 of this chapter shall not apply to surplus line insurance lawfully effectuated under chapter 19 of this title, or to reinsurance, or to any action or proceeding against an unauthorized insurer arising out of any of the following where the policy or contract contains a provision designating the Commissioner as its attorney for the acceptance of service of lawful process in any action or proceeding instituted by or on behalf of an insured or beneficiary arising out of any such policy, or where the insurer enters a general appearance in any such action:

(1) Wet marine and transportation insurance;

(2) Insurance on or with respect to subjects located, resident, or to be performed wholly outside this State, or on vehicles or aircraft owned and principally garaged outside this State;

(3) Insurance on property or operations of railroads engaged in interstate commerce; or

(4) Insurance on aircraft or cargo of such aircraft, or against liability, other than employer's liability, arising out of the ownership, maintenance, or use of such aircraft.

§ 2107. Defense of action by unauthorized insurer

(a) Before an unauthorized insurer files or causes to be filed any pleading in any action or proceeding instituted against it under sections 2104 and 2105 of this chapter, such insurer shall:

(1) Procure a certificate of authority to transact insurance in this State; or

(2) Deposit with the clerk of the court in which such action or proceeding is pending cash or securities, or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action. The court may in its discretion make an order dispensing with such deposit or bond where the insurer makes a showing satisfactory to the court that it maintains in a state of the United States funds or securities, in trust or otherwise, sufficient and available to satisfy any final judgment which may be entered in such action or proceeding, and that the insurer will pay any final judgment entered therein without requiring suit to be brought on such judgment in the state where such funds or securities are located.

(b) The court in any action or proceeding in which service is made in the manner provided in section 2105 of this chapter may, in its discretion, order such postponement as may be necessary to afford the defendant reasonable opportunity to comply with the provisions of subsection (a) above, and to defend such action.

(c) Nothing in subsection (a), above, is to be construed to prevent an unauthorized insurer from filing a motion to quash or to set aside the service of any process made in the manner provided in section 2105 of this chapter on the ground either;

(1) That such unauthorized insurer has not done any of the acts enumerated in section 2104 of this chapter; or

(2) That the person on whom service was made pursuant to subsection (b) of section 2105 of this chapter was not doing any of the acts therein enumerated.

§ 2108. Attorney fees

In any such action against an unauthorized insurer, if the insurer has failed for 30 days after demand prior to the commencement of the action to make payment in accordance with the terms of the contract, and it appears to the court that such refusal was vexatious and without reasonable cause, the court shall allow to the plaintiff a reasonable attorney fee and include such fee in any judgment that may be rendered in such action, and in no event shall such fee be less than $100. Failure of an insurer to defend any such action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause.

§ 2109. Unauthorized insurers false advertising process act; title

Sections 2102 and 2109 through 2111 of this chapter constitute and may be referred to as the "unauthorized insurers false advertising process act."

§ 2110. Notice to domiciliary supervisory official

No unauthorized insurer through any estimate, illustration, circular, pamphlet, letter, announcement, statement, or any other means or medium, shall misrepresent to any person in this State as to its financial condition or the terms of any contract issued or to be issued by it or the advantages thereof, or the dividends or share to be received thereon. Whenever the Commissioner has reason to believe that any such insurer is so misrepresenting, he shall so notify the insurer and the insurance supervisory official of the insurer's domiciliary state or province by registered or certified mail.

§ 2111. Action by commissioner

(a) If within 30 days following the giving of the notice provided for in section 2110 of this chapter the insurer has not ceased such dissemination, and if the Commissioner has reason to believe that such insurer is soliciting, issuing or delivering contracts of insurance to residents of this State or collecting premiums on such contracts or performing any other transaction in connection with such insurance, and that a proceeding by him in respect to such matters would be to the interest of the public, he shall take action against such insurer under provisions of section 2316 of this title (trade practices act, service of process on unauthorized insurers).

(b) If upon such hearing the Commissioner finds that the insurer has misrepresented as referred to in section 2110 of this chapter, he shall by order on such hearing require the insurer to cease and desist from such violation, and shall mail a copy of the order by registered or certified mail to the insurer at its principal place of business last of record with the Commissioner and to the insurance supervisory official of the insurer's domiciliary state or province. Each violation thereafter of such desist order shall subject the insurer to a penalty of $2,000, to be recovered by a civil action brought against the insurer by the Commissioner. Service of process upon the insurer in such action may be made upon the Commissioner pursuant to sections 2105 or 2316 of this title or in any other lawful manner.

§ 2112. Suits instituted by Commissioner

(c) Any foreign or alien insurer not thereunto authorized by the Commissioner, who, by mail or otherwise, solicits insurance business in this state or transacts insurance business in this State as defined by section 110 of this title, thereby submits itself to the jurisdiction of the courts of this State in any action, suit or proceeding instituted by or on behalf of the Commissioner arising out of such unauthorized solicitation of insurance business, including, but not limited to, an action for injunctive relief by the Commissioner.

(d) Process against such unauthorized insurer may be served in the manner provided in section 2316 of this title, except that the insurer shall have 40 days from the date of such service within which to plead, answer or otherwise defend the action.

CHAPTER 23. TRADE PRACTICES AND FRAUDS

§ 2301. Purpose of act; short title

(e) The purpose of sections 2301 through 2316 of this chapter is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the act of Congress of March 9, 1945, (Public Law 15, 79th Congress), by defining, or providing for the determination of, all practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.

(f) Sections 2301 through 2316 of this chapter constitute and may be cited as the unfair trade practices act.

§ 2302. Unfair methods; deceptive acts prohibited

No person shall engage in this State in any trade practice which is defined in this chapter as, or determined pursuant to this chapter to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

§ 2303. Misrepresentation; false advertising of policies

No person shall make, issue, circulate, or cause to be made, issued, or circulated, any estimate, circular, or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or make any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or make any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or use any name or title or any policy or class of policies misrepresenting the true nature thereof.

§ 2304. False information; advertising

No person 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 a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.

§ 2305. "Twisting" prohibited

No person shall make or issue, or cause to be made or issued, any written or oral statement misrepresenting or making incomplete comparisons as to the terms, conditions, or benefits contained in any policy for the purpose of inducing or attempting or tending to induce the policyholder to lapse, forfeit, surrender, retain, exchange or convert any insurance policy.

§ 2306. False or misleading financial statements

(g) No person shall file with any supervisory or other public official, or make, publish, disseminate, circulate or deliver to any person, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to deceive.

(h) No person shall make any false entry in any book, report or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom such insurer is required by law to report, or who has authority by law to examine into its condition or into any of its affairs, or, with like intent, willfully omit to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer.

(i) No person shall advertise the capital or assets of an insurer without in the same advertisement setting forth the amount of the insurer's liabilities.

§ 2307. Defamation

No person shall make, publish, disseminate, or circulate, directly or indirectly, or aid, abet or encourage the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, or of an organization proposing to become an insurer, and which is circulated to injure any person engaged or proposing to engage in the business of insurance.

§ 2308. Boycott, coercion and intimidation

No person shall enter into any agreement to commit, or by any concerted action commit, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or any monopoly in, any business of insurance.

§ 2309. Unfair discrimination--life insurance, annuities, and health insurance

(a) No person shall make or permit any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract.

(b) No person shall make or permit any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever.

§ 2310. Rebates--life, health and annuity contracts

Except as otherwise expressly provided by law, no person shall knowingly permit or offer to make or make any contract of life insurance, life annuity or health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or pay or allow, or give or offer to pay, allow, or give, directly or indirectly, or knowingly accept, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever not specified in the contract; or directly or indirectly give, or sell, or purchase or offer or agree to give, sell, purchase, or allow as inducement to such insurance or annuity or in connection therewith, and whether or not to be specified in the policy or contract, any agreement of any form or nature promising returns and profits, or any stocks, bonds, or other securities, or interest present or contingent therein or as measured thereby, of any insurer or other corporation, association, or partnership, or any dividends or profits accrued or to accrue thereon.

§ 2311. Exceptions to discrimination, rebates, stock inducements provision--life, health, and annuity contracts

(a) Nothing in sections 2309 and 2310 of this chapter shall be construed as including within the definition of discrimination or rebates any of the following practices:

(1) In the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, provided that any such bonuses, or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the insurer and its policyholders;

(2) In the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expense;

(3) Readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for such policy year;

(4) Reduction of premium rate for policies of large amount, but not exceeding savings in issuance and administration expenses reasonably attributable to such policies as compared with policies of similar plan issued in smaller amounts;

(5) Reduction in premium rates for life or health insurance policies on annuity contracts on salary savings, payroll deduction, pre-authorized check, bank draft or similar plans in amounts reasonably commensurate with the savings made by the use of such plans.

(b) Nothing in this chapter shall be construed as including within the definition of securities as inducements to purchase insurance the selling or offering for sale, contemporaneously with life insurance, or mutual fund shares or face amount certificates of regulated investment companies under offerings registered with the Securities and Exchange Commission where such shares or such face amount certificates or such insurance may be purchased independently of and not contingent upon purchase of the other, at the same price and upon similar terms and conditions as where purchased independently.

§ 2312. Unfair discrimination, rebates prohibited--property, casualty, surety insurance

(a) No property, casualty or surety insurer or any employee or representative thereof, and no broker, agent, or solicitor shall pay, allow, or give, or offer to pay, allow or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified or provided for in the policy, except to the extent provided for in an applicable filing with the Commissioner as provided by law.

(b) No insured named in a policy, nor any employee of such insured shall knowingly receive or accept directly or indirectly, any such rebate, discount, abatement, credit or reduction of premium, or any such special favor or advantage or valuable consideration or inducement.

(c) No such insurer shall make or permit any unfair discrimination between insured's or property having like insuring or risk characteristics, in the premium or rates charged for insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the insurance.

(d) Nothing in this section shall be construed as prohibiting the payment of commissions or other compensation to licensed agents, brokers, or solicitors, or as prohibiting any insurer from allowing or returning to its participating policyholders, members or subscribers, dividends, savings or unabsorbed premium deposits. In this section "insurance" includes surety-ship and "policy" includes bond. This section does not apply to wet marine and transportation insurance.

§ 2313. Stock operations and advisory board contracts

(a) No person shall offer, issue or deliver or permit its agents, officers, or employees to offer, issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or any advisory board contract promising returns and profits as an inducement to insurance.

(b) No insurer authorized or proposing to be authorized to transact insurance in this State shall offer, issue or deliver, or permit its agents, officers, or employees to offer, issue or deliver in any other state any such agency company stock, certificates, shares, or contracts as inducement to insurance.

§ 2314. Desist orders for prohibited practices

(c) If, after a hearing thereon of which notice of such hearing and of the charges against him were given such person, the Commissioner finds that any person in this State has engaged or is engaging in any act or practice defined in or prohibited under this chapter, the Commissioner shall order such person to desist from such acts or practices.

(d) Such desist order shall become final upon expiration of the time allowed for appeals from the Commissioner's orders, if no such appeal is taken, or, in the event of such an appeal, upon final decision of the court if the court affirms the Commissioner's order or dismisses the appeal. An intervenor in such hearing shall have the right to appeal as provided in section 333 of this title.

(e) In event of such an appeal, to the extent that the Commissioner's order is affirmed the court shall issue its own order commanding obedience to the terms of the Commissioner's order.

(f) No order of the Commissioner pursuant to this section or order of court to enforce it shall in any way relieve or absolve any person affected by such order from any other liability, penalty, or forfeiture under law.

(g) Violation of any such desist order shall be deemed to be and shall be punishable as a violation of this title.

(h) This section shall not be deemed to affect or prevent the imposition of any penalty provided by this title or by other law for violation of any other provision of this chapter, whether or not any such hearing is called or held or such desist order issued.

§ 2315. Procedures as to undefined practices

(a) If the Commissioner believes that any person engaged in the insurance business is, in the conduct of such business, engaging in this State in any method of competition or in any act or practice not defined in this chapter which is unfair or deceptive and that a proceeding by him in respect thereto would be in the public interest, he shall, after a hearing of which notice of the hearing and of the charges against him are given such person, make a written report of his findings of fact relative to such charges and serve a copy thereof upon such person and any intervener at the hearing.

(b) If such report charges a violation of this chapter and if such method of competition, act or practice has not been discontinued, the Commissioner may, through the Attorney General, at any time after the service of such report cause an action to be instituted to enjoin and restrain such person from engaging in such method, act, or practice. In such action the court may grant a restraining order or injunction upon such terms as may be just; but the State of Delaware shall not be required to give security before the issuance of any such order or injunction. If a stenographic record of the proceedings in the hearing before the Commissioner was made, a certified transcript thereof including all evidence taken and the report and findings shall be received in evidence in such action.

(c) If the Commissioner's report made under subsection (a) above, or order on hearing made under section 332 of this title does not charge a violation of this chapter, then any intervener in the proceedings may appeal therefrom within the time and in the manner provided in this title for appeals from the Commissioner generally.

§ 2316. Service upon unauthorized insurers

(a) Service of all process, statements of charges, and notices under this chapter upon unauthorized insurers shall be made by any deputy or employee of the department delivering to and leaving with the Commissioner or some person in apparent charge of his office, 2 copies thereof, or in the manner provided for by section 2105(b) (service of process, unauthorized insurers process act) of this title.

(b) The Commissioner shall forward all such process, statements of charges, and notices to the insurer in the manner provided in section 2105(a) of this title.

(c) No default shall be taken against any such unauthorized insurer until expiration of 30 days after date of forwarding by the Commissioner under subsection (b) above, or date of service of process if under section 2105 (b) of this title.

(d) Section 2105 of this title shall apply as to all process, statements of charges, and notices under this section.

§ 2317. Favored agent or insurer

No person shall require as a condition precedent concurrent, or subsequent to loaning money upon the security of any real or personal property, or to the selling of any such property under contract, that the owner of the property to whom the money is to be loaned or the vendee of the property so being sold, shall place, continue, or renew any policy of insurance covering or to cover such property, or covering any liability related to such property or the use thereof, through a particular insurance agent or broker or in a particular insurer; except, that this provision shall not prevent the exercise by any such lender or vendor upon a reasonable basis of the right to approve or disapprove of the insurer and representative selected to underwrite the insurance. Such basis shall relate only to (1) the adequacy and terms of the coverage with respect to the interest of the vendor or lender to be insured thereunder, (2) the financial standards to be met by the insurer, and (3) the ability of the insurer or representative to service the policy.

§ 2318. Insurance on public construction contracts

(d) No officer or employee of this State, or of any public agency, public authority or public corporation (except a public corporation or public authority created pursuant to agreement or compact with another state, and no person acting or purporting to act on behalf of such officer or employee, or public agency or public authority or public corporation, shall, with respect to any public building or construction contract which is about to be, or which has been competitively bid, require the bidder to make application to, (or furnish financial data to) or to obtain or procure, any of the surety bonds or contracts of insurance specified in connection with such contract, or specified by any law, general, special or local, from a particular insurer or agent or broker.

(e) No such officer or employee or any person, acting or purporting to act on behalf of such officer or employee shall negotiate, make application for, obtain or procure any of such surety bonds or contracts of insurance (except contracts of insurance for builder's risk or owner's protective liability) which can be obtained or procured by the bidder, contractor or subcontractor.

(c) This section shall not, however, prevent the exercise by such officer or employee on behalf of the State or such public agency, public authority, or public corporation of its right to approve the form, sufficiency or manner of execution of the surety bonds or contracts of insurance furnished by the insurer selected by the bidder to underwrite such bonds, or contracts of insurance.

(d) Any provisions in any invitation for bids, or in any of the contract documents, in conflict with this section are declared to be contrary to the public policy of this State.

(e) A violation of this section shall be subject to the penalties provided by section 113 (general penalty) of this title.

§ 2319. Interlocking ownership, management

(a) Any insurer may retain, invest in or acquire the whole or any part of the capital stock of any other insurer or insurers, or have a common management with any other insurer or insurers, unless such retention, investment, acquisition or common management is inconsistent with any other provision of this title, or unless by reason thereof the business of such insurers with the public is conducted in a manner which substantially lessens competition generally in the insurance business or tends to create any monopoly therein.

(b) Any person otherwise qualified may be a director of 2 or more insurers which are competitors, unless the effect thereof is to lessen substantially competition between insurers generally or tends materially to create any monopoly.

§ 2320. Political contributions prohibited; penalty

(a) No insurer shall directly or indirectly pay or use, or offer, consent, or agree to pay or use, any money or property for or in aid of any political party, committee, or organization, or for or in aid of any corporation or other body organized or maintained for political purposes, or for or in aid of any candidate for political office, or for nomination for such office, or for any political purpose whatsoever, or for the reimbursement or indemnification of any person for money or property so used.

(b) Any officer, director, stockholder, attorney, or agent of any insurer which violates any of the provisions of this section, who participates in, aids, abets, or advises, or consents to any such violation, and any person who solicits or knowingly receives any money or property in violation of this section, shall be guilty of a misdemeanor, and be punished by imprisonment for not more than one year and a fine of not more than $1,000; and any officer or director abetting in any contribution made in violation of this section shall be liable to the insurer for the amount so contributed.

(c) This section shall not prohibit reasonable expenditures by an insurer otherwise lawful, for presentation of information relative to proposed legislation affecting the insurer.

§ 2321. Illegal dealing in premiums; excess charges for insurance

(a) No person shall willfully collect any sum as premium or charge for insurance, which insurance is not then provided or is not in due course to be provided (subject to acceptance of the risk by the insurer) by an insurance policy issued by an insurer as authorized by this title.

(b) No person shall willfully collect as premium or charge for insurance any sum in excess of the premium or charge applicable to such insurance, and as specified in the policy, in accordance with the applicable classifications and rates as filed with and approved by the Commissioner; or, in cases where classifications, premiums, or rates are not required by this code to be so filed and approved, such premiums and charges shall not be in excess of those specified in the policy and as fixed by the insurer. This provision shall not be deemed to prohibit the charging and collection, by surplus lines brokers licensed under chapter 19 of this title, of the amount of applicable state and federal taxes and nominal service charge to cover communication expenses, in addition to the premium required by the insurer. Nor shall it be deemed to prohibit the charging and collection, by a life insurer, of amounts actually to be expended for medical examination of an applicant for life insurance or for reinstatement of a life insurance policy.

§ 2322. Fictitious groups

(c) No insurer, whether an authorized insurer or an unauthorized insurer, shall make available through any rating plan or form, property, casualty or surety insurance to any firm, corporation, or association of individuals, any preferred rate or premium based upon any fictitious grouping of such firm, corporation, or association.

(d) No form or plan of insurance covering any group or combination of persons or risks shall be written or delivered within or outside this State to cover persons or risks in this State at any preferred rate or on any form other than as offered to persons not in such group or combination and to the public generally, unless such form, plan of insurance, and the rates or premiums to be charged therefor have been submitted to and approved by the Commissioner as being not unfairly discriminatory, and as not otherwise being in conflict with subsection (a) above or with any provision of chapter 25 of this title (rates and rating organizations) to the extent that such chapter 25 is, by its terms, applicable thereto.

(e) This section does not apply to life insurance, health insurance, annuity contracts, or wet marine and transportation insurance.

§ 2323. Insurance as inducement to purchase

No person shall directly or indirectly participate in any plan to offer or effect any kind or kinds of life or health insurance or annuities as an inducement to, or in connection with, the purchase by the public of any goods, securities, commodities, services or subscriptions to periodicals. This section shall not apply as to insurance written in connection with an indebtedness if the purpose of such insurance is to pay the indebtedness in case of death or disability of the insured.

§ 2324. Insurer name; deceptive use prohibited

No person who is not an insurer shall assume or use any name which deceptively implies or suggests that it is an insurer.

This section shall not preclude a corporation heretofore or hereafter formed under the laws of this State from using such a name between the date it is incorporated and the date it begins to engage in any business, if during such period the corporate activities are limited to its organization or reorganization or to those activities it would be permitted to engage in, if it were an insurer, under section 4904 (b) (2) of this title.

§ 2325. Service and processing charges by mortgagees prohibited

No mortgagee or agent of any mortgagee shall accept or receive any monetary charge or fee from a mortgagor for handling, servicing or processing insurance policies, or endorsements or for the issuance or cancellation of such policies, on property located within this State.

§ 2326. False applications, claims, proofs of loss; penalty

No agent, broker, solicitor, examining physician, applicant, or other person, shall knowingly or willfully make any false or fraudulent statement or representation in or with reference to any application for insurance; or for the purpose of obtaining any money or benefit, knowingly or willfully present or cause to be presented a false or fraudulent claim; or any proof in support of such a claim for the payment of the loss upon a contract of insurance; or prepare, make, or subscribe a false or fraudulent account, certificate, affidavit or proof of loss, or other document or writing, with intent that the same may be presented or used in support of such a claim.

CHAPTER 25. RATES AND RATING ORGANIZATIONS

§ 2501. Purpose of chapter; interpretation

The purpose of this chapter is to promote the public welfare by regulating insurance rates (in accordance with the intent of Congress as expressed in Public Law 15-79th Congress) and to the end that they shall not be excessive, inadequate or unfairly discriminatory, and to authorize and regulate cooperative action among insurers in rate making and in other matters within the scope of this chapter. Nothing in this chapter is intended

(1) to prohibit or discourage reasonable competition, or (2) to prohibit, or encourage except to the extent necessary to accomplish the aforementioned purpose, uniformity in insurance rates, rating systems, rating plans or practices. This chapter shall be liberally interpreted to carry into effect the provisions of this section.

§ 2502. Scope of chapter

(a) This chapter applies to:

(1) Casualty insurance, including workmen's compensation, and all forms of motor vehicle insurance, on risks or operations in this State;

(2) Surety insurance;

(3) Fire, marine and inland marine insurance, as used in their generally accepted trade sense, on risks located in this State. Inland marine insurance shall be deemed to include insurance as defined by statute, or by ruling of the Commissioner.

(b) This chapter shall not apply to:

(4) Reinsurance, except joint reinsurance as provided in section 2523 of this chapter;

(5) Health insurance;

(6) Insurance of air-borne or water-borne vessels or craft, their cargoes, legal liability of aircraft operators, marine protection and indemnity, or other risks commonly insured under aviation or marine, as distinguished from inland marine. insurance policies;

(7) Life insurance;

(8) Title insurance.

(c) Nothing in this chapter shall abridge or restrict the freedom of contract between insurers and agents or brokers with respect to commissions or between insurers and their employees with respect to compensation.

§ 2503. Making of rates

(a) Rates shall be made in accordance with the following provisions:

(1) Manual, minimum, class rates, rating schedules or rating plans, shall be made and adopted, except in the case of specific inland marine rates on risks specially rated;

(2) Rates shall not be excessive, inadequate or unfairly discriminatory;

(3) Due consideration shall be given:

(i) To past and prospective loss experience within and outside this State;

() To the conflagration and catastrophe hazards;

(i) To a reasonable margin for underwriting profit and contingencies;

(ii) To dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers;

(iii) To past and prospective expenses both country-wide and those specially applicable to this State;

(iv) To all other relevant factors within and outside this State; and

(v) In the case of fire insurance rates, consideration shall be given to the experience of the fire insurance business during a period of not less than the most recent 5 year period for which such experience is available;

(4) The systems of expense provisions included in the rates for use by any insurer or group of insurers may differ from those of other insurers or groups of insurers to reflect the requirements of the operating methods of any such insurer or group with respect to any kind of insurance, or with respect to any subdivision or combination thereof for which subdivision or combination separate expense provisions are applicable;

(5) Risks may be grouped by classifications for the establishment of rates and minimum premiums. Classification rates may be modified to produce rates for individual risks in accordance with rating plans which establish standards for measuring variations in hazards or expense provisions, or both. Such standards may measure any differences among risks which may have a probable effect upon losses or expenses.

(b) Nothing in this section shall be taken to prohibit as unreasonable or unfairly discriminatory the establishment of classifications or modifications of classifications or risks based upon size, expense, management, individual experience, purpose of insurance location or dispersion of hazard, or any other reasonable considerations provided such classifications and modifications apply to all risks under the same or substantially similar circumstances or conditions.

(c) Except to the extent necessary to meet the provisions of subdivisions (2) of subsection (a) of this section, uniformity among insurers in any matters within the scope of this section is neither required nor prohibited.

§ 2504. Rate filings

(a) Every insurer shall file with the Commissioner, except as to inland marine risks which by general custom of the business are not written according to manual rates or rating plans, every manual, minimum, class rate, rating schedule or rating plan and every other rating rule, and every modification of any of the foregoing which it proposes to use. Every such filing shall state the proposed effective date thereof, and shall indicate the character and extent of the coverage contemplated.

() When a filing is not accompanied by the information upon which the insurer supports such filing, and the Commissioner does not have sufficient information to determine whether such filing meets the requirements of this chapter he shall require the insurer to furnish the information upon which it supports the filing. The information furnished in support of a filing may include (1) the experience or judgment of the insurer or rating organization making the filing, (2) its interpretation of any statistical data it relies upon, (3) the experience of other insurers or rating organizations in conjunction with (1), or (4) any other relevant factors. A filing and supporting information shall be open to inspection by parties in interest after 1 he filing becomes effective.

(a) Specific inland marine rates on risks specially rated, made by a rating organization, shall be filed with the Commissioner, and shall become effective when filed and shall be deemed approved and in compliance with the requirements of this chapter until such time as the Commissioner rejects the filing.

§ 2505. Exemption from filing

Under such rules and regulations as he adopts the Commissioner may, by written order, suspend or modify the requirement of filing as to any kind of insurance, subdivision or combination thereof, or as to classes of risks, the rates for which cannot practicably be filed before they are used. Such orders, rules and regulations shall be made known to insurers and rating organizations affected thereby. The Commissioner may make such examination as he deems advisable to ascertain whether any rates affected by such order meet the standards set forth in section 2503 (a) (2) of this chapter.

§ 2506. Effective date of filing

(a) The Commissioner shall review filings as soon as reasonably possible after they have been made in order to determine whether they met the requirements of this chapter. The filings shall be deemed to meet the requirements of this chapter unless disapproved by the Commissioner.

(b) Any special filing with respect to a surety or guaranty bond required by law or by court or executive order or by order, rule or regulation of a public body, not covered by a previous filing, shall become effective when filed and shall be deemed to meet the requirements of this chapter until such time as the Commissioner rejects the filing.

§ 2507. Disapproval of filing

If within 30 clays after a specific inland rate, a special surety or guaranty on a risk specially rated by a rating organization, subject to subsection (b) of section 2504 of this chapter, has become effective, the Commissioner finds that such filing does not meet the requirements of this chapter or if upon review of any other filing, the Commissioner finds that the same does not meet the requirements of this chapter, he shall, after a hearing held upon not less than 10 days' written notice specifying the matters to be considered at such hearing, to every insurer and rating organization which made such filing, issue an order specifying in what respects he finds that such filing fails to meet the requirements of this chapter, and stating when, within a reasonable period thereafter, such filing shall be deemed no longer effective. Copies of the order shall be sent to every such insurer and rating organization. The order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.

§ 2508. Limitation of disapproval power

No manual of classifications, rules, rating plans, or any modification of any of the foregoing which establishes standards for measuring variations in hazards or expense provisions, or both, and which has been filed pursuant to section 2503 of this chapter, shall be disapproved if the rates produced meet the requirements of this chapter.

§ 2509. Excess rates

Upon the written application of the insured, stating his reasons therefor, filed with and approved by the Commissioner, a rate in excess of that provided by a filing otherwise applicable may be used on any specific risk.

§ 2510. Rating organizations--filing for members and subscribers authorized

Insurer may satisfy its obligation to make filings required by section 2503 of this chapter by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings, and by authorizing the Commissioner to accept such filings on its behalf. Nothing contained in this chapter shall be construed as requiring any insurer to become a member of or a subscriber to any rating organization.

§ 2511. Rating organizations--licensing

(c) No rating organization shall make or file risks for risks located in this State without first being licensed therefor under this chapter.

(d) A corporation, an unincorporated association, a partnership or an individual, whether located within or outside this State, may make application to the Commissioner for license as a rating organization for such kinds of insurance, or subdivision or class of risk or a part or combination thereof as are specified in its application and shall file therewith (1) a copy of its constitution, its articles of and of its bylaws, rules and regulations governing the conduct of its business, (2) a list of its members and subscribers, (3) the name and address of a resident of this State upon whom notices or orders of the Commissioner or process affecting such rating organization may be served, and (4) a statement of its qualifications as a rating organization.

(c) If the Commissioner finds that the applicant is competent, trustworthy and otherwise qualified to act as a rating organization and that its constitution, articles of agreement or association or certificate of incorporation, and its by-laws, rules and regulations governing the conduct of its business conform to the requirements of law, he may issue a license specifying the kinds of insurance, or subdivision or class of risk or part or combination thereof for which the applicant is authorized to act as a rating organization. Every such application shall be granted or denied in whole or in part by the Commissioner within a reasonable period after the same has been filed with him.

(d) Licenses issued pursuant to this section shall remain in effect for one year unless sooner suspended or revoked by the Commissioner.

(e) Licenses issued pursuant to this section may be suspended or revoked by the Commissioner, after hearing upon notice, in the event the rating organization ceases to meet the requirements of this section.

§ 2512. Subscribers to rating organizations

(a) Subject to rules and regulations which have been approved by the Commissioner as reasonable, each rating organization shall permit any insurer to be a subscriber to its rating services for any kind of insurance, subdivision, or class of risk or a part or combination thereof for which it is authorized to act as a rating organization. Notice of proposed changes in such rules and regulations shall be given to subscribers. Each rating organization shall furnish its rating services without discrimination to its subscribers.

(b) The reasonableness of any rule or regulation in its application to subscribers, or the refusal of any rating organization to admit an insurer as a subscriber, shall, at the request of any subscriber or any such insurer, be reviewed by the Commissioner at a hearing held upon at least 10 days' written notice to such rating organization and to such subscriber or insurer. If the Commissioner finds that such rule or regulation is unreasonable in its application to subscribers, he shall order that such rule or regulation shall not be applicable to subscribers. If the rating organization fails to grant or reject an insurer's application for subscribership within 30 days after it was made, the insurer may request a review by the Commissioner as if the application had been rejected. If the Commissioner finds that the insurer has been refused admittance to the rating organization as a subscriber without justification, he shall order the rating organization to admit the insurer as a subscriber. If he finds that the action of the rating organization was justified, he shall make an order affirming its action.

§ 2513. Notice of changes

Every rating organization shall notify the Commissioner promptly of every change in (1) its constitution, its articles of agreement or association, or its certificate of incorporation, and its bylaws, rules and regulations governing the conduct of its business, (2) its list of members and subscribers, and (3) the name and address of the resident of this State designed by it upon whom notices or orders of the Commissioner or process affecting such rating organization may be served.

§ 2514. Rules not to affect dividends

No rating organization shall adopt any rule the effect of which would be to prohibit or regulate the payment of dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers.

§ 2515. Technical services

Any rating organization may subscribe for or purchase actuarial, technical or other services, and such services shall be available to all subscribers without discrimination.

§ 2516. Stamping Bureau

Any rating organization may provide for the examination of its subscribers' policies, daily reports, binders, renewal certificates, endorsements or other evidences of insurance, or the cancellation thereof, and may make reasonable rules governing their submission. Such rules shall contain a provision that in the event any insurer does not within 60 days furnish satisfactory evidence to the rating organization of the correction of any error or omission previously called to its attention by the rating organization, the rating organization shall notify the Commissioner thereof. All information so submitted for examination shall be confidential.

§ 2517. Adherence to filings

No insurer shall make or issue a contract or policy except in accordance with the filings which are in effect for the insurer as provided in this chapter or in accordance with sections 2505 (exemption from filing) or 2509 (excess rates) of this chapter. This section shall not apply to contracts or policies for inland marine risks as to which filings are not required.

§ 2518. Deviations

(a) Every subscriber to a rating organization shall adhere to the filings made on its behalf by such organization except that any such insurer may make written application to the Commissioner for permission to file a deviation from the class rates, schedules, rating plans or rules respecting any kind of insurance, or class of risk within a kind of insurance, or combination thereof. Such application shall specify the basis for the modification and a copy thereof shall also be sent simultaneously to such rating organization.

(b) The Commissioner shall set a time and place for a hearing at which the insurer and such rating organization may be heard and shall give them not less than 10 days' written notice thereof. If the Commissioner is advised by the rating organization that it does not desire a hearing he may, upon the consent of the applicant, waive such hearings.

(c) In considering the application for permission to file such deviation the Commissioner shall give consideration to the available statistics and the principles for rate making as provided in section 2503 of this chapter. The Commissioner shall issue an order permitting the deviation for such insurer to be filed if he finds it to be justified and it shall thereupon become effective. He shall issue an order denying such application if he finds that the modification is not justified or that the resulting premiums would be excessive, inadequate or unfairly discriminatory.

(d) Each deviation permitted to be filed shall be effective for a period of one year from the date of such permission unless terminated sooner with the approval of the Commissioner. All term policies issued pursuant to such deviations may remain in force until their expiring dates.

§ 2519. Appeal from rating organization

Any subscriber to a rating organization may appeal to the Commissioner from the action or decision of such rating organization in approving or rejecting any proposed change in or addition to the filings of such rating organization.

§ 2520. Appeal by insurers and others as to filings

(a) Any person or organization in interest, aggrieved with respect to any filing which is in effect may make written application to the Commissioner for a hearing thereon except that the insurer or rating organization that made the filing shall not be authorized to proceed under this section. Such application shall specify the grounds to be relied upon by the applicant.

(b) If the Commissioner finds that the application is made in good faith, that the applicant would be so aggrieved if his grounds are established, and that such grounds otherwise justify holding such a hearing, he shall, within 30 days after receipt of such application, hold a hearing upon not less than 10 days' written notice to the applicant and to every insurer and rating organization which made such filing.

() If, after such hearing, the Commissioner finds that the filing does not meet the requirements of this chapter, he shall issue an order specifying in what respects he finds that such filing fails to meet the requirements of this chapter, and stating when, within a reasonable period thereafter, such filing shall be deemed no longer effective. Copies of the order shall be sent to the applicant and to every such insurer and rating organization. The order shall not affect any contract or policy made or issued prior to the expiration of the period set forth in the order.

§ 2521. Information to be furnished insured

Every rating organization and every insurer which makes its own rates shall, within a reasonable time after receiving written request therefor and upon payment of such reasonable charge as it may make, furnish to any insured affected by a rate made by it, or to the authorized representative of such insured, all information as to such rate.

§ 2522. Advisory organizations

(a) Every group, association or other organization of insurers, whether located within or outside this State, which assists insurers which make their own filings or rating organizations in rate making, by the collection and furnishing of loss or expense statistics, or by the submission of recommendations, but which does not make filings under this chapter, shall be known as an advisory organization.

(b) Every advisory organization shall file with the Commissioner (1) a copy of its constitution, its articles of agreement or association or its certificate of incorporation and of its bylaws, rules, and regulations governing its activities, (2) a list of its members, and (3) the name and address of a resident of this State upon whom notice or orders of the Commissioner or process issued at his direction may be served.

(c) If, after a hearing, the Commissioner finds that the furnishing of such information or assistance involves any act or practice which is unfair or unreasonable or otherwise inconsistent with the provisions of this chapter, he may issue a written order specifying in what respects such act or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this chapter, and requiring the discontinuance of such act or practice.

(d) No insurer which makes its own filing nor any rating organization shall support its filings by statistics or adopt rate making recommendations, furnished to it by an advisory organization which has not complied with this section or with an order of the Commissioner involving such statistics or recommendations issued under subsection (c) of this section, If the Commissioner finds such insurer or rating organization to be in violation of this subsection he may issue an order requiring the discontinuance of such violation.

§ 2523. Joint underwriters; joint reinsurers

(a) Every group, association or other organization of insurers which engages in joint underwriting or joint reinsurance, shall be subject to regulation with respect thereto as herein provided, subject, however, with respect to joint underwriting, to all other provisions of law, and with respect to joint reinsurance, to section 2524 (examinations) of this chapter.

(b) If, after a hearing, the Commissioner finds that any activity or practice of any such group, association or other organization is unfair or unreasonable or otherwise inconsistent with the provisions of this chapter, he may issue a written order specifying in what respects such activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this chapter, and requiring the discontinuance of such activity or practice.

§ 2524. Examinations

(a) The Commissioner shall, at least once in 5 years, make or cause to be made an examination of each rating organization licensed in this State as provided in section 2511 of this chapter, and he may, as often as he may deem it expedient, make or cause to be made an examination of each advisory organization referred to in section 2522 of this chapter and of each group, association or other organization referred to in section 2523 of this chapter. The reasonable costs of any such examination shall be paid by the rating organization, advisory organization, or group, association or other organization examined upon presentation to it of a detailed account of such costs. The officers, manager, agent and employees of such rating organization, advisory organization, or group, association or other organization may be examined at any time under oath and shall exhibit all books, records, accounts, documents, or agreements governing its method of operation.

(b) In lieu of any such examination the Commissioner may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of such state.

(c) The provisions of section 325 of this title (examination report) apply as to such examinations.

§ 2525. Recording and reporting of loss and expense experience

(a) The Commissioner shall promulgate reasonable rules and statistical plans, reasonably adapted to each of the rating systems on file with him, which may be modified from time to time and which shall be used hereafter by each insurer in the recording and reporting of its loss and countrywide expense experience, in order that the experience of all insurers may be made available at least annually in such form and detail as may be necessary to aid him in determining whether rating systems comply with the standards set forth in section 2503 of this chapter. Such rules and plans may also provide for the recording and reporting of expense experience items which are specially applicable to this State and are not susceptible of determination by a pro-rating of countrywide expense experience.

(b) In promulgating such rules and plans, the Commissioner shall give due consideration to the rating systems on file with him and, in order that such rules and plans may be as uniform as is practicable among the several states, to the rules and to the form of the plans used for such rating systems in other states. No insurer shall be required to record or report its loss experience on a classification basis that is inconsistent with the rating system filed by it.

(c) The Commissioner may designate one or more rating organizations or other agencies to assist him in gathering such experience and making compilations thereof, and such compilations shall be made available, subject to reasonable rules promulgated by the Commissioner, to insurers and rating organizations.

(d) Each insurer shall report its loss or expense experience to the lawful rating organization or agency of which it is a member or subscriber, but shall not be required to report its loss of expense experience to any rating organization or agency of which it is not a member or subscriber. Any insurer not reporting such experience to a rating organization or other agency may be required to report such experience to the Commissioner. Any report of such experience of any insurer filed with the Commissioner shall be deemed confidential and shall not be revealed by the Commissioner to any other insurer or other person, but the Commissioner may make compilations including such experience.

§ 2526. Interchange of rating plan data; consultation; cooperative action in rate-making

(a) Reasonable rules and plans may be promulgated by the Commissioner for the interchange of data necessary for the application of rating plans.

(b) In order to further uniform administration of rate regulatory laws, the Commissioner and every insurer and rating organization may exchange information and experience data with insurance supervisory officials, insurers and rating organizations in other states and may consult with them with respect to rate making and the application of rating systems.

(c) Cooperation among rating organizations or among rating organizations and insurers in rate making or in other matters within the scope of this chapter is authorized, but the filings resulting from such cooperation are subject to all provisions of this chapter which are applicable to filings generally. The Commissioner may review such cooperative activities and practices and if, after a hearing, he finds that any such activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this chapter, he may issue a written order specifying in what respects such activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this chapter, and requiring the discontinuance of such activity or practice.

§ 2527. Assigned risk plans

Agreements may be made among insurers with respect to the equitable apportionment among them of insurance which may be afforded applicants who are in good faith entitled to but who are unable to procure such insurance through ordinary methods and such insurers may agree among themselves on the use of reasonable rate modifications for such insurance, such agreements and rate modifications to be subject to the disapproval of the Commissioner pursuant to this chapter.

§ 2528. False or misleading information

(a) No person shall willfully withhold information from, or knowingly give false or misleading information to:

(1) The Commissioner;

(2) Any statistical agency designated by the Commissioner;

(3) Any rating organization or insurer, which affect rates or premiums chargeable under this chapter.

(b) Violation of this section shall be subject to the penalties provided in section 113 of this title, or in lieu thereof, in the Commissioner's discretion, an administrative fine of not over $1,000.

§ 2529. Fleet rates

Two or more insurers, who, by virtue of their business associations in the United States, represent themselves to be or are customarily known as a "group" or similar insurance trade designation, may make the same filings or use the same rates for each such insurer subject to the provisions of section 2503; and nothing contained in this chapter shall be construed to prohibit an agreement to make the same filings or use the same rates and concerted action in connection with such filings or rates by such insurers. This-section shall not apply to 2 or more insurers who are not under the same common executive or general management or control and who act in concert in underwriting groups or pools.

§ 2530. Penalties

(a) The Commissioner may, if he finds that any person or organization has violated any provision of this chapter, impose a penalty of not more than $200 for each such violation, but if he finds such violation to be willful he may impose a penalty of not more than $500 for each such violation, in addition to any other penalty provided by law.

(b) The Commissioner may suspend the license of any rating organization or insurer which fails to comply with his order within the time limited by the order or any extension thereof granted by the Commissioner. The Commissioner shall not so suspend a license for failure to comply with an order until time prescribed for appeal therefrom has expired or if appealed, until such order has been affirmed. The Commissioner may determine the period of a suspension and it shall remain in effect for such period, unless he modifies or rescinds the suspension, or until the order upon which the suspension is based is modified, rescinded or reversed.

(c) No penalty shall be imposed and no license shall be suspended or revoked except upon a written order of the Commissioner, stating his findings, made after a hearing held upon not less than 10 days' written notice to such person or organization specifying the alleged violation.

(d) Any party aggrieved by an order or decision of the Commissioner may, within 30 days after Commissioner's notice, make written request for hearing thereon pursuant to Section 2507.

§ 2531. Appeals from Commissioner

Any order, decision or act of the Commissioner under this chapter is subject to judicial review upon petition of any person aggrieved. The appeal shall be to the Court of Chancery in any county of this State. A petition for review shall be filed within 60 days from notice of the order, decision or act. The commencement of the proceeding shall not affect enforcement or validity of the Commissioner's action unless the court determines, after notice to the Commissioner, that a stay of enforcement until further direction of the court will not unduly injure the interests of the public. Subsections (d) through (i) of section 333 (appeal from the Commissioner) of this title shall apply to such appeals.

CHAPTER 27. THE INSURANCE CONTRACT

§ 2701. Scope of chapter

This chapter applies as to all insurance contracts and annuity contracts, other than:

(a) Reinsurance.

(b) Policies or contracts not issued for delivery in this State nor delivered in this State.

(c) Wet marine and transportation insurance.

§ 2702. "Policy" defined

"Policy" means the written contract of or written agreement for or effecting insurance, by whatever name called, and includes all clauses, riders, endorsements and papers which are a part thereof.

§ 2703. "Premium" defined

"Premium" is the consideration for insurance, by whatever name called. Any "assessment," or any "membership," "policy," "survey," "inspection," "service" or similar fee or other charge in consideration for an insurance contract is deemed part of the premium.

§ 2704. Insurable interest; personal insurance

(a) Any individual of competent legal capacity may procure or effect an insurance contract upon his own life or body for the benefit of any person. But no person shall procure or cause to be procured any insurance contract upon the life or body of another individual unless the benefits under such contract are payable to the individual insured or his personal representatives, or to a person having, at the time when such contract was made, an insurable interest in the individual insured.

(b) If the beneficiary, assignee, or other payee under any contract made in violation of this section receives from the insurer any benefits thereunder accruing upon the death, disablement, or injury of the individual insured, the individual insured or his executor or administrator, as the case may be, may maintain an action to recover such benefits from the person so receiving them.

(c) "Insurable interest" as to such personal insurance means that every individual has an insurable interest in the life, body, and health of himself, and of other persons as follows:

(1) In the case of individuals related closely by blood or by law, a substantial interest engendered by love and affection;

(2) In the case of other persons, a lawful and substantial economic interest in having the life, health, or bodily safety of the individual insured continue, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the individual insured; and

(3) An individual heretofore or hereafter party to a contract or option for the purchase or sale of an interest in a business partnership or firm, or of shares of stock of a corporation or of an interest in such shares, has an insurable interest in the life of each individual party to such contract and for the purposes of such contract only, in addition to any insurable interest which may otherwise exist as to the life of such individual.

(d) An insurer shall be entitled to rely upon all statements, declarations and representations made by an applicant for insurance relative to the insurable interest of the applicant in the insured; and no insurer shall incur legal liability except as set forth in the policy, by virtue of any untrue statements, declarations or representations so relied upon in good faith by the insurer.

§ 2705. Insurable interest; exception when certain institutions designated beneficiary

(a) Life insurance contracts may be entered into in which the person paying the consideration for the insurance has no insurable interest in the life of the individual insured, where charitable, benevolent, educational, or religious institutions, or their agencies, are designated irrevocably as the beneficiaries thereof.

(b) In making such contracts the person paying the premium shall make and sign the application therefor as owner, and shall designate a charitable, benevolent, educational or religious institution, or an agency thereof, irrevocably as the beneficiary or beneficiaries of such contract. The application shall be signed also by the individual whose life is to be insured.

(c) Nothing in this section shall be deemed to prohibit any combination of the applicant, premium payer, owner, and beneficiary from being the same person.

(d) Such a contract shall be valid and binding among the parties thereto, notwithstanding the absence otherwise of an insurable interest in the life of the individual insured.

§ 2706. Insurable interest; property

(a) No contract of insurance of property or of any interest in property or arising from property shall be enforceable as to the insurance except for the benefit of persons having an insurable interest in the things insured as at the time of the loss.

(b) "Insurable interest" as used in this section means any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage or impairment.

(c) The measure of an insurable interest in property is the extent to which the insured might be directly or indirectly damnified by loss, injury, or impairment thereof.

§ 2707. Power to contract; purchase of insurance and annuities by minors

(a) Any person of competent legal capacity may contract for insurance.

(b) Any minor not less than 15 years of age, with the consent of parent or guardian, if any, unless otherwise emancipated, may, notwithstanding his minority, contract for or own annuities, or insurance, or affirm by novation or otherwise pre-existing contracts for annuities or insurance upon his own life, body, health, property, liabilities or other interests, or on the persons of another in whom the minor has an insurable interest. Such a minor shall, notwithstanding such minority, be deemed competent to exercise all rights and powers with respect to or under (1) any contract for annuity or for insurance upon his own life, body or health, or (2) any contract such minor effected upon his own property, liabilities or other interests or (3) any contract effected or owned by the minor on the person of another, as might be exercised by a person of full legal age, and may at any time surrender his interest in any such contracts and give valid discharge for any benefit accruing or money payable thereunder. Such a minor shall not, by reason of his minority, be entitled to rescind, avoid or repudiate the contract, nor to rescind, avoid or repudiate any exercise of a right or privilege thereunder, except that such a minor not otherwise emancipated, shall not be bound by any unperformed agreement to pay by promissory note or otherwise, any premium on any such annuity or insurance contract.

(c) Any annuity contract or policy of life or disability insurance procured by or for a minor under subsection (b) above, shall be made payable either to the minor or his estate or to a person having an insurable interest in the life of the minor.

§ 2708. Consent of insured--life, health insurance

No life or health insurance contract upon an individual, except a contract of group life insurance or of group or blanket health insurance, shall be made or effectuated unless at the time of making of the contract the individual insured, being of competent legal capacity to contract, applies therefor or has consented thereto in writing, except in the following cases:

(1) A spouse may effectuate such insurance upon the other spouse.

(2) Any person having an insurable interest in the life of a minor, or any person upon whom a minor is dependent for support and maintenance, may effectuate insurance upon the life of or pertaining to such minor.

(3) Family policies may be issued insuring any 2 or more members of a family on an application signed by either parent, a step-parent, or by a husband or wife.

§ 2709. Alteration of application, life and health insurance

No alteration of any written application for any life or health insurance policy shall be made by any person other than the applicant without his written consent, except that insertions may be made by the insurer, for administrative purposes only, in such manner as to indicate clearly that such insertions are not to be ascribed to the applicant.

§ 2710. Application as evidence

(a) No application for the issuance of any life or health insurance policy or annuity contract shall be admissible in evidente in any action relative to such policy or contract, unless a true copy of the application was attached to or otherwise made a part of the policy or contract when issued. This provision shall not apply to industrial life insurance policies.

(b) If any policy of life or health insurance delivered in this state is reinstated or renewed, and the insured or the beneficiary or assignee of the policy makes written request to the insurer for a copy of the application, if any, for such reinstatement or renewal, the insurer shall, within 30 days after receipt of such request at its home office, deliver or mail to the person making such request a copy of such application reproduced by any legible means. If such copy is not so delivered or mailed after having been so requested, the insurer shall be precluded from introducing the application in evidence in any action or proceeding based upon or involving the policy or its reinstatement or renewal. In the case of such a request from a beneficiary, the time within which the insurer is required to furnish a copy of such application shall not begin to run until after receipt of evidence satisfactory to the insurer of the beneficiary's vested interest in the policy or contract.

(c) As to kinds of insurance other than life or health insurance, no application for insurance signed by or on behalf of the insured shall be admissible in evidence in any action between the insured and the insurer arising out of the policy so applied for, if the insurer has failed, at the expiration of 30 days after receipt by the insurer of written demand therefor by or on behalf of the insured, to furnish to the insured a copy of such application reproduced by any legible means.

§ 2711. Representations in applications

All statements and descriptions in any application for an insurance policy or annuity contract, by or in behalf of the insured or annuitant, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either:

(1) Fraudulent; or

(2) Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or

(3) The insurer in good faith would either not have issued the policy or contract, or would not have issued it at the same premium rate, or would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.

§ 2712. Filing; approval of forms

(a) No basic insurance policy or annuity contract form, or application form where written application is required and is to be made a part of the policy or contract, or printed rider or endorsement form or form of renewal certificate, shall be delivered, or issued for delivery in this State, unless the form has been filed with the Commissioner. This provision shall not apply to surety bonds, or to specially rated inland marine risks, nor to policies, riders, endorsements or forms of unique character designed for and used with relation to insurance upon a particular subject, or which relate to the manner of distribution of benefits or to the reservation of rights and benefits under life or health insurance policies and are used at the request of the individual policyholder, contract holder, or certificate holder. As to group insurance policies effectuated and delivered outside this State but covering persons resident in this State, the group certificates to be delivered or issued for delivery in this State shall be filed, for the Commissioner's information only, with the Commissioner at his request. As to forms for use in property, marine (other than wet marine and transportation insurance), casualty and surety insurance coverage's the filing required by this subsection may be made by rating organizations on behalf of its members and subscribers; but this provision shall not be deemed to prohibit any such member or subscriber from filing any such forms on its own behalf.

(b) Every such filing shall be made not less than 30 days in advance of any such delivery. At the expiration of such 30 days the form so filed shall be effective unless prior thereto it has been affirmatively acknowledged or disapproved by order of the Commissioner. Acknowledgment of any such form by the Commissioner shall constitute a waiver of any unexpired portion of such waiting period. The Commissioner may extend by not

more than an additional 30 days the period within which he may so affirmatively acknowledge or disapprove any such form, by giving notice to the insurer of such extension before expiration of the initial 30 days period. At the expiration of any such period as so extended, and in the absence of such prior affirmative acknowledgment or disapproval, any such form may be placed in use. The Commissioner may at any time, after notice and for cause shown, withdraw any such acknowledgment or effectiveness.

(c) Any order of the Commissioner disapproving any such form or withdrawing a previous effectiveness shall state the grounds therefor and the particulars thereof in such detail as reasonably to inform the insurer thereof. Any such withdrawal of a previously effective form shall be operative at expiration of such period, not less than 30 clays after the giving of notice of withdrawal, as the Commissioner shall in such notice prescribe.

(d) The Commissioner may, by order, exempt from the requirements of this section for so long as he deems proper any insurance document or form or type thereof as specified in such order, to which, in his opinion, this section may not practicably be applied, or the filing and review of which are, in his opinion, not desirable or necessary for the protection of the public.

(e) Appeals from orders of the Commissioner disapproving any such form or withdrawing a previous effectiveness may be taken as provided in sections 327 through 333 of this title.

§ 2713. Grounds for disapproval

The Commissioner shall disapprove any form filed under section 2712 of this chapter, or withdraw any previous effectiveness thereof, only on one or more of the following grounds:

(1) If it is in any respect in violation of or does not comply with this title.

(2) If it contains or incorporates by reference, where such incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract.

(3) If it has any title, heading, or other indication of its provisions which is misleading.

(4) As to an individual health insurance policy, if the benefits provided therein are unreasonable in relation to the premium charged, or if it contains any unjust, unfair or inequitable provision or provisions.

(0) As to a life insurance or health insurance policy, if it contains a provision or provisions such as to encourage misrepresentation.

§ 2714. Standard provisions, in general

(a) Insurance contracts shall contain such standard or uniform provisions as are required by the applicable provisions of this title pertaining to contracts of particular kinds of insurance. The Commissioner may waive the required use of a particular provision in a particular insurance policy form if:

(1) He finds such provision unnecessary for or unrelated to the protection of the insured and inconsistent with the purposes of the policy, and

(2) The policy is otherwise approved by him.

(b) No policy shall contain any provision inconsistent with or contradictory to any standard or uniform provision used or required to be used, but the Commissioner may approve any substitute provision which is, in his opinion, not less favorable in any particular to the insured or beneficiary than the provisions otherwise required.

(c) In lieu of the provisions required by this title for contracts for particular kinds of insurance, substantially similar provisions required by the law of the domicile of a foreign or alien insurer may be used when approved by the Commissioner.

(d) A policy issued by a domestic insurer for delivery in another jurisdiction may contain any provision required or permitted by the laws of such jurisdiction.

§ 2715. Charter; bylaw provisions

No policy shall contain any provision purporting to make any portion of the charter, bylaws or other constituent document of the insurer (other than the subscriber's agreement or power of attorney of a reciprocal insurer) a part of the contract unless such portion is set forth in full in the policy. Any policy provision in violation of this section shall be invalid.

§ 2716. Execution of policies

(a) Every insurance policy shall be executed in the name of and on behalf of the insurer by its officer, attorney in fact, employee, or representative duly authorized by the insurer.

(b) A facsimile signature of any such executing individual may be used in lieu of an original signature.

(c) No insurance contract heretofore or hereafter issued and which is otherwise valid shall be rendered invalid by reason of the apparent execution thereof on behalf of the insurer by the imprinted facsimile signature of an individual not authorized so to execute as of the date of the policy.

§ 2717. Underwriters' and combination policies

(a) Two or more authorized insurers may jointly issue, and shall be jointly and severally liable on, an underwriters' policy bearing their names. Any one insurer may issue policies in the name of an underwriter's department and such policy shall plainly show the true name of the insurer.

(b) Two or more insurers may, with the approval of the Commissioner, issue a combination policy which shall contain provisions substantially as follows:

(1) That the insurers executing the policy shall be severally liable for the full amount of any loss or damage, according to the terms of the policy, or for specified percentages or amounts thereof, aggregating the full amount of insurance under the policy, and

(2) That service of process, or of any notice or proof of loss required by such policy, upon any of the insurers executing the policy, shall constitute service upon all such insurers.

(c) This section shall not apply to co-surety obligations. § 2718. Validity and construction of non-complying forms

(a) A policy hereafter delivered or issued for delivery to any person in this State in violation of this title but otherwise binding on the insurer, shall be held valid, but shall be construed as provided in this title.

(b) Any condition, omission or provision not in compliance with the requirements of this title and contained in any policy, rider, or endorsement hereafter issued and otherwise valid, shall not thereby be rendered invalid but shall be construed and applied in accordance with such condition, omission or provision as would have applied had the same been in full compliance with this title.

§ 2719. Delivery of policy

In event the original policy is delivered or is so required to be delivered to or for deposit with any vendor, mortgagee, or pledgee of any motor vehicle, and in which policy any interest of the vendee, mortgagor, or pledger in or with reference to such vehicle is insured, a duplicate of such policy setting forth the name and address of the insurer, insurance classification of vehicle, type of coverage, limits of liability, premiums for the respective coverage's, and duration of the policy, or memorandum thereof containing the same such information, shall be delivered by the vendor, mortgagee, or pledgee to each such vendee, mortgagor, or pledger named in the policy or coming within the group of persons designated in the policy to be so included. If the policy does not provide coverage of legal liability for injury to persons or damage to the property of third parties, a statement of such fact shall be printed, written, or stamped conspicuously on the face of such duplicate policy or memorandum. This subsection does not apply to inland marine floater policies.

§ 2720. Assignability

A policy may be assignable or not assignable, as provided by its terms. Subject to its terms relating to assignability, a life or health insurance policy, whether heretofore or hereafter issued, under the terms of which the beneficiary may be changed upon the sole request of the insured or owner, may be assigned either by pledge or transfer of title, by an assignment executed by the insured or owner alone and delivered to the insurer, whether or not the pledgee or assignee is the insurer. Any such assignment shall entitle the insurer to deal with the assignee as the owner or pledgee of the policy in accordance with the terms of the assignment, until the insurer has received at its home office written notice of termination of the assignment or pledge, or written notice by or on behalf of some other person claiming some interest in the policy in conflict with the assignment.

§ 2721. Payment discharges insurer

Whenever the proceeds of or payments under a life or health insurance policy or annuity contract heretofore or hereafter issued become payable in accordance with the terms of such policy or contract, or the exercise of any right or privilege thereunder, and the insurer makes payment thereof in accordance therewith or in accordance with any written assignment thereof, the person then designated as being entitled thereto shall be entitled to receive such proceeds or payments and to give full acquittance therefor, and such payments shall fully discharge the insurer from all claims under the policy or contract unless, before payment is made, the insurer has received at its home office written notice by or on behalf of some other person that such other person claims to be entitled to such payment or some interest in the policy or contract.

§ 2722. Forms for proof of loss to be furnished

An insurer shall furnish, upon written request of any person claiming to have a loss under an insurance contract issued by such insurer, forms of proof of loss for completion by such person, but such insurer shall not, by reason of the requirement so to furnish forms, have any responsibility for or with reference to the completion of such proof or the manner of any such completion or attempted completion.

§ 2723. Minor may give acquittance

(a) Any minor domiciled in this State who has attained the age of 18 years shall be deemed competent to receive and to give full acquittance and discharge for a payment or payments in aggregate amount not exceeding $3,000 in any one year made by a life insurer under the maturity, death, or settlement agreement provisions in effect or elected by such minor under a life insurance policy or annuity contract, if such policy contract or agreement provides for payment to such minor. No such minor shall be deemed competent to alienate the right to or to anticipate or commute such payments. This section shall not be deemed to restrict the rights of minors set forth in section 2707 of this chapter.

(b) If a guardian of the property of any such minor is duly appointed and written notice thereof is given to the insurer at its home office, any such payment thereafter falling due shall be paid to the guardian for the account of the minor, unless the policy or contract under which the payment is made expressly provides otherwise.

(c) This section shall not be deemed to require any insurer making any such payment to determine whether any other insurer may be effecting a similar payment to the same minor.

§ 2724. Claims administration not waiver

Without limitation of any right or defense of an insurer otherwise, none of the following acts by or on behalf of an insurer shall be deemed to constitute a waiver of any provision of a policy or of any defense of the insurer thereunder:

(1) Acknowledgment of the receipt of notice of loss or claim under the policy.

(2) Furnishing forms for reporting a loss or claim, for giving information relative thereto, or for making proof of loss, or receiving or acknowledging receipt of any such forms or proofs completed or uncompleted.

(3) Investigating any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim.

§ 2725. Exemption of proceeds, life insurance

(a) If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his own life, or on another life, in favor of a person other than himself, or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance or executors ar administrators of such insured or the person so effecting such insurance, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall pre-decease such person, and such proceeds and avails shall be exempt from all liability for any debt of the beneficiary existing at the time the policy is made available for his use; Provided, that subject to the statute of limitations, the amount of any premiums for such insurance paid with intent to defraud creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy; but the insurer issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms, unless, before such payment, the insurer shall have received written notice at its home office, by or in behalf of a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors, with specifications of the amount claimed along with such facts as will assist the insurer to ascertain the particular policy.

(b) For the purposes of subsection (a) above, a policy shall also be deemed to be payable to a person other than the insured if and to the extent that a facility-of-payment clause or similar clause in the policy permits the insurer to discharge its obligation after the death of the individual insured by paying the death benefits to a person as permitted by such clause.

§ 2726. Exemption of proceeds; health insurance

Except as may otherwise be expressly provided by the policy or contract, the proceeds or avails of all contracts of health insurance and of provisions providing benefits on account of the insured's disability which are supplemental to life insurance or annuity contracts heretofore or hereafter effected shall be exempt from all liability for any debt of the insured, and from any debt of the beneficiary existing at the time the proceeds are made available for his use.

§ 2727. Exemption of proceeds; group insurance

(a) A policy of group life insurance or group health insurance or the proceeds thereof payable to the individual insured or to the beneficiary thereunder, shall not be liable, either before or after payment, to be applied by any legal or equitable process to pay any debt or liability of such insured individual or his beneficiary or of any other person having a right under the policy.

(b) This section shall not apply to group insurance issued pursuant to this title to a creditor covering his debtors, to the extent that such proceeds are applied to payment of the obligation for the purpose of which the insurance was so issued.

§ 2728. Exemption of proceeds, annuity contracts; assignability of rights

(a) The benefits, rights, privileges and options which under any annuity contract heretofore or hereafter issued are due or prospectively due the annuitant, shall not be subject to execution nor shall the annuitant be compelled to exercise any such rights, powers, or options, nor shall creditors be allowed to interfere with or terminate the contract, except:

(1) As to amounts paid for or as premium on any such annuity with intent to defraud creditors, with interest thereon, and of which the creditor has given the insurer written notice at its home office prior to the making of the payment to the annuitant out of which the creditor seeks to recover. Any such notice shall specify the amount claimed or such facts as will enable the insurer to ascertain such amount, and shall set forth such facts as will enable the insurer to ascertain the annuity contract, the annuitant and the payment sought to be avoided on the ground of fraud.

(2) The total exemption of benefits presently due and payable to any annuitant periodically or at stated times under all annuity contracts under which he is an annuitant, shall not at any time exceed $350 per month for the length of time represented by such installments, and that such periodic payments in excess of $350 per month shall be subject to garnishee execution to the same extent as are wages and salaries.

(3) If the total benefits presently due and payable to any annuitant under all annuity contracts under which he is an annuitant, shall at any time exceed payment at the rate of $350 per month, then the court may order such annuitant to pay to a judgment creditor or apply on the judgment, in installments, such portion of such excess benefits as to the court may appear just and proper, after due regard for the reasonable requirements of the judgment debtor and his family, if dependent upon him, as well as any payments required to be made by the annuitant to other creditors under prior court orders.

(b) If the contract so provides, the benefits, rights, privileges or options accruing under such contract to a beneficiary or assignee shall not be transferable nor subject to commutation, and if the benefits are payable periodically or at stated times, the same exemptions and exceptions contained herein for the annuitant, shall apply with respect to such beneficiary or assignee.

§ 2729. Retention of proceeds of policy by Company

(a) Any life insurer shall have power to hold payment of proceeds, as shall have been agreed to in writing by the insurer and the insured or beneficiary. The insurer shall not be required to segregate funds so held but may hold them as a part of its general corporate assets,

(b) The provisions of this section shall not impair or affect any rights of creditors under sections 2725 through 2728 of this chapter.

CHAPTER 29. LIFE INSURANCE AND ANNUITY CONTRACTS

§ 2901. Scope of chapter

This chapter, except as to section 2933 hereof, applies only to contracts of life insurance and annuities, other than reinsurance, group life insurance and group annuities.

§ 2902. "Annuity" defined

For this title an "annuity" is a contract under which obligations are assumed as to periodic payments for specific term or terms or where the making or continuance of all or some such payments, or the amount of any such payment, is dependent upon continuance of human life. Such a contract which includes extra benefits of kinds set forth in sections 902 ("life insurance" defined) and 903 ("health insurance" defined) of this title shall nevertheless be deemed to be an annuity if such extra benefits constitute a subsidiary or incidental part of the entire contract.

§ 2903. "Industrial life insurance" defined

For the purposes of this title "industrial life insurance" is that form of life insurance written under policies of face amount of $1,000 or less bearing the words "industrial policy" imprinted on the face thereof as part of the descriptive matter, and under which premiums are payable monthly or more often.

§ 2904. Standard provisions required

(c) No policy of life insurance, other than pure endowments with or without return of premiums or of premiums and interest, shall be delivered or issued for delivery in this State unless it contains in substance all of the applicable provisions required by sections 2905 to 2916, inclusive, of this chapter. This section shall not apply to annuity contracts nor to any provision of a life insurance policy, or contract supplemental thereto, relating to disability benefits or to additional benefits in the event of death by accident or accidental means.

(d) Any of such provisions or portions thereof not applicable to single premium or nonparticipating or term policies or insurance granted in exchange for lapsed or surrendered policies, shall to that extent not be incorporated therein.

§ 2905. Payment of premiums

There shall be a provision relating to the time and place of payment of premiums.

§ 2906. Grace period

There shall be a provision that a grace period of 30 days, or, at the option of the insurer, of one month of not less than 30 days, or of 4 weeks in the case of industrial life insurance policies the premiums for which are payable more frequently than monthly, shall be allowed within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force. The insurer may impose an interest charge not in excess of 6% per annum for the number of days of grace elapsing before the payment of the premium, and, whether or not such interest charge is imposed, if a claim arises under the policy during such period of grace the amount of any premium due or overdue, together with interest and any deferred installment of the annual premium, may be deducted from the policy proceeds. Grace shall date from the premium due date specified in the policy.

§ 2907. Entire contract

There shall be a provision that except as otherwise expressly provided by law, the policy and the application therefor, if a copy of such application is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the parties, and that all statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties.

§ 2908. Incontestability

There shall be a provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a period of not more than 2 years after its date of issue, except for (1) nonpayment of premiums, and (2) at the insurer's option, provisions relating to benefits in the event of total and permanent disability and provisions granting additional benefits specifically against death by accident or accidental means.

§ 2909. Misstatement of age

There shall be a provision that if the age of the insured or of any other person whose age is considered in determining the premium or benefit has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages.

§ 2910. Dividends

(a) There shall be a provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy provided the policy is in force and all premiums to that date are paid. Except as hereinafter provided, any dividend becoming payable shall at the option of the party entitled to elect such option be either:

(1) Payable in cash, or

(2) Applied to any one of such other dividend options as may be provided by the policy. If any such other dividend options are provided, the policy shall further state which option shall be automatically effective if such party shall not have elected some other option. If the policy specifies a period within which such other dividend option may be elected, such period shall be not less than 30 clays following the date on which such dividend is due and payable. The annually apportioned dividend shall be deemed to be payable in cash within the meaning of (1) above even though the policy provides that payment of such dividend is to be deferred for a specified period, provided such period does not exceed 6 years from the date of apportionment and that interest will be added to such dividend at a specified rate.

(b) Renewable term policies of 10 years or less may provide that the surplus accrued to such policies shall be determined and apportioned each year after the second policy year, and accumulated during each renewal period, and that at the end of the renewal period, on renewal of the policy by the insured, the insurer shall apply the accumulated surplus as an annuity for the next succeeding renewal term in the reduction of premiums.

(c) In participating industrial life insurance policies, in lieu of the provision required in subsection (a) above, there shall be a provision that, beginning not later than the end of the fifth policy year, the policy shall participate annually in the divisible surplus, if any, in the manner set forth in the policy.

(d) This section does not apply to insurance issued under nonforfeiture provisions of lapsed or surrendered policies.

§ 2911. Policy loan

(a) There shall be a provision that after 3 full years' premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will advance, on proper assignment or pledge of the policy and on the sole security thereof, at a specified rate of interest, not exceeding 6% per annum, or if payable in advance such interest shall not exceed the rate of 5.7% per annum, an amount equal to or, at the option of the party entitled thereto, less than the loan value of the policy. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, and the insurer may deduct, either from such loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining such cash surrender value including any interest then accrued but not due, any unpaid balance of the premium for the current policy year, and interest on the loan to the end of the current policy year. The policy may also provide that if interest on any indebtedness is not paid when due it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value thereof, then the policy shall terminate and become void, but not until at least 30 days' notice has been mailed by the insurer to the last address, of record with the insurer, of the insured or other policy owner and of any assignee of record at the insurer's home office. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for 6 months after application therefor. Such provision shall also contain a table showing in figures the loan values each year during the first 20 years of the policy, or during the term of the policy, whichever is shorter. The policy, at the insurer's option, may provide for automatic premium loan.

(b) This section shall not apply to term policies, or to term insurance benefits provided by rider or supplemental policy provisions or to industrial life insurance policies.

§ 2912. Table of installments

In case the policy provides that the proceeds may be payable in installments which are determinable at issue of the policy, there shall be a table showing the amounts of the guaranteed installments.

§ 2913. Reinstatement

There shall be a provision that unless:

(1) The policy has been surrendered for its cash surrender value, or

(2) Its cash surrender value has been exhausted, or

(3) The paid-up term insurance, if any, has expired.

The policy will be reinstated at any time within 3 years (or 2 years in the case of industrial life insurance policies) from the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all premiums in arrears and the payment or reinstatement of any other indebtedness to the insurer upon the policy, all with interest at a rate not exceeding 6% per annum compounded annually.

§ 2914. Payment of claims

There shall be a provision that when the benefits under the policy shall become payable by reason of the death of the insured, settlement shall be made upon receipt of due proof of death and, at the insurer's option, surrender of the policy and/or proof of the interest of the claimant. If an insurer shall specify a particular period prior to the expiration of which settlement shall be made, such period shall not exceed 2 months from the receipt of such proofs.

§ 2915. Beneficiary; industrial policies

An industrial life insurance policy shall have the name of the beneficiary designated thereon or in the application or other form if attached to the policy, with a reservation of the right to designate or change the beneficiary after the issuance of the policy, unless such beneficiary be irrevocably designated. The policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, and that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. The policy may also provide that if the beneficiary designated in the policy does not make a claim under the policy or does not surrender the policy with due proof of death within the period stated in the policy, which shall not be less than 30 days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give a valid release, then the insurer may make any payment thereunder to the executor or administrator of the insured, or to any relative of the insured by blood or legal adoption or connection by marriage, or to any person appearing to the insurer to be equitably entitled thereto by reason of having been named beneficiary, or by reason of having incurred expense for the maintenance, medical attention or burial of the insured. The policy may also include a similar provision applicable to any other payment due under the policy.

§ 2916. Title

There shall be a title on the policy, briefly describing the same.

§ 2917. Excluded or restricted coverage

A clause in any policy of life insurance providing that such policy shall be incontestable after a specified period shall preclude only a contest of the validity of the policy, and shall not preclude the assertion at any time of defenses based upon provisions in the policy which exclude or restrict coverage, whether or not such restrictions or exclusions are excepted in such clause.

§ 2918. Standard provisions--annuity and pure endowment contracts

(a) No annuity or pure endowment contract, other than reversionary annuities (also called survivorship annuities) or group annuities and except as stated herein, shall be delivered or issued for delivery in this State unless it contains in substance each of the provisions specified in sections 2919 to 2924, inclusive, of this chapter. Any of such provisions not applicable to single premium annuities or single premium pure endowment contracts shall not, to that extent, be incorporated therein.

(b) This section shall not apply to contracts for deferred annuities included in, or upon the lives of beneficiaries under, life insurance policies.

§ 2919. Grace period--annuities

In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that there shall be a period of grace of one month, but not less than 30 days, within which any stipulated payment to the insurer falling due after the first may be made, subject at the option of the insurer to an interest charge thereon at a rate to be specified in the contract but not exceeding 6% per annum for the number of days of grace elapsing before such payment, during which period of grace the contract shall continue in full force; but in case a claim arises under the contract on account of death prior to expiration of the period of grace before the overdue payment to the insurer or the deferred payments of the current contract year, if any, are made, the amount of such payments, with interest on any overdue payments, may be deducted from any amount payable under the contract in settlement.

§ 2920. Incontestability--annuities

If any statements, other than those relating to age, sex and identity are required as a condition to issuing an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, and subject to section 2922 of this chapter, there shall be a provision that the contract shall be incontestable after it has been in force during the lifetime of the person or of each of the persons as to whom such statements are required, for a period of 2 years from its date of issue, except for nonpayment of stipulated payments to the insurer; and at the option of the insurer such contract may also except any provisions relative to benefits in the event of disability and any provisions which grant insurance specifically against death by accident or accidental means.

§ 2921. Entire contract--annuities

In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the contract shall constitute the entire contract between the parties or, if a copy of the application is endorsed upon or attached to the contract when issued, a provision that the contract and the application therefor shall constitute the entire contract between the parties.

§ 2922. Misstatement of age or sex--annuities

In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that if the age or sex of the person or persons upon whose life or lives the contract is made, or of any of them has been misstated, the amount payable or benefits accruing under the contract shall be such as the stipulated payment or payments to the insurer would have purchased according to the correct age or sex and that if the insurer shall make or has made any overpayment or overpayments on account of any such misstatement, the amount thereof with interest at the rate to be specified in the contract but not exceeding 6% per annum, may be charged against the current or next succeeding payment or payments to be made by the insurer under the contract.

§ 2923. Dividends--annuities

If an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, is participating, there shall be a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the contract.

§ 2924. Reinstatement--annuities

In an annuity or pure endowment contract, other than a reversionary or group annuity, there shall be a provision that the contract may be reinstated at any time within one year from the default in making stipulated payments to the insurer, unless the cash surrender value has been paid, but all overdue stipulated payments and any indebtedness to the insurer on the contract shall be paid or reinstated with interest thereon at a rate to be specified in the contract but not exceeding 6% per annum payable annually, and in cases where applicable the insurer may also include a requirement of evidence of insurability satisfactory to the insurer.

§ 2925. Standard provisions--reversionary annuities

(a) Except as stated herein, no contract for a reversionary annuity shall be delivered or issued for delivery in this State unless it contains in substance each of the following provisions:

(1) Any such reversionary annuity contract shall contain the provisions specified in sections 2919 through 2923 of this title except that under section 2919 the insurer may at its option provide for an equitable reduction of the amount of the annuity payments in settlement of an overdue payment in lieu of providing for deduction of such payments from an amount payable upon settlement under the contract.

(2) In such reversionary annuity contracts there shall be a provision that the contract may be reinstated at any time within 3 years from the date of default in making stipulated payments to the insurer, upon production of evidence of insurability satisfactory to the insurer, and upon condition that all overdue payments and any indebtedness to the insurer on account of the contract be paid, or, within the limits permitted by the then cash values of the contract, reinstated, with interest as to both payments and indebtedness at a rate to be specified in the contract but not exceeding 6% per annum compounded annually.

(b) This section shall not apply to group annuities or to annuities included in life insurance policies, and any of such provisions not applicable to single premium annuities shall not to that extent be incorporated therein.

§ 2926. Limitation of liability

(a) No policy of life insurance shall be delivered or issued for delivery in this State if it contains any of the following provisions:

(1) A provision limiting the time within which an action at law or in equity may be commenced on such a policy to less than 3 years after the cause of action has accrued.

(2) A provision which excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status, except that a policy may contain provisions excluding or restricting coverage as specified therein in the event of death under any one or more of the following circumstances:

(i) Death as a result, directly or indirectly, of war, declared or undeclared, or of action by military forces, or of any act or hazard of such war or action, or of service in the military, naval, or air forces or in civilian forces auxiliary thereto, or from any cause while a member of such military, naval, or air forces of any country at war, declared or undeclared, or of any country engaged in such military action;

(ii) Death as a result of aviation or any air travel or flight;

(iii) Death as a result of a specified hazardous occupation or occupations or avocation;

(iv) Death while the insured is a resident outside continental United States and Canada; or

(v) Death within 2 years from the date of issue of the policy as a result of suicide, while sane or insane.

(b) A policy which contains any exclusion or restriction pursuant to subdivision (2) above, shall also provide that in the event of death under the circumstances to which any such exclusion or restriction is applicable, the insurer will pay an amount not less than a reserve determined according to the Commissioners reserve valuation method upon the basis of the mortality table and interest rate specified in the policy for the calculation of nonforfeiture benefits (or if the policy provides for no such benefits, computed according to a mortality table and interest rate determined by the insurer and specified in the policy) with adjustment for indebtedness or dividend credit.

(c) This section shall not apply to group life insurance, health insurance, reinsurance, or annuities, or to any provision in a life insurance policy or contract supplemental thereto relating to disability benefits or to additional benefits in the event of death by accident or accidental means.

(d) Nothing contained in this section shall prohibit any provision which in the opinion of the Commissioner is more favorable to the policyholder than a provision permitted by this section.

§ 2927. Prohibited provisions

(a) No life insurance policy, other than industrial life insurance, shall be delivered or issued for delivery in this State, if it contains any of the following provisions:

(1) A provision by which the policy purports to be issued or to take effect more than one year before the original application for the insurance was made.

(2) A provision for any mode of settlement at maturity of the policy of less value than the amount insured under the policy, plus dividend additions, if any, less any indebtedness to the insurer on or secured by the policy and less any premium that may by the terms of the policy be deducted.

(3) A provision to the effect that the agent soliciting the insurance is the agent of the person insured under the policy, or making the acts or representations of such agent binding upon the person so insured under the policy.

(b) No policy of industrial life insurance shall contain any of the following provisions:

(1) A provision by which the insurer may deny liability under the policy for the reason that the insured has previously obtained other insurance from the same insurer.

(0) A provision giving the insurer the right to declare the policy void because the insured has had any disease or ailment, whether specified or not, or because the insured has received institutional, hospital, medical or surgical treatment or attention, except a provision which gives the insurer the right to declare the policy void if the insured has, within 2 years prior to the issuance of the policy, received institutional, hospital, medical or surgical treatment or attention and if the insured or claimant under the policy fails to show that the condition occasioning such treatment or attention was not of a serious nature or was not material to the risk.

(3) A provision giving the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right be conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer make such contract.

§ 2928. Provisions required by law of other jurisdiction

The policies of a foreign life insurer when issued in this State may contain any provision which the law of the state, territory, district, or country under which the insurer is organized prescribes shall be in such policies, and the policies of a domestic life insurer may, when issued or delivered in any other state, territory, district, or country, contain any provisions required by the laws thereof, anything in this chapter to the contrary notwithstanding.

§ 2929. Standard nonforfeiture law

(a) In the case of policies issued on or after the operative date of this section, as defined in subsection (g) of this section, no policy of life insurance, except as stated in subsection (f) of this section, shall be issued or delivered in this State unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the Commissioner are at least as favorable to the defaulting or surrendering policyholder:

(1) That, in the event of default in any premium payment, the insurer will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of such due date, of such value as may be hereinafter specified.

(2) That, upon surrender of the policy within 60 days after the due date of any premium payment in default after premiums have been paid for at least 3 full years in the case of ordinary insurance or 5 full years in the case of industrial insurance, the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as may be hereinafter specified.

(3) That a specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make such election elects another available option not later than 60 days after the due date of the premium in default.

(4) That, if the policy shall have become paid-up by completion of all premium payments or if it is continued under any paid-up nonforfeiture benefit which became effective on or after the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the insurer will pay, upon surrender of the policy within 30 days after any policy anniversary, a cash surrender value of such amount as may be hereinafter specified.

(5) A statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary either during the first 20 policy years or during the term of the policy, whichever is shorter, such values and benefits to be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the insurer on the policy.

(6) A statement of the method to be used in calculating the cash surrender value and the paid-up nonforfeiture benefit available under the policy or any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy, with an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the insurer on the policy.

Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy.

The insurer shall reserve the right to defer the payment of any cash surrender value for a period of 6 months after demand therefor with surrender of the policy.

(b) Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary, whether or not required by subsection (a) of this section, shall be an amount not less than the excess, if any, of the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of (1) the then present value of the adjusted premiums as defined in subsections (d), (d-1) and (d-2) of this section, corresponding to premiums which would have fallen due on and after such anniversary, and (2) the amount of any indebtedness to the insurer on the policy. Any cash surrender value available within 30 days after any policy anniversary under any policy paid-up by completion of all premium payments or any policy continued under any paid-up nonforfeiture benefit, whether or not required by subsection (a) of this section, shall be an amount not less than the present value, on such anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the insurer on the policy.

(c) Any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment clue on any policy anniversary shall be such that its present value as of such anniversary shall be at least equal to the cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value which would have been required by this section in the absence of the condition that premiums shall have been paid for at least a specified period.

(d) Except as provided in the third paragraph of this subsection, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding extra premiums to cover impairments or special hazards, that the present value, at the date of issue of the policy, of all such adjusted premiums shall be equal to the sum of (1) the then present value of the future guaranteed benefits provided for by the policy; (2) 2% of the amount of insurance, if the insurance be uniform in amount, or of the equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration of the policy; (3) 40% of the adjusted premium for the first policy year; (4) 25% of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less. In applying the percentages specified in (3) and (4) above, no adjusted premium shall be deemed to exceed 4% of the amount of insurance or uniform amount equivalent thereto. The date of issue of a policy for the purpose of this subsection shall be the date as of which the rated age of the insured is determined.

In the case of a policy providing an amount of insurance varying with duration of the policy, the equivalent uniform amount thereof for the purpose of this subsection shall be deemed to be the uniform amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the date of issue as the benefits under the policy; provided, however, that in the case of a policy providing a varying amount of insurance issued on the life of a child under age 10, the equivalent uniform amount may be computed as though the amount of insurance provided by the policy prior to the attainment of age 10 were the amount provided by such policy at age 10.

The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provision shall be equal to (1) the adjusted premiums for an otherwise similar policy issued at the same age without such term insurance benefits, increased, during the period for which premiums for such term insurance benefits are payable, by (2) the adjusted premiums for such term insurance, the foregoing items (1) and (2) being calculated separately and as specified in the first two paragraphs of this subsection except that, for the purposes of (2), (3) and (4) of the first such paragraph, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in (2) shall be equal to the excess of the corresponding amount determined for the entire policy over the amount used in the calculation of the adjusted premiums in (1).

Except as otherwise provided in subsection (d-1) and (d-2) of this section, all adjusted premiums and present values referred to in this section shall for all policies of ordinary insurance be calculated on the basis of the Commissioners 1941 Standard Ordinary Mortality Table, provided that for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than 3 years younger than the actual age of the insured, and such calculations for all policies of industrial insurance shall be made on the basis of the 1941 Standard Industrial Mortality Table. All calculations shall be made on the basis of the rate of interest, not exceeding 31/2% per annum, specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may not be more than 130% of the rates of mortality according to such applicable table. For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the Commissioner.

(d-1) In the case of ordinary policies issued on or after the operative date of this subsection as defined herein, all adjusted premiums and present values referred to in this section shall be calculated on the basis of the Commissioners 1958 Standard Ordinary Mortality Table and the rate of interest, not exceeding 31/2 % per annum, specified in the policy for calculating cash surrender values and paid-up non-forfeiture benefits, provided that for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than three years younger than the actual age of the insured; provided, however, that in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1958 Extended Term Insurance Table. Provided, further, that for insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the Commissioner.

After May 21, 1959, any insurer may file with the Commissioner a written notice of its election to comply with the provisions of this subsection after a specified date before January 1, 1966. After the filing of such notice, then upon such specified date (which shall be the operative date of this subsection for such insurer), this subsection shall become operative with respect to the ordinary policies thereafter issued by such insurer. If an insurer makes no such election, the operative date of this subsection for such insurer shall be January 1, 1966.

(d-2) In the case of industrial policies issued on or after the operative date of this subsection as defined herein, all adjusted premiums and present values referred to in this section shall be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table and the rate of interest, not exceeding 31/4 % per annum, specified in the policy for calculating cash surrender values and paid-up non-forfeiture benefits. Provided, however, that in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners 1961 Industrial Extended Term Insurance Table. Provided, further, that for insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the Commissioner.

After July 7, 1964, any insurer may file with the Commissioner, a written notice of its election to comply with the provisions of this subsection after a specified date before January 1, 1968. After the filing of such notice, then upon such date (which shall be the operative date of this subsection for such insurer), this subsection shall become operative with respect to the industrial policies thereafter issued by such insurer. If an insurer makes no such election, the operative date of this subsection for such insurer shall be January 1, 1968.

(e) Any cash surrender value and any paid-up nonforfeiture benefit, available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary, shall be calculated with allowances for the lapse of time and the payment of fraction premiums beyond the last preceding policy anniversary. All values referred to in subsections (b), (c), (d), (d-1) and (d-2) of this section may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, shall be not less than the dividends used to provide such additions. Notwithstanding the provision of subsection (b) of this section, additional benefits payable (1) in the event of death or dismemberment by accident or accidental means, (2) in the event of total and permanent disability, (3) as reversionary annuity or deferred reversionary annuity benefits, (4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this section would not apply, (5) as term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child's age is 26, is uniform in amount after the child's age is one, and has not become paid-up by reason of the death of a parent of the child, and (6) as other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.

(f) This section shall not apply to any reinsurance, group insurance, pure endowment, annuity or reversionary annuity contract, nor to any term policy of uniform amount, or renewal thereof, of 15 years or less expiring before age 66, for which uniform premiums are payable during the entire term of the policy, nor to any term policy of decreasing amount on which each adjusted premium, calculated as specified in subsections (d), (d-1) and (d-2) of this section, is less than the adjusted premium so calculated, on such 15 year term policy issued at the same age and for the same initial amount of insurance, nor to any policy which shall be delivered outside this State through an agent or other representative of the insurer issuing the policy.

(g) After March 30, 1943, any insurer may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1948. After the filing of such notice, then upon such specified date (which shall be the operative date of this section for such insurer), this section shall become operative with respect to the policies thereafter issued by such insurer. If an insurer makes no such election the operative date of this section for such insurer shall be January 1, 1948.

§ 2930. (Reserved for future use)

§ 2931. Incontestability; limitation of liability after reinstatement

(a) A reinstated policy of life insurance or annuity contract may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contestability after original issuance.

(b) When any life insurance policy or annuity contract is reinstated, such reinstated policy or contract may exclude or restrict liability to the same extent that such liability could have been or was excluded or restricted when the policy or contract was originally issued, and such exclusion or restriction shall be effective from the date of reinstatement.

§ 2932. Participating, nonparticipating policies--right to issue

A life insurer may issue policies on either the participating basis or the nonparticipating basis, or on both basis, if the right or absence of right of participation is reasonably related to the premium charged and the insurer is otherwise not in violation of sections 2309 (unfair discrimination--life insurance, annuities, and health insurance) or 2310 (rebates--life, health and annuity contracts) of this title.

§ 2933. Pension, profit sharing, annuity agreements--separate accounts

(c) A domestic life insurer may establish one or more separate accounts, and may allocate thereto, in accordance with the terms of a written contract or agreement, any amounts paid to the insurer in connection with a pension, retirement or profit sharing plan or an annuity which are to be applied to provide benefits payable in fixed or in variable dollar amounts or in both.

(d) The amounts allocated to each such account and accumulations thereon may be invested and reinvested as provided in section 1322 (special investments of pension, profit sharing or annuity funds) of this title.

(c) The income, if any, and gains and losses, realized or unrealized, on each such account shall be credited to or charged against the amounts allocated to the account in accordance with the agreement, without regard to other income, gains or losses of the insurer.

(d) Assets allocated to a separate account shall be valued at their market value on the date of valuation, or if there is no readily available market, then in accordance with the terms of the applicable contract or agreement; except, that the portion of the assets of such separate account at least equal to the insurer's reserve liability with regard to the guaranteed benefits and funds referred to in section 1322 of this title, if any, shall be valued in accordance with rules otherwise applicable to the insurer's assets.

(e) If the contract or agreement provides for payment of benefits in variable amounts, it shall state the essential features of the procedure to be followed by the insurer in determining the dollar amount of such variable benefits. Any such contract or agreement and any certificate issued thereunder shall state that such dollar amount may decrease or increase and shall state in its first page that the benefits thereunder are on a variable basis.

() No insurer shall be authorized to deliver within this State any such contract or agreement providing benefits in variable amounts until the insurer has satisfied the Commissioner that its condition or methods of operation in connection with the issuance of such contracts or agreement will not render its operation hazardous to the public or its policyholders in this State. In determining the qualification of an insurer requesting such authority, the Commissioner shall consider, among other things:

(1) The history and financial condition of the insurer;

(2) The character, responsibility and general fitness of the officers and directors of the insurer; and

(3) In the case of an insurer other than a domestic insurer, whether the statutes or regulations of the jurisdiction of its incorporation provide a degree of protection to policyholders and the public substantially equal to that provided by this section and rules and regulations issued hereunder.

(g) Any domestic life insurer which establishes one or more separate accounts pursuant to subsection (a) above, may amend its charter to provide for special voting rights and procedures for such separate account contract owners giving them jurisdiction over matters relating to investment policy, investment advisory services and selection of certified public accountants, in relation to the administration of the assets in any such separate account. This provision shall not in any way affect existing laws pertaining to the voting rights of the insurer's policyholders.

(h) The Commissioner has sole authority to regulate issuance and sale of such contracts and agreements, and to make rules and regulations for effectuation of this section.

§ 2934. Prohibited policy plans

(a) No life insurer shall hereafter deliver or issue for delivery in this state:

(1) As part of or in combination with any life insurance, endowment or annuity contract, any agreement or plan, additional to the rights, dividends, and benefits arising out of any such contract, which provides for the accumulation of profits over a period of years and for payment of all or any part of such accumulated profits only to members or policyholders of a designated group or class who continue as members or policyholders until the end of a specified or ascertainable period of years.

(2) Any "registered" policy, that is, any policy (other than one "registered" as a security under applicable state or federal law) purporting to be "registered" or otherwise specially recorded, with any agency of the State of Delaware, or of any other state, or with any bank, trust company, escrow company, or other institution other than the insurer; or purporting that any reserves, assets or deposits are held, or will be so held, for the special benefit or protection of the holder of such policy, by or through any such agency or institution.

(3) Any policy or contract under which any part of the premium or of funds or values arising from the policy or contract or from investment of reserves, or from mortality savings, lapses or surrenders, in excess of the normal reserves or amounts required to pay death, endowment, and nonforfeiture benefits in respective amounts as specified in or pursuant to the policy or contract, are on a basis not involving insurance or life contingency features, (i) to be placed in special funds or segregated accounts or specially designated places or (ii) to be invested in specially designated investments or types thereof, and the funds or earnings thereon to be divided among the holders of such policies or contracts, or their beneficiaries or assignees. This provision does not apply as to any contract authorized under section 2933 of this chapter.

(4) Any policy providing for the segregation of policyholders into mathematical groups and providing benefits for a surviving policyholders arising out of the death of another policyholder of such group, or under any other similar plan.

(5) Any policy providing benefits or values for surviving or continuing policyholders contingent upon the lapse or termination of the policies of other policyholders, whether by death or otherwise.

(6) Any policy containing or referring to one or more of the following provisions or statements:

(i) Investment returns or profit-sharing, other than as a participation in the divisible surplus of the insurer under a regular participation provision as provided for in section 2910 of this chapter;

(ii) Special treatment in the determination of any dividend that may be paid as to such policy;

() Reference to premiums as "deposits;"

(i) Relating policyholder interest or returns to those of stockholders;

(ii) That the policyholder as a member of a select group will be entitled to extra benefits or extra dividends not available to policyholders generally.

(b) This section shall not be deemed to prohibit the provision, payment, allowance or apportionment of regular annual dividends or "savings" under regular participating forms of policies or contracts.

§ 2935. Registered policies, bonds--deposit

Any domestic life insurer shall deposit with the Commissioner securities of the kind required and authorized by law for the investment of life insurance funds, for the common benefit of the holders of its "registered" policies and bonds heretofore issued, which deposit shall be held by him and his successors in office, in trust for the purposes and objects specified therein.

§ 2936. Same--identification

All such registered policies or bonds of each kind and class issued shall have imprinted thereon some appropriate designating letter, combination of letters or terms identifying the special forms of contract, and whenever any change or modification is made in the forms of contracts, policy or bond, the designating letters or terms thereon shall be correspondingly changed.

§ 2937. Same--record of Commissioner--valuation

(a) The Commissioner shall prepare and keep such records of all 'registered" policies and bonds as will enable him to ascertain the reserve required thereon at any time according to the method and basis of valuation prescribed in sections 1109 through 1111 of this title. Upon sufficient proof, attested by the president or vice-president and secretary of an insurer which has issued such "registered" policies or bonds, that any of them have been commuted or terminated, the Commissioner shall commute or cancel them upon his records.

(b) On the 31st clay of December in every year, or within 60 days thereafter, the Commissioner shall cause the registered policies and bonds in force in each insurer to be carefully valued and the net reserve thereon ascertained according to the method and basis of valuation prescribed in sections 1109 through 1111 of this title, and he shall thereupon furnish a certificate of the aggregate amount of such reserve to the respective insurers. The Commissioner may employ a competent actuary to make such computation, who shall be paid by the insurer for which the services are rendered, or the Commissioner may accept the computations of any of the insurers upon such proof as he may determine.

§ 2938. Same--additional deposits

Each insurer which shall have registered policies or bonds outstanding shall make additional deposits from time to time, as the Commissioner may prescribe, in amounts of not less than $5,000, and of such securities as domestic life insurers are authorized by law to invest in, so that the market or amortized value of the securities on deposit shall always at least equal the net reserve required by the method and basis of valuation prescribed in sections 1109 through 1111 of this title, on all the registered policies and bonds in force in the insurer.

§ 2939. Same--deficient deposit

The Commissioner shall keep a careful record of the securities deposited by each insurer, and when furnishing the annual certificates of value, he shall enter thereon the amount and value of the securities deposited by such insurer. If at any time it appears from such certificates or otherwise that the value of securities held on deposit is less than the reserve required by the method and basis of valuation prescribed in sections 1109 through 1111 of this title on all the registered policies and bonds in force in such insurer, the insurer shall have made good the deficit. If the insurer fails to make good such deficit for 60 days it shall be deemed insolvent and shall be proceeded against in the manner provided by chapter 59 (rehabilitation and liquidation) of this title.

§ 2940. Same--effect of insolvency

In case an insurer having securities on deposit as to such registered policies or bonds shall be adjudged insolvent or be dissolved, the proper court shall make and enforce the necessary orders to place said securities, or any part of them, at the sole disposal of the Commissioner.

§ 2941. Same--applicability of general deposit provisions

The applicable provisions of chapter 15 of this title (administration of deposits) shall apply as to all deposits relating to such registered policies and bonds, where not inconsistent with the express provisions of sections 2935 through 2940 of this chapter.

CHAPTER 31. GROUP LIFE INSURANCE

§ 3101. Scope of chapter--short title

(a) This chapter applies only to group life insurance and "employee life insurance."

(b) This chapter may be known and cited as the "group life insurance law."

(c) Except, that this chapter shall not apply as to any group life insurance contract entered into or issued prior to the effective date of this title, or to any extensions, renewals or modifications thereof or amendments thereto whenever made.

§ 3102. Group contracts must meet group requirements

(d) No life insurance policy shall be delivered or issued for delivery in this State insuring the lives of more than one individual unless to one of the groups as provided for in sections 3103 through 3110 of this chapter, and unless in compliance with the other applicable provisions of this chapter.

(e) Subsection (a) above, shall not apply to life insurance policies:

(1) Insuring only individuals related by blood, marriage or legal adoption; or

(2) Insuring only individuals having a common interest through ownership of a business enterprise, or a substantial legal interest or equity therein, and who are actively engaged in the management thereof; or

(3) Insuring only individuals otherwise having an insurable interest in each other's lives.

§ 3103. Employee groups

The lives of a group of individuals may be insured under a policy issued to an employer, or to the trustees of a fund established by an employer, which employer or trustees shall be deemed the policyholder, to insure employees of the employer for the benefit of persons other than the employer, subject to the following requirements:

(1) The employees eligible for insurance under the policy shall be all of the employees of the employer, or all of any class or classes thereof determined by conditions pertaining to their employment. The policy may provide that the term "employees" shall include the employees of one or more subsidiary corporations, and the employees, individual proprietors, and partners of one or more affiliated corporations, proprietors or partnerships if the business of the employer and of such affiliated corporations, proprietors or partnerships is under common control through stock ownership, or contract or otherwise. The policy may provide that the term "employees" shall include the individual proprietor or partners if the employer is an individual proprietor or a partnership. The policy may provide that the term "employees" shall include retired employees. No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. No individual proprietor or partner shall be eligible for insurance under the policy unless he is actively engaged in and devotes a substantial part of his time to the conduct of the business of the proprietor or partnership. A policy issued to insure the employees of a public body may provide that the term "employees" shall include elected or appointed officials.

(2) The premium for the policy shall be paid by the policyholder, either wholly from the employer's funds or funds contributed by him, or partly from such funds and partly from funds contributed by the insured employees. No policy may be issued on which the entire premium is to be derived from funds contributed by the insured employees. A policy on which part of the premium is to be derived from funds contributed by the insured employees may be placed in force only if at least 60% of the then eligible employees, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions. A policy on which no part of the premium is to be derived from funds contributed by the insured employees must insure all eligible employees, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer.

(3) The policy must cover at least 4 employees at date of issue.

(4) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the employees or by the employer or trustees.

§ 3104. Debtor groups

The lives of a group of individuals may be insured under a policy issued to a creditor, or to a trustee or agent appointed by 2 or more creditors, which creditors, trustee or agent shall be deemed the policyholder, to insure debtors of the creditor or creditors, subject to the following requirements:

(1) The debtors eligible for insurance under the policy shall be all of the debtors of the creditor or creditors whose indebtedness is repayable either (i) in installments or (ii) in one sum at the end of a period not in excess of 18 months from the initial date of debt, or all of any class or classes thereof determined by conditions pertaining to the indebtedness or to the purchase giving rise to the indebtedness. The policy may provide that the term "debtors" shall include the debtors of one or more subsidiary corporations, and the debtors of one or more affiliated corporations, proprietors or partnerships if the business of the policyholder and of such affiliated corporations, proprietors or partnerships is under common control through stock ownership, contract or otherwise. No debtor shall be eligible unless the indebtedness constitutes an irrevocable obligation to repay which is binding upon him during his lifetime, at and from the date the insurance becomes effective upon his life.

(2) The premium for the policy shall be paid by the policyholder, either from the creditor's or creditors' funds, or from charges collected from the insured debtors, or from both. A policy on which part or all of the premium is to be derived from the collection from the insured debtors of identifiable charges not required of uninsured debtors shall not include, in the class or classes of debtors eligible for insurance, debtors under obligations outstanding at its date of issue without evidence of insurability unless at least 60% of the then eligible debtors elect to pay the required charges. A policy on which no part of the premium is to be derived from the collection of such identifiable charges must insure all eligible debtors, of all except any as to whom evidence of individual insurability is not satisfactory to the insurer.

(3) The policy may be issued only if the group of eligible debtors is then receiving new entrants at the rate of at least 100 persons yearly, or may reasonably be expected to receive at least 100 new entrants during the first policy year, and only if the policy reserves to the insurer the right to require evidence of individual insurability if less than 60% of the new entrants become insured. The policy may exclude from the classes eligible for insurance classes of debtors determined by age.

(4) The amount of the insurance on the life of any debtor shall at no time exceed the amount of the unpaid indebtedness. Where the indebtedness is repayable in one sum to the creditor or creditors, the insurance on the life of any debtor shall in no instance be in effect for a period in excess of 18 months except that such insurance may be continued for an additional period not exceeding 6 months in the case of default, extension or recasting of the loan.

(5) The insurance shall be payable to the policyholder. Such payment shall reduce or extinguish the unpaid indebtedness of the debtor to the extent of such payment.

(6) Notwithstanding the provisions of the above subsections, insurance on agricultural credit transaction commitments not exceeding 2 years in duration may be written up to the amount of the loan commitment on a non-decreasing or level term plan, and insurance on educational credit transaction commitments may be written up to the amount of the loan commitment less the amount of any repayments made on the loan.

§ 3105. Labor union groups

The lives of a group of individuals may be insured under a policy issued to a labor union, which shall be deemed the policyholder, to insure members of such union for the benefit of persons other than the union or any of its officials, representatives or agents, subject to the following requirements:

(1) The members eligible for insurance under the policy shall be all of the members of the union, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the union, or both.

(2) The premium for the policy shall be paid by the policyholder, either wholly from the union's funds, or partly from such funds and partly from funds contributed by the insured members specifically for their insurance. No policy may be issued on which the entire premium is to be derived from funds contributed by the insured members specifically for their insurance. A policy on which part of the premium is to be derived from funds contributed by the insured members specifically for their insurance may be placed in force only if at least 60% of the then eligible members, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contributions. A policy on which no part of the premium is to be derived from funds contributed by the insured members specifically for their insurance must insure all eligible members, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer.

(3) The policy must cover at least 25 members at date of issue.

(4) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the members or by the union.

§ 3106. Trustee groups

The lives of a group of individuals may be insured under a policy issued to the trustees of a fund established by 2 or more employers in the same industry or in related industries or by one or more labor unions, or by one or more employers and one or more labor unions, which trustees shall be deemed the policyholder, to insure employees of the employers or members of the unions for the benefit of persons other than the employers or the unions, subject to the following requirements:

(1) No policy may be issued to insure employees of any employer whose eligibility to participate in the fund as an employer arises out of considerations directly related to the employer being a commercial correspondent or business client or patron of another employer, except where such other employer exercises substantial control over the business operations of the participating employers.

(2) The persons eligible for insurance shall be all of the employees of the employers or all of the members of the unions, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the unions, or to both. The policy may provide that the term "employees" shall include retired employees, and the individual proprietor or partners if an employer is an individual proprietor or a partnership. No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation by performing services other than the usual duties of a director. No individual proprietor or partner shall be eligible for insurance under the policy unless he is actively engaged in and devotes a substantial part of his time to the conduct of the business of the proprietor or partnership. The policy may provide that the term "employees" shall include trustees or their employees, or both, if their duties are principally connected with such trusteeship.

(3) The premium for the policy shall be paid by the trustees wholly from funds contributed by the employer or employers of the insured persons, or by the union or unions, or by both or partly from such funds and partly from funds contributed by the insured persons. A policy on which part of the premium is to be derived from funds contributed by the insured persons specifically for their insurance may be placed in force only if at least 60% of the then eligible persons, excluding any as to whom evidence of insurability is not satisfactory to the insurer, elect to make the required contributions. A policy on which no part of the premium is to be derived from funds contributed by the insured persons specifically for their insurance must insure all eligible persons, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer.

(4) The policy must cover at date of issue at least 100 persons; and it must cover an average of not less than 3 persons per employer unit unless the policy is issued to the trustees of a fund established by employers which have assumed obligations through a collective bargaining agreement and are participating in the fund either pursuant to those obligations with regard to one or more classes of their employees which are encompassed in the collective bargaining agreement or as a method of providing insurance benefits for other classes of their employees, or unless the policy is issued to the trustees of a fund established by one or more labor unions.

(5) The amounts of insurance under the policy must be based on a plan precluding individual selection either by insured persons or by the policyholder, employers, or unions.

§ 3107. Public employee groups

The lives of a group of individuals may be insured under a policy issued to the departmental head of any department or agency of the State of Delaware and its political subdivisions, state college or university, and school districts or to an association of public employees formed for purposes other than obtaining insurance having, when the policy is placed in force, a membership in the classes eligible for insurance of not less than 60% of the employees eligible for membership in such classes, which association or departmental head shall be deemed the policyholder, to insure members of such association or public employees for the benefit of persons other than the departmental head, the association or any of its officials, subject to the following requirements:

(1) The persons eligible for insurance under the policy shall be all members of the association or employees of the department, or all of any class or classes thereof determined by conditions pertaining to their employment, or to membership in the association, or both. The policy may provide that "employees" includes retired employees.

(2) The premium for the policy shall be paid by the policyholder, either from the association's own funds, or from charges collected from the insured members or employees specifically for the insurance, or from both, or as may otherwise be authorized by existing or future legislation. Any charges collected from the insured members or employees specifically for the insurance, and the dues of the association if they include the cost of insurance, shall be collected through deductions by the employer from salaries of the members or employees. Such deductions from salary may be paid by the employer to the association or directly to the insurer. No policy may be placed in force unless at least 60% of the then eligible members of the association or employees of the department, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, have elected to be covered and have authorized their employer to make the required deductions from salary.

(3) Charges collected from the insured members or employees specifically for the insurance, and the dues of the association if they include the cost of insurance, shall be determined according to each attained age or in not less than 4 reasonably spaced attained age groups. In no event shall the rate of such dues or charges be level for all members or employees regardless of attained age.

(4) The policy must cover at least 10 persons at the date of issue.

(5) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the members, employees, or by the association.

(6) As used herein "employees" mean employees of the United States government, or of any State, or of any political subdivision or instrumentality of any of them, together with elective or appointed officials.

(7) This section does not preclude the insuring of public employees under any other applicable provision of this chapter.

§ 3108. Dependents' coverage

(a) Insurance under any group life insurance policy issued pursuant to sections 3103 (employee groups), 3105 (labor union groups), 3106 (trustee groups), and 3107 (public employee groups) of this chapter, may if 60% of the then insured employees or members who then have eligible dependents elect, be extended to insure the dependents, or any class or classes thereof, of each insured employee or member who so elects in amounts in accordance with a plan which precludes individual selection and shall not be in excess of 50% of the insurance on the life of such employee or member nor in any event in excess of $2,000 upon the life of a spouse or in excess of $1,000 upon the life of a child, or as to a child whose age at death is under 6 months, the amount shall not be in excess of $100. A "dependent" is the husband or wife of the insured employee or member and an insured employee's or member's child under 21 years of age or his child 21 years or older who is attending an educational institution and relying upon the insured employee or member for financial support.

(b) Premiums for the insurance on such dependents may be paid by the group policyholder, or by the employee or member or by the group policyholder and the employee or member jointly.

(c) A spouse pursuant to this section shall have the same conversion right as to the insurance on his or her life as is vested in the employee or member.

(d) Notwithstanding the provision of section 3118 of this chapter only one certificate need be issued for each family unit if a statement concerning any dependent's coverage is included in such certificate.

§ 3109. Credit union groups

The lives of a group of individuals may be insured under a policy issued to a credit union, which shall be deemed the policyholder, to insure eligible members of the credit union for the benefit of persons other than the credit union or its officials, subject to the following requirements:

(1) The members eligible for insurance under the policy shall be all of the members of the credit union, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer, or all of any class or classes thereof determined by conditions pertaining to their age or membership in the credit union or both.

(2) The premium for the policy shall be paid by the policyholder, either wholly from the credit union's funds, or partly from such funds and partly from funds contributed by the insured members specifically for their insurance. No policy may be issued for which the entire premium is to be derived from funds contributed by the insured members specifically for their insurance.

(3) The policy must cover at least 25 members at the date of issue.

(4) The amount of insurance under the policy shall not exceed the amount of the total shares and deposits of the member in or with the credit union.

§ 3110. Professional association groups

The lives of a group of individuals may be insured under a policy issued to the trustees of a fund established by an association of individuals licensed by the State of Delaware or authorized by law to engage in a recognized profession, which trustees shall be deemed the policyholder, to insure members of such association, or all of any class or classes thereof determined by conditions pertaining to their employment or to membership in the association, subject to the following requirements:

(5) The individuals eligible for insurance shall be all the members of the association or all of any class or classes thereof, determined by conditions pertaining to their employment or to membership in the association, or to both.

(6) The premium for the policy shall be paid by the trustees wholly from funds contributed by the association, or partly from such funds and partly from funds contributed by the insured individuals. The premiums may be paid by funds contributed by the insured individuals specifically for their insurance if the number of individuals covered by the policy exceeds 60% of the eligible individuals, excluding any as to whom evidence of insurability is not satisfactory to the insurer, and all of whom elect to make the required contribution. A policy on which no part of the premium is to be derived from funds contributed by the insured individuals specifically for their insurance must insure all eligible persons, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer.

(0) The policy must cover at date of issue at least 100 individuals, and thereafter cover not less than 60% of those eligible therefor under subdivision (1) above, excluding any as to whom evidence of insurability is not satisfactory to the insurer, subject to further requirements, if any, relating to payment of premiums as stated in subdivision (2) above.

(0) The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the insured persons or by the policyholder.

§ 3111. Provisions required in group contracts

No policy of group life insurance shall be delivered in this State unless it contains in substance the provisions set forth in sections 3111 through 3122 of this chapter or provisions which in the opinion of the Commissioner are more favorable to the persons insured, or at least as favorable to the persons insured
and more favorable to the policyholder; except however, that;

(1) Sections 3117 to 3121 of this chapter, inclusive, shall not apply to policies issued to a creditor to insure debtors of such creditor;

(2) The standard provisions required for individual life insurance policies shall not apply to group life insurance policies; and

(3) If the group life insurance policy is on a plan of insurance other than the term plan, it shall contain a nonforfeiture provision or provisions which in the opinion of the Commissioner is or are equitable to the insured persons and to the policyholder, but nothing herein shall be construed to require that group life insurance policies contain the same nonforfeiture provisions as are required for individual life insurance policies.

§ 3112. Grace period

The group life insurance policy shall contain a provision that the policyholder is entitled to a grace period of 31 days for the payment of any premium clue except the first, during which grace period the death benefit coverage shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer for the payment of a pro rata premium for the time the policy was in force during such grace period.

§ 3113. Incontestability

The group life insurance policy shall contain a provision that the validity of the policy shall not be contested, except for nonpayment of premium, after it has been in force for 2 years from its date of issue; and that no statement made by any person insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of 2 years during such person's lifetime nor unless it is contained in a written instrument signed by him.

§ 3114. Application; statements deemed representations

The group life insurance policy shall contain a provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued and become a part of the contract; that all statements made by the policyholder or by the persons insured shall be deemed representations and not warranties, and that no statement made by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or to his beneficiary.

§ 3115. Insurability

The group life insurance policy shall contain a provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage.

§ 3116. Misstatement of age

The group life insurance policy shall contain a provision specifying an equitable adjustment of premiums or of benefits or both to be made in the event the age of a person insured has been misstated, such provision to contain a clear statement of the method of adjustment to be used.

§ 3117. Payment of benefits

The group life insurance policy shall contain a provision that any sum becoming due by reason of the death of the person insured shall be payable to the beneficiary designated by the person insured, subject to the provision of the policy in the event there is no designated beneficiary, as to all or any part of such sum, living at the death of the person insured, and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of such sum not exceeding $500 to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured.

§ 3118. Certificate

The group life insurance policy shall contain a provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable, and the rights and conditions set forth in sections 3119, 3120 and 3121 of this chapter.

§ 3119. Conversion on termination of eligibility

There shall be a provision that if the insurance, or any portion of it, on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy shall be made, and the first premium paid to the insurer, within 31 clays after such termination, and provided further that:

(4) The individual policy shall, at the option of such person, be on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for the amount applied for;

(5) The individual policy shall be in an amount not in excess of the amount of life insurance which ceases because of such termination less the amount of any life insurance for which such person is or becomes eligible under the same or any other group policy within 31 clays after such termination, provided that any amount of insurance which shall have matured on or before the date of such termination as an endowment payable to the person insured, whether in one sum or in installments or in the form of an annuity, shall not, for the purposes of this provision, be included in the amount which is considered to cease because of such termination; and

(6) The premium on the individual policy shall be at the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to his age attained on the effective date of the individual policy.

§ 3120. Conversion on termination of policy

The group life insurance policy shall contain a provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of such termination whose insurance terminates and who has been so insured for at least 5 years prior to such termination date shall be entitled to have issued to him by the insurer an individual policy of life insurance, subject to the same conditions and limitations as are provided by section 3118 of this chapter, except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of:

(7) The amount of the person's life insurance protection ceasing because of the termination or amendment of the group policy, less the amount of any life insurance for which he is or becomes eligible under any group policy issued or reinstated by the same or another insurer within 31 clays after such termination; and

(8) $2,000.

§ 3121. Death pending conversion

The group life insurance policy shall contain a provision that if a person insured under the policy dies during the period within which he would have been entitled to have an individual policy issued to him in accordance with sections 3118 or 3119 of this chapter and before such an individual policy shall have become effective, the amount of life insurance which he would have been entitled to have issued to him under such individual policy shall be payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium therefor has been made.

§ 3122. Information to debtor

A policy issued to a creditor to insurance debtors of such creditor shall contain a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a form which will contain a statement that the life of the debtor is insured under the policy and that any death benefit paid thereunder by reason of his death shall be applied to reduce or extinguish the indebtedness..

§ 3123. Notice as to conversion right

If any individual insured under a group life insurance policy hereafter delivered in this State becomes entitled under the terms of such policy to have an individual policy of life insurance issued to him without evidence of insurability, subject to making of application and payment of the first premium within the period specified in such policy, and if such individual is not given notice of the existence of such right at least 15 days prior to the expiration date of such period, then, in such event the individual shall have an additional period within which to exercise such right, but nothing herein contained shall be construed to continue any insurance beyond the period provided in such policy. This additional period shall expire 15 days next after the individual is given such notice but in no event shall such additional period extend beyond 60 days next after the expiration date of the period provided in such policy. Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder shall constitute notice for the purpose of this section.

§ 3124. Readjustment of premium

Any group life insurance contract may provide for a readjustment of the premium rate based upon the experience thereunder.

§ 3125. Application of dividends; rate reductions

If a policy dividend is hereafter declared or a reduction in rate is hereafter made or continued for the first or any subsequent year of insurance under any policy of group life insurance heretofore or hereafter issued to any policyholder, the excess, if any, of the aggregate dividends or rate reductions under such policy and all other group insurance policies of the policyholder over the aggregate expenditure for insurance under such policies made from funds contributed by the policyholder, or by an employer of insured persons, or by a union or association to which the insured persons belong, including expenditures made in connection with administration of such policies, shall be applied by the policyholder for the sole benefit of insured employees or members.

§ 3126. "Employee life insurance" defined

"Employee life insurance" is that plan of life insurance, other than salary savings life insurance or pension trust insurance and annuities, under which individual policies are issued to the employees of any employer and where such policies are issued on the lives of not less than 3 employees at date of issue. Premiums for such policies shall be paid either wholly from the employer's funds, or funds contributed by him, or partly from such funds and partly from funds contributed by the insured employees.

CHAPTER 33. HEALTH INSURANCE CONTRACTS

§ 3301. Scope of chapter

Nothing in this chapter shall apply to or affect:

(1) Any policy of liability or workmen's compensation insurance with or without supplementary expense coverage therein.

(2) Any group or blanket policy.

(3) Life insurance, endowment or annuity contracts, or contracts supplemental thereto which contain only such provisions relating to health insurance as:

(i) Provide additional benefits in case of death or dismemberment or loss of sight by accident or accidental means, or as

(ii) Operate to safeguard such contracts against lapse, or to give a special surrender value or special benefit or an annuity in the event that the insured or annuitant becomes totally and permanently disabled, as- defined by the contract or supplemental contracts.

(4) Reinsurance.

§ 3302. Short title

This chapter may be cited as the "uniform health policy provisions law."

§ 3303. Scope; format of policy

No policy of health insurance shall be delivered or issued for delivery to any person in this State unless it otherwise complies with this title, and complies with the following:

(1) The entire money and other considerations therefor shall be expressed therein;

(2) The time when the insurance takes effect and terminates shall be expressed therein;

(3) It shall purport to insure only one person, except that a policy may insure, originally or by subsequent amendment, upon the application of an adult member of a family, who shall be deemed the policyholder, any 2 or more eligible members of that family, including husband, wife, dependent children or any children under a specified age which shall not exceed 19 years and any other person dependent upon the policyholder;

(0) The style, arrangement and overall appearance of the policy shall give no undue prominence to any portion of the text, and every printed portion of the text of the policy and of any endorsements or attached papers shall be plainly printed in light-faced type of a style in general use; the size of which shall be uniform and not less than ten-point with a lower case unspaced alphabet length not less than one hundred and twenty-point (the "text" shall include all printed matter except the name and address of the insurer, name or title of the policy, the brief description, if any, and captions and subcaptions);

(1) The exceptions and reductions of indemnity shall be set forth in the policy and, other than those contained in sections 3305 to 3327, inclusive, of this chapter, shall be printed, at the insurer's option, either included with the benefit provision to which they apply, or under an appropriate caption such as "Exceptions," or "Exceptions and Reductions," except that if an exception or reduction specifically applies only to a particular benefit of the policy, a statement of such exception or reduction shall be included with the benefit provision to which it applies;

(6) Each such form, including riders and endorsements, shall be identified by a form number in the lower left-hand corner of the first page thereof; and

(7) The policy shall contain no provision purporting to make any portion of the charter, rules, constitution or bylaws of the insurer a part of the policy unless such portion is set forth in full in the policy, except in the case of the incorporation of, or reference to, a statement of rates or classification of risks, or short-rate table filed with the Commissioner.

§ 3304. Required provisions; captions--omissions--substitutions

(a) Except as provided in subsection (b) below, each such policy delivered or issued for delivery to any person in this State shall contain the provision specified in sections 3305 to 3316. inclusive, of this chapter, in the words in which the same appear; except, that the insurer may, at its option, substitute for one or more of such provisions corresponding provisions of different wording approved by the Commissioner which are in each instance not less favorable in any respect to the insured or the beneficiary. Each such provision shall be preceded individually by the applicable caption shown, or, at the option of the insurer, by such appropriate individual or group captions or sub-captions as the Commissioner may approve.

(b) If any such provision is in whole or in part inapplicable to or inconsistent with the coverage provided by a particular form of policy, the insurer, with the approval of the Commissioner, shall omit from such policy any inapplicable provision or part of a provision, and shall modify any inconsistent provision or part of a provision in such manner as to make the provision as contained in the policy consistent with the coverage provided by the policy.

§ 3305. Entire contract--changes

There shall be a provision as follows:

"Entire Contract; Changes: This policy, including the endorsements and the attached papers, if any, constitutes the entire contract of insurance. No change in this policy shall be valid until approved by an executive officer of the company and unless such approval be endorsed hereon or attached hereto. No agent has authority to change this policy or to waive any of its provisions."

§ 3306. Time limit on certain defenses There shall be a provision as follows:

"Time Limit on Certain Defenses: (a) After three years from the date of issue of this policy no misstatements, except fraudulent misstatements, made by the applicant in the application for such policy shall be used to void the policy or to deny a claim for loss incurred or disability (as defined in the policy) commencing after the expiration of such three-year period."

(1) (The foregoing policy provision shall not be so construed as to affect any legal requirement for avoidance of a policy or denial of a claim during such initial three-year period, nor to limit the application of sections 3318 through 3321 of this chapter in the event of misstatement with respect to age or occupation or other insurance.)

(2) (A policy which the insured has the right to continue in force subject to its terms by the timely payment of premium (i) until at least age 50 or, (ii) in the case of a policy issued after age 44, for at least 5 years from its date of issue, may contain in lieu of the foregoing the following provision (from which the clause in parentheses may be omitted at the insurer's option) under the caption "Incontestable:"

"After this policy has been in force for a period of three years during the lifetime of the insured (excluding any period which the insured is disabled), it shall become incontestable as to the statements contained in the application.)"

"(b) No claim for loss incurred or disability (as defined in the policy) commencing after three years from the date of issue of this policy shall be reduced or denied on the ground that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date of coverage of this policy."

§ 3307. Grace period

There shall be a provision as follows:

"A grace period of . . . (insert a number not less than "7" for weekly premium policies, "10" for monthly premium policies and "31" for all other policies) days will be granted for the payment of each premium falling due after the first premium, during which grace period the policy shall continue in force."

A policy in which the insurer reserves the right to refuse any renewal shall have, at the beginning of the above provision:

"Unless not less than five days prior to the premium due date the company has delivered to the insured or has mailed to his last address as shown by the records of the company written notice of its intention not to renew this policy beyond the period for which the premium has been accepted."

§ 3308. Reinstatement

(a) There shall be a provision as follows:

"Reinstatement: If any renewal premium be not paid within the time granted the insured for payment, a subsequent acceptance of premium by the insurer or by any agent duly authorized by the company to accept such premium, without requiring in connection therewith an application for reinstatement, shall reinstate the policy; provided, however, that if the company or such agent requires an application for reinstatement and issues a conditional receipt for the premium tendered, the policy will be reinstated upon approval of such application by the company or, lacking such approval, upon the forty-fifth clay following the date of such conditional receipt unless the company has previously notified the insured in writing of its disapproval of such application. The reinstated policy shall cover only loss resulting from such accidental injury as may be sustained after the date of reinstatement and loss due to such sickness as may begin more than ten days after such date. In all other respects the insured and company shall have the same rights thereunder as they had under the policy immediately before the due date of the defaulted premium, subject to any provisions endorsed herein or attached hereto in connection with the reinstatement. Any premium accepted in connection with a reinstatement shall be applied to a period for which premium has not been previously paid, but not to any period more than sixty days prior to the date of reinstatement."

(b) The last sentence of the above provision may be omitted from any policy which the insured has the right to continue in force subject to its terms by the timely payment of premiums.

(1) Until at least age 50, or

(2) In the case of a policy issued after age 44, for at least 5 years from its date of issue.

§ 3309. Notice of claim

(a) There shall be a provision as follows:

Notice of Claim: Written notice of claim must be given to the company within twenty days after the occurrence or commencement of any loss covered by the policy, or as soon thereafter as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary to the company at (insert the location of such office as the company may designate for the purpose), or to any authorized agent of the company, with information sufficient to identify the insured, shall be deemed notice to the company."

(b) In a policy providing a loss-of-time benefit which may be payable for at least 2 years, as insurer may at its option insert the following between the first and second sentence of the above provision:

Subject to the qualifications set forth below, if the insured suffers loss of time on account of disability for which indemnity may be payable for at least two years, he shall, at least once in every six months after having given notice of the claim, give to the company notice of continuance of the disability, except in the event of legal incapacity. The period of six months following any filing of proof by the insured or any payment by the company on account of such claim or any denial of liability in whole or in part by the company shall be excluded in applying this provision. Delay in the giving of such notice shall not impair the insured's right to any indemnity which would otherwise have accrued during the period of six months preceding the date on which such notice is actually given."

§ 3310. Claim forms

There shall be a provision as follows:

Claim Forms: The company, upon receipt of a notice of claim, will furnish to the claimant such forms as are usually furnished by it for filing proofs of loss. If such forms are not furnished within fifteen days after the giving of such notice the claimant shall be deemed to have complied with the requirements of this policy as to proof of loss upon submitting, within the time fixed in the policy for filing proofs of loss, written proof covering the occurrence, the character and the extent of the loss for which claim is made.

§ 3311. Proofs of loss

There shall be a provision as follows:

Proofs of Loss; Written proof of loss must be furnished to the company at its said office in case of claim for loss for which this policy provides any periodic payment contingent upon continuing loss within ninety days after the termination of the period for which the company is liable and in case of claim for any other loss within ninety days after the date of such loss. Failure to furnish such proof within the time required shall not invalidate nor reduce any claim if it was not reasonably possible to give proof within such time, provided such proof is furnished as soon as reasonably possible and in no event, except in the absence of legal capacity, later than one year from the time proof- is otherwise required.

§ 3312. Time of payment of claims

There shall be a provision as follows:

Time of Payment of Claims: Indemnities payable under this policy for any loss other than loss for which this policy provides any periodic payment, will be paid immediately upon receipt of due written proof of such loss. Subject to due written proof of loss, all accrued indemnities for loss for which this policy provides periodic payment will be paid ___________ (insert period for payment which must not be less frequently than monthly) and any balance remaining unpaid upon the termination of liability will be paid immediately upon receipt of due written proof."

§ 3313. Payment of claims

(c) There shall be a provision as follows:

Payment of Claims: Indemnity for loss of life will be payable in accordance with the beneficiary designation and the provisions respecting such payment which may be prescribed herein and effective at the time of payment. If no such designation or provision is then effective, such indemnity shall be payable to the estate of the insured. Any other accrued indemnities unpaid at the insured's death may, at the option of the company, be paid either to such beneficiary or to such estate. All other indemnities will be payable to the insured.

(d) The following provisions, or either of them, may be included with the foregoing provision at the option of the insurer:

(1) If any indemnity of this policy shall be payable to the estate of the insured, or to an insured or beneficiary who is a minor or otherwise not competent to give a valid release, the company may pay such indemnity, up to an amount not exceeding $ (insert an amount which shall not exceed
$1,000), to any relative by blood or connection by marriage of the insured or beneficiary who is deemed by the company to be equitably entitled thereto. Any payment made by the company in good faith pursuant to this provision shall fully discharge the company to the extent of such payment.

(2) Subject to any written direction of the insured in the application or otherwise all or a portion of any indemnities provided by this policy on account of hospital, nursing, medical or surgical services may, at the company's option and unless the insured requests otherwise in writing not later than the time of filing proofs of such loss, be paid directly to the hospital or person rendering such services, but it is not required that the service be rendered by a particular hospital or person.

§ 3314. Physical examination; autopsy

There shall be a provision as follows:

Physical Examinations and Autopsy: The company at its own expense shall have the right and opportunity to examine the person of the insured when and as often as it may reasonably require during the pendency of a claim hereunder and to make an autopsy in case of death where it is not forbidden by law.

§ 3315. Legal, actions

There shall be a provision as follows:

Legal Actions: No action at law or in equity shall be brought to recover on this policy prior to the expiration of sixty days after written proof of loss has been furnished in accordance with the requirements of this policy. No such action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished.

§ 3316. Change of beneficiary

(a) There shall be a provision as follows:

Change of Beneficiary: Unless the insured make an irrevocable designation of beneficiary, the right to change the beneficiary is reserved to the insured and the consent of the beneficiary or beneficiaries shall not be requisite to surrender or assignment of this policy or to any change of beneficiary or beneficiaries, or to any other changes in this policy.

(b) The first clause of this provision, relating to the irrevocable designation of beneficiary, may be omitted at the insurer's option.

§ 3317. Optional policy provisions

Except as provided in section 3304 of this chapter, no such policy delivered or issued for delivery to any person in this State shall contain provisions respecting the matters set forth in sections 3318 to 3326, inclusive, of this chapter unless such provisions are in the words in which the same appear in the applicable section, except that the insurer may, at its option, use in lieu of any such provision a corresponding provision of different wording approved by the Commissioner which is not less favorable in any respect to the insured or the beneficiary. Any such provision contained in the policy shall be preceded individually by the appropriate caption or, at the option of the insurer, by such appropriate individual or group captions or subcaptions as the Commissioner may approve.

§ 3318. Change of occupation

There may be a provision as follows:

Change of Occupation: If the insured be injured or contract sickness after having changed his occupation to one classified by the company as more hazardous than that stated in this policy or while doing for compensation anything pertaining to an occupation so classified, the company will pay only such portion of the indemnities provided in this policy as the premium paid would have purchased at the rates and within the limits fixed by the company for such more hazardous occupation. If the insured changes his occupation to one classified by the company as less hazardous than that stated in this policy, the company upon receipt of proof of such change of occupation, will reduce the premium rate accordingly, and will return the excess pro rata unearned premium from the date of change of occupation or from the policy anniversary date immediately preceding receipt of such proof, whichever is the more recent. In applying this provision, the classification of occupational risk and the premium rates shall be such as have been last filed by the company prior to the occurrence of the loss for which the company is liable or prior to date of proof of change in occupation with the state official having supervision of insurance in the state where the insured resided at the time this policy was issued; but if such filing was not required, then the classification of occupational risk and the premium rates shall be those last made effective by the company in such state prior to the occurrence of the loss or prior to the date of proof of change in occupation.

§ 3319. Misstatement of age

There may be a provision as follows:

Misstatement of Age; If the age of the insured has been misstated, all amounts payable under this policy shall be such as the premium paid would have purchased at the correct age.

§ 3320. (Reserved for future use)

§ 3321. Overinsurance--all coverages

(a) There may be a provision as follows:

Overinsurance: If, with respect to a person covered under this policy, benefits for allowable expense incurred during a claim determination period under this policy together with benefits for allowable expense during such period under all other valid coverage (without giving effect to this provision or to any "overinsurance provision" applying to such other valid coverage), exceed the total of such person's allowable expense during such period, this company shall be liable only for such proportionate amount of the benefits for allowable expense under this policy during such period as

(1) the total allowable expense during such period bears to

(2) the total amount of benefits payable during such period for such expense under this policy and all other valid coverage (without giving effect to this provision or to any "overinsurance provision" applying to such other valid coverage) less in both (1) and (2) any amount of benefits for allowable expense payable under other valid coverage which does not contain an "over-insurance provision." In no event shall this provision operate to increase the amount of benefits for allowable expense payable under this policy with respect to a person covered under this policy above the amount which would have been paid in the absence of this provision. This company may pay benefits to any insurer providing other valid coverage in the event of overpayment by such insurer. Any such payment shall discharge the liability of this company as fully as if the payment had been made directly to the insured, his assignee or his beneficiary. In the event that this company pays benefits to the insured, his assignee or his beneficiary, in excess of the amount which would have been payable if the existence of other valid coverage had been disclosed, this company shall have a right of action against the insured, his assignee or his beneficiary, to recover the amount which would not have been paid had there been a disclosure of the existence of the other valid coverage. The amount of other valid coverage which is on a provision of service basis shall be computed as the amount the services rendered would have cost in the absence of such coverage.

For the purposes of this provision:

(3) "allowable expense" means 110% of any necessary, reasonable and customary item of expense which is covered, in whole or in part, as a hospital, surgical, medical or major medical expense under this policy or under any other valid coverage.

(4) "claim determination period" with respect to any covered person means the initial period of (insert period of not less than 30 days) and each successive period of a like number of days, during which allowable expense covered under this policy is incurred on account of such person. The first such period begins on the date when the first such expense is incurred, and successive periods shall begin when such expense is incurred after expiration of a prior period.

or, in lieu thereof:

"claim determination period" with respect to any covered person means each _________ (insert calendar or policy period of not less than a month) during which allowable expense covered under this policy is incurred on account of such person.

(5) "overinsurance provision" means this provision and any other provision which may reduce an insurer's liability because of the existence of benefits under other valid coverage.

(b) The foregoing policy provisions may be inserted in all policies providing hospital, surgical, medical or major medical benefits. The insurer may make this provision applicable to either or both (1) other valid coverage with other insurers and (2), other valid coverage with the same insurer. The insurer shall include in this provision a definition of "other valid coverage" approved as to form by the Commissioner. Such term may include hospital, surgical, medical or major medical benefits provided by group, blanket or franchise coverage, individual and family-type coverage. Blue Cross-Blue Shield coverage and other prepayment plans, group practice and individual practice plans, uninsured benefits provided by labor-management trusteed plans, or union welfare plans, or by employer or employee benefit organizations, benefits provided under governmental programs, workmen's compensation insurance or any coverage required or provided by any other statute, and medical payments under automobile liability and personal liability policies. Other valid coverage shall not include payments made under third party liability coverage as a result of a determination of negligence, but an insurer may at its option include a subrogation clause in its policy. The insurer may require, as part of the proof of claim, the information necessary to administer this provision.

(c) If by application of any of the foregoing provisions the insurer effects a material reduction of benefits otherwise payable under the policy, the insurer shall refund to the insured any premium unearned on the policy by reason of such reduction of coverage subject to the insurer's right to provide in the policy that no such reduction of benefits or refund will be made unless the unearned premium to be so refunded amounts to $5 or such larger sum as the insurer may specify.

§ 3322. Relation of earnings to insurance

(a) There may be a provision as follows:

After the loss-of-time benefit of this policy has been payable for 90 days, such benefit will be adjusted, as provided below, if the total amount of unadjusted loss-of-time benefits provided in all valid loss-of-time coverage upon the insured should exceed % of the insured's earned income; provided, however, that if the information contained in the application discloses that the total amount of loss-of-time benefits under this policy and under all other valid loss-of-time coverage expected to be effective upon the insured in accordance with the application for this policy exceeded % of the insured's earned income at the time of such application, such higher percentage will be used in place of %. Such adjusted loss-of time benefit under this policy for any month shall be only such proportion of the loss-of-time benefit otherwise payable under this policy as

(1) the product of the insured's earned income and ___ % (or, if higher the alternative percentage described at the end of the first sentence of this provision) bears to

(2) the total amount of loss-of-time benefits payable for such month under this policy and all other valid loss-of-time coverage on the insured (without giving effect to the "overinsurance provision" in this or any other coverage) less in both (1) and (2) any amount of loss-of-time benefits payable under other valid loss-of-time coverage which does not contain an "over-insurance provision." In making such computation, all benefits and earnings shall be converted to a consistent (insert "weekly" if the loss-of-time benefit of this policy is payable weekly, "monthly" if such benefit is payable monthly, etc.) basis. If the numerator of the foregoing ratio is zero or is negative, no benefit shall be payable under this policy. In no event shall this provision (i) operate to reduce the total combined amount of loss-of-time benefits for such month payable under this policy and all other valid loss-of-time coverage below the lesser of $300 and the total combined amount of loss-of-time benefits determined without giving effect to any "overinsurance provision", nor (ii) operate to increase the amount of benefits payable under this policy above the amount which would have been paid in the absence of this provision, nor (iii) take into account or operate to reduce any benefit other than the loss-of-time benefit.

For purposes of this provision:

(A) "earned income", except where otherwise specified, means the greater of the monthly earnings of the insured at the time disability commences and his average monthly earnings for a period of two years immediately preceding the commencement of such disability, and shall not include any investment income or any other income not derived from the insured's vocational activities.

(B) "overinsurance provision" shall include this provision and any other provision with respect to any loss-of-time coverage which may have the effect of reducing an insurer's liability if the total amount of loss-of-time benefits under all coverage exceeds a stated relationship to the insured's earnings.

(b) The foregoing provision may be included only in a policy which provides a loss-of-time benefit which may be payable for at least 52 weeks, which is issued on the basis of selective underwriting of each individual application, and for which the application includes a question designed to elicit information necessary either to determine the ratio of the total loss-of-time benefits of the insured to the insured's earned income or to determine that such ratio does not exceed the percentage of earnings, not less than 60% selected by the insurer and inserted in lieu of the blank factor above. The insurer may require, as part of the proof of claim, the information necessary to administer this provision. If the application indicates that other loss-of-time coverage is to be discontinued, the amount of such other coverage shall be excluded in computing the alternative percentage in the first sentence of the overinsurance provision. The policy shall include a definition of "valid loss-of-time coverage," approved as to form by the Commissioner, which definition may include coverage provided by governmental agencies and by organization subject to regulation by insurance law and by insurance authorities of this or any other state of the United States or of any other country or subdivision thereof, coverage provided for such insured pursuant to any disability benefits statute or any workmen's compensation or employer's liability statute, benefits provided by labor-management trusteed plans or union welfare plans or by employer or employee benefit organizations, or by salary continuance or pension programs, and any other coverage the inclusion of which may be approved by the Commissioner.

(c) If by application of any of the foregoing provisions the insurer effects a material reduction of benefits otherwise payable under the policy, the insurer shall refund to the insured any premium unearned on the policy by reason of such reduction of coverage subject to the insurer's right to provide in the policy that no such reduction of benefits or refund will be made unless the unearned premium to be so refunded amounts to $5.00 or such larger sum as the insurer may so specify.

§ 3323. Unpaid premiums

There may be a provision as follows:

Unpaid Premium: Upon the payment of a claim under this policy, any premium then due and unpaid or covered by any note or written order may be deducted therefrom.

§ 3324. Conformity with state statutes

There may be a provision as follows:

Conformity with State Statutes: Any provision of this policy which, on its effective date is in conflict with the statutes of the state in which the insured resides on such date is hereby amended to conform to the minimum requirements of such statutes.

§ 3325. Illegal occupation

There may be a provision as follows:

Illegal Occupation. The company shall not be liable for any loss to which a contributing cause was the insured's commission of or attempt to commit a felony or to which a contributing cause was the insured's being engaged in an illegal occupation.

§ 3326. Intoxicants and narcotics

There may be a provision as follows:

Intoxicants and Narcotics: The company shall not be liable for any loss sustained or contracted in consequence of the insured's being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.

§ 3327. Renewability

Health insurance policies, other than accident insurance only policies, in which the insurer reserves the right to refuse renewal on an individual basis, shall provide in substance in a provision thereof or in an endorsement thereon or rider attached thereto that subject to the right to terminate the policy upon nonpayment of premium when due, such right to refuse renewal may not be exercised so as to take effect before the renewal date occurring on, or after and nearest, each policy anniversary (or in the case of lapse and reinstatement, at the renewal date occurring on, or after and nearest, each anniversary of the last reinstatement), and that any refusal of renewal shall be without prejudice to any claim originating while the policy is in force. (The parenthetic reference to lapse and reinstatement may be omitted at the insurer's option.)

§ 3328. Order of certain provisions

The provisions which are the subject of sections 3305 to 3327, inclusive, of this chapter, or any corresponding provisions which are used in lieu thereof in accordance with such sections shall be printed in the consecutive order of the provisions in such sections or, at the option of the insurer, any such provision may appear as a unit in any part of the policy, with other provisions to which it may be logically related, provided that the resulting policy shall not be in whole or in part unintelligible, uncertain, ambiguous, abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued.

§ 3329. Third party ownership

The word "insured", as used in this chapter, shall not be construed as preventing a person other than the insured with a proper insurable interest from making application for and owning a policy covering the insured or from being entitled under such a policy to any indemnities, benefits, and rights provided therein.

§ 3330. Requirements of other jurisdictions

(a) Any policy of a foreign or alien insurer, when delivered or issued for delivery to any person in this State, may contain any provision which is not less favorable to the insured or the beneficiary than the provisions of this chapter and which is prescribed or required by the law of the state or country under which the insurer is organized.

(b) Any policy of a domestic insurer may, when issued for delivery in any other state or country, contain any provision permitted or required by the laws of such other state or country.

§ 3331. Policies issued for delivery in another state

If any policy is issued by a domestic insurer for delivery to a person residing in another state, and if the Insurance Commissioner or corresponding public official of such other state has informed the Commissioner that any such policy is not subject to approval or disapproval by such official, the Commissioner may by ruling require that the policy meet the standards set forth in sections 3303 to 3330, inclusive, of this chapter.

§ 3332. Conforming to statute

(a) No policy provision which is not subject to this chapter shall make a policy, or any portion thereof, less favorable in any respect to the insured or the beneficiary than the provisions thereof which are subject to this chapter.

(b) A policy delivered or issued for delivery to any person in this State in violation of this chapter shall be held valid but shall be construed as provided in this chapter. When any provision in a policy subject to this chapter is in conflict with any provision of this chapter, the rights, duties, and obligations of the insurer, the insured and the beneficiary shall be governed by the provisions of this chapter.

§ 3333. Age limit

If any such policy contains a provision establishing, as an age limit or otherwise, a date after which the coverage provided by the policy will not be effective, and if such date falls within a period for which premium is accepted by the insurer or if the insurer accepts a premium after such date, the coverage provided by the policy will continue in force until the end of the period for which premium has been accepted. In the event the age of the insured has been misstated and if, according to the correct age of the insured, the coverage provided by the policy would not have become effective, or would have ceased prior to the acceptance of such premium or premiums, then the liability of the insurer shall be limited to the refund, upon request, of all premiums paid for the period not covered by the policy.

§ 3334. Filing of rates

Each insurer issuing health insurance policies for delivery in this State shall, before use thereof, file with the Commissioner its premium rates and classification of risks pertaining to such policies. The insurer shall adhere to its rates and classifications as filed with the Commissioner. The insurer may change such filings from time to time as it deems proper.

§ 3335. Franchise health insurance law

Health insurance on a franchise plan is hereby declared to be that form of health insurance issued to:

(1) Three or more employees of any corporation, co-partnership, or individual employer or any governmental corporation, agency or department thereof; or

(2) Ten or more members, employees or employees of members of any trade or professional association or of a labor union or of any other association having had an active existence for at least 2 years where such association or union has a constitution or bylaws and is formed in good faith for purposes other than that of obtaining insurance; where such persons with or without their dependents, are issued the same form of an individual policy varying only as to amounts and kinds of coverage applied for by such persons under an arrangement whereby the premiums on such policies may be paid to the insurer periodically by the employer, with or without payroll deductions, or by the association or union for its members, or by some designated person acting on behalf of such employer or association or union. The term "employees" as used herein may be deemed to include the officers, managers and employees and retired employees of the employer and the individual proprietor or partners if the employer is an individual proprietor or partnership.

CHAPTER 35. GROUP AND BLANKET HEALTH INSURANCE

§ 3501. Scope of chapter--short title

(a) This chapter applies only to group health insurance contracts and to blanket health insurance contracts as herein provided for.

(b) This chapter may be cited as the "group or blanket health insurance law."

(c) This chapter shall not apply as to any group health insurance contract made or issued prior to the effective date of this Act or to any extensions, renewals, reinstatements, or modifications thereof or amendments thereto whenever made.

§ 3502. "Group health insurance" defined--eligible groups

"Group health insurance" is hereby declared to be that form of health insurance covering groups of persons as defined below, with or without one or more members of their families or one or more of their dependents, or covering one or more members of the families or one or more dependents of such groups of persons, and issued upon the following basis:

(1) Under a policy issued to an employer or trustees of a fund established by an employer, who shall be deemed the policyholder, insuring employees of such employer for the benefit of persons other than the employer. The term "employees" as used herein shall be deemed to include the officers, managers, and employees of the employer, the individual proprietor or partner if the employer is an individual proprietor or partnership, the officers, managers, and employees of subsidiary or affiliated corporations, the individual proprietors, partners and employees of individuals and firms, if the business of the employer and such individual or firm is under common control through stock ownership, contract, or otherwise. The term "employees" as used herein may include retired employees. A policy issued to insure employees of a public body may provide that the term "employees" shall include elected or appointed officials. The policy employees" shall include elected or appointed officials. The policy may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship.

(2) Under a policy issued to an association, including a labor union, which shall have a constitution and bylaws and which has been organized and is maintained in good faith for purposes other than that of obtaining insurance, insuring members, employees, or employees of members of the association for the benefit of persons other than the association or its officers or trustees. The term "employees" as used herein may include retired employees.

(3) Under a policy issued to the trustees of a fund established by 2 or more employers in the same or related industry or by one or more labor unions or by one or more employers and one or more labor unions or by an association as defined in subdivision (2) above, which trustees shall be deemed the policyholder, to insure employees of the employers or members of the unions or of such association, or employees of members of such association, for the benefit of persons other than the employers or the unions or such association. The term "employees" as used herein may include the officers, managers and employees of the employer, and the individual proprietor or partners if the employer is an individual proprietor or partnership. The term "employees" as used herein may include retired employees. The policy may provide that the term "employees" shall include the trustees or their employees, or both, if their duties are principally connected with such trusteeship.

(4) Under a policy issued to any person or organization to which a policy of group life insurance may be issued or delivered in this State to insure any class or classes of individuals that could be insured under such group life policy.

(5) Under a policy issued to cover any other substantially similar group which, in the discretion of the Commissioner, may be subject to the issuance of a group health policy or contract.

(6) Any group health policy which contains provisions for the payment by the insurer of benefits for expenses incurred on account of hospital, nursing, medical, or surgical services for members of the family or dependents of a person in the insured group may provide for the continuation of such benefit provisions, or any part or parts thereof, after the death of the person in the insured group.

§ 3503. Required provisions in group policies

Each such group health insurance policy shall contain in substance the following provisions:

(1) A provision that, in the absence of fraud, all statements made by applicants or the policyholders or by an insured person shall be deemed representations and not warranties, and that no statement made for the purpose of effecting insurance shall void such insurance or reduce benefits unless contained in a written instrument signed by the policyholder or the insured person, a copy of which has been furnished to such policyholder or to such person or his beneficiary.

(2) A provision that the insurer will furnish to the policyholder for delivery to each employee or member of the insured group, a statement in summary form of the essential features of the insurance coverage of such employee or member and to whom benefits thereunder are payable. If dependents are included in the coverage, only one statement need be issued for each family unit.

(3) A provision that to the group originally insured may be added from time to time eligible new employees or members or dependents, as the case may be, in accordance with the terms of the policy.

§ 3504. Direct payment of hospital, medical services

Any group health policy may provide that all or any portion of any indemnities provided by any such policy on account of hospital, nursing, medical or surgical services may, at the insurer's option, be paid directly to the hospital or person rendering such services; but the policy may not require that the service be rendered by a particular hospital or person. Payments so made shall discharge the insurer's obligation with respect to the amount of insurance so paid.

§ 3505. Readjustment of premiums--dividends

Any contract of group health insurance may provide for the readjustment of the rate of premium based upon the experience thereunder. If a policy dividend is hereafter declared or a reduction in rate is hereafter made or continued for the first or any subsequent year of insurance under any policy of group health insurance heretofore or hereafter issued to any policyholder, the excess, if any, of the aggregate dividends or rate reductions under such policy and all other group insurance policies of the policyholder over the aggregate expenditure for insurance under such policies made from funds contributed by the policyholder, or by an employer or insured persons, or by a union or association to which the insured persons belong, including expenditures made in connection with administration of such policies, shall be applied by the policyholders for the sole benefit of insured employees or members.

§ 3506. "Blanket health insurance" defined

Blanket health insurance is hereby declared to be that form of health insurance covering groups of persons as enumerated in one of the following subdivisions:

(1) Under a policy or contract issued to any common carrier or to any operator, owner or lessee of a means of transportation, who or which shall be deemed the policyholder, covering a group of persons who may become passengers defined by reference to their travel status on such common carrier or such means of transportation.

(2) Under a policy or contract issued to an employer, who shall be deemed the policyholder, covering any group of employees, dependents or guests, defined by reference to specified hazards incident to an activity or activities or operations of the policyholder.

(3) Under a policy or contract issued to a college, school or other institution of learning, a school district or districts, or school jurisdictional unit, or to the head, principal or governing board of any such educational unit, who or which shall be deemed the policyholder, covering students, teachers, or employees.

(4) Under a policy or contract issued to any religious, charitable, recreational, educational, or civic organization, or branch thereof, which shall be deemed the policyholder, covering any group of members or participations defined by reference to specified hazards incident to an activity or activities or operations sponsored or supervised by such policyholder.

(5) Under a policy or contract issued to a sports team, camp or sponsor thereof, which shall be deemed the policyholder, covering members, campers, employees, officials or supervisors.

(6) Under a policy or contract issued to any volunteer fire department, first aid, civil defense, or other such volunteer organization, which shall be deemed the policyholder, covering any group of members or participants defined by reference to specified hazards incident to any activity or activities or operations sponsored or supervised by such policyholder.

(7) Under a policy or contract issued to a newspaper or other publisher, which shall be deemed the policyholder, covering its carriers.

(8) Under a policy or contract issued to an association, including a labor union, which has a constitution and bylaws and which has been organized and is maintained in good faith for purposes other than that of obtaining insurance, which shall be deemed the policyholder, covering any group of members or participants defined by reference to specified hazards incident to an activity or activities or operations sponsored or supervised by such policyholder.

(9) Under a policy or contract issued to cover any other risk or class of risks which, in the discretion of the Commissioner, may be properly eligible for blanket health insurance. The discretion of the Commissioner may be exercised on an individual risk basis or class of risks, or both.

§ 3507. Filing and required provisions in blanket policies

Any insurer authorized to write health insurance in this State shall have the power to issue blanket health insurance. No such blanket policy, except as provided in section 2711(d) of this title, may be issued or delivered in this State unless a copy of the form thereof shall have been filed in accordance with such section 2711. Every such blanket policy shall contain provisions which in the opinion of the Commissioner are not less favorable to the policyholder and the individual insured than the following:

(3) A provision that the policy, including endorsements, a copy of the application, if any, of the policyholder and the persons insured shall constitute the entire contract between the parties, and that any statement made by the policyholder or by a person insured shall in absence of fraud, be deemed a representation and not a warranty, and that no such statements shall be used in defense to a claim under the policy, unless contained in a written application. Such person, his beneficiary, or assignee, shall have the right to make written request to the insurer for a copy of such application and the insurer shall, within 15 days after the receipt of such request at its home office or any branch office of the insurer, deliver or mail to the person making such request a copy of such application. If such copy shall not be so delivered or mailed, the insurer shall be precluded from introducing such application as evidence in any action based upon or involving any statements contained therein.

(0) A provision that written notice of sickness or of injury must be given to the insurer within 20 days after the date when such sickness or injury occurred. Failure to give notice within

such time shall not invalidate nor reduce any claim if it shall be shown not to have been reasonably possible to give such notice and that notice was given as soon as was reasonably possible.

(3) A provision that the insurer will furnish either to the claimant or to the policyholder for delivery to the claimant such forms as are usually furnished by it for filing proof of loss. If such forms are not furnished before the expiration of 15 days after giving of such notice, the claimant shall be deemed to have complied with the requirements of the policy as to proof of loss upon submitting, within the time fixed in the policy for filing proof of loss, written proof covering the occurrence, the character and the extent of the loss for which claim is made.

(0) A provision that in the case of claim for loss of time for disability, written proof of such loss must be furnished to the insurer within 90 days after the commencement of the period for which the insurer is liable, and that subsequent written proofs of the continuance of such disability must be furnished to the insurer at such intervals as the insurer may reasonably require, and that in the case of claim for any other loss, written proof of such loss must be furnished to the insurer within 90 days after the date of such loss. Failure to furnish such proof within such time shall not invalidate nor reduce any claim if it shall be shown not to have been reasonably possible to furnish such proof and that such proof was furnished as soon as was reasonably possible.

(1) A provision that all benefits payable under the policy other than benefits for loss of time will be payable immediately upon receipt of due written proof of such loss, and that, subject to due proof of loss, all accrued benefits payable under the policy for loss of time will be paid not less frequently than monthly during the continuance of the period for which the insurer is liable, and that any balance remaining unpaid at the termination of such period will be paid immediately upon receipt of such proof.

(2) A provision that the insurer at its own expense, shall have the right and opportunity to examine the person of the insured when and so often as it may reasonably require during the pendency of claim under the policy and also the right and opportunity to make an autopsy where it is not prohibited by law.

(7) A provision that no action at law or in equity shall be brought to recover under the policy prior to the expiration of 60 days after written proof of loss has been furnished in accordance with the requirements of the policy and that no such action shall be brought after the expiration of 3 years after the time written proof of loss is required to be furnished.

§ 3508. Application and certificates not required

An individual application need not be required from a person covered under a blanket health policy or contract, nor shall it be necessary for the insurer to furnish each person a certificate.

§ 3509. Payment of benefits under blanket policy

All benefits under any blanket health policy or contract shall be payable to the person insured, or to his designated beneficiary or beneficiaries, or to his estate, except that if the person insured be a minor or otherwise not competent to give a valid release, such benefits may be made payable to his parent, guardian or other person actually supporting him. Except, however, that the policy may provide that all or a portion of any indemnities provided by any such policy on account of hospital, nursing, medical or surgical services may, at the option of the insurer and unless the insured requests otherwise in writing not later than the time of filing proofs of such loss, be paid directly to the hospital or person rendering such services; but the policy may not require that the service be rendered by a particular hospital or person. Payment so made shall discharge the obligation of the insurer with respect to the amount of insurance so paid.

CHAPTER 37 CREDIT LIFE AND HEALTH INSURANCE

§ 3701. Scope of chapter

(a) All life insurance and all health insurance in connection with loans or other credit transactions shall be subject to the provisions of this chapter; except, that insurance in connection with a loan or other credit transaction of 5 years duration or more shall not be subject to this chapter, nor shall insurance be subject to this chapter where the issuance thereof is an isolated transaction on the part of the insurer not related to an agreement or plan or regular course of conduct for insuring debtors of the creditor.

(b) Except as provided in section 3707 (f) hereof, this chapter shall not apply as to any contract made or issued prior to January 1, 1969, or to any extensions, renewals, reinstatements, or modifications thereof or amendments thereto when ever made.

§ 3702. Definitions

For the purposes of this chapter;

(1) "Credit life insurance" means insurance on the life of a debtor pursuant to or in connection with a specific loan or other credit transaction.

(2) "Credit health insurance" means insurance on a debtor to provide indemnity for payments becoming due on a specific loan or other credit transaction while the debtor is disabled as defined in the policy.

(3) "Creditor" means the lender of money or vendor of goods, services or property, including a lessor under a lease intended as a security, rights or privileges, for which payment is arranged through a credit transaction, or any successor to the right, title or interest of any such lender or vendor, and an affiliate, associate or subsidiary of any of them or any director, officer or employee of any of them or any other person in any way associated with any of them.

(4) "Debtor" means a borrower of money or a purchaser or lessee of goods, services, property, rights or privileges for which payment is arranged through a credit transaction.

(5) "Indebtedness" means the total amount payable by a debtor to a creditor in connection with a loan or other credit transaction.

§ 3703. Forms of credit life insurance and credit health insurance

Credit life insurance and credit health insurance shall be issued only in the following forms:

(6) Individual policies of life insurance issued to debtors on the term plan.

(7) Individual policies of health insurance issued to debtors on a term plan, or disability benefit provisions in individual policies of credit life insurance.

(8) Group policies of life insurance issued to creditors providing insurance upon the lives of debtors on the term plan.

(9) Group policies of health insurance issued to creditors on a term plan insuring debtors, or disability benefit provisions in group credit life insurance policies to provide such coverage.

§ 3704. Amounts of insurance (a) Credit life insurance:

(10) The amount of credit life insurance shall not exceed the initial indebtedness, however the indebtedness may be repayable.

(11) In cases where an indebtedness is repayable in substantially equal installments, the amount of insurance shall at no time exceed the scheduled or actual amount of unpaid indebtedness, whichever is greater.

(12) Not withstanding the provisions of (1) or (2) above, insurance on agricultural credit transactions not exceeding two years in duration may be written up to the amount of the loan commitment on a nondecreasing or level term plan.

(13) Notwithstanding the provisions of (1) and (2) above, or any other subsection, insurance on educational credit transaction commitments may be written for the amount of the portion of such commitment that has not been advanced by the creditor.

(b) Credit health insurance: The total amount of indemnity payable by credit health insurance in the event of disability, as defined in the policy, shall not exceed the aggregate of the periodic scheduled unpaid installments of the indebtedness; and the amount of each periodic indemnity payment shall not exceed the original indebtedness divided by the number, of periodic installments.

§ 3705. Term of insurance

The term of any credit life insurance or credit health insurance shall, subject to acceptance by the insurer, commence on the date when the debtor becomes obligated to the creditor, or the date when the debtor applies for such insurance, whichever is later, except that, where a group policy provides coverage with respect to the existing obligations, the insurance on a debtor with respect to such indebtedness shall commence on the effective date of the policy. Where evidence of insurability is required and such evidence is furnished more than 30 days after the date when the debtor becomes obligated to the creditor, the term of the insurance may commence on the date on which the insurer determines the evidence to be satisfactory, and in such event there shall be an appropriate refund or adjustment of any charge to the debtor for insurance. The term of such insurance shall not extend more than 15 days beyond the scheduled maturity date of the indebtedness except when extended without additional cost to the debtor. If the indebtedness is discharged due to renewal or refinancing prior to the scheduled maturity date, the insurance in force shall be terminated before any new insurance may be issued in connection with the renewed or refinanced indebtedness. In all cases of termination prior to scheduled maturity, a refund shall be paid or credited as provided in section 3708 of this chapter.

§ 3706. Provisions of policies and certificates of insurance--disclosure to debtors

(a) All credit life insurance and credit health insurance shall be evidenced by an individual polity, or in the case of group insurance by a certificate of insurance, which individual policy or group certificate shall be delivered to the debtor.

(b) Each individual policy or group certificate of credit life insurance and/or credit health insurance shall, in addition to other requirements of law, set forth the name and home office address of the insurer, and the identity of the person or persons insured, by name in the case of individual policies, the rate or amount of payment, if any, by the debtor separately for credit life insurance and credit health insurance, a description of the amount, term and coverage including any exceptions, limitations and restrictions, and shall state that the benefits shall be paid to the creditor to reduce or extinguish the unpaid indebtedness and, wherever the amount of insurance may exceed the unpaid indebtedness, that any such excess shall be payable to a beneficiary, other than the creditor, named by the debtor or to his estate.

(c) The individual policy or group certificate of insurance shall be delivered to the insured debtor at the time the indebtedness is incurred except as hereinafter provided.

() If a debtor makes a separate payment for credit life or credit health insurance and an individual policy or group certificate of insurance is not delivered to the debtor at the time the indebtedness is incurred, a copy of the application for such policy or a notice of proposed insurance shall be delivered at such time to the debtor. The copy of the application for, or notice of proposed insurance, shall be signed by the debtor and shall set forth the identity by name or otherwise of the person or persons insured, the rate or amount of payment by the debtor, if any, separately for credit life insurance and credit health insurance, and a statement that within 30 days, if the insurance is accepted by the insurer, there will be delivered to the debtor an individual policy or group certificate of insurance containing the name and home office address of the insurer, a description of the amount, term and coverage including any exceptions, limitations and restrictions. The copy of the application for, or notice of proposed insurance, shall also refer exclusively to insurance coverage, and shall be separate and apart from the loan, sale or other credit statement of account, instrument or agreement, unless the information required by this subsection is prominently set forth therein. Upon acceptance of the insurance by the insurer and with 30 days of the date upon which the indebtedness is incurred, the insurer shall cause the individual policy or group certificate of insurance to be delivered to the debtor. Such application or notice of proposed insurance shall state that upon acceptance by the insurer, the insurance shall become effective as provided in section 3705 of this chapter.

(c) If the named insurer does not accept the risk, then and in such event the debtor shall receive a policy or certificate of insurance setting forth the name and home office of the substituted insurer and the amount of the premium to be charged, and if the amount of premium is less than that set forth in the notice of proposed insurance an appropriate refund shall be made.

§ 3707. Filing; effectiveness and withdrawal

(a) All policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders delivered or issued for delivery in this State and the schedule of premium rates pertaining thereto shall be filed with the Commissioner.

() The Commissioner shall within 30 days after the filing of any such policies, certificates of insurance, notices of proposed insurance, applications for insurance, endorsements and riders, disapprove any such form if the premium rates charged or to be charged are excessive in relation to benefits, or if it contains provisions which are unjust, unfair, inequitable, misleading, deceptive or encourage misrepresentation of the coverage, or are contrary to any provision of this title or of any rule or regulation promulgated thereunder. In determining whether to disapprove any such forms the Commissioner shall give due consideration to past and prospective loss experience within and outside this State, to underwriting practice and judgment to the extent appropriate, and to all other relevant factors within and outside this State.

(a) If the Commissioner notifies the insurer that the form is disapproved; it is unlawful thereafter for such insurer to issue or use such form. In such notice, the Commissioner shall specify the reason for his disapproval and state that a hearing will be granted within 20 days after request in writing by the insurer. No such policy, certificate of insurance, notice of proposed insurance, nor any application, endorsement, or rider, shall be issued or used until the expiration of 30 days after it has been so filed, unless the Commissioner shall give his prior written acknowledgment thereof.

(b) The Commissioner may, at any time after a hearing held not less than 20 days after written notice to the insurer, withdraw any such form on any ground set forth in subsection (b) above. The written notice of such hearing shall state the reason for the proposed withdrawal.

(e) The insurer shall not issue such forms or use them after the effective date of such withdrawal.

(f) If a group policy has been delivered in this State before January 1, 1969, or has been or is delivered in another state before or on or after January 1, 1969, the insurer shall be required to file only the group certificate and notice of proposed insurance delivered or issued for delivery in this State as specified in subsections (b) and (d) of section 3706 of this chapter, and such forms shall be acknowledged by the Commissioner if they conform with the requirements specified in such subsections and if the schedules of premium rates applicable to the insurance evidenced by such certificate or notice are not in excess of the insurer's schedules of premium rates filed with the Commissioner; provided, that the premium rate in effect on existing group policies may be continued until the first policy anniversary date following December 31, 1968.

§ 3708. Premiums and refunds

(a) Any insurer may revise its schedules of premium rates from time to time, and shall file such revised schedules with the Commissioner. No insurer shall issue any credit life insurance or credit health insurance policy for which the premium rate exceeds that determined by the schedules of such insurer as then on file with the Commissioner.

(b) Each individual policy or group certificate shall provide that in the event of termination of the insurance prior to the scheduled maturity date of the indebtedness, any refund of an amount paid by the debtor for insurance shall be paid or credited promptly to the person entitled thereto; provided, that the Commissioner shall prescribe a minimum refund and no refund which would be less than such minimum need be made. The formula to be used in computing such refund shall be filed with and approved by the Commissioner.

(c) If a creditor requires a debtor to make any payment for credit life insurance or credit health insurance and an individual policy or group certificate of insurance is not issued the creditor shall immediately give written notice to such debtor and shall promptly make an appropriate credit to the account.

(d) The amount charged to a debtor for any credit life or credit health insurance shall not exceed the premiums charged by the insurer, as computed at the time the charge to the debtor is determined.

(e) Nothing in this chapter shall be construed to authorize any payments for insurance now prohibited under any statute, or rule thereunder, governing credit transactions.

§ 3709. Premium--how collected

The insurance premium or other identifiable charge for credit life or credit health insurance may be collected from the insured or included in the principal of any loan or other transaction at the time such transaction is completed.

§ 3710. Premiums not deemed interest

The premium or cost of credit life or credit health insurance when issued through any creditor shall not be deemed interest or charges, or consideration, or an amount in excess of permitted charges in connection with the loan or other credit transaction, and any gain or advantage to the creditor arising out of the premium or commission or dividend from the issuance of such insurance, shall not be deemed a violation of any other law, general or special, civil or criminal, of the State of Delaware.

§ 3711. Issuance of policies

All policies of credit life insurance and credit health insurance shall be delivered or issued for delivery in this State only by an insurer authorized to do an insurance business therein, and shall be issued only through holders of licenses or authorizations issued by the Commissioner.

§ 3712. Claims

(a) All claims shall be promptly reported to the insurer or its designated claim representative, and the insurer shall maintain adequate claim files. All claims shall be settled as soon as possible and in accordance with the terms of the insurance contract.

(b) All claims shall be paid either by draft drawn upon the insurer or by check of the insurer to the order of the claimant to whom payment of the claim is due pursuant to the policy provisions, or upon direction of such claimant to one specified.

(c) No plan or arrangement shall be used whereby any person other than the insurer or its designated claim representative shall be authorized to settle or adjust claims. The creditor shall not be designated as claim representative for the insurer in adjusting claims; except, that a group policyholder may, by arrangement with the group insurer, draw drafts or checks in payment of claims due to the group policyholder subject to audit and review by the insurer.

§ 3713. Existing insurance--choice of insurer

When credit life insurance or credit health insurance is required as additional security for any indebtedness, the debtor shall, upon request to the creditor, have the option of furnishing the required amount of insurance through existing policies of insurance owned or controlled by him or of procuring and furnishing the required coverage through any insurer authorized to transact an insurance business within this State.

CHAPTER 39. CASUALTY INSURANCE CONTRACTS

§ 3901. Contracts subject to general provisions

All contracts of casualty insurance covering subjects resident, located, or to be performed in this State are subject to the applicable provisions of chapter 27 (the insurance contract) of this title, and to other applicable provisions of this title.

§ 3902. Uninsured vehicle coverage; insolvency of insurer

(a) No policy insuring against liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this State with respect to any such vehicle registered or principally garaged in this State unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages, from owners or operators of uninsured or hit-and-run motor vehicles, for bodily injury, sickness or disease, including death, resulting from the ownership, maintenance, or use of such uninsured or hit-and-run motor vehicle. Except, that no such coverage shall be required in or supplemental to a policy where rejected in writing, on a form furnished by the insurer describing the coverage being rejected, by an insured named therein; or upon any renewal of such policy unless the coverage is then requested in writing by the named insured. The coverage herein required may be referred to as "uninsured vehicle coverage."

(b) The amount of coverage to be so provided shall be not less than the minimum limits for bodily injury liability insurance provided for under the motorists financial responsibility laws of this State.

(c) For the purposes of this section the term "uninsured motor vehicle" shall be deemed also to include, subject to the terms and conditions of such coverage, an insured other motor vehicle where:

(1) The liability insurer of such other motor vehicle is unable because of its insolvency to make payment with respect to the legal liability of its insured within the limits specified in its policy; and

(2) The occurrence out of which such legal liability arose took place--while the uninsured vehicle coverage required under subsection (a), above, was in effect; and

(3) The insolvency of the liability insurer of such other motor vehicle existed at the time of, or within one year after, such occurrence.

Nothing contained in this subsection (c) shall be deemed to prevent any insurer from providing insolvency protection to its insured's under more favorable terms.

(d) In the event of payment to any person under uninsured vehicle coverage, and subject to the terms of such coverage, to the extent of such payment the insurer shall be entitled to the proceeds of any settlement or recovery from any person legally responsible for the bodily injury as to which such payment was made, and to amounts recoverable from the assets of the insolvent insurer of the other motor vehicle.

§ 3903. Cancellation or non-renewal of automobile policy; definitions, scope

(a) As used in sections 3903 through 3907 of this chapter:

(1) "Policy" means any one or more of the following portions of an automobile insurance policy:

(i) Insuring against bodily injury and property damage liability;

() Insuring against physical damage;

(i) Insuring against risks commonly included under "comprehensive coverage;"

(ii) Relating to medical payments;

() Providing uninsured motorist coverage, delivered or issued for delivery in this State, insuring a natural person as named insured, or one or more related individuals resident of the same household, and under which the insured vehicles therein designated are motor vehicles of the private passenger or station wagon type (not used for public or livery conveyance of passengers, or rented to others) or any other four-wheel motor vehicles with a load capacity of 1500 pounds or less not used in the occupation, profession, or business of the insured; and other than a policy of automobile liability insurance:

(A) Issued under an assigned risk plan; or

(B) Insuring more than 4 motor vehicles; or

(C) Covering garage, automobile sales agency, repair shop, service station, or public parking place operation hazards.

(2) "Renewal" or "to renew" means the issuance and delivery by an insurer of a policy superseding at the end of the policy period a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term. Any policy with a policy period or term of less than 6 months or any policy with no fixed expiration date shall for the purpose of this section be considered as if written for successive policy periods or terms of 6 months.

(3) "Nonpayment of premium" means failure of the named insured to discharge when due any of his obligations in connection with the payment of premiums on a policy or any installment of such premium, whether the premium is payable directly to the insurer or its agent or indirectly under any premium finance plan or extension of credit.

(b) Sections 3903 through 3907 of this chapter shall not apply to any policy which has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer, unless it is a renewal policy.

§ 3904. Same--reasons for cancellation; nonrenewal

No notice of cancellation of a policy shall be effective and the insurer shall not refuse renewal of a policy, unless based on one or more of the following reasons:

(1) Nonpayment of premium; or

(2) The policy was obtained through a material misrepresentation; or

(3) Any insured violated any of the terms and conditions of the policy; or

(4) The named insured failed to disclose fully his motor vehicle accidents and moving traffic violations, or his losses covered under any automobile physical damage or comprehensive coverage, for the preceding 36 months if called for in the application; or

(5) As to renewal of the policy, if the insured at any time while the policy was in force failed to disclose fully to the insurer, upon request therefor, facts relative to accidents and losses incurred material to underwriting of the risk; or

(6) Any insured made a false or fraudulent claim or knowingly aided or abetted another in the presentation of such a claim; or

(7) The named insured or any other operator who either resides in the same household or customarily operates an automobile insured under such policy:

(1) Has, within the 36 months prior to the notice of cancellation or nonrenewal, had his driver's license under suspension or revocation; or

(ii) Has a history of and is subject to epilepsy or heart attacks, and such individual cannot produce a certificate from a physician testifying to his unqualified ability to operate a motor vehicle safely; or

(iii) Has an accident record, conviction record (criminal or traffic), physical, mental, or other condition which is such that his operation of an automobile might endanger the public safety; or

(iv) Has, while the policy is in force, engaged in a prearranged competitive speed contest while operating or riding in an automobile insured under the policy; or

(v) Has, within the 36 months prior to the notice of cancellation or nonrenewal been addicted to the use of narcotics or other drugs; or

(vi) Uses alcoholic beverages to excess; or

(vii) Has been convicted, or forfeited bail, during the 36 months immediately preceding the notice of cancellation or non-renewal, for:

(A) Any felony; or

(B) Criminal negligence resulting in death, homicide, or assault arising out of the operation of a motor vehicle; or

(C) Operating a motor vehicle while in an intoxicated condition or while under the influence of drugs; or

(D) Leaving the scene of an accident without stopping to report; or

(E) Theft or unlawful taking of a motor vehicle; or

(F) Making false statements in an application for a driver's license; or

(viii) Has been convicted of, or forfeited bail for 3 or more violations within the 36 months immediately preceding the notice of cancellation or nonrenewal, of any law, ordinance, or regulation limiting the speed of motor vehicles, or any of the provisions of the motor vehicle laws of any state, violation of which constitutes a misdemeanor, whether or not the violations were repetitions of the same offense or different offenses.

(8) The insured automobile is:

(i) So mechanically defective that its operation might endanger public safety; or

() Used in carrying passengers for hire or compensation, except that the use of an automobile for a car pool shall not be considered use of an automobile for hire or compensation; or

(i) Used in the business of transportation of flammables or explosives; or

(ii) An authorized emergency vehicle; or

(iii) Modified or changed in condition during the policy period so as to increase the risk substantially; or

(iv) Subject to an inspection law and has not been inspected or, if inspected, has failed to qualify.

§ 3905. Same--notice of cancellation or of intention not to renew; notice of reasons

(a) No cancellation of a policy to which section 3904 of this chapter applies shall be effective unless notice thereof is mailed or delivered by the insurer to the named insured at least 20 days prior to the effective date of cancellation, except that where cancellation is for nonpayment of premium at least 10 days' notice of cancellation accompanied by the reason therefor shall be given. Unless the reason or reasons accompany or are included in the notice, the notice shall state or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the insurer not less than 10 days prior to the effective date of cancellation, the insurer will specify the reason or reasons for such cancellation.

(b) No insurer shall fail to renew a policy to which section 3904 of this chapter applies unless it shall mail or deliver to the named insured, at the address shown in the policy, at least 30 days advance notice of its intention not to renew. Unless the reason or reasons accompany or are included in the notice, the notice shall state or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the insurer not less than 15 days prior to the effective date or non-renewal, the insurer will specify the reason or reasons for such nonrenewal. This subsection shall not apply in case of nonpayment of premium, or if the insurer has manifested its willingness to renew. Notwithstanding the failure of an insurer to comply with this subsection, the policy shall terminate on the effective date of any other policy procured by the insured, with respect to any automobile designated in both policies. Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation or nonrenewal which existed before the effective date of the renewal.

(c) Proof of mailing of notice of cancellation, or of intention not to renew or of reasons for cancellation or nonrenewal to the named insured at his address last of record with the insurer, shall be sufficient proof of notice.

(d) When a policy is cancelled, other than for nonpayment of premium, or in the event of failure to renew a policy to which subsection (b), above, applies, the insurer shall notify the named insured of any possible eligibility for insurance through an automobile assigned risk plan. Such notice shall accompany or be included in the notice of cancellation or the notice of intent not to renew, and shall state that such notice of availability of the automobile assigned risk plan is given pursuant to this section.

(e) Where the reason or reasons for cancellation or non-renewal do not accompany or are not included in the notice of cancellation or of intention not to renew, the insurer shall upon written request of the named insured mailed or delivered to the insurer not less than 10 days prior to the effective date in the case of cancellation or not less than 15 days prior to the effective date in the case of nonrenewal, specify in writing the reason or reasons for such cancellation or nonrenewal. Such reasons shall be mailed or delivered to the named insured within 5 days after receipt of such request, except in the case of cancellation for nonpayment of premium, and shall contain or be accompanied by a notice of the named insured's right to apply to the Commissioner for a hearing thereon if the application is made not less than 4 days prior to the effective date of cancellation or 10 days prior to the effective date of nonrenewal, and is accompanied by a filing fee of $10. If the reasons for cancellation or nonrenewal are stated in or accompany the notice of cancellation or of intention not to renew, such notice shall, except in the case of cancellation for non-payment of premium, also contain or be accompanied by a notice of the named insured's right to apply to the Commissioner for a hearing if the application is made not less than 10 days prior to the effective date of cancellation or of non-renewal and is accompanied by a filing fee of $10. This subsection shall apply only to a cancellation or refusal to renew to which section 3904 of this chapter applies.

§ 3906. Same--hearing before Commissioner; filing fee; order

(a) A named insured who wishes to contest the reason or reasons for a cancellation or nonrenewal to which section 3904 of this chapter is applicable, shall, not less than 4 days prior to the effective date of cancellation where the reasons for cancellation are furnished upon written request and not less than 10 days prior to the effective date of cancellation, where the reasons for cancellation are furnished with the notice of cancellation or of effective date of nonrenewal, mail or deliver to the Commissioner a written request for a hearing, which shall state clearly the basis for the appeal and be accompanied by a filing fee of $10. - This subsection shall not apply to cancellation for nonpayment of premium. A cancellation or nonrenewal which is subject to the provisions of section 3904 of this chapter shall be deemed effective unless the Commissioner determines otherwise in accordance with the provisions of such section.

() Within 2 days after receipt of a timely request for a hearing, the Commissioner shall call a hearing upon 10 days' notice to the parties. The Commissioner may, where he finds that a request for a hearing is not timely made because the insurer did not, within the time period provided in subsection (a), furnish the reason for cancellation or nonrenewal upon the timely request therefor by the named insured, accept the request for a hearing and, after notice to the insurer, extend the effective date of cancellation or nonrenewal for a period not to exceed 4 days from the date the reason for cancellation or nonrenewal was mailed or delivered. Each insurer authorized to transact auto mobile insurance in this State shall maintain on file with the Commissioner the name and address of the person authorized to receive notices pursuant to this section on behalf of the insurer.

(c) The Commissioner at the conclusion of any hearing provided for under subsection (b), above, or not later than 2 days thereafter, shall issue his written findings to the parties and, if he finds for the named insured, he shall assess the insurer $10 to defray the cost of the hearing and shall refund the $10 filing fee to the named insured, and he shall either order the insurer to rescind its notice of cancellation or nonrenewal, or, if the date cancellation or nonrenewal is to be effective has elapsed, order the policy reinstated. Such order shall operate retroactively only to cover a period not to exceed 15 days from the date cancellation or nonrenewal otherwise would have been effective, and prospectively from the date on which the order was issued, except that no policy shall be reinstated while the named insured is in arrears in payment of premium on the policy. If the Commissioner finds for the insurer, his written order shall so state and he shall assess the named insured $10 and apply the named insured's $10 filing fee against the assessment to defray the cost of the hearing. Reinstatement of a policy under this subsection shall not operate in any way to extend the expiration, termination, or anniversary date provided in the policy.

(d) The Commissioner shall promptly deposit all filing fees provided for in this section with the State Treasurer to the credit of the general fund of this State.

§ 3907. Same--nonliability as to information; statements

There shall be no liability on the part of and no cause of action of any nature shall arise against the Commissioner, or the insurer, its authorized representative, its agents, its employees, or any firm, person or corporation furnishing to the insurer information as to reasons for cancellation or refusal to renew any policy under sections 3903 through 3906 of this chapter, for any statement made by any of them in any written notice or explanation of cancellation or refusal to renew, for the providing of information pertaining thereto, or for statements made or evidence submitted at the hearings conducted in connection therewith.

§ 3908. Same--exceptions related to insurer's condition

Nothing contained in sections 3903 through 3907 of this chapter shall be construed to prevent the cancellation or non-renewal of any such insurance where:

(1) Cancellation or nonrenewal is ordered under or in connection with a statutory delinquency proceeding commenced against the insurer under chapter 59 of this title (rehabilitations and liquidations), or

(2) Cancellation or nonrenewal has been consented to by the Commissioner on a showing that continuation of such insurance can reasonably be expected to create a condition in the insurer hazardous to its policyholders, or to its creditors, or to its members, subscribers, or stockholders, or to the public.

§ 3909. Automobile insurance--exclusion, cancellation, or non-renewal as to designated individual

The insurer shall have the right to exclude, cancel or refuse to renew coverage under an automobile insurance policy as to designated individuals. Any such cancellation or refusal to renew shall be acknowledged by the signature of the named insured, and shall be subject to the applicable provisions of sections 3903 through 3907 of this chapter as for cancellation or refusal to renew the policy.

§ 3910. Automobile insurance--insurer's right to impose deductible on renewal

Nothing in sections 3903 through 3909 of this chapter shall prohibit, or be construed to prohibit, an insurer from requiring a provision for a reasonable deductible not exceeding $100 in amount as to physical damage and comprehensive coverage's of the policy, as a condition to renewal of an automobile insurance policy.

CHAPTER 41. PROPERTY INSURANCE CONTRACTS

§ 4101. Contracts subject to general provisions

All contracts of property insurance covering subjects located in this State are subject to the applicable provisions of
chapter 27 (the insurance contract) of this title, and to other applicable provisions of this title.

§ 4102. Attorney's fees

The court upon rendering judgment against any insurer upon any policy of property insurance, as "property" insurance is defined in section 904 of this title, shall allow the plaintiff a reasonable sum as attorney's fees to be taxed as part of the costs.

CHAPTER 43. SURETY INSURANCE CONTRACTS

§ 4301. Subject to general laws

Contracts of surety insurance issued by surety insurers shall be subject to the applicable general provisions of chapter 27 (the insurance contract) of this title and to applicable general laws of suretyship.

CHAPTER 45. TITLE INSURANCE CONTRACTS

§ 4501. Filing of rates; rate standard; adherence

(a) Every title insurer shall, before use in this State, file with the Commissioner its schedule of rates and charges for title insurance, and thereafter every modification or amendment thereof.

(b) Rates and charges for title insurance shall not be excessive, inadequate, or unfairly discriminatory.

(c) The insurer shall adhere to the rates and charges as so filed by it.

CHAPTER 47. FINANCING OF INSURERS

§ 4701. Scope of chapter

This chapter applies as to domestic and foreign insurers of all types, and as to persons providing finances as to such insurers.

§ 4702. Solicitation permit required; penalty

(a) No person forming or proposing to form an insurer, or insurance holding corporation, or corporation to be attorney-in-fact for a reciprocal insurer, or proposing to secure funds for the formation or financing of an insurer, or production of insurance business therefor, or an insurance holding corporation, or attorney-in-fact corporation of a reciprocal insurer, or for the formation of a syndicate, association, firm, partnership, or organization for any such purposes, whether domestic or foreign, shall in this State advertise or offer for sale an securities, or solicit or receive any funds, subscriptions, applications, or membership, except as authorized by a currently effective permit (hereinafter sometimes referred to as a "solicitation permit") issued by the Commissioner.

(b) Any person violating this section shall upon conviction thereof be subject to a fine of not more than $10,000, or imprisonment for not more than 10 years, or by both such fine and imprisonment.

§ 4703. Insurance holding corporation defined

Within the intent of this chapter an insurance holding corporation is one owning or proposing to own a controlling stock interest in a stock insurer. Shares owned directly or indirectly by the corporation or by its subsidiary or affiliate corporation, firm or organization, or by its officers, directors or principal stockholders shall be deemed to be owned by the corporation for the purposes of this provision.

§ 4704. Exemptions

Section 4702 of this chapter shall not apply as to:

(1) Sales of securities not involving a public offering; that is, sales on which no commission is payable resulting from offers privately made to not over 20 persons (other than banks, savings association, investment companies registered as such under the Investment companies Act of 1940, registered securities dealers, investment houses and other financial institutions) within a 12 month period and where all persons (including such banks, associations, companies, dealers, houses and institutions) so acquiring such securities do so for investment purposes only and not with a view to further distribution.

(2) Sales of securities by an insurance holding corporation for purposes which do not include that of financing, directly or indirectly, an insurer.

(3) Stock of the insurer or insurance holding corporation to be offered and sold without payment of commission thereon, exclusively to directors, employees, and agents of the insurer or corporation, or any of them, under stock options granted pursuant to a written lawful plan therefor adopted by the Board of Directors and approved by a majority of the stock of the issuer corporation having voting rights, and which plan has been filed with the Commissioner.

(4) Securities issued or proposed to be issued pursuant to any merger, consolidation, bulk reinsurance, conversion, mutualization, or corporate affiliation approved by him pursuant to chapter 49 of this title.

(5) Securities issued in exchange for outstanding securities of the issuer, or partly in exchange for such outstanding securities and partly for cash, in connection with a recapitalization of the issuer or the exercise of conversion or exchange rights under such outstanding securities.

(6) Fractional share interests in stock of the issuer offered and sold for the purpose of rounding out to whole shares in connection with any stock dividend or other distribution of shares to existing security holders of the issuer.

§ 4705. Application for permit

(a) Written application for any permit required under section 4702 of this chapter shall be filed with the Commissioner. The application shall show, or be accompanied by:

(1) The name, type, and purpose of the insurer, corporation, syndicate, association, firm, or organization formed or proposed to be formed or financed;

(2) The name, residence address, business background and qualifications of each person associated or to be associated in the enterprise, or in the formation of the proposed insurer, corporation, syndicate, association, firm or organization, or in the proposed financing;

(3) Full disclosure of the terms of all pertinent understandings and agreements existing or proposed among persons so associated or to be associated; and a copy of each such agreement relating to the proposed financing, or insurer, corporation, syndicate, association, firm or organization, or the formation thereof;

(4) The plan according to which solicitations are to be made;

(5) A copy of any security, receipt, or certificate proposed to be issued and copy of any proposed application or subscription agreement;

(6) Copy of any prospectus, offering circular, advertising, or sales literature or material proposed to be used;

(7) Copy of proposed form of any escrow agreement required;

(8) Irrevocable appointment of the Commissioner as process agent to receive service of process issued in this State and arising out of any transaction under the permit, if issued. The Commissioner shall prescribe and furnish the form of such appointment;

(9) A copy of the certificate of incorporation or charter of the insurer or proposed insurer, or of any other corporation proposing to offer its securities, certified by the public official having custody of the original thereof; and a copy of any syndicate, association, firm, organization or other similar agreement, by whatever name called, if funds for any of the purposes referred to in section 4702 of this chapter are to be secured through the sale of any security, interest, or right in or relative to such syndicate, association, firm, or organization; and, if the insurer is or-is to be a reciprocal insurer, a copy of the power of attorney and of other agreements existing or proposed affecting subscribers, investors, the attorney-in-fact or the insurer; and

(10) Such additional pertinent information as the Commissioner may reasonably require.

(b) The application shall be accompanied by deposit of the fees required under section 701 (fee schedule) of this title for the filing of the application and for issuance of the permit, if granted.

(c) In lieu of a special filing thereof of information called for in subsection (a), the Commissioner may, in his discretion, accept a copy of any pertinent filing made with the Securities and Exchange Commission relative to the same offering.

§ 4706. Application for permit to solicit qualifying mutual applications

Written application for any permit required under section 4702 of this chapter in connection with the formation of a domestic mutual insurer by the securing of qualifying applications for insurance as provided in section 4905 of this title, shall be filed with the Commissioner. The application shall contain such information and be accompanied by such of the documents and the fees as required under section 4705 of this chapter as may be applicable, and in addition shall be accompanied by:

(1) A copy of the policy for which applications are proposed to be solicited;

(2) A copy of the proposed insurance application form, consistent with the requirements of section 4907 (qualifying applications for insurance) of this title;

(3) A schedule of the premiums or premium rates proposed to be charged in connection with such insurance applications; and

(4) A copy of the bylaws of the proposed insurer.

§ 4707. Investigation

(a) Upon completion of the application for a permit under sections 4705 and 4706 of this chapter, the Commissioner shall promptly cause an investigation to be made of:

(1) The identity, character, reputation, financial standing and motives of the persons proposing to organize, or promote, and manage the proposed insurer or organization;

(2) The character, financial responsibility, insurance management experience, and business qualifications of the officers, directors, and managers of the insurer or proposed insurer or organization;

(3) Such other aspects of the proposed insurer or financing as the Commissioner deems advisable.

(b) The Commissioner may waive such an investigation as to an insurer already duly authorized to transact insurance in this State.

§ 4708. Granting; denial of permit

(a) The Commissioner shall expeditiously examine an application for a solicitation permit as soon as it is completed, and complete the investigation as called for. Subject to subsection (b) below, if the Commissioner finds on such examination and investigation that

(1) The application is complete; and

(2) The documents therewith filed are proper in form; and

(3) That the proposed finances are reasonable and adequate in amount for the purposes intended, he shall give notice to the applicant that he will issue the permit upon the filing of any bond required by section 4713 or deposit required by section 4906 of this title, and the filing of an executed copy of any escrow agreement required in connection therewith.

(b) If the Commissioner does not so find, or finds that

(4) The proposed sale of securities would be or tend to be unfair or inequitable as to present or proposed security holders or investors; or

(0) Any of the individuals associated or to be associated in the insurer, corporation, syndicate, association, firm, organization or financing are not of good reputation as to business affairs; or

(1) The insurer or proposed insurer would not be able to qualify for a certificate of authority in this State by virtue of the provisions of section 508 (b) of this title, he shall give notice to the applicant that a permit will not be granted, stating the particulars of the grounds therefor, and refund to the applicant all sums deposited in connection with the application except the fee for filing the application for a permit.

§ 4709. Terms of permit; compliance

(a) Upon filing any bond required by section 4713 or deposit required by section 4906 of this title, or upon decision to grant the permit if such a bond is not so required, and upon filing an executed copy of any required escrow agreement, the Commissioner shall issue a permit to the applicant.

(b) Every such permit shall contain provisions, as applicable, as follows:

(1) It shall state the securities which are to be offered, the number, par value if any, and selling price; or identify the insurance contract or contracts for which applications and advance premiums are to be solicited in the case of formation of a new domestic mutual insurer.

(2) It shall require that all purchases and premiums shall be payable only in lawful money of the United States of America, except where stock or other securities are to be issued in exchange for securities or rights thereto under a plan approved by the Commissioner, of recapitalization or refinancing of an insurer or other corporation.

(3) It shall require that any securities proposed to be offered or sold under the permit shall be so offered and sold at the same price to all parties, subject, at the option of the issuer, in the case of subscriptions to be paid in installments, to a reasonable additional charge to cover expenses and loss of interest earnings attributable to such installment subscriptions.

(4) It shall limit the portion of funds received on account of sale of securities under the permit, which may be used for organization, securities sales, and promotion expenses to such amount as the Commissioner deems reasonably adequate under the proposed plan of solicitation, but in no event to exceed 15% of such funds as and when the funds are actually received.

(5) If the Commissioner believes the same to be desirable for the protection of the public or for any other reasonable purpose, the permit may:

(i) Require the founders, promoters, incorporators, or other persons directly involved in the proposed offering, to subscribe and pay for immediately and in cash, a reasonable proportion of the same securities as proposed to be offered in this State, at a price not less than that at which any such securities are to be offered to other subscribers or purchasers.

(ii) Prohibit, limit, or control the granting of options to such founders, promoters, incorporators or other persons to buy the securities.

(iii) Prohibit, by any founder, promoters, incorporator or other person associated or to be associated in solicitations under the permit, the resale or transfer for a period terminating 1 year after expiration or other termination of the permit, of his interest in any security, right, or interest of the kind proposed to be offered under the permit, or any other security, interest or right which he may have in or as to the same issuing entity, or the granting of any option or lien as to any such security, right, or interest. The Commissioner may, in his discretion, require that any security, right, or interest the resale or transfer of which is herein prohibited, shall be deposited and held in escrow for the prescribed period. This provision shall not prohibit the sale or transfer of any such security, right or interest by the estate or personal representative of a deceased founder, promoter, or incorporator, or deceased person associated in solicitations under the permit.

(iv) Contain other reasonable provisions for the protection of existing or proposed investors in this State.

(6) If the permit is issued in connection with the solicitation of qualifying applications for a proposed domestic mutual insurer, it shall limit the portion of funds received therefor which may be used for organization and sales expense to a reasonable commission related to the kind of insurance policy involved and costs incurred by mutual insurers in Delaware in the production of similar business; and provide that no such commissions shall be paid or be deemed earned until the insurer has received its certificate of authority and the policies so applied for have been actually issued, delivered to and accepted by the respective insured's.

(7) The permit shall expire at expiration of a period stated therein, which period shall be not more than 2 years after its date of issue, unless earlier terminated by the Commissioner, but subject to an extension of time for such additional reasonable period, not to exceed one year, as the Commissioner may grant for good cause shown.

(8) The permit shall contain such other reasonable conditions relative to accounting, reports, deposits, or other matters consistent with this chapter as the Commissioner deems advisable for the reasonable protection of existing or prospective investors.

(c) The holder of the permit, and its directors, officers, employees, agents, founders, promoters, incorporators and representatives shall comply with the terms of the permit.

§ 4710. Permit as inducement

The granting of a solicitation permit is permissive only and shall not constitute an endorsement by the Commissioner of any person or thing related to any such insurer, corporation, syndicate, association, firm, organization, or financing, nor constitute evidence of the completeness or accuracy of information presented in any prospectus or other sales literature, and the existence of the permit shall not be advertised or used as an inducement in any solicitation. The Commissioner shall place the substance of this section in conspicuous type at the top of each such permit issued.

§ 4711. Prospectus required; other literature

(a) An offering of securities under a solicitation permit shall be made only by written prospectus delivered to the prospective investor.

(b) The prospectus shall make a disclosure of all facts relative to the issuer and the offered security which are reasonably material to the offered investment, and shall not omit a material fact necessary to make the statements made, in the light of the circumstances under which they are made, not misleading. The Commissioner may make reasonable rules and regulations concerning the form and contents of prospectuses, not inconsistent with the provisions of this chapter.

(c) The Commissioner may accept, as a compliance with this section, a prospectus or offering circular covering securities to be offered in this State under an existing registration thereof with the Securities and Exchange Commission or under an existing exemption from such registration pursuant to "Regulation A" of the general rules and regulations of the Securities and Exchange Commission under the Securities Act of 1933, as amended.

(d) As to securities covered by a solicitation permit no sales literature or other visual sales material other than the prospectus or offering circular shall be used in solicitations unless a copy of the same has been filed with the Commissioner in advance of such use and not disapproved by him in writing mailed or delivered to the filing party within 10 days after the date of such filing. The Commissioner shall disapprove any such literature or material found by him to be untrue or misleading. The provision shall not be deemed to modify or affect any applicable requirement or prohibition under or pursuant to the Securities Act of 1933, as amended.

§ 4712. Modification; revocation of permit

The Commissioner may for cause modify a solicitation permit theretofore issued; or may after a hearing thereon revoke the permit for violation of law or the terms of the permit, or any proper order of the Commissioner, or for material misrepresentation in the offering or sale of securities or policies under the permit.

§ 4713. Bond for permit

(a) The Commissioner shall not issue a solicitation permit until the applicant therefor has filed with the Commissioner a corporate surety bond in the penalty of $10,000, aggregate amount, in favor of the State of Delaware and for the use and benefit of the State and of proposed Delaware investors in and creditors of the permitee.

(b) The bond shall be conditioned upon the payment of costs incurred by the State in event of any proceeding for liquidation or dissolution of the proposed organization before completion of organization or, if to be an insurer, a certificate of authority is not granted; and upon a full accounting for funds received until the proposed insurer has been granted its certificate of authority or until the corporation, syndicate, association, firm or organization or financing has been completed within the terms of the permit.

() In lieu of filing such bond the applicant may deposit with the State Treasurer through the Commissioner, $10,000 in cash, or in a certificate of deposit issued by a bank located in Delaware, or an equivalent amount in United States government bonds at market value, to be held in trust under the same conditions as required of the bond. The amount so deposited may be credited toward payment of subscription to securities by founders, promoters and incorporators if required under section 4709 (b) (5) (i) of this chapter.

(a) The Commissioner may, in his discretion, waive the requirement for a bond or deposit in lieu thereof if the securities are to be issued in connection with subsequent financing as provided in section 4717 of this chapter.

(b) The Commissioner shall release and discharge any such bond or deposit or remaining portion thereof held under this section upon written request of the person entitled thereto and upon proof to the Commissioner's satisfaction that all liabilities and obligations with respect to which the bond or deposit was filed or made have been fully settled or terminated or otherwise adequately provided for.

(c) This section does not apply as to solicitation of initial qualifying applications for insurance in a domestic mutual insurer pursuant to section 4906 of this title, except as provided in such section 4906.

§ 4714. Escrow of funds

(a) The holder of the solicitation permit shall promptly deposit all funds received from an offering of securities in this State pursuant to the permit, other than advance premiums for insurance which are subject to section 4907 of this title, in escrow in a bank or trust company located in this State and under an agreement consistent with this chapter approved by the Commissioner.

(b) No part of such funds shall be withdrawn from such deposit, except:

(1) For payment of organization, sales and promotion expenses as earned and as authorized by the permit, and funds for such purposes may be withheld from the deposit; or

(2) For the purpose of making any deposit with the Commissioner required for issuance of a certificate of authority to an insurer; or if the organization is not, or is not to be, an insurer, upon completion of payments on securities subscriptions made under the permit and deposit or appropriation of such funds to the purposes specified in the permit; or

(3) For the making of refunds as provided in section 4716 of this chapter.

(c) Funds while so held in escrow may be invested in certificates of deposit or savings accounts. Interest accruing thereon shall become part of the funds released as provided in subdivision (2) above; or shall be applied toward the costs of making refunds under subdivision (3) above or to supplement the bond or deposit in lieu thereof in event the same is called on pursuant to section 4713 of this chapter.

(d) When the Commissioner has issued a certificate of authority to a proposed insurer any such funds remaining in escrow for its account shall be released to the insurer.

(e) The Commissioner may in his discretion waive compliance with this section as to funds to be received under a subsequent financing permit under section 4717 of this chapter, or in other circumstances where he deems such an escrow to be reasonably unnecessary for the protection of investors or of the public.

§ 4715. Subscriptions

All subscriptions to securities under a solicitation permit shall be binding upon and enforceable against the parties thereto in accordance with the terms of the subscription contract and subject to the provisions of this chapter. No such contract shall be made conditional, except upon such reasonable conditions consistent with applicable statutes as may uniformly be set forth in all such contracts with the Commissioner's approval as not being inappropriate or inequitable.

§ 4716. Failure to complete or qualify

(a) The Commissioner shall withdraw all funds held in escrow under section 4714 of this chapter, and refund to securities subscribers or purchasers all sums paid in thereon under the solicitation permit, less that part allowed and used for organization, sales and promotion expenses, if:

(4) The permit holder has failed to complete its organization or financing, within the terms of the permit, or if to be an insurer it has failed to secure its certificate of authority, all before expiration of the permit; or

(5) The permit is revoked.

(b) As to funds paid in on subscriptions by founders, promoters and incorporators and held on deposit in lieu of bonds under section 4713(c) of this chapter, only such portion of such funds shall be refundable under this section as may remain after discharge of all liabilities against the deposit under section 4713 of this chapter and the charging of such funds with a proportionate share of organization, sales and promotion expenses.

§ 4717. Subsequent financing; penalty

(a) No person referred to in section 4702 (solicitation permit required; penalty) of this chapter, after receiving a certificate of authority, if an insurer, in this or any other State, or after completing its original organization and financing, if other than an insurer, shall in this State solicit or receive funds in exchange for its securities until it has applied to the Commissioner for, and has been granted a solicitation permit. This provision is subject to the same exemptions as are provided by section 4704 of this chapter.

(b) The Commissioner shall expeditiously issue such a permit unless he finds:

(1) That the funds proposed to be secured are inadequate or excessive in amount for the purposes intended, or

(2) That the proposed securities or the manner of their distribution would be unfair or inequitable to existing or proposed security holders or policyholders of the issuer.

(c) Any such permit granted by the Commissioner shall be for such duration, and shall contain such terms and be issued upon such conditions as the Commissioner may reasonably specify or require for the protection of existing or proposed investors. In the Commissioner's discretion such terms and conditions may be substantially the same as or materially different from requirements made under this chapter as to solicitation permits for initial financing.

(d) Violation of subsection (a) of this section shall be subject to the same penalties as prescribed by section 4702 (b) (solicitation permit required; penalty) of this chapter.

CHAPTER 49. ORGANIZATION AND CORPORATE POWERS, PROCEDURES OF DOMESTIC STOCK AND MUTUAL INSURERS

§ 4901. Scope of chapter

This chapter shall apply only as to domestic stock insurers and domestic mutual insurers. This chapter shall apply as to domestic mutual assessment property insurers only as stated in section 5306 of this title.

§ 4902. "Stock," "mutual" insurer; definitions

"Stock" insurer and "mutual" insurer are as defined in sections 501 and 502, respectively, of this title.

§ 4903. General corporation statutes; applicability

Domestic stock and mutual insurers shall be governed by the applicable provisions of the general statutes of this State, as such statutes now are or hereafter may be constituted, relating to private corporations except where such general statutes are in conflict with the express provisions of this title and the reasonable implications of such provisions, in which case the provisions of this title shall govern.

§ 4904. Insurance business exclusive

No domestic insurer heretofore or hereafter formed shall engage directly or indirectly in any business other than the insurance business and in business activities reasonably and necessarily incidental to such insurance business; except that:

(1) A title insurer may also engage in business as an escrow agent; and

(2) Any insurer may also engage in business activities reasonably related to the management, supervision, servicing of, and protection of its interests as to, its lawful investments, and to the full utilization of its facilities.

(3) This section shall not preclude a corporation heretofore or hereafter formed under the laws of this State from possessing corporate powers to engage in business additional to the insurance business, or preclude such a corporation prior to issuance of a certificate of authority thereto as an insurer, from engaging in any such additional business or businesses.

§ 4905. Mutual insurers; initial qualifications

(a) When newly organized, a domestic mutual insurer may be authorized to transact any one of the kinds of insurance listed in the schedule contained in subsection (b) below.

(b) When applying for an original certificate of authority, the insurer must be otherwise qualified therefor under this title, and must have received and accepted bona fide applications as to substantial insurable subjects for insurance coverage of a substantial character of the kind of insurance proposed to be transacted, must have collected in cash the full premium therefor at a rate not less than that usually charged by other insurers for comparable coverage's, must have surplus funds on hand and deposited as of the date such insurance coverage's are to become effective, or, in lieu of such applications, premiums, and surplus, may deposit and thereafter maintain surplus, all in accordance with that part of the following schedule which applies to the one kind of insurance the insurer proposed to transact:

(A) (B) (C) (D) (E) (F) (G) (H)
Kind of Ins. Min. No. of Apps. Accepted Min. No. Subj.Covered Minimum Premium Collected Minimum Amt. Ins. Ea. Subj. Max. Amt. Ins. Ea. Subject Deposit Min. Surpls. Fund Deposit Surplus In Lieu
          (v) (vi) (vii)
Life (i) 500 500 Annual $2,000 $5,000 $100,000 $200,000
Health (ii) 500 500 Quarterly $25 $50 $100,000 $200,000
        (weekly Indem.) (weekly Indem.)    
Property (iii) 100 250 Annual $3,000 $7,000 $100,000 $200,000
Casualty (iv) 250 500 Annual $5,000 $25,000 $200,000 $300,000

Expendable surplus: In addition to surplus deposited and thereafter to be maintained as shown in columns (G) or (H) above, the insurer when first authorized must have on hand surplus funds, which it can thereafter expend in the conduct of its business, in amount not less than 50% of the applicable deposited and maintained surplus required of it under the above schedule. The following provisos are respectively applicable to the foregoing schedule and provisions as indicated by like Roman numerals appearing in such schedule:

(i) No group insurance or term policies for terms of less than 10 years shall be included.

(ii) No group, blanket or family plans of insurance shall be included. In lieu of weekly indemnity a like premium value in medical, surgical, and hospital benefits may be provided. Any accidental death or dismemberment benefit provided shall not exceed $5,000.

() Only insurance of the owner's interest in real property may be included.

(i) Must include insurance of legal liability for bodily injury and property damage, to which the maximum and minimum insured amounts apply.

(ii) The maximums provided for in this column (F) are net of applicable reinsurance.

(iii) The deposit of surplus in the amount specified in columns (G) and (H) must thereafter be maintained unimpaired. The deposit is subject to the provisions of chapter 15 (administration of deposits) of this title.

§ 4906. Mutual insurers; permit, deposit

(a) Before soliciting any applications for insurance as required under section 4905 of this chapter, the incorporators of the proposed insurer shall procure a solicitation permit as required by section 4702 of this title, and shall deposit with the Commissioner $10,000 in cash or in certificate of deposit issued by a bank located in this State or in United States Government bonds at market value, to be held in trust for the use and benefit of the State and of applicant members and creditors of the corporation. The deposit shall be conditioned as follows:

(1) Upon due accounting for and deposit, as required under section 4908 of this chapter, of funds received as premium upon preliminary applications for insurance; and

(2) That in event the corporation fails to complete its organization and secure a certificate of authority issued by the Commissioner within one year after the date of its solicitation permit, all premiums collected in advance from applicant members will be promptly returned to them, all other indebtedness of the corporation other than any compensation to directors, officers, or solicitors of insurance applications, will be paid, and for payment of costs incurred by the State in event of any legal proceedings for liquidation or dissolution of the corporation.

(b) If the corporation or an affiliate corporation proposes also to issue securities for initial financing of the proposed insurer, in addition to the securing of qualifying applications for insurance, the deposit required by this section may be combined with that required under section 4713 of this title, with appropriate extension of the conditions of such deposit to comply with the requirements of both sections, in order that only one such deposit of $10,000 shall be necessary for all such purposes.

(c) The Commissioner shall release such deposit or remaining portion thereof held under this section upon written request of the person entitled thereto and upon proof to the Commissioner's satisfaction that all liabilities and obligations with respect to which the deposit was made and held have been fully settled or terminated or otherwise adequately provided for of the deposit as provided in section 4906 of this chapter, the directors and officers of the proposed domestic mutual insurer may commence solicitation of such requisite applications for insurance policies as they may accept, and may receive deposits of premiums thereon.

(b) All such applications shall be in writing signed by the applicant, covering subjects of insurance resident, located or to be performed in this State.

(c) All such applications shall provide that:

(3) Issuance of the policy is contingent upon the insurer qualifying for and receiving a certificate of authority;

(4) No insurance is in effect unless and until the certificate of authority has been issued; and

(5) The prepaid premium or deposit, and membership or policy fee, if any, shall be refunded in full to the applicant if organization is not completed and the certificate of authority is not issued and received by the insurer before a specified reasonable date, which date shall be not later than one year after the date of the solicitation permit.

(d) All qualifying premiums collected shall be in cash.

(e) Solicitation for such qualifying applications for insurance shall be by licensed agents of the corporation, and the Commissioner shall, upon the corporation's application therefor, issue temporary agent's licenses expiring on the date specified pursuant to subdivision (3) above to individuals qualified as for an agent's license. The Commissioner may suspend or revoke any such license for any of the causes and pursuant to the same procedures as are applicable to suspension or revocation of licenses of agents in general under chapter 17 of this title.

§ 4908. Mutual insurers; trust deposit of qualifying premiums; issuance of policies

(a) All sums collected by a domestic mutual corporation as premiums or fees on qualifying applications for insurance therein shall be deposited in trust in a bank or trust company in this State under a written trust agreement approved by the Commissioner and consistent with this section and with section 4907 of this chapter. The corporation shall file an executed copy of such trust agreement with the Commissioner.

(b) Upon issuance to the corporation of a certificate of authority as an insurer for the kind of insurance for which such applications were solicited, all funds so held in trust shall become the funds of the insurer, and the insurer shall thereafter in due course issue and deliver its policies for which premiums had been paid and accepted. The insurance provided by such policies shall be effective as of the date of the certificate of authority or thereafter as provided by the respective policies.

§ 4909. Mutual insurers; failure to qualify

If the proposed domestic mutual insurer fails to complete its organization and to secure its original certificate of authority within one year from and after date of its solicitation permit, the corporation shall transact no further business, and the Commissioner shall return or cause to be returned to the persons entitled thereto all advance deposits or payments of premiums held in trust under section 4907 of this chapter.

§ 4910. Mutual insurers; additional kinds of insurance

A domestic mutual insurer, after being authorized to transact one kind of insurance, may be authorized to transact such additional kinds of insurance as are permitted under section 510 of this title, while otherwise in compliance with this title and while maintaining unimpaired surplus funds in an amount not less than the amount of paid-in capital stock required of a domestic stock insurer transacting like kinds of insurance, subject further, when first so authorized to transact an additional kind of insurance, in the case of insurers other than those to which section 511(a) (1) of this title, is applicable, to the additional expendable surplus requirements of such section 511 applicable to such a stock insurer.

§ 4911. Membership in mutual

(a) Each policyholder of a domestic mutual insurer, other than of a reinsurance contract, is a member of the insurer during the period of the insurance with all rights and obligations of such membership, and the policy shall so specify.

(b) Any person, government or governmental agency, state or political subdivision thereof, public or private corporation, board, association, estate, trustee or fiduciary may be a member of a domestic mutual insurer. The right of certain governmental bodies or agencies of this State to become and be members of mutual insurers shall be subject further to the laws of this State governing such bodies or agencies.

§ 4912. Bylaws of mutual insurer

Every domestic mutual insurer shall promptly file with the Commissioner a copy, certified by the insurer's secretary, of its bylaws and of every modification thereof or addition thereto. The bylaws and modifications thereof shall be subject to the Commissioner's approval. The Commissioner shall not disapprove any such bylaw or modification unless found by him, after a hearing held thereon, to be unlawful, unreasonable, inadequate, unfair or injurious to the proper interests or protection of the insurer's members or any class thereof. The insurer shall not, after receiving written notice of such disapproval and during the existence thereof, effectuate any bylaw provision so disapproved.

§ 4913. Minutes of corporate meetings; mutual insurers

A domestic mutual insurer upon the Commissioner's written request therefor shall promptly file with the Commissioner a copy, certified by the insurer's secretary, of the notice, minutes and other, record of every meeting of the insurer's board of directors or other similar governing body and of every meeting of the insurer's members. All such copies so filed shall constitute confidential records for the information of the Commissioner only, and shall not constitute or be treated as public records in his office or be open to public inspection.

§ 4914. Contingent liability of mutual members

(a) Except as provided otherwise in section 4916 of this chapter with respect to non-assessable policies, each member of a domestic mutual insurer shall have a contingent liability, pro-rata and not one for another, for the discharge of its obligations, which contingent liability shall be in such maximum amount--not less than 1 nor more than 6 times the premium for the member's policy at the annual premium rate--as shall be specified in the insurer's certificate of incorporation or bylaws.

(b) Every policy issued by the insurer shall contain a statement of the contingent liability.

(c) Termination of the policy of any such member shall not relieve the member of contingent liability for his proportion of the obligations of the insurer which accrued while the policy was in force.

(d) Unrealized contingent liability of members does not constitute an asset of the insurer in any determination of its financial condition.

§ 4915. Levy of contingent liability

(a) If at any time the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under this title for authority to transact the kinds of insurance being transacted, and the deficiency is not cured from other sources, its directors may, if the same is approved by the Commissioner as being reasonable and in the best interests of the insurer and its members, levy an assessment only on its members who held the policies providing for contingent liability at any time within the 12 months next preceding the date the levy was authorized by the board of directors, and such members shall be liable to the insurer for the amount so assessed.

(b) The levy of assessment shall be for such an amount as is required to cure such deficiency and to provide a reasonable amount of working funds above such minimum amount of surplus, but such working funds so provided shall not exceed 5% of the sum of the insurer's liabilities and such minimum required surplus as of the date of the levy.

(c) As to the respective policies subject to the levy, the assessment shall be computed upon the basis of premium earned during the period covered by the levy.

(d) No member shall have an offset against any assessment for which he is liable, on account of any claim for unearned premium or loss payable.

(e) As to life insurance, any part of such an assessment upon a member which remains unpaid following notice of assessment, demand for payment, and lapse of a reasonable waiting period as specified in such notice, may, if approved by the Commissioner as being in the best interests of the insurer and its members, be secured by placing a lien upon the cash surrender values and accumulated dividends held or to be held by the insurer to the credit of the member's policy.

§ 4916. Enforcement of contingent liability

(a) The insurer shall notify each member of the amount of the assessment to be paid by written notice mailed to the address of the member last of record with the insurer. Failure of the member to receive the notice so mailed, within the time specified therein for the payment of the assessment or at all, shall be no defense in any action to collect assessment.

(b) If a member fails to pay the assessment within the period specified in the notice, which period shall not be less than 20 days after mailing, the insurer may institute suit to collect the same.

§ 4917. Non-assessable policies, mutual insurers; revocation of authority

(c) A domestic mutual insurer, by depositing through the Commissioner and thereafter maintaining unimpaired surplus funds not less in amount than the minimum paid-in capital stock required of a domestic stock insurer for authority to transact the same kind or kinds of insurance, may, upon receipt of the Commissioner's order so authorizing, extinguish the contingent liability to assessment of its members as to all its policies in force and, so long as such surplus and deposit are maintained, may omit provisions imposing contingent liability in all policies currently issued. Any deposit of the insurer made through the Commissioner as prerequisite to its certificate of authority may be included as part of the deposit required under this section.

(d) The Commissioner shall not authorize a domestic insurer to extinguish the contingent liability of any of its members or in any of its policies to be issued, unless it qualifies to and does extinguish such liability of all its members and in all such policies for all kinds of insurance transacted by it.

(e) The Commissioner shall revoke the authority of a domestic mutual insurer to issue policies without contingent liability if

(1) At any time the insurer's assets are less than the sum of its liabilities and the surplus required for such authority; or

(2) The insurer, by resolution of its board of directors approved by a majority of its members, requests that the authority be revoked.

(d) During the absence of such authority the insurer shall not issue any policy without providing therein for the contingent liability of the policyholder, nor renew any policy which is then in force without endorsing the same to provide for such contingent liability.

§ 4918. Information to stockholders and proxy regulations

(a) This section shall apply to all domestic stock insurers except:

(3) A domestic stock insurer having less than 100 stockholders; except, that if 95% or more of the insurer's stock is owned or controlled by a parent or affiliated insurer, this section shall not apply to such insurer unless its remaining shares are held by 500 or more stockholders.

(4) Domestic stock insurers which file with the Securities and Exchange Commission forms of proxies, consents and authorizations pursuant to the Securities Exchange Act of 1934, as amended.

(b) Every insurer to which this section is applicable shall seasonably furnish its stockholders in advance of stockholder meetings, information in writing reasonably adequate to inform them relative to all matters to be presented by the insurer's management for consideration of stockholders at such meeting.

(c) No person shall solicit a proxy, consent, or authorization in respect of any stock or other voting security of such an insurer unless he furnishes the person so solicited with written information reasonably adequate as to

(1) the material matters in regard to which the powers so solicited are proposed to be used; and

(2) the person or persons on whose behalf the solicitation is made, and the interest of such person or persons in relation to such matters.

(d) No person shall so furnish to another, information which the informer knows or has reason to believe is false or misleading as to any material fact, or which fails to state any material fact reasonably necessary to prevent any other statement made from being misleading.

(e) The form of all such proxies shall:

(5) Conspicuously state on whose behalf the proxy is so-solicited;

(6) Provide for dating the proxy;

(7) Impartially identify each matter or group of related matters intended to be acted upon;

(8) Provide means for the principal to instruct the vote of his shares as to approval or disapproval of each matter or group, other than election to office; and

(9) Be legibly printed, with context suitably organized.

Except, that a proxy may confer discretionary authority as to matters as to which choice is not specified pursuant to item (4), above, if the form conspicuously states how it intended to vote the proxy or authorization in each such case; and may confer discretionary authority as to other matters which may come before the meeting but unknown for a reasonable time prior to the solicitation by the persons on whose behalf the solicitation is made.

(f) No proxy shall confer authority (1) to vote for election of any person to any office for which a bona fide nominee is not named in the proxy statement, or (2) to vote in any annual meeting (or adjournment thereof) other than the annual meeting next following the date on which the proxy statement and form were furnished stockholders.

(g) The Commissioner shall have authority to make and promulgate reasonable rules and regulations for the effectuation of this section, and in so doing shall give due consideration to rules and regulations promulgated for similar purposes by the insurance supervisory officials of other states.

(h) Any proxy, consent or authorization obtained in violation of this section or of the lawful rules and regulations of the Commissioner hereunder, shall be void.

§ 4919. Change of directors, officers--notice

Every domestic stock or mutual insurer shall promptly notify the Commissioner in writing of any change of personnel among its directors or principal officers.

§ 4920. Prohibited pecuniary interest of officials

(a) Any officer or director, or any member of any committee or an employee of a domestic insurer, having the duty or power of investing or handling the insurer's funds, shall not deposit or invest such funds except in the insurer's name; shall not borrow the funds of the insurer; or be pecuniarily interested in any loan, pledge, deposit, security, investment, sale, purchase, exchange, reinsurance, or other similar transaction or property of the insurer except as a stockholder, member, employee, or director, unless the transaction is authorized or approved by the insurer's board of directors, with knowledge and recording of such pecuniary interest, by affirmative vote of not less than two-thirds of the directors; and shall not take or receive to his own use any fee, brokerage, commission, gift, or other similar consideration for or on account of any such transaction made by or on behalf of the insurer.

(b) No insurer shall guarantee the financial obligation of any of its officers or directors.

(c) This section shall not prohibit such a director, officer, member of a committee, or employee from becoming a policyholder of the insurer and enjoying the usual rights of a policyholder or from participating as beneficiary in any pension trust, deferred compensation plan, profit sharing plan, stock option plan or similar plan authorized by the insurer and to which he may be eligible; or prohibit any director or member of a committee from receiving a reasonable fee for lawful services actually rendered to the insurer.

(d) The Commissioner may, by regulation from time to time, define and permit additional exceptions to the prohibition contained in subsection (a) of this section solely to enable payment of a reasonable compensation to a director who is not otherwise an officer or employee of the insurer, or to a corporation or firm in which a director is interested, for necessary services performed or sales or purchases made to or for the insurer in the ordinary course of the insurer's business and in the usual private professional or business capacity of such director, corporation or firm.

§ 4921. Management and exclusive agency contracts

(e) No domestic insurer shall hereafter make any contract whereby any person is granted or is to enjoy in fact the management of the insurer to the material exclusion of its board of directors or to have the controlling or preceptive right to produce substantially all insurance business for the insurer, or, if an officer, director, or otherwise part of the insurer's management, is to receive any commission, bonus or compensation based upon the volume of the insurer's business or transactions, unless the contract is filed with and not disapproved by the Commissioner. The contract shall become effective in accordance with its terms unless disapproved by the Commissioner within 20 clays after date of filing, subject to such reasonable extension of time as the Commissioner may require by notice given within such 20 days. Any disapproval shall be delivered to the insurer in writing stating the grounds therefor.

(f) Any such contract shall provide that any such manager, producer of its business, or contract holder shall within 90 days after expiration of each calendar year furnish the insurer's board of directors a written statement of amounts received under or on account of the contract and amounts expended thereunder during such calendar year, with specification of the emoluments received therefrom by the respective directors, officers, and other principal management personnel of the manager or producer, and with such classification of items and further detail as the insurer's board of directors may reasonably require.

(g) The Commissioner shall disapprove any such contract if he finds that it:

(1) Subjects the insurer to excessive charges; or

(2) Is to extend for an unreasonable length of time; or

(3) Does not contain fair and adequate standards of performance; or

(4) Contains other inequitable provision or provisions which impair the proper interests of stockholders or members of the insurer.

(d) The Commissioner may, after a hearing held thereon, disapprove any such contract theretofore permitted to become effective, if he finds that the contract should be disapproved on any of the grounds referred to in subsection (c) above.

(e) This section does not apply as to contracts entered into prior to the effective date of this Act, or to extensions or amendments of such contracts.

§ 4922. Dividends to stockholders

(a) A domestic stock insurer shall not pay any cash dividend to stockholders except out of that part of its available and accumulated surplus funds which is derived from realized net operating profits on its business and realized capital gains.

(b) A cash dividend otherwise lawful may be payable out of the insurer's earned surplus even though its total surplus is then less than the aggregate of its past contributed or paid-in surplus.

(c) A stock dividend may be paid out of any available surplus funds.

§ 4923. Participating policies

(d) If provided for in its certificate of incorporation or charter, a stock insurer or mutual insurer may issue any or all of its policies or contracts with or without participation in profits, savings, unabsorbed portions of premiums, or surplus; may classify policies issued and perils insured on a participating and nonparticipating basis, and may determine the right to participate and the extent of participation of any class or classes of policies. Any such classification or determination shall be reasonable, and shall not unfairly discriminate as between policies so classified.

(e) A life insurer may issue both participating and nonparticipating policies or contracts if the right or absence of right to participate is reasonably related to the premium charged.

(c) After the first policy year, no dividend, otherwise earned, shall be made contingent upon the payment of renewal premium on any policy or contract; except, that a participating life of health insurance policy providing for participation at the end of the first and/or second policy year may provide that the dividend or dividends will be paid subject to payment of premium for the next ensuing year.

§ 4924. Dividends to policyholders

(a) The directors of a domestic mutual insurer may from time to time apportion and pay or credit to its members dividends only out of that part of its surplus funds which represents net realized savings, net realized earnings, and net realized capital gains, all in excess of the surplus required by law to be maintained by the insurer.

(b) A dividend otherwise proper may be payable out of such savings, earnings, and gains even though the insurer's total surplus is then less than the aggregate of contributed surplus remaining unpaid by the insurer.

(c) A domestic stock insurer may pay dividends to holders of its participating policies out of any available surplus funds.

(d) No dividend shall be paid which is inequitable, or which unfairly discriminates as between classifications of policies or policies within the same classifications.

§ 4925. Solicitation of business, issuance of policies in other jurisdictions

(a) No domestic insurer shall knowingly solicit insurance business in any reciprocating state in which not then licensed as an authorized insurer. This subsection shall not prohibit advertising through publications and radio, television and other media originating outside such reciprocating state, if the insurer is licensed in the state in which the advertising originates and the advertising is not specifically directed to residents of such reciprocating state. This subsection shall not apply as to surplus line insurance, or prohibit insurance covering persons or risks located in a reciprocating state, under contracts solicited and issued in states in which the insurer is then licensed, or insurance otherwise effectuated in accordance with the laws of the reciprocating state. A "reciprocating" state, as used herein, is one under the laws of which a similar prohibition is imposed upon and enforced against insurers domiciled in that state.

(b) A domestic insurer duly authorized to transact insurance in another jurisdiction may frame and issue policies for delivery in such jurisdiction pursuant to applications for insurance solicited and obtained therein, in accordance with the laws thereof, subject only to such restrictions, if any, as may be contained in the insurer's certificate of incorporation or bylaws; and subject, in the case of health insurers, to the provisions of section 3331 of this title (policies issued for delivery in another state).

§ 4926. Payment of taxes; exoneration

(e) Every domestic insurer may comply with any law of any state or political subdivision imposing any license, excise, privilege, premium, occupation or other fee or tax, and pay such fee or tax unless prior to such payment the law shall have been expressly held invalid by the state court having final appellate jurisdiction in the premises or by the Supreme Court of the United States.

(f) No officer, director, or trustee of any insurer shall be subject to personal liability by reason of any payment, or determination not to contest payment, deemed by the board of directors or trustee to be in the corporate interests of the insurer, of any license, excise, privilege, premium, occupation or other fee or tax to any such state or political subdivision unless prior to such payment the law imposing such fee or tax shall have been expressly held invalid by the state court having final appellate jurisdiction in the premises or by the Supreme Court of the United States.

§ 4927. Impairment of capital or assets

(a) If a domestic stock insurer's paid-in capital stock (as represented by the aggregate par value of its outstanding capital stock) becomes impaired, or the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under this title for authority to transact the kinds of insurance being transacted, the Commissioner shall at once determine the amount of deficiency and serve notice upon the insurer to cure the deficiency and file proof thereof with him within the period specified in the notice, which period shall be not less than 30 nor more than 90 days from the date of the notice. Such notice may be so served by delivery to the insurer, or by mailing to the insurer addressed to its registered office in this State.

(b) The deficiency may be made good in cash or in assets eligible under chapter 13 (investments) of this title for the investment of the insurer's funds' or by amendment of the insurer's certificate of authority to cover only such kind or kinds of insurance thereafter for which the insurer has sufficient paid-in capital stock (if a stock insurer) or surplus (if a mutual insurer) under this title; or, if a stock insurer, by reduction of the number of shares of the insurer's authorized capital stock or the par value thereof through amendment of its articles of incorporation, to an amount of authorized and unimpaired paid-in capital stock not below the minimum required for the kinds of insurance thereafter to be transacted.

(c) If the deficiency is not made good and proof thereof filed with the Commissioner within the period required by the notice as specified in subsection (a) above, the insurer shall be deemed insolvent and the Commissioner shall institute delinquency proceedings against it under chapter 59 of this title.

§ 4928. Mutualization of stock insurer

(a) A stock insurer other than a title insurer may become a mutual insurer under such plan and procedure as may be approved by the Commissioner after a hearing thereon.

(b) The Commissioner shall not approve any such plan, procedure or mutualization unless:

(1) It is equitable to stockholders and policyholders;

(2) It is subject to approval by the holders of not less than two-thirds of the insurer's outstanding capital stock having voting rights, and by not less than two-thirds of the insurer's policyholders who vote on such plan in person, by proxy or by mail pursuant to such notice and procedure as may be approved by the Commissioner;

(3) If a life insurer, the right to vote thereon is limited to holders of policies other than term or group policies, and whose policies have been in force for more than one year;

(4) Mutualization will result in retirement of shares of the insurer's capital stock at a price not in excess of the fair market value thereof as determined by competent disinterested appraisers;

(5) The plan provides for the purchase of the shares of any nonconsenting stockholder in the same manner and subject to the same applicable conditions as provided by the general corporation law of the State, as to rights of nonconsenting stockholders, with respect to consolidation or merger of private corporations;

(6) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective; and

(7) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in the states in which it is then authorized to transact insurance, and for the kinds of insurance included in its certificates of authority in such states.

(c) No director, officer, agent or employee of the insurer, nor any other person, shall receive any fee, commission or other valuable consideration whatsoever, other than their customary salaries or other regular compensation, for in any manner aiding, promoting, or assisting in the mutualization, except as set forth in the plan of mutualization as approved by the Commissioner.

(d) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer under chapter 59 of this title.

§ 4929. Conversion to ordinary business corporation

(a) A domestic stock insurer may convert to a Delaware ordinary business corporation through the following procedures:

(1) The insurer must give the Commissioner written notice of its intent to convert to an ordinary business corporation;

(2) The insurer must bulk reinsure all of its insurance in force, if any, with another authorized insurer under a bulk reinsurance agreement approved by the Commissioners as provided in section 4943 of this chapter. The agreement of bulk reinsurance may be made contingent upon approval of stockholders as provided in subdivision (4) below;

(3) The insurer must set aside in a special reserve funds in such amount and subject to such administration as may be found by the Commissioner to be adequate and reasonable for the purpose, for payment of all obligations, if any, of the insurer incurred by it under its insurance contracts prior to the effective date of such bulk reinsurance, and remaining unpaid, or make other reasonable disposition satisfactory to the Commissioner for such payment;

(4) The proposed conversion must be approved by affirmative vote of not less than two-thirds of each class of the outstanding securities of the insurer having voting rights, at a special meeting of holders of such securities called for the purpose, and at such meeting and by a like vote the certificate of incorporation of the corporation must be amended to remove therefrom the power to transact an insurance business as an insurer and to provide for such new powers and purposes as may be consistent with the purposes for which the corporation is thereafter to exist;

(5) Security holders of the corporation who dissent from such proposed conversion shall have the same applicable rights as exist under the general corporation laws of this State with respect to dissent from a proposed merger of the corporation;

(6) Upon compliance with subdivisions (1) through (4) above, and upon filing of the amendment of the certificate of incorporation as required by law, the conversion shall thereupon become effective.

(b) An insurer which has once converted to an ordinary business corporation shall not have the power thereafter to convert to an insurer.

§ 4930. Merger; consolidation of stock insurers

(a) A domestic stock insurer may merge or consolidate with one or more domestic or foreign stock insurers, by complying with the applicable provisions of the statutes of this State governing the merger or consolidation of stock corporations formed for profit, but subject to subsection (b) and (c) below. A domestic stock insurer shall not merge or consolidate with any corporation not formed for the purpose of transacting insurance as an insurer.

(b) No such merger or consolidation shall be effectuated unless in advance thereof the plan and agreement therefor have been filed with the Commissioner and approved in writing by him after a hearing thereon after notice to the stockholders of each insurer involved. The Commissioner shall give such approval within a reasonable time after such filing unless he finds such plan or agreement:

(1) Is contrary to law; or

(2) Unfair or inequitable to the stockholders of any insurer involved; or

(3) Would substantially reduce the security of and service to be rendered to policyholders of the domestic insurer in this State or elsewhere; or

(4) Would materially tend to lessen competition in the insurance business in this State or elsewhere as to the kinds of insurance involved, or would materially tend to create a monopoly as to such business; or

(5) Is subject to other material and reasonable objections.

(c) No director, officer, agent or employee of any insurer party to such merger or consolidation shall receive any fee, commission, compensation or other valuable consideration whatsoever for in any manner aiding, promoting or assisting therein except as set forth in such plan or agreement.

(d) If the Commissioner does not approve any such plan or agreement, he shall so notify the insurer in writing specifying his reasons therefor.

§ 4931. Affiliation of stock insurers

(a) A domestic stock insurer shall not acquire a controlling interest in the shares of another stock insurer by an exchange of securities or partly in exchange for securities and partly for cash or property, unless the insurer has first submitted the plan for such acquisition and exchange to the Commissioner and the Commissioner has approved the same.

(b) The Commissioner shall not so approve unless he finds the plan for such acquisition and the terms and conditions thereof to be fair and equitable to all parties concerned therein, after a hearing to which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear.

(c) Notice and conduct of such hearing shall be as provided in chapter 3 of this title.

§ 4932. Acquisition of controlling stock

(a) Any person proposing to acquire the controlling capital stock of any domestic stock insurer and thereby to change the control of the insurer, other than through merger or consolidation or affiliation as provided for in sections 4930 and 4931 of this chapter, shall first apply to the Commissioner in writing for approval of such proposed change of control. The application shall state the names and addresses of the proposed new owners of the controlling stock and contain such additional information as the Commissioner may reasonably require.

(b) The Commissioner shall not approve the proposed change of control if he finds:

(1) That the proposed new owners are not qualified by character, experience and financial responsibility to control and operate the insurer, or cause the insurer to be operated, in a lawful and proper manner; or

(2) That as a result of the proposed change of control the insurer may not be qualified for a certificate of authority under the provisions of section 508 (b) (general eligibility for certificate of authority--ownership, management) of this title; or

(3) That the interests of the insurer or other stockholders of the insurer or policyholders would be impaired through the proposed change of control; or

(4) That the proposed change of control would tend materially to lessen competition, or to create any monopoly, in a business of insurance in this State or elsewhere.

(c) If the Commissioner does not by affirmative action approve or disapprove the proposed change of control within 30 days after the date such application was so filed with him, the proposed change may be made without such approval. Except, that if the Commissioner gives notice to the parties of a hearing to be held by him with respect to the proposed change of control, and the hearing is held within such 30 days or on a date mutually acceptable to the Commissioner and the parties, the Commissioner shall have 10 days after the conclusion of the hearing within which to so approve or disapprove the proposed change; and if not so approved or disapproved, the change may thereafter be made without the Commissioner's approval.

(d) If the Commissioner disapproves the proposed change he shall give written notice thereof to the parties, setting forth in detail the reasons for disapproval.

(e) The Commissioner shall suspend or revoke the certificate of authority of any insurer the control of which has been changed in violation of this section.

§ 4933. Converting mutual insurer

(a) A mutual insurer may become a stock insurer under such reasonable plan and procedure as may be approved by the Commissioner after a hearing thereon of which notice was given to the insurer, its directors or trustees, its officers, employees and its members, all of whom shall have the right to appear at the hearing.

(b) The Commissioner shall not approve any such plan or procedure unless:

(1) Its terms and conditions are fair and equitable;

(2) It is subject to approval by vote of not less than three-fourths of the insurer's current members voting thereon in person, by proxy, or by mail at a meeting of members called for the purpose pursuant to such reasonable notice and procedure as may be approved by the Commissioner; if a life insurer, right to vote shall be limited to members who hold policies other than group policies or term policies for terms of less than 20 years, and whose policies have been in force for not less than one year;

(3) The equity of each member in the insurer is determinable under a fair and reasonable formula approved by the Commissioner, which such equity shall be based upon the insurer's entire surplus, including all voluntary reserves but excluding contingently repayable funds; and without taking into account non-admitted assets or insurance business in force;

(4) The plan gives to each member of the insurer as specified in subdivision (5) below, a pre-emptive right to acquire his proportionate part of all of the proposed capital stock of the insurer within a designated reasonable period, as such part is determinable under the plan of conversion, and to apply upon the purchase thereof the amount of his equity in the insurer as determined under subdivision (3) above;

(0) The members entitled to participate in the purchase of stock or distribution of assets shall include not less than all current policyholders of the insurer and each existing person who had been a policyholder of the insurer within 3 years prior to the date such plan was submitted to the Commissioner;

(1) Shares are to be offered to members at a price not greater than to be thereafter offered under the plan to others;

(2) The plan provides for payment to each member not electing to apply his equity in the insurer for or upon the purchase price of stock to which preemptively entitled, of cash in an amount found to be reasonable by the Commissioner but not in excess of 50% of the amount of his equity not so used for the purchase of stock, and which cash payment together with stock so purchased, if any, shall constitute full payment and discharge of the member's equity or property interest as an owner of such mutual insurer;

(3) The plan, when completed, would provide for the converted insurer paid-in capital stock in an amount not less than the minimum paid-in capital stock required of a domestic stock insurer upon initial authorization to transact like kinds of insurance, together with expendable surplus funds in amount not less than one-half of such required capital stock; and

(4) The Commissioner finds that the insurer's management has not, through reduction in volume of new business written, or cancellation or through any other means sought to reduce, limit, or affect the number or identity of the insurer's members to be entitled to participate in such plan, or to secure for the individuals comprising management any unfair advantage through such plan.

(c) Subsection (b) shall not be deemed to prohibit the inclusion in the mutualization plan of provisions under which the individuals comprising the insurer's management and employee group shall be entitled to purchase for cash at the same price as offered to the insurer's members, shares of stock not taken by members on the pre-emptive offering to members, in accordance with such reasonable classifications of such individuals as may be included in the plan and approved by the Commissioner.

(d) No director, officer, agent or employee of the insurer, or any other person, shall receive any fee, commission or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting, or assisting in such conversion except as set forth in the plan approved by the Commissioner. This provision shall not be deemed to prohibit the payment of reasonable fees and compensation to attorneys at law, accountants, and actuaries for services performed in the independent practice of their professions, even though also directors of the insurer.

§ 4934. Merger; consolidation of mutual insurers

(a) A domestic mutual insurer shall not merge or consolidate with a stock insurer.

(b) A domestic mutual insurer may merge or consolidate with another domestic or foreign mutual insurer under the procedures provided for in this and sections 4935 through 4942 of this chapter.

(c) If for a consolidation and the new corporation is to be domiciled in this State, the new corporation shall be formed under the applicable provisions of the general corporation laws of this State.

(d) For the purposes of this chapter the "surviving insurer" is that which survives and continues as a result of a merger of 2 or more corporations into one corporation.

§ 4935. Approval of merger; consolidation agreement by boards of directors

(e) The board of directors of each of the mutual insurers proposing to merge or consolidate shall, by resolution adopted by at least a majority of all the members of each board, approve a joint agreement of merger or consolidation, as the case may be, between the insurer parties, setting forth the terms and conditions of the merger or consolidation, the mode of carrying the same into effect, and such other provisions as are deemed advisable.

(f) Upon approving such agreement each such board shall by resolution direct that the same be submitted to the Commissioner and be subject to his disapproval as provided in section 4936 of this chapter, and to approval of the members of the respective insurers as provided in section 4937 of this chapter.

§ 4936. Effectuation; disapproval by Commissioner

(a) No such merger or consolidation of a domestic mutual insurer shall be effectuated unless in advance thereof the agreement therefor has been filed with the Commissioner and has not been disapproved by him in writing. If the insurer is not then impaired the Commissioner shall not act with respect to such agreement until after a hearing thereon. The agreement shall be effectuated in accordance with its terms unless the Commissioner disapproves the same within ten days after the date of such filing or the conclusion of such hearing, if any, whichever is the later date, subject to the Commissioner's right to have a reasonable extension of time not to exceed 10 days, upon written notice to the insurers involved. The Commissioner may disapprove the agreement upon one or more of the following grounds --that the agreement:

(1) Is inequitable to the policyholders of any domestic insurers involved; or

(2) Would materially reduce the security of and service to be rendered to policyholders of the domestic insurer in this State and elsewhere;

(3) Would materially tend to lessen competition in this State or elsewhere as to the kinds of insurance involved, or would materially tend to create a monopoly therein; or

(4) Is subject to other reasonable objections.

(b) If the Commissioner disapproves the agreement he shall so notify the insurers in writing specifying his reasons therefor.

(c) No director, officer, agent or employee of any insurer involved, or any other person, shall receive any fee, commission or other valuable consideration whatsoever, other than their usual regular salaries and compensation, for in any manner aiding, promoting, or assisting in such merger or consolidation except as set forth in the agreement approved by the Commissioner. This provision shall not be deemed to prohibit payment of reasonable fees and compensation to attorneys at law, accountants, and actuaries for services performed in the independent practice of their professions, even though also directors of the insurer.

§ 4937. Approval by members

(a) After the Commissioner has approved the proposed agreement of merger or consolidation, and if the insurer is then unimpaired, the agreement shall be submitted to the domestic insurer's members for approval at a regular or special meeting of members. If a life insurer, right to vote shall be limited to members whose policies are other than term policies for terms of less than 20 years, and other than group policies, and have been in force for at least one year.

(b) Not less than 15 days before such meeting written notice of the meeting and of the proposed merger or consolidation shall be given to each member of the insurer. The notice shall state the day, hour, place, and purposes of the meeting, and be accompanied by a copy or summary of agreement of merger or consolidation, as the case may be. Notice and accompanying copy or summary shall be deemed given when enclosed in an envelope addressed to the member at his address last of record with the insurer, and deposited postage paid in a depository of the United States post office.

(c) Upon receiving the affirmative vote of two-thirds of all votes cast by members present or represented at the meeting, the agreement shall be deemed to have been approved. Each member of the insurer shall be bound by such vote, without right of dissent other than the right to vote against the proposal at the meeting. Such a dissenting member shall have no right or equity as to the assets of the insurer except as expressly provided in the member's policy or policies.

§ 4938. Impaired mutuals

If a domestic mutual insurer is then impaired, that is, if the insurer's surplus is less than the amount thereof required under this title for authority to transact the kinds of insurance being transacted by the insurer, the Commissioner may approve the agreement of merger or consolidation without a hearing thereon, and the same may be effectuated without approval of the insurer's members.

§ 4939. Articles of merger; consolidation; mutual insurers

Upon the approval by the Commissioner and members, if required, agreement of merger or consolidation, articles of merger or consolidation, as the case may be, shall be executed under the seal of each insurer and verified by a duly authorized officer of each insurer and shall set forth as applicable:

(1) The name of the surviving or new corporation.

(2) The time and place of the meeting of the directors at which the agreement of merger or consolidation was approved and except where pursuant to section 4938 of this chapter the agreement is not submitted to a vote of the members of the insurer, the time and place of the meeting of the members of each insurer at which the agreement of merger or consolidation, as the case may be, was approved, the kind and period of notice given to the members and the total vote by which the agreement was approved.

(3) In the case of a merger into a surviving insurer, any changes desired to be made in the articles of the surviving insurer or in the case of a consolidation into a new domestic insurer, all of the statements required by law to be set forth in the original articles in the case of the formation of a domestic insurer.

(4) The number, names and addresses of the persons to be the first directors of the surviving or new insurer.

(5) The agreement of merger or consolidation.

§ 4940. Filing of articles of merger or consolidation; payment of fees; approval by Secretary of State

(a) The articles of merger or consolidation, as the case may be, referred to in section 4939 of this chapter, together with a certificate or certificates from the proper department or departments evidencing payment of all applicable taxes and charges required by law, shall be delivered to the Secretary of State.

(b) The Secretary of State shall examine the articles and the certificate or certificates to determine whether they contain all necessary information and satisfy all requirements as to form. If the Secretary of State finds that the articles and certificates contain all necessary information and satisfy all requirements as to form, he shall endorse his approval upon the articles. If the Secretary of State does not so find, he shall forthwith give notice thereof to the parties stating in detail his reasons for so doing and stating how the non-conformance can be remedied. Upon remedying the defects, the party may in the same manner file the same or amended articles, whichever the particular case may require, and the Secretary of State shall endorse his approval thereon.

§ 4941. Issuance of certificate of merger or consolidation; effective date

(c) Immediately upon his approval of the articles of merger or consolidation as provided in section 4940 of this chapter, the Secretary of State shall file the articles and issue to the surviving or new corporation or its representative a certificate of merger or consolidation, and shall deliver a copy of the articles so approved to the Commissioner.

(d) The merger or consolidation shall be effective upon the issuance of the certificate by the Secretary of State as above provided.

(e) The certificate shall be conclusive evidence of the performance of all conditions precedent to such consolidation or merger, and of the continuation or creation of the surviving or new corporation, to the extent that the same is governed by the laws of this State.

§ 4942. Effect of merger or consolidation

(f) Upon the merger or consolidation becoming effective the several corporations, parties to the agreement of merger or consolidation, shall be a single corporation, which in the case of a merger, shall be that corporation designated in the agreement as the surviving corporation; and in the case of a consolidation, shall be the new corporation provided for in the agreement of consolidation. The separate existence of all the constituent corporations parties to said agreement, except the surviving corporations, in the case of a merger, or the new corporation, in the case of a consolidation, shall thereupon cease.

(g) All the property, real, personal and mixed, of each of the corporations parties to the agreement of merger or consolidation, and all debts or obligations due to any of them, shall be taken and be deemed to be transferred to and vested in the surviving or new corporation, as the case may be, without further act or deed.

(h) The surviving or new corporation shall, upon effectuation of the merger or consolidation, thenceforth be responsible for all the liabilities and obligations of each of the corporations so merged or consolidated; but the liabilities of the merging or consolidating corporations or of their directors or officers shall not be affected, and the rights of creditors thereof or of any person dealing with such corporations or any liens upon the property of such corporations shall not be impaired by the merger or consolidation; and any claim existing or action or proceeding pending by or against any of such corporations may be prosecuted to judgment as if the merger or consolidation had not taken place, or the surviving or new corporation may be proceeded against or substituted in its place.

(i) In the case of a merger, the certificate of incorporation of the surviving corporation, if such corporation is a domestic insurer, shall be deemed to be amended to the extent, if any, that changes in its certificate are stated in the articles of merger; and in the case of a consolidation, the statements set forth in the articles of consolidation, in case the new corporation is one formed under the laws of this State, which are required or permitted to be set forth in the certificate of incorporation of such insurer formed under the general corporation laws of this State, shall be deemed to be the certificate of incorporation of the new corporation.

§ 4943. Bulk reinsurance

(j) A domestic insurer may reinsure all or substantially all of its business in force, or all or substantially all of a major class thereof, with another insurer, stock or mutual, by an agreement of bulk reinsurance after compliance with this section. No such agreement shall become effective unless filed with the Commissioner, or if disapproved by him.

(k) The Commissioner shall disapprove such agreement within a reasonable time after filing if he finds:

(1) That the plan and agreement are unfair and inequitable to any insurer or to policyholders involved;

(2) That the reinsurance, if effectuated, would substantially reduce the protection or service to the policyholders of any domestic insurer involved;

(3) That the agreement does not embody adequate provisions by which the reinsuring insurer becomes liable to the original insured's for any loss or damage occurring under the policies reinsured in accordance with the original terms of such policies, or does not require the reinsuring insurer to furnish each such insured with a certificate evidencing such assumption of liability;

(0) That the assuming reinsurer is not authorized to transact such insurance in this State, or is not qualified as for such authorization or will not appoint the Commissioner and his successors as its irrevocable attorney for service of process, so long as any policy so reinsured or claim thereunder remains in force or outstanding;

(1) That such reinsurance would materially tend to lessen competition in the insurance business in this State or elsewhere as to the kinds of insurance involved, or would materially tend to create a monopoly as to such business;

(0) That the proposed bulk reinsurance is not free of other reasonable objections,

(c) If the Commissioner disapproves the agreement he shall forthwith notify in writing each insurer involved specifying his reasons therefor.

(d) If for reinsurance of all or substantially all of the business in force of an insurer at a time when the insurer's capital (if a stock insurer) or surplus (if a mutual insurer) is not impaired, the plan and agreement of such reinsurance must be approved by a vote of not less than two-thirds of the insurer's outstanding stock having voting rights (if a stock insurer), or of members (if a mutual insurer), voting thereon, at a meeting of stockholders or members called for the purpose, pursuant to such reasonable notice and procedure as is provided for in the agreement. If a mutual life insurer, right to vote may be limited to members whose policies are other than term policies for terms of less than 20 years, or group policies, and have been in effect for more than one year.

(e) No director, officer, agent or employee of any insurer party to such reinsurance, nor any other person, shall receive any special compensation for arranging or with respect to, any such reinsurance except as is set forth in the reinsurance agreement filed with the Commissioner.

§ 4944. Mutual member's share of assets on liquidation

(a) Upon any liquidation of a domestic mutual insurer, its assets remaining after discharge of its indebtedness, policy obligations, repayment of contributed or borrowed surplus, if any, and expenses of administration, shall be distributed to currently existing persons who had been members of the insurer for at least one year and who were its members at any time within 36 months next preceding the date such liquidation was authorized or ordered, or date of last termination of the insurer's certificate of authority whichever date is the earlier; except, that if the Commissioner has reason to believe that those in charge of the management of the insurer have caused or encouraged the reduction of the number of members of the insurer in anticipation of liquidation and for the purpose of reducing thereby the number of persons who may be entitled to share in distribution of the insurer's assets, he may enlarge the 36 month qualification period as he may deem to be reasonable.

(b) The insurer shall make a reasonable classification of its policies so held by such members, and a formula based upon such classification for determining the equitable distributive share of each such member. Such classification and formula shall be subject to the approval of the Commissioner.

CHAPTER 51. INSIDER TRADING IN DOMESTIC INSURER SECURITIES

§ 5101. Scope of chapter

This chapter shall apply only with respect to securities issued by domestic stock insurers.

§ 5102. "Equity security" defined

The term "equity security" when used in this chapter means any stock or similar security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right; or any other security which the Commissioner deems to be of similar nature and considers necessary or appropriate, by such rules and regulations as he may prescribe in the public interest or for the protection of investors, to treat as an equity security.

§ 5103. Statement of ownership

Every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security of a domestic stock insurer, or who is a director or an officer of such insurer, shall file with the Commissioner within 10 days after he becomes such beneficial owner, director or officer a statement, in such form as the Commissioner may prescribe, of the amount of all equity securities of such insurer of which he is the beneficial owner, and within 10 days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file with the Commissioner a statement, in such form as the Commissioner may prescribe, indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

§ 5104. Recovery of profits

(a) For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to such insurer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such insurer within any period of less than 6 months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the insurer, irrespective of any intention on the part of such beneficial owner, director or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding 6 months.

(b) Suit to recover such profit may be instituted in any court of competent jurisdiction by the insurer, or by the owner of any security of the insurer in the name and in behalf of the insurer if the insurer shall fail or refuse to bring such suit within 60 days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than 2 years after the date such profit was realized.

(c) This section shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commissioner by rules and regulations may exempt as not comprehended within the purpose of this section.

§ 5105. Unlawful sale of securities

No such beneficial owner, director or officer, directly or indirectly, shall sell any equity security of such insurer if the person selling the security or his principal (1) does not own the security sold or (2) if owning the security, does not deliver it against such sale within 20 days thereafter, or does not within 5 days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this section if he proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

§ 5106. Excepted securities; dealers

(a) Section 5104 of this title shall not apply to any purchase and sale, or sale and purchase, and section 5105 of this title shall not apply to any sale, of an equity security of a domestic stock insurer not then or theretofore held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market (otherwise than on an exchange as defined in the Securities Exchange Act of 1934) for such security.

(b) The Commissioner may, by such rules and regulations as he deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

§ 5107. Arbitrage transactions

Sections 5103, 5104, and 5105 of this title shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the Commissioner may adopt in order to carry out the purposes of this chapter.

§ 5108. Registered or closely held securities

Sections 5103, 5104 and 5105 of this title shall not apply to equity securities of a domestic stock insurer if (1) such securities shall be registered, or shall be required to be registered, pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or if (2) such domestic stock insurer shall not have any class of its equity securities held of record by 100 or more persons on the last business clay of the year next preceding the year in which equity securities of the insurer would be subject to the provisions of sections 5103, 5104 and 5105 of this title, except for the provisions of this clause.

§ 5109. Rules and regulations

The Commissioner may make such rules and regulations as may be necessary for the execution of the functions vested in him by this chapter, and may for such purpose classify domestic stock insurers, securities, and other persons or matters within his jurisdiction. No provision of sections 5103, 5104 and 5105 of this title imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commissioner, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

CHAPTER 53. MUTUAL ASSESSMENT PROPERTY INSURERS

§ 5301. Scope of chapter; definition

(a) This chapter shall apply only as to domestic mutual fire insurers heretofore and now doing business on the assessment premium plan.

(b) For the purposes of this chapter an insurer "doing business on the assessment premium plan" is one which depends in whole or substantial part upon special or regular assessments levied upon its members, either prior to or after a loss, for the payment of losses and expenses. This provision shall not be deemed to prevent any such insurer from collecting from each member such initial amount as it may deem proper prior to or at the time of the effectuation of the member's insurance; and shall not be deemed to prohibit the acquisition, accumulation and maintenance of surplus or unallocated funds.

§ 5302. Continuation of existing insurers

(c) All such insurers holding subsisting certificates of authority from the Commissioner immediately prior to the effective date of this Act may continue to be so authorized so long as qualified therefor under this title.

(d) No new such insurers shall be formed or be newly authorized after the effective date of this Act.

§ 5303. Insuring powers

(a) Such insurers shall have power to insure only real property and personal property incidental to such real property, against the perils of fire, lightning, and windstorm, together with perils customarily included under extended coverage's.

(b) The maximum amount of insurance which the insurer shall retain on any one subject of insurance, after deduction of applicable reinsurance, shall not exceed 10% of its admitted assets, or $5,000, whichever is the larger amount. For the purposes of this subsection a "subject of insurance" shall have the meaning ascribed in section 909 (limits of risk) of this title.

§ 5304. Reinsurance

Such an insurer may cede reinsurance to any insurer authorized to transact property insurance in this State, other than on the assessment premium plan. An insurer doing business on the assessment premium plan shall not accept reinsurance from other insurers.

§ 5305. Records

Every such insurer, through its president and secretary, shall keep or cause to be kept accurate records and accounts of its transactions. The books, files and records of the insurer shall be located at its principal place of business in this State, or at such place in this State as may be expressly authorized by the insurer's board of directors with notice thereof in writing to the Commissioner. The books, files and records of the insurer shall be available for inspection by the insurer's directors and officers, and by the Commissioner, at all reasonable times.

§ 5306. Subject to other provisions

(e) Such insurers shall be subject to all reasonably applicable provisions of this title, except provisions requiring the possession, maintenance, or deposit of surplus.

(f) Such insurers shall expressly be subject to the following provisions of chapter 49 of this title (organization and corporate powers, procedures of domestic stock and mutual insurers):

(1) Section 4903 (general corporation statutes, applicability);

(2) Section 4904 (insurance business exclusive);

(3) Section 4911 (membership in mutual);

(4) Section 4912 (bylaws of mutual);

(5) Section 4913 (minutes of corporate meetings);

(6) Section 4919 (change of directors, officers--notice);

(7) Section 4920 (prohibited pecuniary interest of officials);

(8) Section 4921 (management and exclusive agency contracts);

(9) Section 4926 (payment of taxes; exoneration);

(0) Sections 4934 through 4942 (merger, consolidation of mutual insurers);

(5) Section 4943 (bulk reinsurance); and

(6) Section 4944 (mutual member's share of assets on liquidation).

CHAPTER 55. MUTUAL BENEFIT ASSOCIATIONS

§ 5501. Scope of chapter; provisions exclusive

(a) This chapter applies only to domestic mutual benefit associations as defined in section 5502 of this chapter.

(b) No provision of this title shall apply as to such associations unless contained or referred to in this chapter.

§ 5502. "Mutual benefit association," "association" defined

As used in this chapter

(1) "Mutual benefit association" means a corporation, society, order or association, which has no capital stock, which issues certificates of membership providing for payment of benefits in case of sickness, disability or death of its members and which accumulate funds by the collection of fees or dues from its members, at either stated or irregular intervals, with which to discharge its liabilities on its membership certificates and with which to pay the administrative expenses; but fraternal benefit societies as defined in chapter 61 of this title shall not be deemed to be mutual benefit associations.

(2) "Association" means a mutual benefit association as defined in this section.

§ 5503. Exempt associations

A mutual benefit association whose membership is confined to employees or former employees of common carriers engaged in interstate commerce, or any association which administers 2 or more such associations, is not subject to the provisions of this chapter.

§ 5504. Incorporation; prerequisites

The Secretary of State shall not file a certificate of incorporation for any mutual benefit association unless accompanied by a certificate duly signed by the Commissioner setting forth that a deposit of $25,000 has been made with him in cash or approved securities, that conformity has been made with all of the requirements of this chapter, and that the certificate of incorporation so presented for filing is in substantial compliance with the provisions of the insurance laws of this State. The deposit shall constitute a guaranty fund, hereinafter mentioned.

§ 5505. Certificate of authority required; foreign operations

(a) No association shall directly or indirectly issue any certificate of membership without being so authorized by a valid and subsisting certificate of authority issued to it by the Commissioner.

(b) No association shall issue any certificate of membership in any other state or foreign country unless it holds a valid and subsisting certificate of authority issued to it by the Commissioner.

§ 5506. Certificate of authority--application for

(a) No certificate of authority shall be issued to any association unless it files with the Commissioner:

(1) A certified copy of its certificate of incorporation or charter;

(2) A copy of its constitution and bylaws;

(3) A copy of all forms of certificates of membership which it proposes to issue;

(4) A certified statement that it has a membership of at least 500 persons or that it has at least 500 bona fide applications for membership, accompanied by the initial payments;

(5) Such other information respecting its business or affairs as may be required by the Commissioner.

(b) At the time of application for certificate of authority the association shall deposit with the Commissioner a guaranty fund as required under section 5509 of this chapter.

§ 5507. Certificate of authority--issuance, renewal

(a) The Commissioner shall issue a certificate of authority to every mutual benefit association complying with the provisions of this chapter, upon payment of the fee therefor in the amount specified in section 5520 of this chapter.

(b) The certificate of authority shall be valid until the March 1st next following its issuance. So long as the association is qualified therefor the Commissioner shall, upon payment of the fee for renewal specified in section 5520 of this chapter, annually on March 1st renew the certificate of authority for the ensuing year.

§ 5508. Certificate of authority--revocation

The Commissioner shall forthwith revoke the certificate of authority of an association if from an examination of the affairs of the association or for other cause, and after notice to the association and a hearing before the Commissioner, the Commissioner finds that as to the association any one or more of the following grounds exist:

(1) It is insolvent, or its assets are not sufficient for carrying on its business;

(2) Its condition is such as to render its further proceeding hazardous to its certificate holders or to the public notwithstanding any special provision granted in its charter or certificate of incorporation;

(3) It is fraudulently conducted; or

(4) It has violated or failed to comply with any provision of this chapter.

§ 5509. Guaranty fund; deposit; purpose; substitutions

(a) Each mutual benefit association before receiving a certificate of authority shall deposit with the Commissioner $25,000 in cash and/or securities approved by him.

(b) The deposit shall constitute a guaranty fund, and shall remain in trust with the Commissioner to answer any default of the association.

(c) While not in default, the association may collect the interest, dividends and profits upon the deposited securities, and from time to time substitute therefor other securities of equally good character and value, subject to the approval of the Commissioner.

(d) The deposit shall not be withdrawn by the association except as hereinafter provided. The Commissioner may make withdrawals from the fund upon the order of any court of record of this State issued upon a final judgment, to pay any claim reduced to final judgment by such court in an action by any member or beneficiary based upon a certificate of membership. In the event of such withdrawal, the association shall replace the amount withdrawn within 6 months thereafter.

(e) If the association determines to discontinue its business, it shall make written application to the Commissioner for withdrawal of its guaranty fund. Within 3 months after receipt of the application, the Commissioner shall determine the financial affairs and condition of the association; and if he finds that its books and records are in proper order and that it has no liabilities outstanding he shall cancel the association's certificate of authority and deliver to the association or its assigns all moneys and/or securities then held in the deposited guaranty fund to the association's credit.

§ 5510. Benefit fund

(a) Every association shall deposit in a bank of trust company approved by the Commissioner, a sum not less than 50% of all dues collected by the association or by any agent thereof on all certificates of membership. This shall constitute a benefit fund for the sole purpose of payment of claims arising under certificates of membership, for the payments to the guaranty fund maintained with the Commissioner, and for the payment of legal expenses incurred in adjusting and defending claims.

(b) If after an examination of the financial affairs of the association the Commissioner determines that 50% of all dues collected is insufficient to properly maintain the benefit fund, he may require the association to deposit a larger percentage of its dues to the credit of the benefit fund.

§ 5511. Investments

An association may invest its funds in such investments as are eligible for investment of the funds of domestic life insurers under chapter 13 (investments) of this title.

§ 5512. Annual statement

(f) Each association shall annually on or before March 1st file with the Commissioner its financial statement, on forms furnished by the Commissioner and subscribed and sworn to by its president and secretary, or in their absence by 2 of its principal officers. The statement shall show the association's financial condition and total membership at the close of business on the December 31st next preceding.

(g) The Commissioner shall annually, in December, furnish to each association then holding a certificate of authority, 2 or more blanks in the form adopted for such annual statements.

§ 5513. Examination of association

(a) The Commissioner shall examine the affairs of each association as to its financial condition at least once in 3 years. He shall also make an examination of any such association whenever he deems it prudent or advisable to do so.

(b) The examination shall be made by the Commissioner personally or by his deputy or other accredited representative, and all proper charges incurred in making such examination, inclusive of expert assistance, shall be paid by the association examined; except, that the expenses of such examination shall not exceed $25 per day, plus traveling expenses incurred.

§ 5514. Examination--access to books and records--witnesses

For the purpose of the examination under section 5513 of this chapter, the person making the examination shall have free access to all the books and papers of the association relating to its business, and to the books and papers of any of its agents, and may summon and qualify as witnesses under oath and examine the directors, officers, agents and employees of the association, and any other persons in relation to its affairs, transactions and conditions.

§ 5515. Examination--refusal to permit; revocation of certificate of authority

The refusal of any association to submit to and provide for the examination under section 5513 of this chapter, or to exhibit its books and records for inspection, shall be presumptive evidence that it has violated the provisions of this chapter, and its certificate of authority shall forthwith be revoked by the Commissioner, and it shall be subject to the penalties prescribed and imposed by this chapter.

§ 5516. Domestic associations; situs of business; reports and fees

Any mutual benefit association organized under the general corporation law of this State, with its principal office situated in this State, shall be regarded as doing business in this State regardless of whether or not its membership is acquired from residents of this State, other states, District of Columbia or territories of the United States, and shall make the reports required to the Commissioner and pay all of the fees prescribed in this chapter.

§ 5517. Certificate of membership; approval; terms

(a) No certificate of membership providing for sick, accident and/or death benefits to members or their beneficiaries, as hereinafter provided, shall be issued by any association unless the form of the same shall first be filed with and approved by the Commissioner.

(b) A certificate of membership, among other conditions not contrary to the provisions of this chapter, may specify the diseases for which limited benefits may be paid in sickness or death, and may also specify the causes of personal injuries, or death therefrom, for which no benefit will be paid.

(c) A certificate of membership may also restrict the payment of any benefit for sickness, accident and/or death that occurs within a specified time after the issuance of such certificate to the refund of all dues paid by the members or their beneficiaries, less the expense of carrying the same on the books of the association, and the payment of such refund shall fully liquidate all claims of a member against the association by reason of such certificate of membership.

(d) A certificate of membership may also limit the time which shall elapse before any benefits are payable and may be paid, within reasonable limitations approved by the Commissioner.

§ 5518. Certificate of membership--limitations on benefits

No certificate of membership issued by any association shall provide for death benefits in excess of $7,500, or sickness or accident disability benefits in excess of $100 per week. No association shall issue more than one of each of the above types of certificates of membership to any one person.

§ 5519. Agreement between association and members; binding effect

The certificate of membership, the certificate of incorporation, and any amendments thereto, the bylaws of the association and the provisions of this chapter shall constitute an agreement between the association as a whole or the membership thereof, and the members, and binding on their respective beneficiaries.

§ 5520. Fees, costs; in lieu provision

(a) Each association shall pay to the Commissioner fees and costs as follows:

(1) For issuance of original certificate of authority $25

For each annual renewal thereof 25

(2) For filing of annual statement 25

(3) For filing, reviewing, and approval of the form of certificates of membership, the actual expenses incurred by the department in connection therewith, as determined by the Commissioner.

(b) The fees and costs hereinabove provided shall be for the use of the State, and shall be in lieu of all other taxes, levies, assessments or contributions, except taxes on real property.

§ 5521. Merger, reinsurance, transfers with other associations

Every association may merge, insure, reinsure, or accept the transfer of membership or funds with any other like association under such reasonable rules and regulations for the protection of members as the Commissioner prescribes.

§ 5522. Dissolution

Upon the withdrawal of its guaranty fund deposit as provided in section 5509 (e) of this chapter, the directors or governing body of the association shall forthwith cause the association to be dissolved in accordance with the applicable laws of this State, and shall file proper evidence of such dissolution with the Commissioner.

§ 5523. Violations; penalties

(a) Any corporation, society, order or association which shall organize and/or transact the business of a mutual benefit association in this State, contrary to the provisions of this chapter, or any mutual benefit association which shall directly or indirectly transact such business in this State without having a valid and unrevoked certificate of authority therefor, agreeable to the provisions of this chapter, shall be fined not more than $1,000. Any officer, manager or agent of such corporation, society, order or association, or mutual benefit association, willfully violating or failing to observe or comply with the provisions of this chapter shall be punishable under this section.

(b) Any mutual benefit association, or any officer, manager or agent thereof, neglecting or refusing to comply with, or violating, any of the provisions of this chapter, the penalty for which neglect, refusal or violation is not otherwise specified, shall be fined not more than $200.

§ 5524. Other provisions applicable

The following additional chapters of this title shall also apply as to mutual benefit associations to the extent so applicable and not inconsistent with the express provisions of this chapter and the reasonable implications of such express provision:

(1) Chapter 1 (general definition and provisions);

(2) Chapter 3 (the Insurance Commissioner);

(3) Chapter 13 (investments);

(4) Chapter 15 (administration of deposits);

(5) Chapter 23 (trade practices and frauds);

(6) Chapter 59 (rehabilitations and liquidations); and

(7) Chapter 67 (transitory provisions).

CHAPTER 57. RECIPROCAL INSURERS

§ 5701. "Reciprocal" insurance defined

"Reciprocal" insurance is that resulting from an interchange among persons, known as "subscribers," of reciprocal agreements of indemnity, the interchange being effectuated through an "attorney-in-fact" common to all such persons.

§ 5702. Scope of chapter--existing insurers

(a) All authorized reciprocal insurers shall be governed by those sections of this chapter not expressly made applicable to domestic reciprocals.

(b) Existing authorized reciprocal insurers shall after the effective date of this Act comply with the provisions of this chapter, and shall make such amendments to their subscribers' agreement, power of attorney, policies and other documents and accounts and perform such other acts as may be required for such compliance.

§ 5703. Insuring powers of reciprocals

(a) A reciprocal insurer may, upon qualifying therefor as provided for by this title, transact any kind or kinds of insurance defined by this title, other than life or title insurances.

(b) Such an insurer may purchase reinsurance upon the risk of any subscriber, and may grant reinsurance as to any kind of insurance it is authorized to transact direct.

§ 5701. Name; suits

A reciprocal insurer shall:

(1) Have and use a business name. The name shall include the word "reciprocal," or "interinsurer," or "interinsurance," or "exchange," or "underwriters," or "underwritings," or "association."

(2) Sue and be sued in its' own name.

§ 5705. Attorney

(a) "Attorney," as used in this chapter, refers to the attorney-in-fact of a reciprocal insurer. The attorney may be an individual, firm or corporation.

(b) The attorney of a foreign reciprocal insurer, which insurer is duly authorized to transact insurance in this State, shall not, by virtue of discharge of its duties as such attorney with respect to the insurer's transactions in this State, be thereby deemed to be doing business in this State within the meaning of any laws of this State applying to foreign persons, firms or corporations.

(c) The subscribers and the attorney-in-fact comprise a reciprocal insurer and a single entity for the purposes of chapter 7 of this title as to all operations under the insurer's certificate of authority.

§ 5706. Organization of reciprocal insurer

(a) Twenty-five or more persons domiciled in this State may organize a domestic reciprocal insurer and make application to the Commissioner for a certificate of authority to transact insurance.

(b) The proposed attorney shall fulfill the requirements of and shall execute and file with the Commissioner when applying for a certificate of authority, a declaration setting forth:

(1) The name of the insurer;

(2) The location of the insurer's principal office, which shall be the same as that of the attorney and shall be maintained within this State;

(0) The kinds of insurance proposed to be transacted;

(2) The names and addresses of the original subscribers;

(3) The designation and appointment of the proposed attorney and a copy of the power of attorney;

(4) The names and addresses of the officers and directors of the attorney, if a corporation, or its members, if a firm;

(5) The powers of the subscribers' advisory committee; and the names and terms of office of the members thereof;

(6) That all monies paid to the reciprocal shall, after deducting therefrom any sum payable to the attorney, be held in the name of the insurer and for the purposes specified in the subscribers' agreement;

(7) A statement that each of the original subscribers has hi good faith applied for insurance of a kind proposed to be transacted, and that the insurer has received from each such subscriber the full premium or premium deposit required for the policy applied for, for a term of not less than 6 months at an adequate rate theretofore filed with and approved by the Commissioner;

(8) A statement of the financial condition of the insurer, a schedule of its assets, and a statement that the surplus as required by section 511 of this title is on hand; and

(9) A copy of each policy, endorsement and application form it then proposes to issue or use.

The declaration shall be acknowledged by the attorney in the manner required for the acknowledgment of deeds.

§ 5707. Certificate of authority

(a) The certificate of authority of a reciprocal insurer shall be issued to its attorney in the name of the insurer.

(b) The Commissioner may refuse, suspend or revoke the certificate of authority, in addition to other grounds therefor, for failure of the attorney to comply with any applicable provisions of this title.

§ 5708. Power of attorney

(a) The rights and powers of the attorney of a reciprocal insurer shall be as provided in the power of attorney given it by the subscribers.

(b) The power of attorney must set forth:

(1) The powers of the attorney;

(2) The general services to be performed by the attorney;

(3) The maximum amount to be deducted from advance premiums or deposits to be paid to the attorney and the general items of expense in addition to losses, to be paid by the insurer; and

(4) Except as to nonassessable policies, a provision for a contingent several liability of each subscriber in a specified amount which amount shall be not less than one nor more than 10 times the premium or premium deposit stated in the policy.

(c) The power of attorney may:

(1) Provide for the right of substitution of the attorney and revocation of the power of attorney and rights thereunder;

(2) Impose such restrictions upon the exercise of the power as are agreed upon by the subscribers;

(3) Provide for the exercise of any right reserved to the subscribers directly or through their advisory committee; and

(4) Contain other lawful provisions deemed advisable.

(d) The terms of any power of attorney or agreement collateral thereto shall be reasonable and equitable, and no such power or agreement shall be used or be effective in this State until approved by the Commissioner.

§ 5709. Modifications

Modifications of the terms of the subscribers' agreement or of the power of attorney of a domestic reciprocal insurer shall be made jointly by the attorney and the subscribers' advisory result of breach by the attorney of the conditions of his bond as committee. No such modification shall be effective retroactively, nor as to any insurance contract issued prior thereto.

§ 5710. Attorney's bond

the attorney and by an authorized corporate surety, and shall be

(a) Concurrently with the filing of the declaration provided for in section 5706 of this chapter, the attorney of a domestic favor of this State for the benefit of all persons damaged as a reciprocal insurer shall file with the Commissioner a bond in set forth in subsection (b) hereof. The bond shall be executed by subject to the Commissioner's approval.

(b) The bond shall be in the penal sum of $25,000, aggregate in form, conditioned that the attorney will faithfully account for all monies and other property of the insurer coming into his hands, and that he will not withdraw or appropriate to his own use from the funds of the insurer, any monies or property to which he is not entitled under the power of attorney.

() The bond shall provide that it is not subject to cancellation unless SO days' advance notice in writing of cancellation is given both the attorney and the Commissioner.

§ 5711. Deposit in lieu of bond

In lieu of the bond required under section 5710 of this chapter, the attorney may maintain on deposit through the office of the Commissioner, a like amount in cash or in value of securities qualified under this title as insurers' investments, and subject to the same conditions as the bond.

§ 5712. Action on bond

Action on the attorney's bond or to recover against any such deposit made in lieu thereof may be brought at any time by one or more subscribers suffering loss through a violation of its conditions, or by a receiver or liquidator of the insurer. Amounts recovered on the bond shall be deposited in and become part of the insurer's funds. The total aggregate liability of the surety shall be limited to the amount of the penalty of such bond.

§ 5713. Services of process--judgment

(a) Legal process shall be served upon a domestic reciprocal insurer by serving the insurer's attorney at his principal offices or by serving the Commissioner as the insurer's process agent under sections 524 and 525 of this title.

(b) Any judgment based upon legal process so served shall be binding upon each of the insurer's subscribers as their respective interests may appear, but in an amount not exceeding their respective contingent liabilities, if any, the same as though personal service of process was had upon each such subscriber.

§ 5714. Contributions to insurer

The attorney or other parties may advance to a domestic reciprocal insurer upon reasonable terms such funds as it may require from time to time in its operations. Sums so advanced shall not be treated as a liability of the insurer, and, except upon liquidation of the insurer, shall not be withdrawn or repaid except out of the insurer's realized earned surplus in excess of its minimum required surplus. No such withdrawal or repayment shall be made without the advance approval of the Commissioner. This section does not apply to bank loans, or to other loans made upon security.

§ 5715. Financial condition--method of determining

In determining the financial condition of a reciprocal insurer the Commissioner shall apply the following rules:

(1) He shall charge as liabilities the same reserves as are required of incorporated insurers issuing nonassessable policies on a reserve basis.

(2) The surplus deposits of subscribers shall be allowed as assets, except that any premium deposit delinquent for 90 days shall first be charged against such surplus deposit.

(3) The surplus deposits of subscribers shall not be charged as a liability.

(4) All premium deposits delinquent less than 90 clays shall be allowed as assets.

(5) An assessment levied upon subscribers, and not collected, shall not be allowed as an asset.

(6) The contingent liability of subscribers shall not be allowed as an asset.

(7) The computation of reserves shall be based upon premium deposits other than membership fees and without any deduction for expenses and the compensation of the attorney.

§ 5716. Who may be subscribers

Individuals, partnerships, and corporations of this State may make application, enter into agreement for and hold policies or contracts in or with and be a subscriber of any domestic, foreign, or alien reciprocal insurer. Any corporation now or hereafter organized under the laws of this State shall, in addition to the rights, powers, and franchises specified in its articles of incorporation, have full power and authority as a subscriber to exchange insurance contracts through such reciprocal insurer. The right to exchange such contracts is hereby declared to be incidental to the purposes for which such corporations are organized and to be as fully granted as the rights and powers expressly conferred upon such corporations. Government or governmental agencies, state or political subdivisions thereof, boards, associations, estates, trustees or fiduciaries are authorized to exchange nonassessable reciprocal interinsurance contracts with each other and with individuals, partnerships and corporations to the same extent that individuals, partnerships and corporations are herein authorized to exchange reciprocal intersurance contracts. Any officer, representative, trustee, receiver, or legal representative of any such subscriber shall be recognized as acting for or on its behalf for the purpose of such contract but shall not be personally liable upon such contract by reason of acting in such representative capacity.

§ 5717. Subscribers' advisory committee

(a) The advisory committee of a domestic reciprocal insurer exercising the subscribers' rights shall be selected under such rules as the subscriber adopt.

(b) Not less than 2/3 of such committee shall be subscribers other than the attorney, or any person employed by, representing, or having a financial interest in the attorney.

(c) The committee shall

(1) Supervise the finances of the insurer;

(2) Supervise the insurer's operations to such extent as to assure conformity with the subscribers' agreement and power of attorney;

(3) Procure the audit of the accounts and records of the insurer and of the attorney at the expense of the insurer; and

(4) Have such additional powers and functions as may be conferred by the subscribers' agreement.

§ 5718. Subscribers' liability

(a) The liability of each subscriber, other than as to a nonassessable policy, for the obligations of the reciprocal insurer shall be an individual, several and proportionate liability, and not joint.

(b) Except as to a nonassessable policy, each subscriber shall have a contingent assessment liability, in the amount provided for in the power of attorney or in the subscribers' agreement, for payment of actual losses and expenses incurred while his policy was in force. Such contingent liability may be at the rate of not less than one nor more than 10 times the premium or premium deposit stated in the policy, and the maximum aggregate thereof shall be computed in the manner set forth in section 5722 of this chapter.

(c) Each assessable policy issued by the insurer shall contain a statement of the contingent liability, set in type of the same prominence as the insuring clause.

§ 5719. Subscribers' liability on judgment

(a) No action shall lie against any subscriber upon any obligation claimed against the insurer until a final judgment has been obtained against the insurer and remains unsatisfied for 30 days.

(b) Any such judgment shall be binding upon each subscriber only in such proportion as his interests may appear and in amount not exceeding his contingent liability, if any.

§ 5720. Assessments

(a) Assessments may from time to time be levied upon subscribers of a domestic reciprocal insurer liable therefor under the terms of their policies by the attorney upon approval in advance by the subscribers' advisory committee and the Com missioner; or by the Commissioner in liquidation of the insurer.

(b) Each subscriber's share of a deficiency for which an assessment is made, but not exceeding in any event his aggregate contingent liability as computed in accordance with section 5722 of this chapter, shall be computed by applying to the premium earned on the subscriber's policy or policies during the period to be covered by the assessment, the ratio of the total deficiency to the total premiums earned during such period upon all policies subject to the assessment.

(c) In computing the earned premiums for the purposes of this section, the gross premium received by the insurer for the policy shall be used as a base, deducting therefrom solely charges not recurring upon the renewal or extension of the policy.

(d) No subscriber shall have an offset against any assessment for which he is liable, on account of any claim for unearned premium or losses payable.

§ 5721. Time limit for assessments

Every subscriber of a domestic reciprocal insurer having contingent liability shall be liable for, and shall pay his share of any assessment, as computed and limited in accordance with this chapter, if:

(1) While his policy is in force or within 1 year after its termination, he is notified by either the attorney or the Commissioner of his intentions to levy such assessment; or

(2) If an order to show cause why a receiver, conservator, rehabilitator or liquidator of the insurer should not be appointed is issued while his policy is in force or within 1 year after its termination.

§ 5722. Aggregate liability

No one policy or subscriber as to such policy, shall be assessed or charged with an aggregate of contingent liability as to obligations incurred by a domestic reciprocal insurer in any one calendar year, in excess of the amount provided for in the power of attorney or in the subscribers' agreement, computed solely upon premium earned on such policy during that year.

§ 5723. Nonassessable policies

(a) If a reciprocal insurer has a surplus of assets over all liabilities at least equal to the minimum capital stock and surplus required to be maintained by a domestic stock insurer authorized to transact like kinds of insurance, upon application of the attorney and as approved by the subscribers' advisory committee the Commissioner shall issue his certificate authorizing the insurer to extinguish the contingent liability of subscribers under its policies then in force in this State, and to omit provisions imposing contingent liability in all policies delivered or issued for delivery in this State for so long as all such surplus remains unimpaired.

(b) Upon impairment of such surplus, the Commissioner shall forthwith revoke the certificate. Such revocation shall not render subject to contingent liability any policy then in force and for the remainder of the period for which the premium has theretofore been paid; but after such revocation no policy shall be issued or renewed without providing for contingent assessment liability of the subscriber.

(c) The Commissioner shall not authorize a domestic reciprocal insurer so to extinguish the contingent liability of any of its subscribers or in any of its policies to be issued, unless it qualified to and does extinguish such liability of all its subscribers and in all such policies for all kinds of insurance transacted by it. Except, that if required by the laws of another state in which the insurer is transacting insurance as an authorized insurer, the insurer may issue policies providing for the contingent liability of such of its subscribers as may acquire such policies in such state, and need not extinguish the contingent liability applicable to policies theretofore in force in such state.

§ 5724. Subscribers' share in assets

Upon the liquidation of a domestic reciprocal insurer, its assets remaining after discharge of its indebtedness and policy obligations, the return of any contributions of the attorney or other persons to its surplus, and the return of any unused premium, savings, or credits then standing on subscribers' account, shall be distributed to its subscribers who were such within the 12 months prior to the last termination of its certificate of authority, according to such reasonable formula as the Commissioner may approve.

§ 5725. Merger or conversion

(a) A domestic reciprocal insurer upon affirmative vote of not less than 2/3 of its subscribers who vote on such merger pursuant to due notice and the approval of the Commissioner of the terms therefor, may emerge with another reciprocal insurer or be converted to a stock or mutual insurer.

(b) Such a stock or mutual insurer shall be subject to the same capital or surplus requirements and shall have the same rights as a like domestic insurer transacting like kinds of insurance.

(c) The Commissioner shall not approve any plan for such merger or conversion which is inequitable to subscribers, or which, if for conversion to a stock insurer, does not give each subscriber preferential right to acquire stock of the proposed insurer proportionate to his interest in the reciprocal insurer as determined in accordance with section 5724 of this chapter and a reasonable length of time within which to exercise such right.

§ 5726. Impaired reciprocals

(a) If the assets of a domestic reciprocal insurer are at any time insufficient to discharge its liabilities, other than any liability on account of funds contributed by the attorney or others, and to maintain the required surplus, its attorney shall forthwith make up the deficiency or levy an assessment upon the subscribers for the amount needed to make up the deficiency; but subject to the limitation set forth in the power of attorney or policy.

(b) If the attorney fails to make up such deficiency or to make the assessment within 30 days after the Commissioner orders him to do so, or if the deficiency is not fully made up within 60 days after the date the assessment was made, the insurer shall be deemed insolvent and shall be proceeded against as authorized by this title.

(c) If liquidation of such an insurer is ordered, an assessment shall be levied upon the subscribers for such an amount, subject to limits as provided by this chapter, as the Commissioner determines to be necessary to discharge all liabilities of the insurer, exclusive of any funds contributed by the attorney or other persons, but including the reasonable cost of the liquidation.

CHAPTER 59. REHABILITATION AND LIQUIDATION

§ 5901. Definitions

For the purpose of this chapter:

(1) "Impairment" or "insolvency." The capital of a stock insurer or the surplus of a mutual or reciprocal insurer, shall be deemed to be impaired and the insurer shall be deemed to be insolvent, when such insurer is not possessed of assets at least equal to all liabilities and required reserves together with its total issued and outstanding capital stock if a stock insurer, or the minimum surplus if a mutual or reciprocal insurer, required by this title to be maintained for the kind or kinds of insurance it is then authorized to transact.

(2) "Insurer" means any person, firm, corporation, association or aggregation of persons doing an insurance business and subject to the insurance supervisory authority or, or to liquidation, rehabilitation, reorganization or conservation by the Commissioner or the equivalent insurance supervisory official of another state.

(3) "Delinquency proceeding" means any proceeding commenced against an insurer pursuant to this chapter for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer.

(4) "State" means any state of the United States, and also the District of Columbia, and the Commonwealth of Puerto Rico.

(5) "Foreign country" means territory not in any state.

(6) "Domiciliary state" means the state in which an insurer is incorporated or organized, or in the case of an insurer incorporated or organized in a foreign country, the state in which such insurer, having become authorized to do business in such state, has at the commencement of delinquency proceedings the largest amount of its assets held in trust and assets held on deposit for the benefit of its policyholder or policyholders and creditors in the United States, and any such insurer is deemed to be domiciled in such state.

(7) "Ancillary state" means any state other than a domiciliary state.

(8) "Reciprocal state" means any state other than this State in which in substance and effect the provisions of the uniform insurers liquidation act, as defined in section 5920 of this chapter, are in force, including the provisions requiring that the Commissioner of Insurance or equivalent insurance supervisory official be the receiver of a delinquent insurer.

(9) "General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of person, and as to such specifically encumbered property the term includes all such property or its proceeds in excess of the amount necessary to discharge the sum or sums secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders or all policyholders and creditors in the United States shall be deemed general assets.

(10) "Preferred claim" means any claim with respect to which the law of the state or of the United States accords priority of payments from the general assets of the insurer.

(11) "Special deposit claim" means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any general assets.

(12) "Secured claim" mean any claim secured by mortgage, trust deed, pledge, deposit as security, escrow or otherwise, but not including special deposit claim or claims against general assets. The term also includes claims which more than four months prior to the commencement of delinquency proceedings in the state of the insurer's domicile have become liens upon specific assets by reason of judicial process.

(13) "Receiver" means receiver, liquidator, rehabilitator or conservator, as the context may require.

§ 5902. Jurisdiction of delinquency proceedings; venue; change of venue; exclusiveness of remedy; appeal

(a) The Court of Chancery shall have original jurisdiction of delinquency proceedings under this chapter and any court with jurisdiction is authorized to make all necessary or proper orders to carry out the purposes of this chapter.

(b) The venue of delinquency proceedings against a domestic insurer shall be in the county of the insurer's principal place of business. The venue of such proceedings against foreign and alien insurers shall be in any county in this State selected by the Commissioner for the purpose.

(c) At any time after the commencement of a proceeding under this chapter the Commissioner may apply to the court for an order changing the venue of, and removing the proceeding to any other county of this State in which he deems that such proceeding may be most economically and efficiently conducted.

(d) Delinquency proceedings pursuant to this chapter shall constitute the sole and exclusive method of liquidating, rehabilitating, reorganizing or conserving an insurer, and no court shall entertain a petition for the commencement of such proceedings unless the same has been filed in the name of the State on the relation of the Commissioner.

(e) An appeal shall lie to the supreme court from an order granting or refusing rehabilitation, liquidation, or conservation, and from every order in delinquency proceedings having the character of a final order as to the particular portion of the proceedings embraced therein.

§ 5903. Commencement of delinquency proceedings

The Commissioner shall commence any such proceedings by application to the court for an order directing the insurer to show cause why the Commissioner should not have the relief prayed for. On the return of such order to show cause, and after a full hearing, the courts shall either deny the application or grant the application, together with such other relief as the nature of the case and the interests of the policyholders, creditors, stockholders, members, subscribers or the public may require.

§ 5904. Injunctions

(a) Upon application by the Commissioner for such an order to show cause, or at any time thereafter, the court may without notice issue an injunction restraining the insurer, its officers, directors, stockholders, members, subscribers, agents and all other persons from the transaction of its business or the waste or disposition of its property until the further order of the court.

(b) The court may at any time during a proceeding under this chapter issue such other injunctions or orders as may be deemed necessary to prevent interference with the Commissioner or the proceeding, or waste of the assets of the insurer, or the commencement or prosecution of any actions, or the obtaining of preferences, judgments, attachments or other liens, or the making of any levy against the insurer or against its assets or any part thereof.

(c) Notwithstanding any other provision of law, no bond shall be required of the Commissioner as a prerequisite for the issuance of any injunction or restraining order pursuant to this section.

§ 5905. Grounds for rehabilitation--domestic insurers

The Commissioner may apply to the court for an order appointing him as receiver of and directing him to rehabilitate a domestic insurer upon one or more of the following grounds. That the insurer:

(1) Is impaired or insolvent; or is in unsound condition, or in such condition or using such methods and practices in the conduct of its business as to render its further transaction of insurance presently or prospectively hazardous to its policyholders;

(2) Has refused to submit any of its books, records, accounts or affairs to reasonable examination by the Commissioner;

(3) Has concealed or removed records or assets;

(4) Has failed to comply with an order of the Commissioner to make good an impairment of capital or surplus or both;

(5) Has transferred or attempted to transfer substantially its entire property or business, or has entered into any transaction the effect of which is to merge substantially its entire property or business in that of any other insurer without having first obtained the written approval of the Commissioner;

(6) Has willfully violated its charter or certificate of incorporation or any law of this State;

(7) Has an officer, director or manager who has refused to be examined under oath concerning its affairs, for which purposes the Commissioner is hereby authorized to conduct and to enforce by all appropriate and available means any such examination under oath in any other state or territory of the United States, in which any such officer, director or manager may then presently be, to the full extent permitted by the laws of such other state or territory, this special authorization considered;

(8) Has been or is the subject of an application for the appointment of a receiver, trustee, custodian or sequestrator of the insurer or its property otherwise than pursuant to the provisions of this title, but only if such appointment has been made or is imminent and its effect is or would be to oust the courts of this State of jurisdiction hereunder;

(0) Has consented to such an order through a majority of the directors, stockholders, members or subscribers; and

(5) Has failed to pay a final judgment rendered against it in this State upon any insurance contract issued or assumed by it, within 30 days after the judgment became final or within 30 days after the time for taking an appeal has expired, or within 30 days after dismissal of an appeal before final termination, whichever date is the later.

§ 5906. Grounds for liquidation

The Commissioner may apply to the court for an order appointing him as receiver (if his appointment as receiver shall not be then in effect) and directing him to liquidate the business of a domestic insurer or of the United States branch of an alien insurer having trusteed assets in this State regardless of whether or not there has been a prior order directing him to rehabilitate such insurer, upon any of the grounds specified in section 5905 of this chapter, or if such insurer:

(1) Has ceased transacting business for a period of one year; or

(2) Is an insolvent insurer and has commenced voluntary liquidation or dissolution, or attempts to commence or prosecute any action or proceeding to liquidate its business or affairs, or to dissolve its corporate charter, or to procure the appointment of a receiver, trustee, custodian or sequestrator under any law except this title.

§ 5907. Grounds for conservation--foreign insurers

The Commissioner may apply to the court for an order appointing him as receiver or ancillary receiver, and directing him to conserve the assets within this State, of a foreign insurer upon any of the following grounds:

(1) Upon any of the grounds specified in sections 5905 or 5906 of this chapter; or

(2) Upon the ground that its property has been sequestrated in its domiciliary sovereignty or in any other sovereignty.

§ 5908. Grounds for conservation--alien insurers

The Commissioner may apply to the court for an order appointing him as receiver or ancillary receiver, and directing him to conserve the assets within this State, of any alien insurer upon any of the following grounds:

(1) Upon any of the grounds specified in sections 5905 or 5906 of this chapter.

(2) Upon the ground that the insurer has failed to comply, within the time designated by the Commissioner, with an order made by him to make good an impairment of its trusteed funds, or

(3) Upon the ground that the property of the insurer has been sequestrated in its domiciliary sovereignity or elsewhere.

§ 5909. Grounds for ancillary liquidation--foreign insurers

The Commissioner may apply to the court for an order appointing him as ancillary receiver of and directing him to liquidate the business of a foreign insurer having assets, business or claims in this State upon the appointment in the domiciliary state of such insurer of a receiver, liquidator, conservator, rehabilitator or other officer by whatever name called for the purpose of liquidating the business of such insurer.

§ 5910. Order of rehabilitation--termination

(a) An order to rehabilitate a domestic insurer shall direct the Commissioner forthwith to take possession of the property of the insurer and to conduct the business thereof, and to take such steps toward removal of the causes and conditions which have made rehabilitation necessary as the court may direct.

(b) If at any time the Commissioner deems that further efforts to rehabilitate the insurer would be useless, he may apply to the court for an order of liquidation.

(c) The Commissioner, or any interested person upon due notice to the Commissioner, at any time may apply to the court for an order terminating the rehabilitation proceedings and permitting the insurer to resume possession of its property and the conduct of its business, but no such order shall be made or entered except when, after a hearing, the court has determined that the purposes of the proceeding have been fully accomplished.

§ 5911. Order of liquidation--domestic insurers

(a) An order to liquidate the business of a domestic insurer shall direct the Commissioner forthwith to take possession of the property of the insurer, to liquidate its business, to deal with the insurer's property and business in his own name as Insurance Commissioner or in the name of the insurer, as the court may direct, and to give notice to all creditors who may have claims against the insurer to present such claims.

(b) The Commissioner may apply for and secure an order dissolving the corporate existence of a domestic insurer upon his application for an order of liquidation of such insurer or at any time after such order has been granted.

§ 5912. Order of conservation or ancillary liquidation of foreign or alien insurers

(a) An order to conserve the assets of a foreign or alien insurer shall require the Commissioner forthwith to take possession of the property of the insurer within this State and to conserve it, subject to the further direction of the court.

(b) An order to liquidate the assets in this State of a foreign insurer shall require the Commissioner forthwith to take possession of the property of the insurer within this State and to liquidate it subject to the orders of the court and with clue regard to the rights and powers of the domiciliary receiver, as provided in this chapter.

§ 5913. Conduct of delinquent proceedings against domestic and alien insurers

(a) Whenever under this chapter a receiver is to be appointed in delinquency proceedings for an insurer, the court shall appoint the Commissioner as such receiver. The court shall order the Commissioner forthwith to take possession of the assets of the insurer and to administer the same under the order of the court.

(b) As a domiciliary receiver, the Commissioner shall be vested by operation of law with the title to all of the property, contracts and rights of action, and all of the books and records of the insurer, wherever located, as of the date of entry of the order directing him to rehabilitate or liquidate a domestic insurer or to liquidate the United States branch of an alien insurer domiciled in this State, and he shall have the right to recover the same and reduce the same to possession; except that ancillary receivers in reciprocal states shall have, as to assets located in their respective states, the rights and powers which are herein prescribed for ancillary receivers appointed in this State as to assets located in this State.

(c) The filing or recording of the order directing possession to be taken, or a certified copy thereof, in any office where instruments affecting title to property are required to be filed or recorded shall impart the same notice as would be imparted by a deed, bill of sale, or other evidence of title duly filed or recorded.

(d) The Commissioner as domiciliary receiver shall be responsible for the proper administration of all assets coming into his possession or control. The court may at any time require a bond from him or his deputies if deemed desirable for the protection of such assets.

(e) Upon taking possession of the assets of an insurer, the domiciliary receiver shall, subject to the direction of the court, immediately proceed to conduct the business of the insurer or to take such steps as are authorized by this chapter for the purpose of rehabilitating, liquidating or conserving the affairs or assets of the insurer.

(f) In connection with delinquency proceedings, the Commissioner may appoint one or more special Deputy Commissioners to act for him and he may employ such counsel, clerks and assistants as he deems necessary. The compensation of the special deputies, counsel, clerks or assistants and all expenses of taking possession of the insurer and of conducting the proceedings shall be fixed by the receiver, subject to the approval of the court, and shall be paid out of the funds or assets of the insurer. Within the limits of duties imposed upon them, special deputies shall possess all the powers given to and, in the exercise of those powers, shall be subject to all of the duties imposed upon the receiver with respect to such proceedings.

§ 5914. Conduct of delinquency proceedings against foreign insurers

(a) Whenever under this chapter an ancillary receiver is to be appointed in delinquency proceedings for an insurer not domiciled in this State, the court shall appoint the Commissioner as ancillary receiver. The Commissioner shall file a petition requesting the appointment on the grounds set forth in section 5909 of this chapter:

(1) If he finds that there are sufficient assets of the insurer located in this State to justify the appointment of an ancillary receiver; or

(2) If 10 or more persons resident in this State having claims against such insurer file a petition with the Commissioner requesting the appointment of such ancillary receiver.

(b) The domiciliary receiver for the purpose of liquidating an insurer domiciled in a reciprocal state shall be vested by operation of law with the title to all of the property, contracts and rights of action, and all of the books and records of the insurer located in this State, and he shall have the immediate right to recover balances due from local agents and to obtain possession of any books and records of the insurer found in this State. He shall also be entitled to recover the other assets of the insurer located in this State, except that upon the appointment of an ancillary receiver in this State, the ancillary receiver shall during the ancillary receivership proceedings have the sole right to recover such other assets. The ancillary receiver shall, as soon as practicable, liquidate from their respective securities those special deposit claims and secured claims which are proved and allowed in the ancillary proceedings in this State, and shall pay the necessary expenses of the proceedings. All remaining assets he shall promptly transfer to the domiciliary receiver. Subject to the foregoing provisions, the ancillary receiver and his deputies shall have the same powers and be subject to the same duties with respect to the administration of such assets as a receiver of an insurer domiciled in this State.

(c) The domiciliary receiver of an insurer domiciled in a reciprocal sate may sue in this State to recover any assets of such insurer to which he may be entitled under the laws of this State.

§ 5915. Claims of nonresidents against domestic insurers

(a) In a delinquency proceeding begun in this State against a domestic insurer, claimants residing in reciprocal states may file claims either with the ancillary receivers, if any, in their respective states, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings.

(b) Controverted claims belonging to claimants residing in reciprocal states may either:

(1) Be proved in this State; or

(2) If ancillary proceedings have been commenced in such reciprocal states, may be proved in those proceedings. In the event a claimant elects to prove his claim in ancillary proceedings, if notice of the claim and opportunity to appear and be heard is afforded the domiciliary receiver of this State, as provided in section 5916 of this chapter with respect to ancillary proceedings in this state, the final allowance of such claim by the courts in the ancillary state shall be accepted in this State as conclusive as to its amount and shall also be accepted as conclusive as to its priority, if any, against special deposits or other security located within the ancillary state.

§ 5916. Claims against foreign insurers

(a) In a delinquency proceeding in a reciprocal state against an insurer domiciled in that state, claimants against such insurer who reside within this State may file claims either with the ancillary receiver, if any, appointed in this State, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceedings.

(b) Controverted claims belonging to claimants residing in this State may either:

(1) Be proved in the domiciliary state as provided by the law of that state; or

(2) If ancillary proceedings have been commenced in this State, be proved in those proceedings. In the event that any such claimant elects to prove his claim in this State, he shall file his claim with the ancillary receiver and shall give notice in writing to the receiver in the domiciliary state, either by registered or certified mail or by personal service at least 40 days prior to the date set for hearing. The notice shall contain a concise statement of the amount of the claim, the facts on which the claim is based, and the priorities asserted, if any. If the domiciliary receiver within 30 days after the giving of such notice shall give notice in writing to the ancillary receiver and to the claimant, either by registered or certified mail or by personal service, of his intention to contest such claim, he shall be entitled to appear or to be represented in any proceeding in this State involving adjudication of the claim. The final allowance of the claim by the courts of this State shall be accepted as conclusive as to its amount and shall also be accepted as conclusive as to its priority, if any, against special deposits or other security located within this State.

§ 5917. Form of claim--notice--hearing

(a) All claims against an insurer against which delinquency proceedings have been begun shall set forth in reasonable detail the amount of the claim, or the basis upon which such amount can be ascertained, the facts upon which the claim is based and the priorities asserted, if any. All such claims shall be verified by the affidavit of the claimant, or someone authorized to act on his behalf and having knowledge of the facts, and shall be supported by such documents as may be material thereto.

(b) All claims filed in this State shall be filed with the receiver, whether domiciliary or ancillary, in this State, on or before the last date for filing as specified in this chapter.

(c) Within 10 days of the receipt of any claim, or within such further period as the court may fix for good cause shown, the receiver shall report the claim to the court, specifying in such report his recommendation with respect to the action to be taken thereon. Upon receipt of such report, the court shall fix a time for hearing the claim and shall direct that the claimant or the court shall determine to such persons as shall appear to the court to be interested therein. All such notices shall specify the time and place of the hearing and shall concisely state the amount and nature of the claim, the priorities asserted, if any, and the recommendation of the receiver with reference thereto.

(d) At the hearing, all persons interested shall be entitled to appear and the court shall enter an order allowing, allowing in part, or disallowing the claim. Any such order shall be deemed to be an appealable order.

§ 5918. Priority of certain claims

(a) In a delinquency proceeding against an insurer domiciled in this State, claims owing to residents of ancillary states shall be preferred claims if like claims are preferred under the laws of this State. All such claims owning to residents or nonresidents shall be given equal priority of payment from general assets regardless of where such assets are located.

(b) In a delinquency proceedings against an insurer domiciled in a reciprocal state, claims owing to residents of this State shall be preferred if like claims are preferred by the laws of that state.

(c) The owners of special deposit claims against an insurer for which a receiver is appointed in this or any other state shall be given priority against their several special deposits in accordance with the provisions of the statutes governing the creation and maintenance of such deposits. If there is a deficiency in any such deposit so that the claims secured thereby are not fully discharged therefrom, the claimants may share in the general assets, but such sharing shall be deferred until general creditor, and also claimants against other special deposits who have received smaller percentages from their respective special deposits, have been paid percentages of their claims equal to the percentage paid from the special deposit.

(d) The owner of a secured claim against an insurer for which a receiver has been appointed in this or any other state may surrender his security and file his claim as a general creditor, or the claim may be discharged by resort to the security, in which case the deficiency, if any, shall be treated as a claim against the general assets of the insurer on the same basis as claims of unsecured creditors. If the amount of the deficiency has been adjudicated in ancillary proceedings as provided in this chapter, or if it has been adjudicated by a court of competent jurisdiction in proceedings in which the domiciliary receiver has had notice and opportunity to be heard, such amounts shall be conclusive; otherwise the amount shall be determined in the delinquency proceeding in the domiciliary state.

§ 5919. Attachment and garnishment of assets

During the pendency of delinquency proceedings in this or any reciprocal state, no action or proceeding in the nature of an attachment, garnishment or execution shall be commenced or maintained in the courts of this State against the delinquent insurer or its assets. Any lien obtained by any such action or proceeding within four months prior to the commencement of any such delinquency proceeding or at any time thereafter shall be void as against any rights arising in such delinquency proceeding.

§ 5920. Uniform insurers liquidation act

(a) Paragraphs (2) to (13) inclusive, of section 5901, together with sections 5902, 5903, and 5913 through 5920 of this chapter constitute and may be referred to as the uniform insurers liquidation act.

(b) The uniform insurers liquidation act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it. To the extent that its provisions when applicable conflict with other provisions of this chapter, the provisions of such act shall control.

§ 5921. Deposit of monies collected

The monies collected by the Commissioner in a proceeding under this chapter shall be from time to time deposited in one or more state or national banks, savings banks or trust companies, and in the case of the insolvency or voluntary or involuntary liquidation of any such depositary which is an institution organized and supervised under the laws of this State, such deposits shall be entitled to priority of payment on an equality with any other priority given by the banking laws of this State. The Commissioner may in his discretion deposit such monies or any part thereof in a national bank or trust company as a trust fund.

§ 5922. Exemption from fees

The Commissioner shall not be required to pay any fee to any public officer in this State for filing, recording, issuing a transcript or certificate of authenticating any paper or instrument pertaining to the exercise by the Commissioner of any of the powers or duties conferred upon him under this chapter, whether or not such paper or instrument be executed by the Commissioner or his deputies, employees or attorneys of record and whether or not it is connected with the commencement of any action or proceeding by or against the Commissioner, or with the subsequent conduct of such action or proceeding.

§ 5923. Borrowing on pledge of assets

For the purpose of facilitating the rehabilitation, liquidations, conservation or dissolution of an insurer pursuant to this chapter, the Commissioner may, subject to the approval of the court, borrow money and execute, acknowledge and deliver notes or other evidences of indebtedness therefor and secure the repayment of the same by the mortgage, pledge, assignment, transfer in trust, or hypothecation of any or all of the property, whether real, personal or mixed, of such insurer, and the Commissioner subject to the approval of the court shall have power to take any and all other action necessary and proper to consummate any such loan and to provide for the repayment thereof. The Commissioner shall be under no obligation personally or in his official capacity to repay any loan made pursuant to this section.

§ 5924. Date rights fixed on liquidation

The rights and liabilities of the insurer and of its creditors, policyholders, stockholders, members, subscribers and all other persons interested in its estate shall, unless otherwise directed by the court, be fixed as of the date on which the order directing the liquidation of the insurer is filed in the office of the clerk of the court which made the order, subject to the provisions of this chapter with respect to the rights of claimants holding contingent claims.

§ 5925. Voidable transfers

(a) Any transfer of, or lien upon, the property of an insurer which is made or created within four months prior to the granting of an order to show cause under this chapter with the intent of giving to any creditor a preference or of enabling him to obtain a greater percentage of his debt than any other creditor of the same class and which is accepted by such creditor having reasonable cause to believe that such preference will occur, shall be voidable.

(b) Every director, officer, employee, stockholder, member, subscriber and any other person acting on behalf of such insurer who shall be concerned in any such act or deed and every person receiving thereby any property of such insurer of the benefit thereof shall be personally liable therefor and shall be bound to account to the Commissioner.

() The Commissioner as receiver in any proceeding under this chapter may avoid any transfer of or lien upon the property of an insurer which any creditor, stockholder, subscriber or member of such insurer might have avoided and may recover the property so transferred unless such person was a bona fide holder for value prior to the date of the entering of an order to show cause under this chapter. Such property or its value may be recovered from anyone who has received it except a bona fide holder for value as herein specified.

§ 5926. Priority of claims for compensation

(a) Compensation actually owing to employees other than officers of an insurer, for services rendered within 3 months prior to the commencement of a proceeding against the insurer under this chapter, but not exceeding $500 for each employee, shall be paid prior to the payment of any other debt or claim, and in the discretion of the Commissioner may be paid as soon as practicable after the proceeding has been commenced; except that at all times the Commissioner shall reserve such funds as will in his opinion be sufficient for the expenses of administration.

(b) Such priority shall be in lieu of any other similar priority which may be authorized by law as to wages or compensation of such employees.

§ 5927. Offsets

(a) In all cases of mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter, such credits and debts shall be set off and the balance only shall be allowed or paid, except as provided in subsection (b) below.

() No offset shall be allowed in favor of any such person where:

(1) The obligation of the insurer to such person would not at the date of the entry of any liquidation order or otherwise, as provided in section 5924 of this chapter, entitle him to share as a claimant in the assets of the insurer; or

(2) The obligation of the insurer to such person was purchased by or transferred to such person with a view of its being used as an offset; or

(3) The obligation of such person is to pay an assessment levied against the members of a mutual insurer, or against the subscribers of a reciprocal insurer, or is to pay a balance upon the subscription to the capital stock of a stock insurer.

§ 5928. Allowance of certain claims

(a) No contingent and unliquidated claim shall share in a distribution of the assets of an insurer which has been adjudicated to be insolvent by an order made pursuant to this chapter, except that such claim shall be considered, if properly presented, and may be allowed to share where:

(1) Such claim becomes absolute against the insurer on or before the last day for filing claims against the assets of such insurer; or

(2) There is a surplus and the liquidation is thereafter conducted upon the basis that such insurer is solvent.

(b) Where an insurer has been so adjudicated to be insolvent any person who has a cause of action against an insured of such insurer under a liability insurance policy issued by such insurer shall have the right to file a claim in the liquidation proceeding, regardless of the fact that such claim may be contingent, and such claim may be allowed:

(1) If it may be reasonably inferred from the proof presented upon such claim that such person would be able to obtain a judgment upon such cause of action against such insured;

(2) If such person shall furnish suitable proof, unless the court for good cause shown shall otherwise direct, that no further valid claim against such insurer arising out of his cause of action other than those already presented can be made; and

(3) If the total liability of such insurer to all claimants arising out of the same act of its insured shall be no greater than its maximum liability would be were it not in liquidation.

(c) No judgment against such an insured taken after the date of entry of the liquidation order shall be considered in the liquidation proceedings as evidence of liability, or of the amount of damages, and no judgment against an insured taken by default, or by collusion prior to the entry of the liquidation order shall be considered as conclusive evidence in the liquidation proceedings, either of the liability of such insured to such person upon such cause of action or of the amount of damages to which such person is therein entitled.

(d) No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the claim without security and the value of the security itself as of the date of the entry of the order of liquidation of such other date set by the court for determining rights and liabilities as provided in sections 5924 of this chapter unless the claimant surrenders his security to the Commissioner, in which event the claim shall be allowed in the full amount for which it is valued.

§ 5929. Time to file claims

(a) If upon the entry of an order of liquidation under this chapter or at any time thereafter during liquidation proceedings the insurer is not clearly solvent, the court shall, upon hearing after such notice it deems proper, make and enter an order adjudging the insurer to be insolvent.

(b) After the entry of the order of insolvency, regardless of any prior notice that may have been given to creditors, the Commissioner shall notify all persons who may have claims against the insurer to file such claims with him, at a place and within the time specified in the notice, or that such claims shall be forever barred. The time specified in the notice shall be as fixed by the court for filing of claims and which shall be not less than 6 months after the entry of the order of insolvency. The notice shall be given in such manner and for such reasonable period of time as may be ordered by the court.

§ 5930. Report and petition for assessment

Within 3 years after the date of the entry of an order of rehabilitation or liquidation of a domestic mutual insurer or a domestic reciprocal insurer, the Commissioner may make and file his report and petition to the court setting forth:

(1) The reasonable value of the assets of the insurer;

(2) The liabilities of the insurer to the extent thus far ascertained by the Commissioner;

(3) The aggregate amount of the assessment, if any, which the Commissioner deems reasonably necessary to pay all claims, the costs and expenses of the collection of the assessments and the costs and expenses of the delinquency proceeding in full;

(4) Any other information relative to the affairs or property of the insurer that the Commissioner deems material.

§ 5931. Order and levy of assessment

(a) Upon the filing and reading of the report and petition provided for in section 5930 of this chapter, the court, ex pante, may order the Commissioner to assess all members or subscribers of the insurer who may be subject to such an assessment, in such an aggregate amount as the court finds reasonably necessary to pay all valid claims as may be timely filed and proved in the delinquency proceedings, together with the costs and expenses of levying and collecting assessments and the costs and expenses of the delinquency proceedings in full. Any such order shall require the Commissioner to assess each such member or subscriber for his proportion of the aggregate assessment, according to such reasonable classification of such members or subscribers and formula as may be made by the Commissioner and approved by the court.

(b) The court may order additional assessments upon the filing and reading of any amendment or supplement to the report and petition referred to in (a) above, if such amendment or supplement is filed within 3 years after the date of the entry of the order of rehabilitation or liquidation.

(c) After the entry of the order to levy and assess members or subscribers of an insurer referred to in (a) or (b) above, the Commissioner shall levy and assess members or subscribers in accordance with the order.

(d) The total of all assessments against any member or subscriber with respect to any policy, whether levied pursuant to this chapter or pursuant to any other provision of this title, shall be for no greater amount than that specified in the policy or policies of the member or subscriber and as limited under this title, except as to any policy which was issued at a rate of premium below the minimum rate lawfully permitted for the risk insured, in which event the assessment against any such policyholder shall be upon the basis of the minimum rate for such risk.

(e) No assessment shall be levied against any member or subscriber with respect to any nonassessable policy issued in accordance with this title.

§ 5932. Assessment prima fade correct--notice--payment proceedings to collect

(a) Any assessment of a subscriber or member of an insurer made by the Commissioner pursuant to the order of court fixing the aggregate amount of the assessment against all members or subscribers and approving the classification and formula made by the Commissioner under section 5931 (a) of this chapter shall be prima facie correct.

(b) Each member or subscriber shall be notified of the amount of assessment to be paid by him by written notice mailed to the address of the member or subscriber last of record with the insurer. Failure of the member or subscriber to receive the notice so mailed, within the time specified therein or at all, shall be no defense in any proceeding to collect the assessment.

(c) If any such member or subscriber fails to pay the assessment within the period specified in the notice, which period shall not be less than 20 days after mailing, the Commissioner may obtain an order in the delinquency proceedings requiring the member or subscriber to show cause at a time and place fixed by the court why judgment should not be entered against such member or subscriber for the amount of the assessment together with all costs, and a copy of the order and a copy of the petition therefor shall be served upon the member or subscriber within the time and in the manner designated in the order.

(d) If the subscriber or member after due service of a copy of the order and petition referred to in (c) above is made upon him:

(1) Fails to appear at the time and place specified in the order, judgment shall be entered against him as prayed for in the petition; or

(2) Appears in the manner and form required by law in response to the order, the court shall hear and determine the matter and enter a judgment in accordance with its decision.

(e) The Commissioner may collect any such assessment through any other lawful means.

CHAPTER 61. FRATERNAL BENEFIT SOCIETIES

§ 6101. Fraternal benefit societies defined

(a) Any incorporated society, order or supreme lodge, without capital stock, including one exempted under the provisions of section 6142 of this chapter, whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which makes provision for the payment of benefits in accordance with this chapter, is hereby declared to be a fraternal benefit society.

(b) When used in this chapter the word "society," unless otherwise indicated, shall mean fraternal benefit society.

§ 6102. Lodge system defined

A society having a supreme legislative or governing body and subordinate lodges or branches by whatever name known, into which members are elected, initiated or admitted in accordance with its constitution, laws, ritual and rules, which subordinate lodges or branches shall be required by the laws of the society to hold regular meetings at least once in each month, shall be deemed to be operating on the lodge system.

§ 6103. Representative form of government defined

A society shall be deemed to have a representative form of government when:

(1) It provides in its constitution or laws for a supreme legislative or governing body, composed of representatives elected either by the members or by delegates elected directly or indirectly by the members, together with such other members of such body as may be prescribed by the society's constitution and laws;

(2) The representatives elected constitute a majority in number and have not less than 2/3 of the votes nor less than the votes required to amend its constitution and laws;

(3) The meetings of the supreme legislative or governing body and the election of officers, representatives or delegates are held as often as once in 4 calendar years;

(4) The society has a board of directors charged with the responsibility for managing its affairs in the interim between meetings of its supreme legislative or governing body, subject to control by such body and having powers and duties delegated to it in the constitution or laws of the society;

(5) Such board of directors is elected by the supreme legislative or governing body, except in case of filling a vacancy in the interim between meetings of such body;

(6) The officers are elected either by the supreme legislative governing body or by the board of directors; and

(7) The members, officers, representatives or delegates shall not vote by proxy.

§ 6104. Organization

The organization of a society shall be governed as follows:

(1) Seven or more citizens of the United States, a majority of whom are citizens of this State, who desire to form a fraternal benefit society, may make, sign and acknowledge before some officer competent to take acknowledgment of deeds, articles of incorporation, in which shall be stated:

(i) The proposed corporate name of the society, which shall not so closely resemble the name of any society or insurance company as to be misleading or confusing;

(ii) The purposes for which it is being formed and the mode in which its corporate powers are to be exercised. Such purposes shall not include more liberal powers than are granted by this chapter, provided that any lawful, social, intellectual, educational, charitable, benevolent, moral, fraternal or religious advantages may be set forth among the purposes of the society; and

(iii) The names and residences of the incorporators and the names, residences and official titles of all the officers, trustees, directors, or other persons who are to have and exercise the general control of the management of the affairs and funds of the society for the first year or until the ensuing election at which all such officers shall be elected by the supreme legislative or governing body, which election shall be held not later than 1 year from the date of the issuance of the permanent certificate.

(2) Such articles of incorporation, duly certified copies of the constitution, laws and rules, copies of all proposed forms of certificates, applications therefor, and circulars to be issued by the society and a bond conditioned upon the return to applicants of the advanced payments if the organization is not completed within 1 year shall be filed with the Commissioner, who may require such further information as he deems necessary. The bond with sureties approved by the Commissioner shall be in such amount, not less than $5,000 nor more than $25,000, as required by the Commissioner. All documents filed are to be in the English language. If the purposes of the society conform to the requirements of this chapter and all provisions of the law have been complied with, the Commissioner shall so certify, retain and file the articles of incorporation and furnish the incorporators a preliminary certificate authorizing the society to solicit members as hereinafter provided.

(3) No preliminary certificate granted under the provisions of this section shall be valid after 1 year from its date or after such further period, not exceeding 1 year, as may be authorized by the Commissioner upon cause shown, unless the 500 applicants hereinafter required have been secured and the organization has been completed as herein provided. The articles of incorporation and all other proceedings thereunder shall become null and void in 1 year from the date of the preliminary certificate, or at the expiration of the extended period, unless the society shall have completed its organization and received a certificate of authority to do business as hereinafter provided.

(4) Upon receipt of a preliminary certificate from the Commissioner, the society may solicit members for the purpose of completing its organization, shall collect from each applicant the amount of not less than 1 regular monthly premium in accordance with its table of rates as provided by its constitution and laws, and shall issue to each such applicant a receipt for the amount so collected. No society shall incur any liability other than for the return of such advance premium, nor issue any certificate, nor pay, allow, or offer or promise to pay or allow, any death or disability benefit to any person until:

(i) Actual bona fide applications for death benefits have been secured aggregating at least $500,000 on not less than 500 lives;

(ii) All such applicants for death benefits shall have furnished evidence of insurability satisfactory to the society;

() Certificates of examinations or acceptable declarations of insurability have been duly filed and approved by the chief medical examiner of the society;

(iv) Ten subordinate lodges or branches have been established into which the 500 applicants have been admitted;

(v) There has been submitted to the Commissioner, under oath of the president or secretary, or corresponding officer of the society, a list of such applicants, giving their names, addresses, date each was admitted, name and member of the subordinate branch of which each applicant is a member, amount of benefits to be granted and premiums therefor; and

(vi) It shall have been shown to the Commissioner by sworn statement of the treasurer, or corresponding officer of such society, that at least 500 applicants have each paid in cash at least 1 regular monthly premium as herein provided, which premiums in the aggregate shall amount to at least $2,500, all of which shall be credited to the fund or funds from which benefits are to be paid and no part of which may be used for expenses. The advance premiums shall be held in trust during the period of organization and if the society has not qualified for a certificate of authority within 1 year, as herein provided, such premiums shall be returned to the applicants.

(5) The Commissioner may make such examination and require such further information as he deems advisable. Upon presentation of satisfactory evidence that the society has complied with all the provisions of law, he shall issue to the society a certificate to that effect and that the society is authorized to transact business pursuant to the provisions of this chapter. The certificate shall be prima facie evidence of the existence of the society at the date of such certificate. The Commissioner shall cause a record of such certificate to be made. A certified copy of such record may be given in evidence with like effect as the original certificate.

(6) Every society shall have the power to adopt a constitution and laws for the government of the society, the admission of its members, the management of its affairs and the fixing and readjusting of the rates of its members from time to time. It shall have the power to change, alter, add to or amend such constitution and laws and shall have such powers as are necessary and incidental to carrying into effect the objects and purposes of the society.

§ 6105. Corporate powers retained

Any incorporated society authorized to transact business in this State at the time this chapter becomes effective may thereafter exercise all the rights, powers and privileges prescribed in this chapter and in its charter or articles of incorporation as far as consistent with this chapter. A domestic society shall not be required to reincorporate.

§ 6106. Voluntary associations

No unincorporated or voluntary association shall be permitted to transact business in this State as a fraternal benefit society.

§ 6107. Location of office--place of meeting

The principal office of any domestic society shall be located in this State. The meetings of its supreme legislative or governing body may be held in any state, district, province or territory wherein such society has at least 5 subordinate branches and all business transacted at such meetings shall be as valid in all respects as if such meetings were held in this State.

§ 6108. Consolidations and mergers

A domestic society may consolidate or merge with any other society by complying with the provisions of this section.

It shall file with the Commissioner:

(1) A certified copy of the written contract containing in full the terms and conditions of the consolidation or merger;

(2) A sworn statement by the president and secretary or corresponding officers of each society showing the financial condition thereof on a date fixed by the Commissioner but not earlier than December 31, next preceding the date of ale contract;

(3) A certificate of such officers, duly verified by their respective oaths, that the consolidation or merger has been approved by a 2/3 vote of the supreme legislative or governing body of each society; and

(4) Evidence that at least 60 days prior to the action of the supreme legislative or governing body of each society, the text of the contract has been furnished to all members of each society either by mail or by publication in full in the official organ of each society.

If the Commissioner finds that the contract is in conformity with the provisions of this section, that the financial statements are correct and that the consolidation or merger is just and equitable to the members of each society, he shall approve the contract and issue his certificate to such effect. Upon such approval, the contract shall be in full force and effect unless any society which is a party to the contract is incorporated under the laws of any other state or territory. In such event the consolidation or merger shall not become effective unless and until it has been approved as provided by the laws of such state or territory and a certificate of such approval filed with the Commissioner or, if the laws of such state or territory contain no such provision, then the consolidation or merger shall not become effective unless and until it has been approved by the Commissioner of such state or territory and a certificate of such approval filed with the Commissioner of this State.

Upon the consolidation or merger becoming effective as herein provided, all the rights, franchises and interests of the consolidated or merged societies in and to every species of property, real, personal or mixed, and things in action thereunto belonging shall be vested in the society resulting from or remaining after the consolidation or merger without any other instrument, except that conveyances of real property may be evidenced by proper deeds, and the title to any real estate or interest therein, vested under the laws of this State in any of the societies consolidated or merger, shall not revert or be in any way impaired by reason of the consolidation or merger, but shall vest absolutely in the society resulting from or remaining after such consolidation or merger.

The affidavit of any officer of the society or of anyone authorized by it to mail any notice or document, stating that such notice or document has been duly addressed and mailed, shall be prima facie evidence that such notice or document has been furnished the addressees.

§ 6109. Conversion of fraternal benefit society into mutual life insurance company

Any domestic fraternal benefit society may be converted and licensed as a mutual life insurance company by compliance with all the requirements of section 4905 of this title if such plan of conversion has been approved by the Commissioner. Such plan shall be prepared in writing setting forth in full the terms and conditions thereof. The board of directors shall submit such plan to the supreme legislative or governing body of such society at any regular or special meeting thereof by giving a full, true and complete copy of such plan with the notice of such meeting. Such notice shall be given as provided in the laws of the society for the convocation of a regular or special meeting of such body, as the case may be. The affirmative vote of 2/3 of all members of such body shall be necessary for the approval of such agreement. No such conversion shall take effect unless and until approved by the Commissioner who may give such approval if he finds that the proposed change is in conformity with the requirements of law and not prejudicial to the certificate holders of the society.

§ 6110. Qualifications for membership

A society may admit to benefit membership any person not less than 15 years of age, nearest birthday, who has furnished evidence of insurability acceptable to the society. Any such member who shall apply for additional benefits more than 6 months after becoming a benefit member shall furnish additional evidence of insurability acceptable to the society unless such additional benefits are issued pursuant to an existing contract under the terms of which such member is entitled to purchase such additional benefits without furnishing evidence of insurability.

Any person admitted prior to attaining the full age of 21 years shall be bound by the terms of the application and certificate and by all the laws and rules of the society and shall be entitled to all the rights and privileges of membership therein to the same extent as though the age of majority had been attained at the time of application. A society may also admit general or social members who shall have no voice or vote in the management of its insurance affairs.

§ 6111. Articles of incorporation, constitution and laws--amendments

A domestic society may amend its articles of incorporation, constitution or laws in accordance with the provisions thereof by action of its supreme legislative or governing body at any regular or special meeting thereof or, if its articles of incorporation, constitution or laws so provide, by referendum. Such referendum may be held in accordance with the provisions of its articles of incorporation, constitution or laws by the vote of the voting members of the society, by the vote of delegates or representatives of voting members or by the vote of local lodges or branches. No amendment submitted for adoption by referendum shall be adopted unless, within 6 months from the date of submission thereof, a majority of all the voting members of the society shall have signified their consent to such amendment by one of the methods herein specified.

No amendment to the articles of incorporation, constitution or laws of any domestic society shall take effect unless approved by the Commissioner, who shall approve such amendment if he finds that it has been duly adopted and is not inconsistent with any requirement of the laws of this State or with the character, objects and purposes of the society. Unless the Commissioner shall disapprove any such amendment within 60 days after the filing of same, such amendment shall be considered approved. The approval or disapproval of the Commissioner shall be in writing and mailed to the secretary or corresponding officer of the society at its principal office. In case he disapproves such amendment, the reasons therefor shall be stated in such written notice.

Within 90 days from the approval thereof by the Commissioner, all such amendments, or a synopsis thereof, shall be furnished to all members of the society either by mail or by publication in full in the official organ of the society. The affidavit of any officer of the society or of anyone authorized by it to mail any amendments or synopsis thereof, stating facts which show that same have been duly addressed and mailed, shall be prima facie evidence that such amendments or synopsis thereof, have been furnished the addressee.

Every foreign or alien society authorized to do business in this State shall file with the Commissioner a duly certified copy of all amendments of, or additions to, its articles of incorporation, constitution or laws within 90 days after the enactment of same.

Printed copies of the constitution or laws as amended, certified by the secretary or corresponding officer of the society shall be prima facie evidence of the legal adoption thereof.

§ 6112. Institutions

It shall be lawful for a society to create, maintain and operate charitable, benevolent or educational institutions for the benefit of its members and their families and dependents and for the benefit of children insured by the society. For such purpose it may own, hold or lease personal property or real property located within or without this State, with necessary buildings thereon. Such property shall be reported in every annual statement but shall not be allowed as an admitted asset of such society.

Maintenance, treatment and proper attendance in any such institution may be furnished free or a reasonable charge may be made therefor, but no such institution shall be operated for profit. The society shall maintain a separate accounting of any income and disbursements under this section and report them in its annual statement. No society shall own or operate funeral homes or undertaking establishments.

§ 6113. No personal liability

The officers and members of the supreme, grand or any subordinate body of a society shall not be personally liable for payment of any benefits provided by a society.

§ 6114. Benefits

(a) A society authorized to do business in this State may provide for the payment of:

(1) death benefits in any form;

(2) endowment benefits;

(3) annuity benefits;

(4) temporary or permanent disability benefits as a result of disease or accident;

(5) (8) hospital, medical or nursing benefits clue to sickness or bodily infirmity or accident; and

(6) monument or tombstone benefits to the memory of deceased members not exceeding in any case the sum of $300.

(b) Such benefits may be provided on the lives of members or, upon application of a member, on the lives of the member's family, including the member, the member's spouse and minor children, in the same or separate certificates.

§ 6115. Benefits on lives of children

A society may provide for benefits on the lives of children under the minimum age for adult membership but not greater than 21 years of age at time of application therefor, upon the application of some adult person, as its laws or rules may provide, which benefits shall be in accordance with the provisions of section 6114(a) of this chapter. A society may, at its option, organize and operate branches for such children. Membership and initiation in local lodges shall not be required of such children, nor shall they have a vote in the management of the society.

A society shall have power to provide for the designation and changing of designation of beneficiaries in the certificates providing for such benefits and to provide in all other respects for the regulation, government and control of such certificates with all rights, obligations and liabilities incident thereto and connected therewith.

§ 6116. Nonforfeiture benefits, cash surrender values, certificate loans and other options

A society may grant paid-up nonforfeiture benefits, cash surrender values, certificate loans and such other options as its laws may permit. As to certificates issued on and after the effective date of this Act, a society shall grant at least one paid-up nonforfeiture benefit, except in the case of pure endowment, annuity or reversionary annuity contracts, reducing term insurance contracts or contracts of term insurance of uniform amount of 15 years or less expiring before age 66.

In the case of certificates other than those for which reserves are computed on the Commissioners 1941Standard Ordinary Mortality Table, the Commissioners 1941 Standard Ordinary Mortality Table, the value of every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan or other option granted shall not be less than the excess, if any, of (1) over (2) as follows:

(6) The reserve under the certificate determined on the basis specified in the certificate; and

(7) The sum of any indebtedness to the society on the certificate, including interest due and accrued, and a surrender charge equal to 21/2% of the face amount of the certificate, which, in the case of insurance on the lives of children, shall be the ultimate face amount of the certificate, if death benefits provided therein are graded.

However, in the case of certificates issued on a substandard basis or in the case of certificates, the reserves for which are computed upon the American Men Ultimate Table of Mortality, the term of any extended insurance benefit granted including accompanying pure endowment, if any, may be computed upon the rates of mortality not greater than 130% of those shown by the mortality table specified in the certificate for the computation of the reserve.

In the case of certificates for which reserves are computed on the Commissioners 1941 Standard Ordinary Mortality Table, the Commissioners 1941 Standard Industrial Table or the Commissioners 1958 Standard Ordinary Mortality Table, every paid-up nonforfeiture benefit and the amount of any cash surrender value, loan or other option granted shall not be less than the corresponding amount ascertained in accordance with the provisions of the laws of this State applicable to life insurers issuing policies containing like insurance benefits based upon such tables.

§ 6117. Beneficiaries

The member shall have the right at all times to change the beneficiary or beneficiaries in accordance with the constitution, laws or rules of the society. Every society by its constitution, laws or rules may limit the scope of beneficiaries and shall provide that no beneficiary shall have or obtain any vested interest in the proceeds of any certificate until the certificate has become due and payable in conformity with the provisions of the insurance contract.

A society may make provision for the payment of funeral benefits to the extent of such portion of any payment under a certificate as might reasonably appear to be due to any person equitably entitled thereto by reason of having incurred expense occasioned by the burial of the member, provided the portion so paid shall not exceed the sum of $500.

If, at the death of any member, there is no lawful beneficiary to whom the insurance benefits shall be payable, the amount of such benefits, except to the extent that funeral benefits may be paid as hereinbefore provided, shall be payable to the personal representative of the deceased member.

§ 6118. Benefits not attachable

No money or other benefit, charity, relief or aid to be paid, provided or rendered by any society, shall be liable to attachment, garnishment or other process, or to be seized, taken, appropriated or applied by any legal or equitable process or operation of law to pay any debt or liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment by the society.

6119. The contract

Every society authorized to do business in this State shall issue to each benefit member a certificate specifying the amount of benefits provided thereby. The certificate, together with any riders or endorsements attached thereto, the charter or articles of incorporation, the constitution and laws of the society, the application for membership, and declaration of insurability, if any, signed by the applicant, and all amendments to each thereof, shall constitute the agreement, as of the date of issuance, between the society and the member, and the certificate shall so state. A copy of the application for membership and of the declaration of insurability, if any, shall be endorsed upon or attached to the certificate.

All statements purporting to be made by the member shall be representations and not warranties. Any waiver of this provision shall be void.

Any changes, additions or amendments to the charter or articles of incorporation, constitution or laws duly made or enacted subsequent to the issuance of the certificate, shall bind the member and the beneficiaries, and shall govern and control the agreement in all respects the same as though such changes, additions or amendments had been made prior to and were in force at the time of the application for membership, except that no change, addition or amendment shall destroy or diminish benefits which the society contracted to give the member as of the date of issuance.

Copies of any of the documents mentioned in this section, certified by the secretary or corresponding officer of the society, shall be received in evidence of the terms and conditions thereof.

A society shall provide in its constitution or laws that if its reserves as to all or any class of certificates become impaired its board of directors or corresponding body may require that there shall be paid by the member to the society the amount of the member's equitable proportion of such deficiency as ascertained by its board, and that if the payment be not made it shall stand as an indebtedness against the certificate and draw interest not to exceed 5% per annum compounded annually.

§ 6120. Life benefit certificate provisions, standard and prohibited

No life benefit certificate shall be delivered or issued for delivery in this State unless a copy of the form shall have been filed with the Commissioner and approved by him as conforming to the requirements of this section and not inconsistent with any other provisions of law applicable thereto. A certificate shall be deemed approved unless disapproved by the Commissioner within 60 clays from the date of such filing.

(1) The certificate shall contain in substance the following standard provisions or, in lieu thereof, provisions which are more favorable to the member.

(i) Title on the face and filing page of the certificate clearly and correctly describing its form;

(ii) A provision stating the amount of rates, premiums or other required contributions, by whatever name known, which are payable by the insured under the certificate;

(iii) A provision that the member is entitled to a grace period of not less than a full month (or 30 days at the option of the society) in which the payment of any premium after the first, may be made. During such grace period the certificate shall continue in full force, but in case the certificate becomes a claim during the grace period before the overdue payment is made, the amount of such overdue payment or payments may be deducted in any settlement under the certificate;

(iv) A provision that the member shall be entitled to have the certificate reinstated at any time within 3 years from the due date of the premium in default, unless the certificate has been completely terminated through the application of a non-forfeiture benefit, cash surrender value or certificate loan, upon the production of evidence of insurability satisfactory to the society and the payment of all overdue premiums and any other indebtedness to the society upon the certificate, together with interest on such premiums and such indebtedness, if any, at a rate not exceeding 6% per annum compounded annually;

() Except in the case of pure endowment, annuity or reversionary annuity contracts, reducing term insurance contracts, or contracts of term insurance of uniform amount of 15 years or less expiring before age 66, a provision that, in the event of default in payment of any premium after 3 full years' premiums have been paid or after premiums for a lesser period have been paid if the contract so provides, the society will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on the plan stipulated in the certificate, effective as of such due date, of such value as specified in this chapter. The certificate may provide, if the society's laws so specify or if the member shall so elect prior to the expiration of the grace period of any overdue premium, that default shall not occur so long as premiums can be paid under the provisions of an arrangement for automatic premium loan as may be set forth in the certificate.

(i) A provision that one paid-up nonforfeiture benefit as specified in the certificate shall become effective automatically unless the member elects another available paid-up nonforfeiture benefit, not later than 60 days after the due date of the premium in default;

(iv) A statement of the mortality table and rate of interest used in determining all paid-up nonforfeiture benefits and cash surrender options available under the certificate, and a brief general statement of the method used in calculating such benefits;

(viii) A table showing in figures the value of every paid-up nonforfeiture benefit and cash surrender option available under the certificate for each certificate anniversary either during the first 20 certificate years or during the term of the certificate whichever is shorter;

() A provision that the certificate shall be incontestable after it has been in force during the lifetime of the member for a period of 2 years from its date of issue except for nonpayment of premiums, violation of the provisions of the certificate relating to military, aviation, or naval service and violation of the provisions relating to suspension or expulsion as substantially set forth in the certificate. At the option of the society, supplemental provisions relating to benefits in the event of temporary or permanent disability or hospitalization and provisions which grant additional insurance specifically against death by accident or accidental means, may also be excepted. The certificate shall be incontestable on the ground of suicide after it has been in force during the lifetime of the member for a period of 2 years from date of issue. The certificate may provide, as to statements made to procure reinstatement, that the society shall have the right to contest a reinstated certificate within a period of 2 years from date of reinstatement with the same exceptions as herein provided;

() A provision that in case the age or sex of the member or of any other person is considered in determining the premium and it is found at any time before final settlement under the certificate that the age or sex has been misstated, and the discrepancy and premium involved have not been adjusted, the amount payable shall be such as the premium would have purchased at the correct age and sex; but if the correct age or sex was not an insurable age or sex under the society's charter or laws, only the premiums paid to the society, less any payments previously made to the member, shall be returned or, at the option of the society, the amount payable under the certificate shall be such as the premium would have purchased at the correct age and sex according to the society's
promulgated rates and any extension thereof based on actuarial principles;

(xi) A provision or provisions which recite fully, or which set forth the substance of, all sections of the charter, constitution, laws, rules or regulations of the society, in force at the time of issuance of the certificate, the violation of which will result in the termination of, or in the reduction of, the benefit or benefits payable under the certificate; and

(xii) If the constitution or laws of the society provide for expulsion or suspension of a member, any member so expelled or suspended, except for nonpayment of a premium or within the contestable period for material misrepresentations in such member's application for membership shall have the privilege of maintaining his insurance in force by continuing payment of the required premium.

Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance or because the certificate is an annuity certificate may to the extent inapplicable, be omitted from the certificate.

(2) No life benefit certificate shall be delivered or issued for delivery in this State containing in substance any of the following provisions:

(i) Any provision limiting the time within which any action at law or in equity may be commenced to less than 2 years after the cause of action shall accrue;

(ii) Any provision by which the certificate shall purport to be issued or to take effect more than 6 months before the original application for the certificate was made, except in case of transfer from one form of certificate to another in connection with which the member is to receive credit for any reserve accumulation under the form of certificate from which the transfer is made; or

() Any provision for forfeiture of the certificate for failure to repay any loan thereon or to pay interest on such loan while the total indebtedness, including interest, is less than the loan value of the certificate.

(3) The word "premiums" as used in this chapter means premiums, rates, or other required contributions by whatever name known.

§ 6121. Accident and health insurance and total and permanent disability insurance certificates

No society shall issue or deliver in this State any certificate or other evidence of any contract or accident insurance or health insurance or of any total and permanent disability insurance contract unless and until the form thereof, together with the form of application and all riders or endorsements for use in connection therewith, shall have been filed with the Commissioner and approved by him as conforming to reasonable rules and regulations from time to time made by him and as not inconsistent with any other provisions of law applicable thereto. The Commissioner shall, within a reasonable time after the filing of any such form, notify the society filing the same either of his approval or of his disapproval of such form. The Commissioner may approve any such form which in his opinion contains provisions on any one or more of the several requirements made by him which are more favorable to the members than the one or ones so required. The Commissioner shall have power, from time to time, to make, alter and supersede reasonable regulations prescribing the required, optional and prohibited provisions in such contracts, and such regulations shall conform, as far as practicable, to the provisions of chapter 33 of this title. Where the Commissioner deems inapplicable, either in part or in their entirety, the provisions of the foregoing sections, he may prescribe the portions or summary thereof of the contract to be printed on the certificate issued to the member. Any filing made hereunder shall be deemed approved unless disapproved within 60 days from the date of such filing.

§ 6122. Waiver

The constitution and laws of the society may provide that no subordinate body, nor any of its subordinate officers or members shall have the power or authority to waive any of the provisions of the laws and constitution of the society. Such provision shall be binding on the society and every member and beneficiary of a member.

§ 6123. Reinsurance

A domestic society may, by a reinsurance agreement, cede any individual risk or risks in whole or in part to an insurer (other than another fraternal benefit society) having the power to make such reinsurance and authorized to do business in this State, or if not so authorized, one which is approved by the Commissioner, but no such society may reinsure substantially all of its insurance in force without the written permission of the Commissioner. It may take credit for the reserves on such ceded risks to the extent reinsured, but no credit shall be allowed as an admitted asset or as a deduction from liability, to a ceding society for reinsurance made, ceded, renewed, or otherwise becoming effective after the effective date of this article, unless the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding society under the contract or contracts reinsured without diminution because of the insolvency of the ceding society.

§ 6124. Annual license

Societies which are now authorized to transact business in this State may continue such business until the first day of April next succeeding the effective date of this title. The authority of such societies and all societies hereafter licensed, may thereafter be renewed annually but in all cases to terminate on the first day of the succeeding April. However, a license so issued 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 Commissioner $25. A duly certified copy of duplicate of such license shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this chapter.

§ 6125. Foreign or alien society--admission

No foreign or alien society shall transact business in this State without a license issued by the Commissioner. Any such society may be licensed to transact business in this State upon filing with the Commissioner:

(1) A duly certified copy of its charter or articles of incorporation;

(2) A copy of its constitution and laws, certified by its secretary or corresponding officer;

(3) A power of attorney to the Commissioner as prescribed in section 6129 of this chapter;

(4) A statement of its business under oath of its president and secretary or corresponding officers in a form prescribed by the Commissioner, duly verified by an examination made by the supervising insurance official of its home state or other state, territory, province or country, satisfactory to the Commissioner of this State;

(5) A certificate from the proper official of its home state, territory, province or country that the society is legally incorporated and licensed to transact business therein;

(6) Copies of its certificate forms; and

(7) Such other information as he may deem necessary; and upon a showing that its assets are invested in accordance with the provisions of this chapter.

Any foreign or alien society desiring admission to this State shall have the qualifications required of domestic societies organized under this chapter.

§ 6126. Injunction--liquidation--receivership of domestic society

(a) When the Commissioner upon investigation finds that a domestic society:

(1) Has exceeded its powers;

(2) Has failed to comply with any provision of this Article;

(3) Is not fulfilling its contracts in good faith;

(4) Has a membership of less than 400 after an existence of 1 year or more; or

(5) Is conducting business fraudulently or in a manner hazardous to its members, creditors, the public or the business; he shall notify the society of such deficiency or deficiencies and state in writing the reasons for his dissatisfaction. He shall at once issue a written notice to the society requiring that the deficiency or deficiencies which exist are corrected. After such notice the society shall have a 30-day period in which to comply with the Commissioner's request for correction, and if the society fails to comply the Commissioner shall notify the society of his findings of noncompliance and require the society to show cause on a date named why it should not be enjoined from carrying on any business until the violation complained of shall have been corrected, or why an action in quo warranto should not be commenced against the society.

If on such date the society does not present good and sufficient reasons why it should not be so enjoined or why such action should not be commenced, the Commissioner may present the facts relating thereto to the Attorney General who shall, if he deems the circumstances warrant, commence an action to enjoin the society from transacting business or in quo warranto.

The court shall thereupon notify the officers of the society of a hearing. If after a full hearing it appears that the society should be so enjoined or liquidated or a receiver appointed, the court shall enter the necessary order.

(b) No society so enjoined shall have the authority to do business until:

(1) The Commissioner finds that the violation complained of has been corrected;

(2) The costs of such action shall have been paid by the society if the court finds that the society was in default as charged;

(3) The court has dissolved its injunction; and

(4) The Commissioner has reinstated the certificate of authority.

(c) If the court orders the society liquidated, it shall be enjoined from carrying on any further business, whereupon the receiver of the society shall proceed at once to take possession of the books, papers, money and other assets of the society and, under the direction of the court, proceed forthwith to close the affairs of the society and to distribute its funds to those entitled thereto.

(d) No action under this section shall be recognized in any court of this State unless brought by the Attorney General upon request of the Commissioner. Whenever a receiver is to be appointed for a domestic society, the court shall appoint the Commissioner as such receiver.

(e) The provisions of this section relating to hearing by the Commissioner, action by the Attorney General at the request of the Commissioner, hearing by the court, injunction and receivership shall be applicable to a society which shall voluntarily determine to discontinue business.

§ 6127. Suspension; revocation or refusal of license of foreign or alien society

(a) When the Commissioner upon investigation finds that a foreign or alien society transacting or applying to transact business in this State:

(6) Has exceeded its powers;

(7) Has failed to comply with any of the provisions of this chapter;

(8) Is not fulfilling its contracts in good faith;

(9) Is conducting its business fraudulently or in a manner hazardous to its members or creditors or the public; he shall notify the society of such deficiency or deficiencies and state in writing the reasons for his dissatisfaction. He shall at once issue a written notice to the society requiring that the deficiency or deficiencies which exist are corrected. After such notice the society shall have a 30-day period in which to comply with the Commissioner's request for correction, and if the society fails to comply the Commissioner shall notify the society of his findings of noncompliance and require the society to show cause on a date named why its license should not be suspended, revoked or refused. If on such date the society does not present good and sufficient reason why its authority to do business in this State should not be suspended, revoked or refused, he may suspend or refuse the license of the society to do business in this State until satisfactory evidence is furnished to him that such suspension or refusal should be withdrawn or he may revoke the authority of the society to do business in this State.

(b) Nothing contained in this section shall be taken or construed as preventing any such society from continuing in good faith all contracts made in this State during the time such society was legally authorized to transact business herein.

§ 6128. Licensing of agents

(a) Agents of societies shall be licensed in accordance with the provisions of this section.

(b) Insurance agent defined--The term "insurance agent" as used in this section means any authorized or acknowledged agent of a society who acts as such in the solicitation, negotiation or procurement or making of a life insurance, accident and health insurance or annuity contract, except that the term "insurance agent" shall not include:

(10) Any regular salaried officer or employee of a licensed society who devotes substantially all of his services to activities other than the solicitation of fraternal insurance contracts from the public, and who receives for the solicitation of such contracts no commission or other compensation directly dependent upon the amount of business obtained; or

(11) Any agent or representative of a society who devotes, or intends to devote, less than 50% of his time to solicitation and procurement of insurance contracts for such society. Any person who in the preceding calendar year has solicited and procured life insurance contracts on behalf of any society in an amount of insurance in excess of $50,000, or, in the case of any other kind or kinds of insurance which the society might write, on the persons of more than 25 individuals and who has received or will receive a commission or other compensation therefor, shall be presumed to be devoting, or intending to devote, 50% of his time to the solicitation or procurement of insurance contracts for such society.

(c) License required--Any persons who in this State acts as insurance agent for a society without having authority so to do by virtue of a license issued and in force pursuant to the provisions of this section shall, except as provided in subsection (b), be guilty of a Misdemeanor.

(c1) Payment of commissions forbidden--No society doing business in this State shall pay any commission or other compensation to any person for any services in obtaining in this State any new contract of life, accident or health insurance, or any new annuity contract, except to a licensed insurance agent of such society and except an agent exempted under subsection (b) (ii) of this section.

(e) Prerequisites, issuance and renewal of insurance agents' licenses--

(1) The Commissioner may issue a license to any person who has paid an annual license fee of $2 and who has complied with the requirements of this section, authorizing such licensee to act as an insurance agent on behalf of any society named in such license which is authorized to do business in this State.

(2) Before any insurance agent's license shall be issued there shall be on file in the office of the Commissioner of insurance the following documents:

(i) A written application by the prospective licensee in such form or forms and supplements thereto, and containing such information, as the Commissioner may prescribe; and

(ii) A certificate by the society which is to be named in such license, stating that such society has satisfied itself that the named applicant is trustworthy and competent to act as such insurance agent and that the society will appoint such applicant to act as its agent if the license applied for is issued by the Commissioner. Such certificates shall be executed and acknowledged by an officer or managing agent of such society.

(3) No written or other examination shall be required of any individual seeking to be named as licensee to represent a fraternal benefit society as its agent.

(4) The Commissioner may refuse to issue or renew any insurance agent's license if in his judgment the proposed licensee is not trustworthy and competent to act as such agent, or has given cause for revocation or suspension of such license, or has failed to comply with any prerequisite for the issuance or renewal, as the case may be, of such license.

(5) License years shall be from March 1st of each calendar year to the last day of February of the next calendar year. Every license issued pursuant to this section, and every renewal therof, shall expire on March 1st of the license year for which issued.

(6) If the application for a renewal license shall have been filed with the Commissioner on or before the last day of February of the year in which the existing license was issued, the applicant named in such existing license may continue to act as insurance agent under such existing license, unless same shall be revoked or suspended, until the issuance by the Commissioner of the renewal license or until the expiration of 5 days after he shall have refused to renew such license and shall have served written notice of such refusal on the applicant, If the applicant shall, within 30 days after such notice is given, notify the Commissioner in writing of his request for a hearing on such refusal, the Commissioner shall, within a reasonable time after receipt of such notice, grant such hearing, and he may, in his discretion, reinstate such license.

(7) Any such renewal license of an insurance agent may be issued upon the application of the society named in the existing license. Such application shall be in the form or forms prescribed by the Commissioner and shall contain such information as he may require. Such application shall contain a certificate executed by the president, or by a vice president, a secretary, an assistant secretary, or corresponding officer by whatever name known, or by an employee expressly designated and authorized to execute such certificate of a domestic or foreign society or by the United States manager of an alien society, stating that the addresses therein given of the agents of such society for whom renewal licenses are requested therein have been verified in each instance immediately preceding the preparation of the application. Notwithstanding the filing of such application, the Commissioner may, after reasonable notice to any such society, require that any or all agents of such society to be named as licensees in renewal licenses shall execute and file separate applications for the renewal of such licenses, as hereinbefore specified, and he may also require that each such application shall be accompanied by the certificate specified in subsection (e) (2) (ii) of this section.

(f) Notice of termination of appointment of agent. Every society doing business in this State shall, upon the termination of the appointment of any agent licensed to represent it in this Slate, forthwith file with the Commissioner a statement, in such form as he may prescribe, of the facts relative to such termination and the cause thereof. Every statement made pursuant to this section shall be deemed a privileged communication.

(g) Revocation or suspension of agent's license--

(1) The Commissioner may revoke, or may suspend for such period as he may determine, any insurance agent's license if, after notice and hearing as specified in this section, he determines that the licensee has:

(i) violated any provision of, or any obligation imposed by, this section, or has violated any law in the course of his dealings as agent;

(ii) made a material misstatement in the application for such license;

() been guilty of fraudulent or dishonest practices;

(i) demonstrated his incompetency or untrustworthiness to act as an insurance agent; or

(ii) been guilty of rebating as defined by the laws of this State applicable to life insurance companies.

(2) The revocation or suspension of any insurance agent's license shall terminate forthwith the license of such agent. No individual whose license has been revoked shall be entitled to obtain any insurance agent's license under the provisions of this section for a period of one year after such revocation or, if such revocation be judicially reviewed, for 1 year after the final determination thereof affirming the action of the Commissioner in revoking such license.

§ 6129. Service of process

Every society authorized to do business in this State shall appoint in writing the Commissioner and each successor in office to be its true and lawful attorney upon whom all lawful process in any action or proceeding against it shall be served, and shall agree in such writing that any lawful process against it which is served on said 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. Copies of such appointment, certified by the Commissioner, shall be deemed sufficient evidence thereof and shall be admitted in evidence with the same force and effect as the original thereof might be admitted.

Service shall only be made upon the Commissioner, or if absent, upon the person in charge of his office. It shall be made in duplicate and shall constitute sufficient service upon the society. When legal process against a society is served upon the Commissioner, he shall forthwith forward one of the duplicate copies by registered mail, prepaid, directed to the secretary or corresponding officer. No such service shall require a society to file its answer, pleading or defense in less than 30 days from the date of mailing the copy of the service to a society. Legal process shall not be served upon a society except in the manner herein provided. At the time of serving any process upon the Commissioner, the plaintiff or complainant in the action shall pay to the Commissioner a fee of $2.

§ 6130. Injunction

No application or petition for injunction against any domestic, foreign or alien society, or branch thereof, shall be recognized in any court of this State unless made by the Attorney general upon request of the Commissioner.

§ 6131. Review

All decisions and findings of the Commissioner made under the provisions of this chapter shall be subject to review by proper proceedings in any court of competent jurisdiction in this State.

§ 6132. Funds

All assets shall be held, invested and disbursed for the use and benefit of the society and no member or beneficiary shall have or acquire individual rights therein or become entitled to any apportionment or the surrender of any part thereof, except as provided in the contract.

A society may create, maintain, invest, disburse and apply any special fund or funds necessary to carry out any purpose permitted by the laws of such society.

Every society, the admitted assets of which are less than the sum of its accrued liabilities and reserves under all of its certificates when valued according to standards required for certificates issued after 1 year from the effective date of this chapter, shall, in every provision of the laws of the society for payments by members of such society, in whatever form made, distinctly state the purpose of the same and the proportion thereof which may be used for expenses, and no part of the money collected for mortuary or disability purposes or the net accretions thereto shall be used for expenses.

§ 6133. Investments

A society shall invest its funds only in such investments as are authorized by the laws of this State for the investment of assets of life insurers and subject to the limitations thereon. Any foreign or alien society permitted or seeking to do business in this State which invests its funds in accordance with the laws of the state, district, territory, country or province in which it is incorporated, shall be held to meet the requirements of this section for the investment of funds.

§ 6134. Reports and valuations

Reports shall be filed and synopsis of annual statements shall be published in accordance with the provisions of this section.

(1) Every society transacting business in this State shall annually, on or before the 1st day of March, unless for cause shown such time has been extended by the Commissioner, file with the Commissioner a true statement of its financial condition, transactions and affairs for the preceding calendar year and pay a fee of $25 for filing same. The statement shall be in general form and context as approved by the National Association of Insurance Commissioners for fraternal benefit societies and as supplemented by additional information required by the Commissioner.

(2) A synopsis of its annual statement providing an explanation of the facts concerning the condition of the society thereby disclosed shall be printed and mailed to each benefit member of the society not later than June 1 of each year, or, in lieu thereof, such synopsis may be published in the society's official publication.

(3) As a part of the annual statement herein required, each society shall, on or before the 1st day of March, file with the Commissioner a valuation of its certificates in force on December 31 last preceding, provided the Commissioner may, in his discretion for cause shown, extend the time for filing such valuation for not more than 2 calendar months. Such report of valuation shall show, as reserve liabilities, the difference between the present midyear value of the promised benefits provided in the certificates of such society in force and the present midyear value of the future net premiums as the same are in practice actually collected, not including therein any value for the right to make extra assessments and not including any amount by which the present midyear value of future net premiums exceeds the present midyear value of promised benefits on individual certificates. At the option of any society, in lieu of the above, the valuation may show the net tabular value. Such net tabular value as to certificates issued prior to 1 year after the effective date of this chapter shall be determined in accordance with the provisions of law applicable prior to the effective date of this chapter and as to certificates issued on or after 1 year from the effective date of this chapter shall not be less than the reserves determined according to the Commissioner's reserve valuation method as hereinafter defined. If the premium charged is less than the tabular net premium according to the basis of valuation used, an additional reserve equal to the present value of the deficiency in such premiums shall be set up and maintained as a liability. The reserve liabilities shall be properly adjusted in the event that the midyear or tabular values are not appropriate.

(4) Reserves according to the Commissioner's reserve valuation method, for the life insurance and endowment benefits of certificates providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such certificates, over the then present value of any future modified net premiums therefor. The modified net premiums for any such certificate shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the certificate, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the certificate and the excess of (i) over (if), as follows:

(i) A net level premium equal to the present value, at the date of issue, of such benefits provided for after the first certificate year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such certificate on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age 1 year higher than the age at issue of such certificate; and

(ii) A net 1-year term premium for such benefits provided for in the first certificate year. Reserves according to the Commissioner's reserve valuation method for (A) life insurance benefits for varying amounts of benefits or requiring the payment of varying premiums, (B) annuity and pure endowment benefits, (C) disability and accidental death benefits in all certificates and contracts, and (D) all other benefits except life insurance and endowment benefits, shall be calculated by a method consistent with the principles of this subsection.

(5) The present value of deferred payments due under incurred claims or matured certificates shall be deemed a liability of the society and shall be computed upon mortality and interest standards prescribed in the following subsection.

(6) Such valuation and underlying data shall be certified by a competent actuary or, at the expense of the society, verified by the actuary of the department of insurance of the state of domicile of the society.

The minimum standards of valuation for certificates issued prior to the effective date of this chapter shall be those provided by the law applicable immediately prior to the effective date of this chapter but not lower than the standards used in the calculating of rates for such certificates.

The minimum standard of valuation for certificates issued after the effective date of this chapter shall be 31/2% interest and the following tables:

(i) For certificates of life insurance--American Men Ultimate Table of Mortality, with Bowerman's or Davis' extension thereof or with the consent of the Commissioner, the Commissioners 1941 Standard Ordinary Mortality Table, the Commissioners 1941 Standard Industrial Mortality Table or the Commissioners 1958 Standard Ordinary Mortality Table, using actual age of the insured for male risks and an age not more than 3 years younger than the actual age of the insured for female risks;

(ii) For annuity and pure endowment certificates, excluding any disability and accidental death benefits in such certificates--the 1937 Standard Annuity Mortality Table or the Annuity Mortality Table for 1949, ultimate, or any modification of either of these tables approved by the Commissioner;

(iii) For total and permanent disability benefits in or supplementary to life insurance certificates--Hunter's Disability Table, or the class III disability table (1926) modified to conform to the contractual waiting period, or the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the Society of Actuaries with due regard to the type of benefit. Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance certificates;

(iv) For accidental death benefits in or supplementary to life insurance certificates--the Inter-company Double Indemnity Mortality Tables or the 1959 Accidental Death Benefits Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance certificates; and

() For noncancellable accident and health benefits--the class III disability table (1926) with conference modifications or, with the consent of the Commissioner, tables based upon the society's own experience.

The Commissioner may, in his discretion, accept other standards for violation if he finds that the reserves produced thereby will not be less in the aggregate than reserves computed in accordance with the minimum valuation standard herein prescribed. The Commissioner may, in his discretion, vary the standards of mortality applicable to all certificates of insurance on substandard lives or other extra hazardous lives by any society authorized to do business in this State. Whenever the mortality experience under all certificates valued on the same mortality table is in excess of the expected mortality according to such table for a period of 3 consecutive years, the Commissioner may require additional reserves when deemed necessary in his judgment on account of such certificates.

Any society, with the consent of the Commissioner of the state of domicile of the society and under such conditions, if any, which he may impose, may establish and maintain reserves on its certificates in excess of the reserves required thereunder, but the contractual rights of any insured member shall not be affected thereby.

(7) A society neglecting to file the annual statement in the form and within the time provided by this section shall forfeit $100 for each clay during which such neglect continues, and, upon notice by the Commissioner to that effect, its authority to do business in this State shall cease while such default continues.

§ 6135. Examination of domestic societies

The Commissioner, or any person he may appoint, shall have the power of visitation and examination into the affairs of any domestic society and he shall make such examination at least once in every 3 years. He may employ assistants for the purpose of such examination, and he, or any person he may appoint, shall have free access to all books, papers and documents that relate to the business of the society. The minutes of the proceedings of the supreme legislative or governing body and of the board of directors or corresponding body of a society shall be in the English language. In making any such examination the Commissioner 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 condition of the society. A summary of the report of the Commissioner and such recommendations or statements of the Commissioner as may accompany such report, shall be read at the first meeting of the board of directors or corresponding body of the society following the receipt thereof, and if directed so to do by the Commissioner, shall also be read at the first meeting of the supreme legislative or governing body of the society following the receipt thereof. A copy of the report, recommendations and statements of the Commissioner shall be furnished by the society to each member of such board of directors or other governing body. The expense of each examination and of each valuation, including compensation and actual expense of examiners, shall be paid by the society examined or whose certificates are valued, upon statements furnished by the Commissioner.

§ 6136. Examination of foreign and alien societies

The Commissioner, or any person whom he may appoint, may examine any foreign or alien society transacting or applying for admission to transact business in this State. He may employ assistants and he, or any person he may appoint, shall have free access to all books, papers and documents that relate to the business of the society. He may in his discretion accept, in lieu of such examination, the examination of the insurance department of the state, territory, district, province or country where such society is organized. The compensation and actual expenses of the examiners making any examination or general or special valuation shall be paid by the society examined or by the society whose certificate obligations have been valued, upon statements furnished by the Commissioner.

§ 6137. No adverse publications

Pending, during or after an examination or investigation of a society, either domestic, foreign or alien, the 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 society, until a copy thereof shall have been served upon the society at its principal office and the 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.

§ 6138. Misrepresentation

(a) No person shall cause or permit to be made, issued or circulated in any form:

(1) Any misrepresentation or false or misleading statement concerning the terms, benefits or advantages of any fraternal insurance contract now issued or to be issued in this State, or the financial condition of any society;

(2) Any false or misleading estimate or statement concerning the dividends or shares of surplus paid or to be paid by any society on any insurance contract; or

(3) Any incomplete comparison of an insurance contract of one society with an insurance contract of another society or insurer for the purpose of inducing the lapse, forfeiture or surrender of any insurance contract. A comparison of insurance contracts is incomplete if it does not compare in detail:

(i) The gross rates, and the gross rates less any dividend or other reduction allowed at the date of the comparison; and

(ii) Any increase in cash values, and all the benefits provided by each contract for the possible duration thereof as determined by the life expectancy of the insured; or if it omits from consideration;

() Any benefit or value provided in the contract;

(i) Any differences as to amount or period of rates; or

(ii) Any difference in limitations or conditions or provisions which directly or indirectly affect the benefits. In any determination of the incompleteness or misleading character of any comparison or statement, it shall be presumed that the insured had no knowledge of any of the contents of the contract involved.

Any person who violates any provision of this section or knowingly receives any compensation or commission by or in consequence of such violation, shall upon conviction be punished by a fine not less than $100 nor more than $500, or by imprisonment in the county jail not less than 30 days nor more than 1 year, or both fine and imprisonment and shall in addition, be liable for a civil penalty in the amount of 3 times the sum received by such violator as compensation or commission, which penalty may be sued for and recovered by any person or society aggrieved for his or its own use and benefit in accordance with the provisions of civil practice.

§ 6139. Discrimination and rebates

No society doing business in this State shall make or permit any unfair discrimination between insured members of the same class and equal expectation of life in the premiums charged for certificates of insurance, in the dividends or other benefits payable thereon or in any other of the terms and conditions of the contracts it makes.

No society, by itself, or any other party, and no agent or solicitor, personally, or by any other party, shall offer, promise, allow, give, set off, or pay directly or indirectly any valuable consideration or inducement to or for insurance on any risk authorized to be taken by such society, which is not specified in the certificate. No member shall receive or accept, directly or indirectly, any rebate or premium, or part thereof, or agent's or solicitor's commission thereon, payable on any certificate or receive or accept any favor or advantage or share in the dividends or other benefits to accrue on, or any valuable consideration or inducement not specified in the contract of insurance.

§ 6140. Taxation

Every society organized or licensed under this chapter 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 and office equipment.

§ 6141. Exemptions

Except as herein provided, societies shall be governed by this chapter and shall be exempt from all other provisions of the insurance laws of this State, not only in governmental relations with the state, but for every other purpose. No law hereafter enacted shall apply to them, unless they be expressly designated therein.

§ 6142. Exemption of certain societies

(a) Nothing contained in this chapter shall be so construed as to affect or apply to:

(1) Grand or subordinate lodges of societies, orders or associations now doing business in this State which provide benefits exclusively through local or subordinate lodges;

(2) Orders, societies or associations which admit to membership only persons engaged in one or more crafts or hazardous occupations, in the same or similar lines of business, insuring only their own members and their families, and the ladies' societies or ladies' auxiliaries to such orders, societies or associations;

(3) Domestic societies which limit their membership to employees of a particular city or town, designated firm, business house or corporation which provide for a death benefit of not more than $400 or disability benefits of not more than $350 to any person in any 1 year, or both; or

(4) Domestic societies or associations of a purely religious, charitable or benevolent description, which provide for a death benefit of not more than $400 or for disability benefits of not more than $350 to any one person in any 1 year, or both.

Any such society or association described in clauses (3) or (4) supra which provides for death or disability benefits for which benefit certificates are issued, and any such society or association included in paragraph (4) which has more than 1,000 members, shall not be exempted from the provisions of this chapter but shall comply with all requirements thereof.

No society which, by the provisions of this section, is exempt from the requirements of this chapter, except any society described in paragraph (2), supra, shall give or allow, or promise to give or allow to any person any compensation for procuring new members.

Every society which provides for benefits in case of death or disability resulting solely from accident, and which does not obligate itself to pay natural death or sick benefits shall have all of the privileges and be subject to all the applicable provisions and regulations of this chapter except that the provisions thereof relating to medical examination, valuations of benefit certificates, and incontestability, shall not apply to such society.

The Commissioner may require from any society or association, by examination or otherwise, such information as will enable him to determine whether such society or association is exempt from the provisions of this chapter.

Societies, exempted under the provisions of this section, shall also be exempt from all other provisions of the insurance laws of this State.

§ 6143. Penalties

Any person who willfully makes a false or fraudulent statement in or relating to an application for membership or for the purpose of obtaining money from or a benefit in any society, shall upon conviction be fined not less than $100 nor more than $500 or imprisonment in the county jail not less than 30 days nor more than 1 year, or both.

Any person who willfully makes a false or fraudulent statement in any verified report or declaration under oath required or authorized by this chapter, or of any material fact or thing contained in a sworn statement concerning the death or disability of a member for the purpose of procuring payment of a benefit named in the certificate, shall be guilty of perjury and shall be subject to the penalties therefor prescribed by law.

Any person who solicits membership for, or in any manner assists in procuring membership in, any society not licensed to do business in this State shall upon conviction be fined not less than $50 nor more than $200.

Any person guilty of a willful violation of, or neglect or refusal to comply with, the provisions of this chapter for which a penalty is not otherwise prescribed, shall upon conviction, be subject to the penalties provided by section 113 (general penalty) of this title.

CHAPTER 63. HEALTH SERVICE CORPORATIONS

§ 6301. Provisions exclusive

Health service corporations now or hereafter incorporated in this State shall be governed by this chapter, shall be exempt from all other provisions of this title, except as herein expressly provided, and no insurance law hereafter enacted shall be deemed to apply to such corporations unless they be specifically referred to therein.

§ 6302. Health service corporation defined

"Health service corporation" means a non-profit corporation, without capital stock, organized under the laws of this State for the purpose of establishing, maintaining and operating plans to provide hospital, physicians' or related health services, or indemnity therefor, for such persons as become members or subscribers of any plan of such corporation.

§ 6303. Limited application

This chapter, other than section 6301 of this chapter, shall not apply to any corporation operating or maintaining a hospital service plan or medical service plan, participation in which is limited to its employees and the employees of other persons or corporations with which such corporation may have contracted to provide such services. As used in this section, the term "employees" may include members of the families of employees and retired employees.

§ 6304. Certificate of authority; when required; application

(a) No corporation shall engage in the business of a health service corporation without first obtaining a certificate of authority therefor from the Commissioner, except that this provision shall not apply to corporations which are engaged in such business in this State on the effective date of this Act.

(b) Application for a certificate of authority as a health service corporation shall be made on forms supplied by the Commissioner and containing such information as he shall reasonably deem necessary. The application shall be accompanied by a filing fee of $25 and copies of the following documents:

(1) Certificate of incorporation;

(2) Bylaws;

(3) Forms of all proposed contracts between the applicant and participating hospitals, physicians and other providers of health services, showing the terms under which services are to be furnished to subscribers or members;

(4) Forms of all proposed contracts and optional riders to be offered for subscribers or members;

(5) Tables of rates to be charged for each such contract or rider, or a statement of the rating formulas to be used in lieu of fixed rates;

(6) Financial statement of the corporation, including the amounts of contributions paid or agreed to be paid to the corporation for working capital and the name or names of each contributor and the terms of each contribution;

(7) A statement of the areas in which the corporation proposes to operate; and

(8) A list of the names and addresses of the members of the board of directors or other governing body of the corporation and its principal officers.

(c) Every corporation engaging in the business of a health service corporation pursuant to the exception stated in subsection (a) above, shall, within 30 days after the effective date of this Act, file with the Commissioner copies of all the documents referred to in (1) through (8) of subsection (b), above, and pay therewith a filing fee of $25.

§ 6305. Issuance of certificate of authority

The Commissioner shall issue a certificate of authority to the applicant when it is shown to his satisfaction that:

(1) The applicant is established as a bona fide nonprofit health service corporation;

(2) Arrangements have been made by the applicant reasonably to assure provision of the services covered by its contracts and riders;

(3) The amounts provided as working capital of the corporation are repayable, without interest, only out of operating revenues;

(4) The amount of money actually available for working capital is sufficient to carry on the plan for a period of 2 months from the date of issuance of the certificate of authority.

§ 6306. Filing required for contract or rate changes

No new or changed contract or rider shall be offered to the public, and no new or changed rate or rating formula shall be charged or employed, unless documentation with respect thereto as specified in section 6304 (b) of this chapter is first filed with the Commissioner.

§ 6307. Annual report; examination

(a) Not later than the first day of June of each year every such corporation shall file with the Commissioner a statement sworn to by at least two of its principal officers, showing its financial condition on the last day of the next preceding calendar year.

(b) The Commissioner may appoint an examiner to examine into the affairs of the corporation. Such person shall have the power of visitation and examination, shall have free access to all the books, papers and documents relating to the business of the corporation, and may require the officers, agents or employees thereof, or any other persons, to testify under oath concerning the affairs, transactions and conditions at least every three years. Except, that the confidentiality of information relating to the diagnosis and treatment of the members of such corporation shall be strictly maintained by the examiner. The reasonable cost of the examination shall be paid by the corporation upon completion of the examination.

§ 6308. Suspension or revocation of authority to do business

The Commissioner may, after hearing, suspend or revoke the right to do business or the certificate of authority for any of the following causes:

(1) If the corporation is no longer qualified therefor under this chapter;

(2) For a violation by the corporation of a provision of this chapter; or

(3) Upon any applicable ground under this chapter or any of the chapters specified in section 6309 of this chapter for which the certificate of authority of an insurer may be suspended or revoked.

§ 6309. Other provisions applicable

Such corporations shall be subject to the provisions of this chapter, and to the following chapters and provisions of this title, to the extent applicable and not in conflict with the express provisions of this chapter:

(1) Chapter 1 (general definitions and provisions).

(2) Chapter 3 (the Insurance Commissioner).

(3) Chapter 23 (trade practices and frauds).

(4) Chapter 59 (rehabilitation and liquidation).

CHAPTER 65. INSURANCE FOR THE PROTECTION OF THE STATE OF DELAWARE

§ 6501. Insurance for the protection of the State and the Public

(1) Determination of coverage. The Governor, the State Auditor, and the Insurance Commissioner shall from time to time determine the method, the amount of insurance, and the class of coverage covering any type of risk, including but not limited to property, fidelity and surety, life, accident and health, workmen's compensation, marine, to be effected and carried by the State or any subdivision thereof, including all school districts, but excepting however municipal corporations, counties, and the authorities relating to the crossings of the Delaware River and the Delaware Bay.

(2) Form of coverage. The Governor, the State Auditor, and the Insurance Commissioner shall:

(a) Protect the State from loss to state owned property;

(b) Protect the public from wrongful actions of State officials and employees and failure or malfunction of state owned property;

(c) Secure the economic advantage of blanket policies and deductible or excess loss insurance;

(d) Determine such insurance protection by no insurance on small losses, commercial insurance, self-insurance, or a combination of methods.

(3) Payment of premiums. The Insurance Commissioner shall establish necessary rules and regulations, demand and receive all bills for premiums to be paid, and after approval by himself, the Governor, and the State Auditor, shall present the same for payment to the State Treasurer, who shall pay the same.

§ 6502. Establishment of Insurance Purchasing and Administrative Office

There is hereby established under the direction of the Insurance Commissioner an Insurance Purchasing and Administrative Office, the executive head of which shall be the Director of Insurance Purchasing, who shall be appointed by and serve at the pleasure of the Insurance Commissioner.

§ 6503. Qualifications of Director of Insurance Purchasing

The Director of Insurance Purchasing shall be so qualified by virtue of his education and experience, and shall not during his tenure of office be associated directly or indirectly with any insurance agency, firm, or corporation, and shall before entering upon the duties of his office file with the Secretary of State a bond in the penal sum of Fifty Thousand Dollars ($50,000.00) with corporate surety approved by the Insurance Commissioner. The Director shall be charged with and responsible for the administration of the Insurance Purchasing and Administrative Office as herein provided.

§ 6504. Salary of Director of Insurance Purchasing

The salary of the Director of Insurance Purchasing shall be not less than Ten Thousand Dollars ($10,000.00) per year. The Director shall be in the classified service of the State by virtue of said employment.

§ 6505. Duties of the Insurance Purchasing and Administrative Office

The Insurance Purchasing and Administrative Office shall provide:

(a) The placement of all insurance as has been determined necessary by the Governor, the State Auditor, and the Insurance Commissioner.

(b) Centralized responsibility vested in a single agency with an adequate staff of legal, actuarial and administrative personnel.

(c) The establishment of an Open Bid procedure to be maintained for purchasing new insurance and renewing existing contracts which permits the free forces of market competition to operate to the benefit of the insurance program.

(d) The keeping of policies and records thereof in some safe and secure place.

(e) The preparation of reports as requested by the Insurance Commissioner. Such reports shall present the basic statistical-actuarial data pertaining to the experience of the program and its component parts, provide sufficient information about bidding procedures as required by the statutes of the State of Delaware so that any qualified insurance firm may have an opportunity to offer its services to the State, and such report shall be a public document.

(f) Periodic comprehensive insurance surveys of program needs, and a continuing review of existing insurance contracts as well as analyses of rates in terms of changing economic conditions, and periodic studies of market conditions and developments.

(g) Special investigations and reports as may be requested by the Insurance Commissioner.

§ 6506. Insurance by other agencies of the State

No agency of the State as herein provided shall be authorized to place any insurance, any provisions of the law to the contrary notwithstanding.

§ 6507. Existing insurance contracts

Existing insurance contracts and any renewals thereof may continue in full force and effect unless and until otherwise provided by the Director of Insurance Purchasing.

§ 6508. Defense of sovereignty prohibited

Every insurance contract where appropriate shall contain a provision agreeing on behalf of the insurer that the defense of sovereignty is waived and cannot and will not be asserted.

Section 2. Every certificate of authority of an insurer in force immediately prior to the effective date of this Act and existing under any law herein repealed shall be valid until midnight of the last day of February next following such effective date, unless earlier terminated in accordance with this Act. Such certificate of authority upon first renewal under this Act shall be replaced by a certificate of authority in form as consistent with this Act, and shall thereafter be subject to continuance, suspension, revocation or termination as though originally issued under this Act.

Section 3. Every license of an agent or broker in force immediately prior to the effective date of this Act and existing under any law herein repealed shall be valid until midnight of the last day of February next following such effective date, unless earlier suspended, revoked, or terminated in accordance with this Act. The respective such licenses upon first renewal under this Act shall be replaced by a license in form consistent with this Act, and shall thereafter be subject to continuation, suspension, revocation, or termination as though originally issued under this Act.

Section 4. Every form of insurance document and every rate or other filing lawfully in use immediately prior to the effective date of this Act may continue to be so used or be effective until the Commissioner otherwise prescribes pursuant to this Act; except, that before expiration of one year from and after such effective date neither this Act nor the Commissioner shall prohibit the use of any such document, rate, or filing because of any power, prohibition, or requirement contained in this Act which did not exist under laws in force immediately prior to such effective date, unless expressly otherwise provided in this Act.

Section 5. Continuation by this Act of the Insurance Department and the office of Insurance Commissioner, existing under any law repealed herein, preserves such department, the tenure and compensation of the individual holding such office at the effective date of this Act, and the unexpended budgeted funds of the department.

Section 6. Any deposit made in this State under any law repealed herein, with or through the Insurance Department or the Commissioner, or by any insurer in compliance with a condition precedent to or in connection with its certificate of authority to transact insurance in this State, and so on deposit immediately prior to the effective date of this Act, shall be given full recognition as fulfillment, to the extent of such deposit, of any deposit so required for similar purposes under this Act. The deposit shall hereafter be held for the purpose applicable thereto as specified in this Act, and shall be subject in all respects to the provisions of this Act applicable to similar deposits newly made under this Act.

Section 7. Any laws of Delaware, other than this Act, remaining in force after the effective date of this Act which refer to certain provisions of law repealed under this Act, shall be deemed to refer to those provisions of this Act which are in substance the same or substantially the same as such repealed provisions.

Section 8. This Act shall not impair or affect any act clone, offense committed or right accruing, accrued, or acquired, or liability, penalty, forfeiture or punishment incurred, prior to the time this Act takes effect, but the same may be enjoyed, asserted, enforced, prosecuted or inflicted, as fully and to the same extent as if this Act had not been passed.

Section 9. If any section, subsection, subdivision, paragraph, sentence, part or provision of this Act shall be found to be invalid or ineffective by any court it shall be conclusively presumed that this Act would have been passed by the General Assembly without such invalid section, subsection, subdivision, paragraph, sentence, part, or provision, and this Act as a whole shall not be declared invalid by reason of the fact that one or more sections, subsections, subdivisions, paragraphs, sentences, part or provision may be found invalid.

Section 10. Except as otherwise expressly provided the respective provisions of this Act, and this Act, shall be in full force and effect on the first day of the fourth month next following the month in which this Act is enacted.

Section 11. Any law inconsistent with the provisions herein contained is hereby repealed.

Approved July 3, 1968.