TITLE 18

Insurance Code

Insurance

CHAPTER 21. UNAUTHORIZED INSURERS — PROHIBITIONS, PROCESS AND ADVERTISING


(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, §§ 2103-2108 of this title;

(2) Transactions as to which the insurer is not required to have a certificate of authority pursuant to § 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/her 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 coverages, 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 coverages on the property, risks and insurable interests of the employer.

18 Del. C. 1953, § 2101; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;

The purpose of §§ 2103 through 2108 (Unauthorized Insurers Process Act) and §§ 2109 through 2111 (Unauthorized Insurers False Advertising Process Act) of this title 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 insureds 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 coverages 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 15 U.S.C. § 1011 et seq., as amended, which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states.

18 Del. C. 1953, § 2102; 56 Del. Laws, c. 380, § 1.;

(a) Sections 2103 through 2108 of this title 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.

18 Del. C. 1953, § 2103; 56 Del. Laws, c. 380, § 1.;

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/her successors in office as its attorney, upon whom may be served all lawful process issued 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.

18 Del. C. 1953, § 2104; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;

(a) Service of process upon any such insurer pursuant to § 2104 of this title shall be made by delivering to and leaving with the Commissioner or some person in apparent charge of his/her office 2 copies thereof and the payment to him/her of the fees as prescribed by § 701 of this title. The Commissioner shall forthwith mail by registered or certified mail 1 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/her. 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

(2) Making any contract of insurance or issuing or delivering any policies or written contracts of insurance; or

(3) 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.

18 Del. C. 1953, § 2105; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;

Sections 2104 and 2105 of this title 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.

18 Del. C. 1953, § 2106; 56 Del. Laws, c. 380, § 1.;

(a) Before an unauthorized insurer files or causes to be filed any pleading in any action or proceeding instituted against it under §§ 2104 and 2105 of this title, 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 § 2105 of this title 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 § 2105 of this title on the ground either:

(1) That such unauthorized insurer has not done any of the acts enumerated in § 2104 of this title; or

(2) That the person on whom service was made pursuant to subsection (b) of § 2105 of this title was not doing any of the acts therein enumerated.

18 Del. C. 1953, § 2107; 56 Del. Laws, c. 380, § 1.;

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's 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.

18 Del. C. 1953, § 2108; 56 Del. Laws, c. 380, § 1.;

Sections 2102 and 2109 through 2111 of this title constitute and may be referred to as the "Unauthorized Insurers False Advertising Process Act."

18 Del. C. 1953, § 2109; 56 Del. Laws, c. 380, § 1.;

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/she shall so notify the insurer and the insurance supervisory official of the insurer's domiciliary state or province by registered or certified mail.

18 Del. C. 1953, § 2110; 56 Del. Laws, c. 380, § 1; 70 Del. Laws, c. 186, § 1.;

(a) If within 30 days following the giving of the notice provided for in § 2110 of this title 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/her in respect to such matters would be to the interest of the public, he/she shall take action against such insurer under Chapter 23 of this title.

(b) If upon such hearing the Commissioner finds that the insurer has misrepresented, as referred to in § 2110 of this title, he/she 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 $5,000, 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 § 2105 or Chapter 23 of this title or in any other lawful manner.

18 Del. C. 1953, § 2111; 56 Del. Laws, c. 380, § 1; 58 Del. Laws, c. 278, § 4; 70 Del. Laws, c. 186, § 1.;

(a) 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 § 103 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.

(b) Process against such unauthorized insurer may be served in the manner provided in § 2307 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.

18 Del. C. 1953, § 2112; 56 Del. Laws, c. 380, § 1.;