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title-27•Title 27 — Insurance
This title constitutes the Alabama Insurance Code.
(Acts 1971, No. 407, p. 707, §1.)
For the purposes of this title, the following terms shall have the meanings respectively ascribed to them by this section.
(1) INSURANCE. A contract whereby one undertakes to indemnify another or pay or provide a specified amount or benefit upon determinable contingencies.
(2) INSURER. Every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance.
(3) PERSON. An individual, insurer, company, association, organization, Lloyd’s insurer, society, reciprocal insurer or interinsurance exchange, partnership, syndicate, business trust, corporation, and every legal entity.
(4) COMMISSIONER. The Commissioner of Insurance of this state.
(5) DEPARTMENT. The Department of Insurance of this state.
(6) DOMESTIC INSURER. One formed under the laws of this state.
(7) FOREIGN INSURER. One formed under the laws of any jurisdiction other than this state. Except where distinguished by context, “foreign” insurers includes also “alien” insurers.
(8) ALIEN INSURER. One formed under the laws of any country other than the United States of America, its states, district, territories, and commonwealths.
(9) STATE. Such term, when used in context signifying a jurisdiction other than the State of Alabama, means any state, district, territory, commonwealth, or possession of the United States of America.
(10) AUTHORIZED INSURER; UNAUTHORIZED INSURER. An “authorized” insurer is one duly authorized, by a subsisting certificate of authority issued by the commissioner, to transact insurance in this state. An “unauthorized” insurer is one not so authorized.
(11) TRANSACT. Such term, with respect to insurance, includes any of the following:
a. Solicitation and inducement;
b. Preliminary negotiations;
c. Effectuation of a contract of insurance; or
d. Transaction of matters subsequent to effectuation of a contract of insurance and arising out of it.
(Acts 1971, No. 407, p. 707, §§2-9.)
No provision of this title shall apply with respect to:
(1) Domestic mutual aid associations, as identified in Chapter 30, except as stated in Chapter 30; or
(2) Fraternal benefit societies, as identified in Chapter 34, except as stated in Chapters 34 and 35.
(Acts 1971, No. 407, p. 707, §11.)
This title shall not apply as to:
(1) Any fraternal or other organization or activity which is exempted from the provisions of Chapter 34 under Section 27-34-5, except to the extent provided in such section;
(2) Nonprofit corporations for establishment of hospitalization plan under Section 10-4-100 et seq., except to the extent now or hereafter provided in such laws;
(3) The insurance department of a brotherhood or labor union, the members of which are subject to the act of Congress known as the Railway Labor Act; or
(4) The establishment, maintenance, administration, and operation of any trust established pursuant to Section 22-21-240 by agreement of any hospitals, other health care units or dental practitioners licensed as such by the State of Alabama.
(Acts 1971, No. 407, p. 707, §12; Acts 1977, No. 166, p. 226, §1; Acts 1978, 2nd Ex. Sess., No. 24, p. 1703, §1.)
No person shall transact a business of insurance in Alabama, or relative to a subject resident, located or to be performed in Alabama, without complying with the applicable provisions of this title.
(Acts 1971, No. 407, p. 707, §10.)
Provisions of this title relative to a particular kind of insurance, a particular type of insurer, or a particular matter shall prevail over provisions in this title relating to insurance in general, insurers in general, or such matters in general.
(Acts 1971, No. 407, p. 707, §13.)
The scope and meaning of any provision shall not be limited or otherwise affected by the caption or heading of any chapter, section, or provision.
(Acts 1971, No. 407, p. 707, §14.)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1943, No. 438, p. 403; Acts 1961, Ex. Sess., No. 86, p. 2003.)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1945, No. 37, p. 44.)
Any contract or policy of insurance or any plan or agreement for health services providing for reimbursement or payment for health services performed by a medical doctor or physician or upon the certification of a medical doctor, surgeon, osteopath or physician, shall also reimburse or pay for such health services performed by a doctor of chiropractic or upon his certificate; provided, that the health services performed by the doctor of chiropractic are within the scope of his license and he is duly licensed by the State of Alabama.
The insured or such other person entitled to benefits under such contract or policy of insurance or plan or agreement for health services shall have the exclusive right to choose or select any practitioner or member of the healing arts of Alabama to perform such services, notwithstanding any provisions of such contract or policy of insurance or plan or agreement for health services to the contrary.
(Acts 1975, No. 1101, p. 2172, §1.)
(a) The Legislature finds and declares the following:
(1) The citizens of this state rely upon health insurance to cover the cost of obtaining health care and it is essential that the citizens’ expectation that their health care costs will be paid by their insurance policies is not disappointed and that they obtain the coverage necessary and appropriate for their care within the terms of their insurance policies.
(2) Some insurers deny payment for drugs that have been approved by the Federal Food and Drug Administration, hereafter referred to as FDA, when the drugs are used for indications other than those stated in the labelling approved by the FDA, off-label use, while other insurers with similar coverage terms do pay for off-label use.
(3) Denial of payment for off-label use can interrupt or effectively deny access to necessary and appropriate treatment for a person being treated for a life-threatening illness.
(4) Equity among employers who obtain insurance coverage for their employees and fair competition among insurance companies require that insurance companies assure citizens reimbursement for drugs in the same way and in the way citizens expect.
(5) Off-label use of an FDA-approved drug is legal when prescribed in a medically appropriate manner and is often necessary to provide needed care. Approximately 50% of cancer drug treatment is for off-label indications. The FDA and the Federal Department of Health and Human Services recognize the wide variety of effective uses of FDA-approved drugs for off-label indications. Information on the appropriate off-label use of FDA-approved drugs is obtained from compendia published by the United States Pharmacopoeial Convention, the American Medical Association, and the American Society of Hospital Pharmacists. In addition, scientific studies of off-label use of drugs published in recognized peer-reviewed professional journals provide information on appropriate use of drugs for off-label indications. The Omnibus Budget Reconciliation Act of 1990 recognizes these three compendia and peer-reviewed literature as appropriate sources for reimbursement and requires Medicaid agencies to pay for off-label use of drugs prescribed for Medicaid patients if the use is stated in any of such sources. The Omnibus Budget Reconciliation Act of 1993 applies the same criteria and coverage to Medicare patients.
(6) Use of FDA-approved drugs for off-label indications provides efficacious drugs at a lower cost. To require that all appropriate uses of a drug undergo approval by the FDA would substantially increase the cost of drugs and delay or even deny patients’ ability to obtain medically effective treatment. FDA approval for each use would require substantial expenditure and time to undergo the clinical trials necessary to obtain FDA approval. This is particularly the case when a drug is off-patent and in generic production, and consequently is available at a lower price. Once a drug is in generic production by multiple manufacturers, it is not economically feasible for a manufacturer to incur the cost of FDA approval.
(7) Reimbursement for off-label indications of FDA-approved drugs is necessary to conform to the way in which appropriate medical treatment is provided, to make needed drugs available to patients, and to contain health care costs.
(b) The following words and phrases used in this section shall have the following meanings:
(1) CONTRAINDICATION. The potential for, or the occurrence of, an undesirable alteration of the therapeutic effect of a given prescription because of the presence, in the patient for whom it is prescribed, of a disease condition or the potential for, or the occurrence of, a clinically significant adverse effect of the drug on the patient’s disease condition.
(2) INDICATION. Any symptom, cause, or occurrence in a disease which points out its cause, diagnosis, course of treatment, or prognosis.
(3) INSURANCE POLICY. An individual, group, blanket, or franchise insurance policy, insurance agreement, or group hospital service contract providing for hospital, medical, surgical, or pharmaceutical services.
(4) MEDICAL LITERATURE. Published scientific studies published in any peer-reviewed national professional journal.
(5) STANDARD REFERENCE COMPENDIA. Any of the following:
a. The United States Pharmacopeia Drug Information.
b. The American Medical Association Drug Evaluations.
c. The American Hospital Formulary Service Drug Information.
(c)(1) Title 27, or any other provision of law, rule, or regulation to the contrary notwithstanding, it is specifically provided that:
a. No insurance policy which provides coverage for drugs shall exclude coverage of a drug for a particular indication on the ground that the drug has not been approved by the Federal Food and Drug Administration for that indication, if the drug is recognized for treatment of that indication in one of the standard reference compendia, or in the medical literature, or by the Commissioner of Insurance.
b. Coverage of a drug required by this section shall also include medically necessary services associated with the administration of the drug.
(2) This section shall not be construed to alter existing law with regard to provisions limiting the coverage of drugs that have not been approved by the Federal Food and Drug Administration.
(3) This section shall not be construed to require coverage for any drug when the Federal Food and Drug Administration has determined its use to be contraindicated.
(4) This section shall not be construed to require coverage for experimental drugs not otherwise approved for any indication by the Federal Food and Drug Administration.
(5) The Commissioner of Insurance may direct any person who issues an insurance policy to make payments required by this section.
(6) Nothing in this section shall be construed, expressly or by implication, to create, impair, alter, limit, modify, enlarge, abrogate, or prohibit reimbursement for drugs used in the treatment of any other disease or condition.
(Acts 1994, 1st Ex. Sess., No. 94-805, p. 121, §§1-3.)
Whenever the terms “physician” and/or “doctor” are used in any policy of health or accident insurance issued in this state or in any contract for the provision of health care, services, or benefits issued by any health, medical or other service corporation existing under, and by virtue of any laws of this state, said terms shall include within their meaning those persons licensed under and in accordance with Chapter 9 of Title 34 in respect to any care, services, procedures, or benefits covered by said policy of insurance or health care contract which the said persons are licensed to perform, any provisions in any such policy of insurance or health care contract to the contrary notwithstanding. This section shall be applicable to all policies in this state, regardless of date of issue, on October 10, 1975.
(Acts 1975, No. 1241, p. 2607, §1.)
Any appropriations made by the Legislature of Alabama to the University of Alabama in Birmingham and to the University of South Alabama shall be for the unrestricted support of the activities of the said university and therefore insurance companies, whether operated for profit or not for profit, licensed under the laws of the State of Alabama, whether acting on their own behalf or for others, are prohibited from applying or taking into account in any manner whatsoever, any portion of those appropriations in determining reimbursement for patient care activities.
(Acts 1980, No. 80-445, p. 690.)
Each willful violation of this title for which a greater penalty is not provided by another provision of this title or by other applicable laws of this state shall, in addition to any applicable prescribed denial, suspension, or revocation of certificate of authority or license, be punishable as a misdemeanor, upon conviction, by a fine of not more than $1,000.00, or by imprisonment in the county jail, or by sentence to hard labor for the county, for a period not to exceed one year, or by both such fine and imprisonment or hard labor in the discretion of the court. Each instance of violation shall be considered a separate offense.
(Acts 1971, No. 407, p. 707, §15.)
Every form of insurance document and every rate or other filing lawfully in use immediately prior to January 1, 1972, may continue to be so used or be effective until the commissioner otherwise prescribes pursuant to this title.
(Acts 1971, No. 407, p. 707, §809.)
This title shall not impair or affect any act done, offense committed or right accruing, accrued, or acquired or liability, penalty, forfeiture, or punishment incurred prior to January 1, 1972, but the same may be enjoyed, asserted, enforced, prosecuted, or inflicted, as fully, and to the same extent, as was possible prior to January 1, 1972.
(Acts 1971, No. 407, p. 707, §810).
Notwithstanding any other provision of law, when any contract of health insurance or any plan or agreement for health services provides for the reimbursement or payment for services which are within the scope of a podiatrist’s professional license as defined in the general laws of Alabama, such policy shall be construed to include payment to a podiatrist who has performed such procedures.
(Acts 1976, No. 678, p. 927.)
(a)(1) The Commissioner of the Department of Insurance shall prescribe a standard health insurance claim form to be used by all hospitals. The forms shall be prescribed in a format which allows for the use of generally accepted diagnosis and treatment coding systems by providers of health care and payors. The standard form shall be accepted and used by all insurers doing business in the State of Alabama and by all state agencies which pay providers of health care for hospital services.
(2) The Commissioner of the Department of Insurance shall also prescribe a format for all health insurance claims transmitted or submitted for payment by electronic or electro-mechanical means. Such a format shall be used by all insurers doing business in the State of Alabama and by all state agencies which pay providers of health care for hospital services.
(b) An advisory committee of five persons, two appointed by the Alabama Hospital Association, two by the Health Insurance Association of America, and one by an Alabama nonprofit corporation which markets health insurance, shall advise the commissioner on an acceptable standard health insurance claim form and an electronic or electro-mechanical claims form no later than 60 days prior to January 1, 1982. If changes in the forms need to be made at any future time, the Commissioner of the Department of Insurance shall inform the advisory committee and the committee shall make recommendations as to the changes.
(c) All insurers doing business in Alabama and all state agencies shall accept, for services from physicians licensed to practice medicine, the Uniform Health Insurance Claim Form approved by the Council on Medical Service of the American Medical Association. Nothing in this section shall be construed to prohibit an insurer or state agency from accepting any other health insurance claim form for services provided by a physician licensed to practice medicine.
(d) Every third party prescription program serving patients in Alabama shall utilize the Universal Pharmacy Billing Claim Form or format used by pharmacists billing for their services. Information required on the universal prescription claim form, either hard copy or electronic, shall be in compliance with the National Council on Pharmaceutical Drug Plan standards. If a provider, due to the location of the pharmacy, cannot comply with electronic claims submission requirements, then the prescription program shall allow the pharmacy to submit claims via hard copy. Pharmacy providers and recipients shall be given at least 45 days advance notice regarding changes in procedures and benefits.
(e) All insurers doing business in Alabama and all state agencies shall accept for services from dentists licensed to practice dentistry, the Uniform Dental Claim Form approved by the Council on Dental Care Programs of the American Dental Association. Nothing in this section shall be construed to prohibit an insurer or state agency from accepting any other dental insurance claim form for services provided by a dentist licensed to practice dentistry.
(f) The foregoing provisions shall not apply to the Alabama Medicaid Agency.
(Acts 1981, No. 81-292, p. 374; Acts 1993, No. 93-310, p. 465, §1.)
(a) Each insurer, health service corporation, and health benefit plan that issues or renews any policy of accident or health insurance providing benefits for medical or hospital expenses for its insured persons shall pay for services rendered by Alabama health care providers within 45 calendar days upon receipt of a clean written claim or 30 calendar days upon receipt of a clean electronic claim. If the insurer, health service corporation, or health benefit plan is denying or pending the claim, the insurer, health service corporation, or health benefit plan shall, within 45 calendar days for a written claim and 30 calendar days for an electronic claim, notify the health care provider or certificate holder of the reason for denying or pending the claim and what, if any, additional information is required to process the claim. Any undisputed portion of the claim shall be paid in accordance with the foregoing schedule. If the insurer, health service corporation, or health benefit plan fails to provide the notice to the health care provider of the reason for denying or pending the claim, then any such claim, if and when determined to be payable, shall accrue interest at the rate as provided herein, from the date such notice should have been given in accordance with this provision. Upon receipt of the necessary information, the claim must be paid, denied, or otherwise adjudicated within 21 calendar days from the receipt of the requested information. The failure of an insurer, health service corporation, or health benefit plan to comply with the time limits in this section shall not have the effect of requiring coverage for an otherwise non-covered claim. This section shall only apply to payments made on a claims basis and shall not apply to capitation or other forms of periodic payment to providers. For the purposes of this section, an insurer, health service corporation, or health benefit plan domiciled outside of the State of Alabama is deemed to be subject to the provisions of this section if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama.
(b) As used in this section, the following terms shall have the following meanings:
(1) CLEAN ELECTRONIC CLAIM. The transmission of data for purposes of payment of covered health care expenses that is submitted to an insurer, health service corporation, or health benefit plan which contains substantially all of the required data elements necessary for accurate adjudication, without obtaining additional information from the provider of the service or from a third party, in an electronic data format specified by the insurer’s, health service corporation’s, or health benefit plan’s published filing requirements. In no event shall an insurer, health service corporation, or health benefit plan require that the health care provider submit data elements in excess of those required on the standard electronic health insurance claim format designated by Section 27-1-16 as a condition to the acceptance and processing of an initial claim as a clean claim.
(2) CLEAN WRITTEN CLAIM. A claim for payment of covered health care expenses that is submitted to an insurer, health service corporation, or health benefit plan on the claim form of the insurer, health service corporation, or health benefit plan which contains substantially all of the required data elements necessary for accurate adjudication, without obtaining additional information from the provider of the service or from a third party. In no event shall an insurer, health service corporation, or health benefit plan require that the health care provider submit information or data elements in excess of those required on the standard health insurance claim form designated by Section 27-1-16 as a condition to the acceptance and processing of an initial claim as a clean claim.
(3) COORDINATION OF BENEFITS. The determination of the order in which health care insurers, health maintenance organizations, health service corporations, health benefit plans, or government benefit plans are responsible for claims payments, as defined in Alabama Insurance Department Regulation No. 56, or any successor regulation.
(4) FRAUD. The intentional and deliberate misrepresentation of a material fact or facts by a health care provider made to induce the insurer, health service corporation, or health benefit plan to pay a claim that was not legally payable to that provider. The term fraud, as used in this section, shall not include a good faith interpretation by a health care provider of utilization, medical necessity, coding, and billing requirements of the insurer, health service corporation, or health benefit plan, unless subject provider has been sent a notice in writing by the insurer, health service corporation, or health benefit plan that such interpretation is in error.
(5) INSURER, HEALTH SERVICE CORPORATION, and HEALTH BENEFIT PLAN. Include health care insurers, health maintenance organizations, accident and sickness insurers, fraternal benefit societies, nonprofit hospital service corporations, or nonprofit medical service providers that pay for, purchase, or furnish health care services to patients, insureds, or beneficiaries in this state.
(6) NOTICE or NOTIFY. Where the provider files an electronic claim or where the provider has electronic media available, as used herein, the following terms shall mean:
Notice. In addition to all forms of paper notice, includes electronic notice whereby the insurer, health services corporation, or the health benefit plan makes claims status, eligibility, and payment and remittance advice information which is available to the provider via electronic media.
Notify. In addition to all forms of paper notification, includes the posting or updating of an electronic record or data set with the claims status, eligibility, and payment and remittance advice information which is available to the provider via electronic media.
In all other instances, except where the provider has agreed to accept notice by electronic media, notice shall mean written notice delivered or mailed to the provider.
This provision is intended to be and shall be applied in a manner consistent with the standardized transaction and code set requirements for administrative simplification pursuant to the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Public Law 104-191.
(7) POLICY OF ACCIDENT OR HEALTH INSURANCE. Any individual or group plan, policy, or contract for health care services issued, delivered, issued for delivery, renewed in this state by a health care insurer, health maintenance organization, accident and sickness insurer, fraternal benefit society, nonprofit hospital service corporation, or nonprofit medical service corporation that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state.
(c) Any claim which has not been denied with notice, made pending with notice, or paid to the provider by the insurer, health service corporation, or the health benefit plan shall be overdue if the notice or payment is not received by the provider within the time periods specified in subsection (a). No further notice by the provider to the insurer, health service corporation, or health benefit plan shall be required under this section. If the insurer, health service corporation, or health benefit plan fails to deny or pay a clean written claim or clean electronic claim within the time periods, then the following shall occur: The amount of the overdue claim shall include an interest payment of 1.5 percent per month prorated daily which shall accrue from the date the payment was overdue and which shall be payable at the time that the claim is paid.
(d) The following are exceptions to the requirements of this section:
(1) No insurer, health service corporation, or health benefit plan shall be in violation of this section for a claim submitted by a health care provider if any of the following circumstances apply:
a. Failure to comply is caused by a directive from a court or a federal or state agency.
b. The insurer, health service corporation, or health benefit plan is in liquidation or rehabilitation or is operating in compliance with a court-ordered plan of rehabilitation.
c. Compliance by the insurer, health service corporation, or health benefit plan is rendered impossible due to matters beyond its control which were not caused by such insurer, health service corporation, or health benefit plan or caused by any third party vendor, agent, or contracting party furnishing services to the insurer, health service corporation, or health benefit plan which are related directly or indirectly to the processing of claims by such insurer, health service corporation, or health benefit plan.
(2) No insurer, health service corporation, or health benefit plan shall be in violation of this section for any claim submitted more than 180 days after the service was rendered.
(3) No insurer, health service corporation, or health benefit plan shall be in violation of this section while the claim is pending due to a fraud investigation that has been reported to a state or federal agency, or an external review process.
(e) An insurer, health service corporation, and health benefit plan shall not retroactively deny, adjust, or seek recoupment or refund of a paid claim for health care expenses submitted by a health care provider for any reason, other than fraud or coordination of benefits or for duplicate payments on claims received from the same insurer, health service corporation, or health benefit plan for the same service, after the expiration of one year from the date that the initial claim was paid or after the expiration of the same period of time that the health care provider is required to submit claims pursuant to a contract between the health care provider and an insurer, health service corporation, or health benefit plan, whichever date occurs first. Retroactive denials, adjustments, recoupments, or refunds based on coordination of benefits shall be governed by subsection (f). Notwithstanding any other provision of law or contract to the contrary, if an insurer, health service corporation, or health benefit plan retroactively denies, adjusts, or seeks recoupment or refund of a paid claim, the health care provider shall have an additional period of six months from the date that the notice required by subsection (g) was received within which to file either a revised claim or a request for reconsideration with additional medical records or information, and the insurer, health service corporation, or health benefit plan shall process the revised claim or request for reconsideration in accordance with the requirements of subsections (a), (b), and (c), or in accordance with U.S. Department of Labor regulations governing the resolution of claims disputes and time for appeals, if applicable.
(f) An insurer, health service corporation, or health benefit plan shall not retroactively deny, adjust, or seek recoupment or refund of a paid claim submitted by a health care provider for reasons related to coordination of benefits with another insurer or entity responsible for payment of the claim after the expiration of 18 months from the date that the original claim was paid. If the insurer, health service corporation, or health benefit plan retroactively denies, adjusts, or seeks recoupment or refund of a paid claim based on coordination of benefits, the insurer, health service corporation, or health benefit plan shall provide the health care provider with notice specifying the reason for the denial, adjustment, recoupment, or refund. If requested by a health care provider, an insurer, health service corporation, or health benefit plan shall furnish any available information concerning the name and address of the entity determined to be responsible for payment of the denied claim. Notwithstanding any other provision of law or contract to the contrary, if an insurer, health service corporation, or health benefit plan retroactively denies reimbursement for services as a result of coordination of benefits with another insurer, the health care provider shall have an additional six months from the date that the health care provider received the notice specified herein to submit a claim for reimbursement for the service to the insurer, health service corporation, health benefit plan, medical assistance program, government health benefit program, or other entity responsible for payment for the services provided.
(g) An insurer, health service corporation, or health benefit plan that retroactively denies, adjusts, or seeks recoupment or refund of a paid claim submitted by a health care provider shall give the health care provider notice specifying the reason for the action taken. Any retroactive denials, adjustments, or requests for recoupment or refund of previous payments which are based upon medical necessity determinations, level of service determinations, coding errors, or billing irregularities shall be reconciled to specific claims. A health care provider who disputes or contests the basis for the retroactive denial, adjustment, or request for recoupment or refund on all or any portion of a claim shall notify the insurer, health service corporation, or health benefit plan within 30 days after the provider receives the notice that the retroactive denial, adjustment, or request for recoupment or refund for overpayment is disputed or contested.
(h) Any provision of a contract between a health care provider and an insurer, health service corporation, or health benefit plan that is in conflict with the requirements of this section is unenforceable. The requirements of this section may not be waived between the health care provider and an insurer, health service corporation, or health benefit plan. Nothing in this section shall prevent or preclude an insurer, health service corporation, or health benefit plan from recovering in the circuit or district courts from a subscriber, enrollee, or beneficiary any amounts paid to a health care provider for benefits to which the subscriber, enrollee, or beneficiary was not entitled under the terms and conditions of the contract of insurance or the coverage agreement if the insurer, health service corporation, or health benefit plan is barred from seeking a retroactive denial, adjustment, or request for recoupment or refund from the health care provider under this section.
(i) The commissioner may assess an administrative fine against any insurer, health service corporation, or health benefit plan or may suspend or revoke the license or certificate of authority of any insurer, health service corporation, or health benefit plan after determining that the insurer, health service corporation, or health benefit plan has violated the requirements of subsections (e), (f), and (g) or has established a pattern of overdue payments and that the contemplated enforcement action would not promote the deterioration of the financial condition of an at-risk insurer, health service corporation, or health benefit plan. Such fine shall be up to one thousand dollars ($1,000) for each violation of the requirement of subsections (e), (f), and (g) or for each day that the claim or claims remained unpaid, not to exceed one hundred thousand dollars ($100,000) per violation. All fines recovered by the Department of Insurance shall be deposited in the General Fund and shall become available for use by the Department of Insurance for administration of the department.
(j) The State Department of Public Health is authorized to adopt regulations implementing those provisions of this section and Sections 27-1-19, 27-21A-23, and 10-4-115 that apply to health maintenance organizations. The commissioner is authorized to adopt such regulations as may be required to implement the provisions of this section and Sections 27-1-19, 27-21A-23, and 10-4-115 that apply to insurers and regulations governing the assessment of administrative fines authorized by this section.
(k) This section shall not apply to claims by the Alabama Medicaid Agency. This section shall also not apply Medicare claims except that Medicare + Choice plans shall be required to comply with any of the provisions of this section that are not in conflict with federal laws or regulations governing such plans.
(Acts 1981, No. 81-371, p. 539; Act 2001-445, p. 595, §1; Act 2001-1060, 4th Sp. Sess., p. 1054, §2; Act 2003-348, p. 896, §1.)
(a) As used in this section, the following words shall have the following meanings:
(1) ACH ELECTRONIC FUNDS TRANSFER. An electronic funds transfer through the Health Insurance Portability and Accountability Act (HIPPA) standard Automated Clearing House network.
(2) COVERED HEALTH CARE PROVIDER. A physician as defined in Section 34-24-50.1; a dentist as defined in Section 34-9-1; a chiropractor as defined in Section 34-24-120; an individual engaged in the practice of optometry as defined in Section 34-22-1; other licensed health care professionals as defined in Title 34; a hospital as defined in Section 22-21-20; and a health care facility, or other provider who or that is accredited, licensed, or certified and who or that is performing within the scope of that accreditation, license, or certification.
(3) HEALTH INSURANCE PLAN. Any hospital and medical expense incurred policy, health maintenance organization subscriber contract, or any other health care plan, policy, coverage, or arrangement that pays for or furnishes medical or health care services, whether by insurance or otherwise, offered in this state. The term does not include a regional care organization.
(4) HEALTH INSURER. An entity or person that offers or administers a health insurance plan in this state, or contracts with covered health care providers to furnish specified health care services to enrollees covered under a health insurance plan. The term includes corporations organized pursuant to Article 6 of Chapter 20 of Title 10A, commencing at Section 10A-20-6.01, and to policies, plans, or contracts entered into, issued by, or administered by such corporations.
(5) REGIONAL CARE ORGANIZATION. An organization as defined in Section 22-6-150.
(b) Contracts issued, amended, or renewed on or after January 1, 2017, between a health insurer or its contracted vendor or a regional care organization and a covered health care provider shall include the following language, set off from other language in bold, 12-point type and in all capital letters: “If a covered health care provider requests payment under a health insurance plan from a health insurer or its contracted vendor or a regional care organization be made using ACH electronic funds transfer, that request must be honored. Furthermore, such a request may not be used to delay or reject a transaction, or attempt to adversely affect the covered health care provider.”
(c) Nothing in this section prohibits or adopts any standards for other methods of electronic funds transfers outside of the Automated Clearing House network. Alternative electronic funds transfer methods, including wire transfer and payment by card or otherwise through a private card network, are expressly permitted to pay a covered health care provider.
(Act 2016-320, §1.)
(a) For the purposes of this section, the following terms have the following meanings:
(1) ARTIFICIAL INTELLIGENCE. A machine-based system that may include software or physical hardware that performs tasks, based upon data set inputs, which require human-like perception, cognition, planning, learning, communication, or physical action, and which is capable of improving performance based upon learned experience without significant human oversight toward influencing real or virtual environments.
(2) DEPARTMENT. The Department of Insurance of the State of Alabama.
(3) ENROLLEE. An individual to whom a health benefit plan provider is contractually obligated to pay for or provide medical benefits under a health benefit plan.
(4) GROUP PLAN. A health benefit plan that is sponsored by an employer or other entity on behalf of group members.
(5) HEALTH BENEFIT PLAN. a. Any plan, policy, or contract issued, delivered, or renewed in this state that provides medical benefits that include payment for hospitalization, physician care, treatment, surgery, therapy, drugs, equipment, and any other medical expense, regardless of whether the plan is for a group or individual.
b. The term does not include accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare supplement, long-term care, disability income, or other limited benefit health insurance policies, or coverage issued as supplemental to liability insurance, workers’ compensation, or automobile medical payment insurance.
(6) HEALTH BENEFIT PLAN PROVIDER. The term includes all of the following:
a. Any entity that issues, delivers, or renews a health benefit plan, including a person as defined in Section 27-1-2; a health maintenance organization established under Chapter 21A; a nonprofit health care services plan established under Article 6, Chapter 20 of Title 10A; or a nonprofit agricultural organization that offers health care benefits pursuant to Chapter 33 of Title 2.
b. Any department or office internal to an entity described in paragraph a. which performs utilization review.
c. Any separate entity that performs utilization review as a contractor or agent of an entity described in paragraph a.
(7) HEALTH CARE SERVICE. Diagnosing, testing, monitoring, or treating a human disease, disorder, syndrome, illness, or injury which may include, but not be limited to, hospitalization, physician care, treatment, surgery, therapy, drugs, or medical equipment.
(8) INDIVIDUAL PLAN. A health benefit plan that is purchased directly by an individual.
(9) PRIOR AUTHORIZATION. A written or oral determination made by a health benefit plan provider that a health care service is a benefit covered under the applicable health benefit plan which, under the enrollee’s clinical circumstances, is medically necessary or satisfies another requirement imposed by the health benefit plan provider or law and thus satisfies the requirements for payment or reimbursement.
(10) UTILIZATION REVIEW. The determination of requests for prior authorization under a health benefit plan according to the rules, health care service policies, and guidelines adopted by a health benefit plan provider, or requirements imposed by law, and applicable to a health benefit plan.
(b)(1) A health benefit plan provider that uses artificial intelligence to make determinations of medical necessity on requests for prior authorization under health benefit plans shall base determinations on all of the following:
a. The enrollee’s medical history.
b. Any clinical circumstances unique to the enrollee which are presented by the requesting health care provider.
c. Additional clinical information about the enrollee which may be present in the enrollee’s medical record.
(2) A health benefit plan provider shall certify annually to the department that the artificial intelligence used to make determinations of medical necessity on requests for prior authorization complies with all of the following:
a. The artificial intelligence does not rely on a group dataset to make determinations.
b. The artificial intelligence is fairly and equitably applied, including in accordance with any applicable regulations and guidance issued by the U.S. Department of Health and Human Services.
c. The artificial intelligence does not discriminate, directly or indirectly, against any subscriber group or enrollee in violation of state or federal law, including any regulation or guidance issued by the U.S. Department of Health and Human Services.
(3) In addition to the requirements listed in subdivisions (1) and (2), a determination to deny, delay, or modify a request for prior authorization based on medical necessity shall always be made by a licensed physician or other health care professional who is competent to evaluate any recommendation or conclusion of artificial intelligence in light of the specific clinical issues involved in the health care service requested which are unique to the enrollee’s circumstances or as recommended by the treating health care provider.
(c) A health benefit plan provider shall do all of the following:
(1) Make prominent written disclosures regarding its use of artificial intelligence in utilization review in its policies and procedures.
(2) Ensure that its use of artificial intelligence and the outcomes that it generates are reviewed on a periodic basis to maximize accuracy and reliability to ensure its use of artificial intelligence in utilization review complies with the requirements of subsection (b).
(3) Ensure that patient data used in utilization review functions by artificial intelligence is not used beyond its intended and stated purpose consistent with the federal Health Insurance Portability and Accountability Act (HIPAA), 42 U.S.C. § 1320d et seq.
(4) The requirements under subsection (b) and this subsection shall be satisfied by an attestation by an authorized representative of the health benefit plan provider based on reasonable reliance upon internal policies, procedures, and third-party vendors.
(d)(1) When the department has reasonable grounds to believe that a health benefit plan provider has or is engaged in conduct that violates subsection (b), including making determinations of prior authorization adverse to an enrollee without taking into consideration the enrollee’s medical history and relevant clinical circumstances, the department may notify the health benefit plan provider of the alleged violation and the health benefit plan provider shall respond to the notice within 30 days.
(2) If the department finds the response required in subdivision (1) to be unsatisfactory, the department may hold a hearing as provided in Article 1, Chapter 2 of Title 27.
(3)a. If, upon hearing the case, the department determines that the health benefit plan provider has or is engaged in conduct that violates subsection (b), including making determinations of prior authorization adverse to an enrollee without taking into consideration the enrollee’s medical history and relevant clinical circumstances, the department may impose a plan upon the health benefit plan provider to correct procedures, policies, and guidelines to bring the health benefit plan provider’s utilization review into compliance with this section.
b. For repeat violations of subsection (b), the department may also exercise either or both of the following disciplinary powers:
Impose an administrative fine of not more than five thousand dollars ($5,000) for a violation that occurred with such frequency as to indicate a general business pattern or practice. Administrative fines collected by the department shall be deposited in the State Treasury to the credit of the State General Fund.
Suspend or revoke the certificate of authority of the health benefit plan provider for a violation that occurred with such frequency as to indicate a general business pattern or practice.
(4) The department shall require the health benefit plan provider to reimburse the department the administrative expenses incurred by the department in the investigation and enforcement pursuant to this subsection. Administrative expenses collected by the department shall be deposited in the State Treasury to the credit of the Special Examination Revolving Fund.
(e) The department shall adopt rules to enforce this section.
(Act 2026-589, §1.)
(a) Whenever any group, or blanket hospital or medical expense insurance policy or hospital or medical service contract issued for delivery in this state provides for the reimbursement of health or health related services which includes mental health services, and such services are within the lawful scope of practice of a duly qualified psychiatrist or psychologist, the insured or other person entitled to benefits under such policy or contract shall be entitled to reimbursement for outpatient services, and inpatient services if requested by the attending physician, performed by a duly qualified psychiatrist or psychologist notwithstanding any provisions of the policy or contract to the contrary.
(b) For purposes of this section, a duly qualified psychologist means, one who is duly licensed or certified at the doctorate level in the state by the licensing board for psychologists of the state where the service is rendered, has had at least two years post-doctoral, clinical experience in a recognized health setting or has met the standards of the National Register of Health Service Providers in Psychology which require two years post-doctoral, clinical experience.
(c) Nothing in this section shall be construed to mandate or require an insurance company to include mental health services in a policy or contract which does not include such services, nor shall it be construed to expand the scope or nature of benefits provided when mental health services are included in a policy or contract.
(d) This section shall become effective immediately upon its passage and approval by the Governor, or upon its otherwise becoming law and shall apply to policies or contracts covered by the section delivered or issued for delivery in this state on and after such effective date and to group and blanket policies and contracts issued prior to the effective date on the next anniversary or renewal date or the expiration of the applicable collective bargaining agreement, if any, whichever date is the later.
(Acts 1982, No. 82-628, p. 1182, §§1, 2, 5.)
(a) The insured, or health or dental plan beneficiary may assign reimbursement for health or dental care services directly to the provider of services. Health benefits include medical, pharmacy, podiatric, chiropractic, optometric, durable medical equipment, and home care services. The company or agency, when authorized by the insured, or health or dental plan beneficiary, shall pay directly to the health care provider the amount of the claim, under the same criteria and payment schedule that would have been reimbursed directly to the contract provider, and any applicable interest. This amount only applies to assigned claims. Any company or agency making a payment to the insured, or health or dental plan beneficiary, after the rights of reimbursement have been assigned to the provider of services, shall be liable to the provider for the payment. If the company or agency fails to reimburse the provider in accordance with the terms of the provider contract as provided in this section, then the provider shall be entitled to recover in the circuit or district courts of this state from the company or agency responsible for the payment of the claim an amount equal to the value of such claim plus interest and a reasonable attorney’s fee to be determined by the court.
(b) Nothing in this section shall be construed to limit any insurer, health maintenance organization, preferred provider organization, health care service corporation, or other third party payor from determining the scope of its benefits or services or any other terms of its group and/or individual insured, subscriber or enrollee contracts nor from negotiating contracts with licensed providers on reimbursement rates or any other lawful provisions, except that the contract providing coverage to an insured may not exclude the right of assignment of benefits to any provider at the same benefit rate as paid to a contract provider.
(c) This section shall not apply to any persons covered under a state administered health benefit plan.
(Acts 1994, No. 94-638, p. 1197, §§1-6; Act 2001-445, p. 573, §1.)
(a) For the purposes of this section, the following terms have the following meanings:
(1) HEALTH CARE PROVIDER. The term includes:
a. A pharmacist licensed pursuant to Chapter 23 of Title 34.
b. A physician or other health care professional licensed pursuant to Chapter 24 of Title 34.
c. An optometrist licensed pursuant to Chapter 22 of Title 34.
(2) HEALTH INSURER. An entity subject to the insurance laws of this state and the rules of the Department of Insurance of the State of Alabama, or a health maintenance organization operating pursuant to Chapter 21A or a nonprofit hospital or health service corporation organized pursuant to Article 6, Chapter 20 of Title 10A that contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any of the costs of physical, mental, or behavioral health care services, including pharmaceutical services, or a nonprofit agricultural organization that provides a plan for health care benefits to its members. The term includes a pharmacy benefits manager or pharmacy benefits manager affiliate subject to the licensure requirements of Chapter 45A or any other entity providing a plan of health insurance, health benefits, or health services.
(3) OTHER CONTRACTING ENTITY. The term includes all of the following:
a. A hospital, nursing home, or health care institution licensed under Article 2, Chapter 21, Title 22.
b. An institution that provides postsecondary education, laboratory services, or performs clinical research.
c. A manufacturer, distributor, or supplier of drugs, medical devices, diagnostic equipment, durable medical equipment, or any other service or product that may be used in providing health care.
(b)(1) Subject to the limitations set forth in Sections 34-23-8 and 34-23-8.1, a health care provider, in the scope of his or her professional practice, may provide a patient or customer with any of the following information:
a. The estimated cost of a treatment or drug, including the cost in the absence of insurance coverage; the allowed amount for payment or reimbursement under a plan of health benefits; and a cost-sharing amount to be owed by a patient or customer, such as a deductible, copayment, or coinsurance.
b. A treatment or drug that is less expensive than the treatment or drug under consideration between the health care provider and the patient or customer.
c. The availability of a treatment or drug that is an alternative to the treatment or drug under consideration between the health care provider and the patient or customer, including the off-label use of the treatment or drug, provided that it is within the standard of care for treatment of the disease, condition, or symptom of the individual.
(2) A health care provider, relying upon professional knowledge or experience that is within the standard of care of his or her profession or specialty, may opine on or otherwise provide an individual with information on any of the following topics:
a. The cost of a treatment or drug.
b. The comparative costs of treatment or drugs that are available for the treatment of a disease, condition, or symptom.
c. The comparative effectiveness of available treatments or drugs, including so-called alternative treatments or drugs or the off-label use of treatments or drugs, for the treatment of a disease, condition, or symptom.
(c)(1) A health insurer or other contracting entity may not cancel or refuse to renew a contract with a health care provider, or penalize or take any adverse action against a health care provider, regardless of whether the penalty or adverse action is provided for in a contract, or otherwise retaliate against a health care provider, as a result of the health care provider providing a patient, customer, or other individual with any information described in subsection (b).
(2) Any provision in a contract between a health insurer or other contracting entity and a health care provider which prohibits a health care provider from providing a patient, customer, or other individual with the information described in subsection (b), or which otherwise imposes any penalty, adverse consequence, or monetary disincentive on a health care provider for providing a patient, customer, or other individual with the information described in subsection (b), is unenforceable in the courts of the State of Alabama.
(Act 2025-452, §1.)
(a) This section shall be known and may be cited as the “Patient Right to Know Act.”
(b) As used in this section, unless the context clearly indicates otherwise, the following words shall have the following meanings:
(1) ENROLLEE. A person who purchases individual health care coverage or an employer who purchases a group health care plan.
(2) PROVIDER. A physician, dentist, podiatrist, pharmacist, optometrist, psychologist, clinical social worker, advanced nurse practitioner, registered optician, licensed professional counselor, physical therapist, and chiropractor.
(c)(1) All persons, firms, corporations, associations, health maintenance organizations, health insurance services, or preferred provider organizations, any employer-sponsored health benefit plan, or any similar organization or entity, providing health, accident, or dental insurance coverage, either directly or indirectly, shall provide an enrollee with a written description of the terms and conditions of the plan. The written plan description shall be in a simple, readable, and easily understandable format and shall include all of the following:
a. Coverage provisions including complete extent and exclusions or restrictions of coverage or service, including, but not limited to the following:
Outpatient physician services.
Referral to specialty physicians and other providers.
Choice of pharmacy providers.
Diagnostic tests, including mammography exams.
Dental services.
Chiropractic services.
Hospitalization.
Laboratory tests and services.
FDA approved therapies.
Prescription drug coverage.
Rehabilitation services, and physical, occupational, and vocational therapy.
Mental health services.
Long-term care.
Full range of reproductive services.
b. Extent of benefits provided or excluded, including prescription drug coverage with both generic and brand names.
c. Any exclusions or limitations by category of service, provider, and, if applicable, by the specific service or type of drug.
d. Any prior authorizations, including procedures for and limitations or restrictions on referrals to a provider other than primary care physicians, dentists, or other review requirements, including preauthorization review, concurrent review, postservice review, and postpayment review.
e. An explanation of the financial responsibility for payment of coinsurance or other noncovered or out-of-plan service.
f. Disclosure to enrollees that includes the following language:
“You have the right to information about how the plan operates its care delivery system and an explanation of the benefits to which participants are entitled under the terms of the plan.”
g. The phone number and address for the enrollee to obtain additional information concerning the items described in paragraph f.
(2) The organization or entity may provide the information under paragraph f of subdivision (1) of this subsection by providing information in the entity’s annual financial statement most recently submitted to the Department of Insurance.
(d) The information provided by subsection (c) shall be updated annually and shall be provided to any enrollee on a schedule established by the entity.
(Acts 1996, No. 96-651, p. 1048, §§1-4.)
(a) For the purposes of this section, the following words shall have the following meanings:
(1) ENROLLEE. A person enrolled in a health benefit plan.
(2) HEALTH BENEFIT PLAN. Any individual or group plan, policy, or contract for health care services issued, delivered, issued for delivery, renewed in this state by a health care insurer, health maintenance organization, accident and sickness insurer, fraternal benefit society, nonprofit hospital service corporation, nonprofit medical service corporation, health care service plan, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 4 of Title 10. The term shall not include any collective bargaining agreement or any employee welfare benefit plan as defined in 29 U.S.C. Section 1002 (1) or any third party administrator to the extent it provides services to an employee welfare benefit plan. For the purposes of this section, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this section if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama.
(b) Each health benefit plan shall apply the same coinsurance, copayment, deductible, and quantity limit factors within the same employee group and other plan-sponsored group factors to all drug prescriptions filled by a pharmacy provider, whether by a retail provider or a mail service provider, provided the retail provider complies with the same terms, conditions, services, and price as a mail service provider. Nothing in this section shall be construed to prohibit the health benefit plan from applying different coinsurance, copayment, and deductible factors within the same employer group and other plan-sponsored group between generic and brand name drugs, nor prohibit an employer or other plan-sponsored group from offering multiple options or choices of health benefit plans, including, but not limited to, cafeteria benefit plans.
(c) A health benefit plan shall not set a limit on the quantity of drugs which an enrollee may obtain at any one time with a prescription, unless the limit is applied uniformly to all pharmacy providers who comply with the same terms, conditions, services, and price as mail service providers.
(Act 2000-327, p. 523, §1.)
(a) Every health benefit plan that provides coverage for prescription drugs or devices, or administers a plan, including, but not limited to, third party administrators for self-insured plans and state administered plans, excluding the Alabama Medicaid Program, shall issue to its insureds a card or other technology containing prescription drug information. The uniform prescription drug information card or technology shall be in the format approved by the National Council for Prescription Drug Programs (NCPDP) and shall include all of the required fields and conform to the most recent pharmacy ID card or technology implementation guide produced by NCPDP or conform to a national format acceptable to the Commissioner of Insurance. If a health care plan includes a conditional or situational field, it shall conform to the most recent pharmacy information card or technology implementation guide by the NCPDP or conform to a national format acceptable to the Commissioner of Insurance.
(b) A new uniform prescription drug information card or technology, as required under subsection (a), shall be issued by an insurer upon enrollment and revised upon any change in the certificate holder’s coverage that impacts data contained on the card or upon any change in the NCPDP implementation guide or successor document, provided that the change affects data elements contained on the card. Newly issued cards or technology shall be updated with the latest coverage information and shall conform to the NCPDP standards in effect and to the implementation guide then in use.
(c) For purposes of this section, a “health benefit plan” is a health insurance policy, including a self-insured health plan, that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. The term does not include accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare-supplement, long-term care, or disability income insurance; coverage issued as a supplement to liability insurance, workers’ compensation, or similar insurance; or automobile medical-payment insurance. For the purposes of this section, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this section if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 4 of Title 10.
(d) Enforcement of this section shall be the responsibility of the Commissioner of Insurance. The Commissioner of Insurance shall promulgate rules necessary to effectuate this section. A health benefit plan may not conduct business in this state if the plan violates this section.
(e) For purposes of this section, renewal of a health benefit policy, contract, or plan is presumed to occur on each anniversary of the date on which coverage was first effective on the person or persons covered by the health benefit plan.
(Act 2000-392, p. 615, §§1, 2.)
(a) A personal auto insurance carrier of a full-time law enforcement officer or firefighter of a municipality or a county or the State of Alabama or a member of a volunteer fire department, volunteer rescue squad, or volunteer emergency medical service shall not consider any motor vehicle accident of the full-time law enforcement officer or firefighter or member of a volunteer fire department, volunteer rescue squad, or volunteer emergency medical service in fixing insurance premiums or cause any increase in the employee’s personal automobile insurance premiums if, at the time of the accident, any of the following conditions exist:
(1) The full-time law enforcement officer or firefighter or member of a volunteer fire department, volunteer rescue squad, or volunteer emergency medical service was acting as an agent of the governmental employer or of the volunteer fire department, volunteer rescue squad, or volunteer emergency medical service and the automobile accident occurred in the performance of their duties.
(2) The full-time law enforcement officer or firefighter or member of a volunteer fire department, volunteer rescue squad, or volunteer emergency medical service was operating a motor vehicle owned by the governmental employer or by the volunteer fire department, volunteer rescue squad, or volunteer emergency medical service and the automobile accident occurred in the performance of their duties.
(3) The full-time law enforcement officer or firefighter or member of a volunteer fire department, volunteer rescue squad, or volunteer emergency medical service was not negligent or operating the government or department vehicle in a negligent manner at the time of the accident.
(b) The full-time law enforcement officer or firefighter or member of a volunteer fire department, volunteer rescue squad, or volunteer emergency medical service shall be exempt from filing the SR-13 form with the Department of Public Safety if any of the conditions in subsection (a) existed at the time of the motor vehicle accident.
(Act 2000-729, p. 1568, §§1, 2; Act 2006-425, p. 1052, §1.)
(a) Every insurer authorized to write and engaged in writing, on a direct basis, fire and extended coverage insurance in Alabama shall be and remain a member of the Alabama Insurance Underwriting Association, an unincorporated nonprofit joint underwriting association organized in 1970 and in continuous existence from 1970 through November 1, 2008. Every such insurer shall be and remain a member of the association so long as the association is in existence as a condition of such insurer’s authority to continue to transact the business of insurance in Alabama. An insurer that ceases to be a member of the association due to withdrawal from the business of insurance in Alabama or its withdrawal from writing fire and extended coverage insurance in Alabama remains liable to the association as to contracts entered into during the insurer’s membership in the association to the same extent and effect as if the insurer’s membership in the association had not been terminated.
(b) An insurer that becomes authorized and is engaged in writing insurance that requires the insurer to be a member of the association after November 1, 2008, shall become a member of the association on the November 1 following the effective date of the insurer’s authorization.
(c) The plan of operation, articles of agreement, and rules and procedures of the Alabama Insurance Underwriting Association effective January 1, 2008, shall be adopted pursuant to this section, and any revisions thereto shall be approved pursuant to the method set forth in the plan of operation, articles of agreement, or rules and procedures by the board of directors and submitted to and approved by the commissioner before the effective date thereof. A copy of the approved plan of operation and articles of agreement, together with a copy of any approved revisions thereto, will be maintained for public inspection in the Department of Insurance.
(d) The Alabama Insurance Underwriting Association shall have the general power and authority, in addition to the powers and authority already provided through its plan of operation, articles of agreement, and rules and procedures, to maintain and carry over any unexpended surplus which may exist to subsequent fiscal years. Monies shall not lapse or be transferred to the General Fund or other state funds and shall not be redistributed. Any interest earned or investment earnings shall be deposited to the credit of the association. Monies shall be used for the purpose of assisting the association in defraying expenses, paying claims, paying reinsurance costs, and performing all acts that relate to the function and purpose of the association.
(e) The Alabama Insurance Underwriting Association shall have the general power and authority to issue bonds, surplus notes or other debentures and solicit and accept goods, loans, and grants.
(f) The Beach Area consists of the gulf front, beach, and seacoast areas of Baldwin and Mobile Counties as designated by the Insurance Services Office, Inc.
(Act 2008-392, p. 752, §§1-6.)
(a) Insurance carriers providing full property and casualty coverage, to specifically include wind and hail coverage, to property owners within the areas defined in Section 27-1-24, including any portion of the area as it may be expanded from time to time pursuant to Section 27-1-27, but only on properties that as of the time of writing are insured for wind coverage through the Alabama Insurance Underwriting Association, may claim as a nonrefundable credit against the insurance premium tax imposed by Chapter 4A of this title, in an amount equal to 20 percent of the insurance premium tax otherwise due on the premium written for the property owners for the taxable year in Zones B4, B5, M4, M5, or successor zones; and 35 percent of the insurance premium tax otherwise due on the premium written for the property owners for the taxable year in Zones Gulf Front, B1, B2, B3, M1, M2, M3, or successor zones. The aggregate amount of all tax credits in any tax year that may be claimed by insurance carriers pursuant to this section shall not exceed fifty thousand dollars ($50,000).
(b) The credit allowed by this section is available only to an insurer licensed or authorized to do business in this state with respect to a property and casualty insurance policy providing full coverage as defined in subsection (a).
(c) A licensed insurer who claims the credit allowed by this section shall provide information required by the Department of Insurance to demonstrate that the taxpayer is eligible for the credit and that the amount paid for premiums for which the credit is claimed was not excluded from the licensed insurer’s gross income for the taxable year.
The department shall establish a process for which licensed insurers may make application for a tax credit certificate in order to claim any tax credit provided for by this section. This tax credit certificate issued by the department shall reserve the appropriate allocation of tax credits for the insurer to which a certificate is issued. An insurer seeking such certificate for reservation of tax credits for the writing of a policy pursuant to subsection (a) shall make application to the department in the manner prescribed by the department. The department shall review the applications received and subsequently issue a tax credit certificate to the insurer reserving the appropriate allocation of tax credits for the insurer. The department shall reserve the tax credits provided for by this section in the order in which the department receives the application for tax credit certificates, and for the benefit of the appropriate insurer, provided the application is approved by the department.
(d) The tax credit allowed under this section for a taxable year may be claimed only once for any one structure, regardless of the number of policies written on the structure.
(e) The department shall take the action necessary to monitor and examine the use of the credit claims under this section.
(f) This section applies to all new policies issued with an effective date after July 1, 2014.
(Act 2012-374, p. 934, §1; Act 2014-420, p. 1535, §2.)
(a) Except as limited in subsection (c), all rate filings and related actuarial information for homeowners insurance coverage in Alabama filed after September 1, 2011, shall be treated as public information.
(b) All rate filings and related actuarial information for homeowners insurance coverage shall be available to the public for review at the office of the Commissioner of Insurance in Montgomery, Alabama, and shall be available via the Internet through the website of the Department of Insurance.
(c) Any proprietary actuarial risk analysis or forecasting information or information otherwise restricted by statute or regulation included in a rate filing or related actuarial information is considered to be a commercially valuable trade secret under Chapter 27 of Title 8, and shall be confidential. The department, absent a court order, shall not release this confidential information. Any such information shall be submitted under separate cover and clearly state the desires of the party filing the information as to its confidentiality. The information shall be maintained by the department separate and distinct from all of the records available for public inspection. Notice of at least 10 business days shall be given to the applicable entity if such information is requested by court order from the department.
Act 2011-644, p. 1640, §3.)
(a) This section may be cited as the Alabama Living Donor Protection Act.
(b) For the purposes of this section, the following terms have the following meanings:
(1) INSURER. Any entity that issues, delivers, or renews a policy.
(2) LIVING ORGAN DONOR. An individual who donates all or part of an organ and is not deceased.
(3) POLICY. Any of the following contracts:
a. Disability insurance as defined in Section 27-5-4.
b. Life insurance as defined in Section 27-5-2.
c. Long-term care insurance as defined in Section 27-19-103.
(c) An insurer may not:
(1) Decline or limit coverage of an individual under any policy solely, and without any additional actuarial risk, due to the status of the individual as a living organ donor;
(2) Require an individual to refrain from acting as a living organ donor as a condition for renewal of a policy; or
(3) Otherwise discriminate in the offering, issuance, cancellation, amount of coverage, price, or any other condition of a policy based solely, and without any additional actuarial risk, upon the status of an individual as a living organ donor.
(Act 2026-559, §1.)
(a) There shall be a Department of Insurance of the State of Alabama with such subordinate bureaus and divisions as the commissioner determines to be necessary.
(b) The expenses of operating the department shall be paid out of funds appropriated to it by the Legislature or otherwise made available for the purpose.
(Acts 1951, No. 234, p. 504, §§1, 8; Acts 1971, No. 407, p. 707, §16.)
(a) A Commissioner of Insurance shall be chief executive officer of the department. The commissioner shall be appointed by the Governor. He shall serve for a term concurrent with that of the Governor by whom he is appointed, or for the unexpired portion thereof.
(b) The commissioner shall be selected with special reference to his training, experience, and capacity. He shall not be a candidate for, nor hold, any other public office of trust nor be a member of any political committee. If he becomes a candidate for public office or becomes a member of a political committee, his office as commissioner shall be immediately vacated.
(Acts 1951, No. 234, p. 504, §§4, 5; Acts 1971, No. 407, p. 707, §17.)
Before entering upon the duties of his office the commissioner shall take and subscribe to the oath prescribed by Article 16, Section 279 of the State Constitution and give bond in favor of the State of Alabama in the penal sum of $50,000.00. The surety on the bond shall be a corporate surety authorized to transact such business in this state. The form of the bond and surety shall be subject to the Governor’s approval. The bond and oath shall be filed with the Secretary of State.
(Acts 1951, No. 234, p. 504, §6; Acts 1971, No. 407, p. 707, §18.)
(a) The commissioner shall receive such annual salary as fixed by the Governor in the same manner as the salaries of other appointive department heads. Such salary shall be payable in the same manner as other state employees are paid.
(b) The commissioner shall devote his entire time to the duties of his office.
(Acts 1951, No. 234, p. 504, §8; Acts 1971, No. 407, p. 707, §19.)
(a) The commissioner shall have an official seal as heretofore provided him by the State of Alabama.
(b) All certificates executed by the commissioner, other than licenses of agents, brokers, solicitors, adjusters, and similar licenses, shall bear his seal.
(c) Every such certificate so executed and sealed under the authority conferred upon the commissioner by law may be recorded in the proper recording office in this state in the same manner and with the same effect as a deed regularly acknowledged or proven.
(d) Every certificate and other document or paper executed by the commissioner pursuant to any authority conferred upon him by law and sealed with the seal of his office and all copies or photographic copies of papers certified by him and authenticated by such seal shall, in all cases, be evidenced equally and in like manner as the original thereof and shall have the same force and effect as the original would in any action or proceeding in any court of this state.
(e) The commissioner shall collect such fees and charges for the use of his official seal as are provided for under Section 27-4-2.
(Acts 1923, No. 464, p. 607; Acts 1971, No. 407, p. 707, §20.)
(a) The commissioner’s offices shall be located at the state capitol. The commissioner may have a service office at Birmingham and in such other cities of this state as he may deem necessary.
(b) The commissioner shall keep his offices open at all reasonable times for the transaction of public business.
(Acts 1951, No. 234, p. 504, §7; Acts 1971, No. 407, p. 707, §21.)
The commissioner shall:
(1) Organize, supervise, and administer the Department of Insurance so that the department will perform its lawful functions efficiently and effectively.
(2) Enforce the provisions of this title.
(3) Execute the duties imposed upon him or her by this title.
(4) Have the powers and authority expressly conferred upon him or her by, or reasonably implied from, this title.
(5) Sign and execute in the name of the state, by “the state Department of Insurance,” all contracts or agreements with the federal government or its agencies, other states or political subdivisions thereof, political subdivisions of this state, or with private persons.
(6) Conduct such examinations and investigations of insurance matters, in addition to examinations and investigations expressly authorized, as he or she may deem proper 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 additional examinations or investigations shall be borne by the state except as otherwise expressly provided.
(7) Invoke any legal, equitable, or special remedy for the enforcement of orders or this title.
(8) Have such powers and perform such duties as may be granted to or required of the superintendent of insurance of this state under laws remaining in force after the effective date of this title.
(9) Have such additional powers and duties as may be provided by other laws of this state.
(10) Not issue a license to a natural person under this title or other law unless the natural person is a United States citizen or, if not a citizen of the United States, a person who is legally present in the United States with appropriate documentation from the federal government.
(11) Create educational and informational programs and presentations for consumers regarding insurance and other matters regulated by the department.
(Acts 1951, No. 234, p. 504, §9; Acts 1971, No. 407, p. 707, §27; Act 2008-135, p. 202, §3; Act 2019-177, §1.)
Subject to the discretion of the Commissioner of Insurance, any increase in automobile insurance rates sought in the future should come before a public rate hearing.
(Act 99-430, p. 779, §5.)
(a) The commissioner may delegate to any deputy, assistant, examiner, or 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 by this title in the commissioner.
(b) The commissioner is responsible for the official acts of his deputy, assistant, examiner, or employee acting in the commissioner’s name and by his authority.
(Acts 1951, No. 234, p. 504, §11; Acts 1971, No. 407, p. 707, §26.)
As early as consistent with full and accurate preparation, the commissioner shall annually make a report to the Governor of his official transactions during the preceding calendar year. He shall include in the report:
(1) A statement of the receipts and expenditures of the department for the preceding year;
(2) An exhibit of the financial condition and business transactions during the preceding year of insurers authorized to transact business in this state, as disclosed by the financial statements of the insurers filed with the commissioner;
(3) Names of insurers whose business was closed during the year, the cause thereof, and amount of assets and liabilities as ascertainable;
(4) Names of insurers against whom delinquency or similar proceedings were instituted and a concise statement of the circumstances and results of each such proceeding;
(5) His recommendations as to amendments or supplementation of laws affecting insurance;
(6) His recommendations concerning the condition, operation, and functioning of the department; and
(7) Such other pertinent information and matters as he deems to be in the public interest.
(Code 1940, T. 28, §72; Acts 1971, No. 407, p. 707, §34.)
(a) Subject to the Merit System Act and rules and regulations issued pursuant thereto, the commissioner shall prescribe the qualifications and duties of and appoint, employ, bond, and remove a State Fire Marshal and such other assistants, deputies, actuaries, examiners, and other employees as he deems necessary for the efficient performance of his duties under this code.
(b) The commissioner shall fix the compensation of all such personnel in accordance with the Merit System Act and the pay plan of the state Personnel Department.
(c) The commissioner may contract for and procure on a basis of fee, and without giving such persons any status in the classified service of the state, such independently contracting actuarial, technical, and other similar professional services as he may from time to time require for the discharge of his duties.
(d) Before entering upon the duties of their respective offices, the chief deputy fire marshal, the deputy fire marshal, and the chief clerk shall execute to the State of Alabama a bond, to be approved by the Governor, in amounts to be fixed by the Insurance Commissioner, for the faithful performance of their duties.
(Acts 1943, No. 122, p. 123; Acts 1951, No. 234, p. 504, §10; Acts 1961, Ex. Sess., No. 208, p. 2190; Acts 1971, No. 407, p. 707, §22.)
The Attorney General shall assign to the department an assistant attorney general who shall render to the commissioner such legal services as may be required.
(Acts 1951, No. 234, p. 504, §12; Acts 1971, No. 407, p. 707, §23.)
In addition to compensation for their services, the commissioner and deputy commissioners shall receive actual expenses for travel on official business in accordance with Article 2, Chapter 7 of Title 36 of this code. Assistants and employees of the department shall be paid expenses for travel on official business as may be authorized by the commissioner and incurred by them in the performance of their duties in the same manner and in the same amounts as such expenses are paid to all other state employees.
(Acts 1951, No. 234, p. 504, §8; Acts 1971, No. 407, p. 707, §24.)
(a) The commissioner or any deputy, examiner, assistant, or employee of the commissioner shall not be financially interested, directly or indirectly, in any insurer, insurance agency, or insurance transaction except as a policy holder or claimant under a policy; except, that as to such 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, accountants, or other professional personnel who are independently practicing their professions even though similarly employed or retained by insurers or others.
(b) The commissioner or any deputy, examiner, assistant, or employee of the commissioner shall not be given, nor receive, any fee, compensation, loan, gift, or other thing of value in addition to the compensation and expense allowance provided by law for any service rendered, or to be rendered, as such commissioner, deputy, assistant, examiner, or employee or in connection therewith. This section shall not apply to any person who is holding office or position on date of enactment of this title.
(Acts 1971, No. 407, p. 707, §25.)
(a) The commissioner shall keep and preserve in permanent form accurate and complete records of his proceedings, including also a concise statement of the result of such examination of insurers by the commissioner, record and file all bonds and contracts and shall file such records in the department. The commissioner is responsible for the custody and preservation of all records, documents, and files of the department.
(b) The records of the commissioner and insurance filings in his office shall be open to public inspection, except as otherwise provided by this title.
(c) The commissioner may photograph, microphotograph, or reproduce on film, whereby each page will be reproduced in exact conformity with the original, all financial records, financial statements of domestic insurers, reports of business transacted in this state by foreign insurers, reports of examination of domestic insurers, and such other records and documents on file in his office as he may in his discretion select.
(d) To facilitate efficient use of floor space and filing equipment in his offices the commissioner may destroy records and documents as follows:
(1) General correspondence files over three years old;
(2) Agent, broker, solicitor, adjuster, and similar license files over two years old;
(3) Insurer certificate of authority files over two years old;
(4) All documents and records which have been photographed or otherwise reproduced as provided in subsection (c) of this section, and such reproduction has been filed and after audit of the commissioner’s office has been completed for the period embracing the dates of such documents and records; and
(5) All other records, documents, and files not expressly provided for in subdivisions (1) through (4) of this subsection.
(Code 1940, T. 28, §72; Acts 1971, No. 407, p. 707, §31.)
(a) Photographs or microphotographs in the form of film or prints of documents and records made under subsection (c) of Section 27-2-14 shall have the same force and effect as the originals thereof and shall be treated as originals for the purpose of their admissibility in evidence. Duly certified or authenticated reproductions of such photographs or microphotographs shall be as admissible in evidence as the originals.
(b) Upon request of any person and payment of the applicable fee, the commissioner shall give a certified copy of any record in his office which is then subject to public inspection.
(c) Copies of original records or documents in his office certified by the commissioner shall be received in evidence in all courts as if they were originals.
(d) If at any time the commissioner or any deputy, assistant, examiner, or other employee of the department is required by subpoena duces tecum to produce in any court or proceeding in this state any record of the department or copy thereof for the purpose of offering the same in evidence in such court or proceeding, the commissioner may designate any deputy, assistant, or other full-time employee of the department, who is competent for the purpose, to respond to such subpoena with the record or copy thereof so required and in lieu of the individual to whom the subpoena is directed.
(Acts 1971, No. 407, p. 707, §32.)
(a) The commissioner shall have printed or otherwise published for public distribution all of the following:
(1) The insurance laws of this state.
(2) The rules and regulations of the commissioner.
(3) A directory, annually, of all insurers and of all resident insurance producers authorized or licensed by this state.
(4) Any other material the commissioner deems relevant and suitable for the more effective administration of the laws relating to insurance.
(b) The commissioner shall fix at a price at not less than cost of printing and distribution, to be paid by persons requesting copies of the insurance laws, regulations, and other publications the commissioner deems proper to sell on behalf of the state rather than distribute free of charge; except that the commissioner may furnish, without charge, copies of any such publication to the Legislature or to officials and departments of government or political subdivisions of this state or of other states of the federal government or of foreign countries. The commissioner shall promptly deposit all monies so received in the State Treasury with 50 percent credited to the State General Fund and 50 percent credited to the Insurance Department Fund.
(c) In complying with this section, the commissioner may, in lieu of printing the above information, provide access to the information by way of the Internet.
(Acts 1951, No. 234, p. 504, §15; Acts 1971, No. 407, p. 707, §33; Act 2001-702, p. 1509, §15.)
(a) The commissioner may make reasonable rules and regulations necessary for the 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) Any such rule or regulation affecting persons or matters other than the personnel or the internal affairs of the commissioner’s office shall be made or amended only after a hearing thereon of which notice was given as required by Section 27-2-29. If reasonably possible the commissioner shall set forth the proposed rule, regulation, amendment, or summary in or with the notice of hearing.
(c) No such rule or regulation as to which a hearing is required under subsection (b) of this section above shall be effective until after it has been on file as a public record in the commissioner’s office and in the office of the Secretary of State for at least 10 days.
(d) Upon request and payment of the reasonable cost thereof, if required and fixed by the commissioner, the commissioner shall furnish a copy of any such rule or regulation to any person so requesting.
(e) The willful failure to comply with or willful violation of any material provision of a rule or regulation may be treated by the commissioner in the same manner as the willful failure to comply with or willful violation of any material provision of this title, but such action taken by the commissioner shall not be in the nature of a criminal penalty and shall be limited to suspension or revocation of licenses of agents or insurers doing business in Alabama.
(Acts 1951, No. 234, p. 504, §13; Acts 1971, No. 407, p. 707, §28; Acts 1975, No. 215, p. 739, §1.)
The commissioner shall, by regulation, provide for the transition from annual renewal to biennial renewal of licenses for insurance producers, service representatives, and adjusters by staggering the renewal periods in 2007 and 2008. Certain licensees may be required to renew for one year at one-half the biennial fee and continuing education coursework otherwise required under Act 2006-299.
(Act 2006-299, p. 614, §2.)
(a) Orders and notices of the commissioner shall be effective only when in writing signed by him or by his authority.
(b) Every such order shall state its effective date, and shall concisely state:
(1) Its intent or purpose;
(2) The grounds on which based; and
(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.
(c) Except as may be provided in this title respecting 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 him at his principal place of business as last of record in the department. Notice so mailed shall be deemed to have been given when deposited in a letter depository of a United States post office.
(Acts 1971, No. 407, p. 707, §29.)
The commissioner may institute such actions or other proceedings as may be required for enforcement of any provisions of this title. If the commissioner has reason to believe that any person has violated any provision of this title for which criminal prosecution would be in order, he shall give the information relative thereto to the Attorney General or the district attorney having jurisdiction of any such violation. The Attorney General shall promptly institute such action or proceeding against such person as the information may require or justify.
(Acts 1971, No. 407, p. 707, §30.)
(a) If he has reason to believe that any such person has violated or is violating any provision of this title or upon complaint by any resident of this state indicating that any such violation may exist, the commissioner may examine the accounts, records, documents, and transactions pertaining to or affecting the insurance affairs of any:
(1) General agent, agent, broker, surplus line broker, solicitor, or adjuster;
(2) Person having a contract or power of attorney under which he enjoys in fact the exclusive or dominant right to manage or control an insurer; or
(3) Person engaged in or proposing to be engaged in or assisting in the promotion or formation of a domestic insurer, insurance holding corporation, or corporation to finance a domestic insurer or the production of its business.
(b) The commissioner may examine the insurance affairs and transactions of the attorney-in-fact of a reciprocal insurer in the same manner and on the same basis as examination of such an insurer.
(c) When he deems it necessary for determination of the value of such securities or compliance with any provision of this title, the commissioner may, in his discretion, examine the transactions and affairs of any corporation of which a domestic insurer owns shares of stock or other securities under which it has, or effectively participates in, the control of such corporation.
(Acts 1971, No. 407, p. 707, §36.)
(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, and the records of surplus line brokers restricted to those matters under Section 27-10-29, including the attorney-in-fact of a reciprocal insurer insofar as insurer transactions are involved as often as the commissioner deems appropriate but shall, at a minimum, conduct an examination of every insurer licensed in this state not less frequently than once every five years. In scheduling and determining the nature, scope, and frequency of the examinations, the commissioner shall consider such matters as the results of financial statement analyses and ratios, changes in management or ownership, actuarial opinions, reports of independent certified public accountants, and other criteria as set forth in the Examiners’ Handbook adopted by the National Association of Insurance Commissioners and in effect when the commissioner exercises discretion under this section.
(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 an examination under this article of any foreign or alien insurer licensed in this state or applying for an initial certificate of authority, the commissioner may accept an examination report on the company as prepared by the Department of Insurance for the company’s state of domicile or port-of-entry state until January 1, 1994. Thereafter, the reports may only be accepted if: (1) the Department of Insurance was at the time of the examination accredited under the National Association of Insurance Commissioners’ Financial Regulation Standards and Accreditation Program, or (2) the examination is performed under the supervision of an accredited Department of Insurance or with the participation of one or more examiners who are employed by an accredited State Department of Insurance and who, after a review of the examination work papers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by the accredited State Department of Insurance.
(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.
(Acts 1915, No. 730, p. 834; Acts 1939, No. 527, p. 818; Acts 1965, No. 571, p. 1056; Acts 1971, No. 407, p. 707, §35; Acts 1980, No. 80-774, p. 1608, §1; Acts 1993, No. 93-675, p. 1240, §2.)
(a) The commissioner may conduct any such examination in person or by examiners regularly employed and commissioned by him in writing for the purpose. No person shall be eligible for designation as an examiner to examine an insurer unless by reason of experience as an accountant, auditor, or examiner of financial institutions or other special experience, education, or training he is capable of adequately discharging the responsibilities of such an examiner.
(b) At any time, when examiners who are regular officers or employees of the department are not available for the purpose, the commissioner may specially appoint and employ a competent examiner, or examiners, for the purpose of making a particular examination. The special examiner shall be compensated and reimbursed for expenses in the same manner as provided for regular examiners under Section 27-2-25, but shall not have any status in the classified service of the state.
(Acts 1971, No. 407, p. 707, §37.)
(a) The examination may be conducted by the commissioner or his accredited examiners at the offices wherever located of the person being examined and at such other places as may be required for determination of matters under examination.
(b) 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 in his possession or control relating to the subject of the examination.
(c) If the commissioner or examiner finds any account or record of an insurer being examined to be inadequate or inadequately kept or posted for proper examination of the condition and affairs of the examinee, he shall give written notice to such examinee specifying:
(1) The deficiencies to be corrected; and
(2) A reasonable period within which to correct the stated deficiencies.
If the examinee fails to maintain, complete, or correct such accounts or records within the period specified, the commissioner may employ experts to reconstruct, rewrite, post, or balance such accounts or records in accordance with recognized accounting principles and procedures.
(d) If the commissioner deems it necessary to value any asset involved in such an examination, he may make written request of the person being examined to appoint one or more competent appraisers approved by the commissioner for the purpose of appraising such property. If no such appointment is made within 10 days after such request was delivered to such person, the commissioner may appoint the appraiser or appraisers. Any such appraisal shall be promptly made, and a copy of the report thereof shall be furnished to the commissioner. The reasonable expense of the appraisal shall be borne by the person being examined.
(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 of such person except with the written consent of such person given in advance of such removal or pursuant to an order of court duly obtained.
(f) Any individual who obstructs the commissioner or his examiner in the examination of an insurer shall be guilty of a misdemeanor and, upon conviction, shall be punished as provided in Section 27-1-12.
(Acts 1971, No. 407, p. 707, §38.)
(a) The commissioner, or his or her examiner, shall make a full and true written report of each examination. The examination report shall contain only information obtained from examination of the books, records, accounts, files, or other documents of, or relative to, the person examined, its agents or other persons examined, or as ascertained from the testimony of its officers or agents or other persons examined concerning its affairs, together with conclusions and recommendations as the examiners find reasonable warranted from the facts.
(b) No later than 60 days following completion of the examination, the examiner in charge shall file with the department a verified written report of examination under oath. Upon receipt of the verified report, the department shall transmit the report to the company examined, together with a notice that the company examined may make a written submission or rebuttal with respect to any matter contained in the examination report within 30 days thereafter.
(c) Within 30 days of the end of the period allowed for the receipt of written submissions or rebuttals, the commissioner shall fully consider and review the report, together with any written submissions or rebuttals and any relevant portions of the examiner’s workpapers and enter one of the following:
(1) An order adopting the examination report as filed or with modifications or corrections. If the examination report reveals that the company is operating in violation of any law, regulation, or prior order of the commissioner, the commissioner may order the company to take any action the commissioner considers necessary and appropriate to cure the violation.
(2) An order rejecting the examination report with directions to the examiners to reopen the examination for purposes of obtaining additional data, documentation, or information, and refiling pursuant to subsection (a).
(3) An order calling for an investigatory hearing with no less than 20 days’ notice to the company for purposes of obtaining additional documentation, data, information, and testimony.
(d) Orders entered pursuant to subdivision (1) of subsection (c) shall be accompanied by findings and conclusions resulting from the commissioner’s consideration and review of the examination report, relevant examiner workpapers, and any written submissions or rebuttals. An order shall be considered a final administrative decision and shall be served upon the company by certified mail. The order may be appealed pursuant to Section 27-2-32.
(e) The examination report, when adopted, 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. The commissioner or his examiners may, at any time, testify and offer other 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.
(f)(1) Upon the adoption of the examination report under subdivision (1) of subsection (c), the commissioner shall hold the content of the examination report as private and confidential information for a period of 20 days except to the extent provided in subsection (b). Thereafter, the commissioner may open the report for public inspection unless a court of competent jurisdiction has stayed its publication; however, the commissioner may withhold from public inspection any examination or investigation report for so long as the commissioner deems necessary to protect the person examined from unwarranted injury or to be in the public interest.
(2) Nothing contained in this section shall prevent or be construed as prohibiting the commissioner from disclosing the content of an examination report, preliminary examination report or results, or any matter relating thereto, to the insurance department of any other state or country, or to law enforcement officials of this or any other state or agency of the federal government at any time, so long as the agency or office receiving the report or matters relating thereto agrees in writing to hold it confidential and in a manner consistent with this section.
(3) In the event the commissioner determines that regulatory action is appropriate as a result of an examination, the commissioner may initiate any proceedings or actions provided by law.
(g)(1) Except as provided in subsection (f) and this subsection, documents, materials, or other information in the possession or control of the commissioner or the Department of Insurance, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this chapter, or in the course of analysis by the commissioner of the financial condition or market conduct of a company, and documents or exhibits which contain information regarding the compensation of the officers or employees of a company as required by the instructions for annual statements filed in accordance with Section 27-3-26, 27-21A-8, 27-31-16, 27-34-36, or 10A-20-6.14, shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, and shall not be subject to subpoena. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as part of the commissioner’s official duties.
(2) Documents, materials, or other information, including, but not limited to, all working papers, and copies thereof, in the possession or control of the NAIC shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, and shall not be subject to subpoena, if they are either of the following:
a. Created, produced, or obtained by or disclosed to the NAIC in the course of the NAIC assisting an examination made under this chapter, or assisting a commissioner in the analysis of the financial condition or market conduct of a company.
b. Disclosed to the NAIC under subdivision (4) by a commissioner.
(3) Neither the commissioner nor any person who received the documents, material, or other information while acting under the authority of the commissioner, including the NAIC, shall be permitted to testify in any private civil action concerning any confidential documents, materials, or information subject to subdivision (2).
(4) In order to assist in the performance of the commissioner’s duties, the commissioner may do all of the following:
a. Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (f), with other state, federal, and international regulatory agencies, with the NAIC, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, communication, or other information.
b. Receive documents, materials, communications, or information, including otherwise confidential and privileged documents, materials, or information from the NAIC and from regulatory and law enforcement officials of other foreign or domestic jurisdictions. The commissioner shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
c. Enter into written agreements governing sharing and use of information consistent with this subsection.
(5) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subdivision (4).
(6) For purposes of this subsection, NAIC shall mean the National Association of Insurance Commissioners and its affiliates and subsidiaries.
(Acts 1971, No. 407, p. 707, §39; Act 2015-227, §1.)
(a) Each person being examined shall pay to the commissioner the travel expense to and from such examination, a living expense allowance at such reasonable rates customary for such examination in which state the examination takes place and established or adopted by the commissioner and the compensation of the examiners making the examination, upon presentation by the commissioner of a detailed account of such allowances and expenses. Such an account may be so presented periodically during the course of the examination or at the termination of the examination, as the commissioner deems proper.
(b) The commissioner shall deposit all funds received under subsection (a) of this section in the State Treasury to the credit of a fund to be known as the Special Examination Revolving Fund. The expenses incurred by the commissioner and his examiners in the making of examinations under this title, together with the compensation of such examiners, shall be paid from such revolving fund and the amount necessary to make such payments is hereby appropriated from such fund.
(Acts 1939, No. 527, p. 818; Acts 1943, No. 416, p. 381; Acts 1953, No. 776, p. 1047; Acts 1971, No. 407, p. 707, §40.)
(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 and compel the production of records, books, files, documents, and other evidence.
(b) Witness fees and mileage, if claimed, shall be allowed the same as for testimony in a circuit court. Witness fees, mileage, and the actual expense necessarily incurred in securing attendance of witnesses and their testimony shall be itemized and shall be paid by the person being examined if in the proceedings in which such witness is called 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 circuit court. If any individual fails to obey a subpoena issued and served under this section with respect to any matter concerning which he may be lawfully interrogated or required to produce for examination, on application of the commissioner, the circuit court of the county in which is pending the proceeding at which such individual was so required to appear or the circuit court of the county in which such individual resides may issue an order requiring such individual to comply with the subpoena and to testify or produce the evidence subpoenaed. Any failure to obey such order of the court may be punished by the court as a contempt thereof.
(d) Any person willfully testifying falsely under oath as to any matter material to any such examination, investigation, or hearing shall, upon conviction thereof, be guilty of perjury and punished accordingly.
(Acts 1939, No. 527, p. 818; Acts 1971, No. 407, p. 707, §41.)
(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, 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 department 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, 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.
(Acts 1971, No. 407, p. 707, §42.)
(a) The commissioner may hold hearings for any purpose within the scope of this title deemed by him to be necessary.
(b) The commissioner shall hold a hearing if required by any provision, or upon written demand therefor 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 an order on hearing or pursuant thereto. Any such demand shall specify the grounds to be relied upon as a basis for the relief to be demanded at the hearing, and unless postponed by mutual consent, the hearing shall be held within 30 days after receipt by the commissioner of demand therefor.
(c) Pending such hearing and decision thereon, the commissioner may suspend or postpone the effective date of his previous action.
(d) This section does not apply as to hearings provided for in Chapter 13 of this title.
(Acts 1971, No. 407, p. 707, §43.)
(a)(1) Except where a longer period of notice is provided by other provisions of this title relative to particular matters, not less than 10 days in advance the commissioner shall give notice of the time and place of the hearing, stating the matters to be considered. If the persons to be given notice are not specified in the provision pursuant to which the hearing is held, the commissioner shall give the notice to all persons whose pecuniary interests are to be directly and immediately affected by the hearing.
(2) If a hearing is to be held for consideration of matters which under this subsection would otherwise require separate notices to more than 50 persons, in lieu of the notice required under this subsection, the commissioner may post a notice of the hearing for at least 30 days prior to the date of the hearing on a website maintained by the department.
(b) If a hearing is to be held for consideration of rules of the commissioner, notice shall be posted for at least 35 days prior to the date of the hearing on a website maintained by the department and by publication in the Alabama Administrative Monthly.
(c)(1) The notices provided for by this section shall state the time and place of the hearing and shall specify the matters to be considered at the hearing.
(2) All of the notices, other than published notices, shall be given as provided in Section 27-2-18.
(d) This section does not apply as to hearings provided for in Chapter 13.
(Acts 1971, No. 407, p. 707, §44; Act 2023-202, §1.)
(a) A hearing may be held in the department at Montgomery, Alabama, or at any other place in this state more convenient to parties and witnesses, as the commissioner determines. The commissioner or his deputy or examiner shall preside at the hearing and shall expedite the hearing and all procedures involved therein.
(b) Hearings may be closed to the public at the commissioner’s discretion; except that a hearing shall be open to the public if so requested in writing by any party to the hearing.
(c) The commissioner shall allow any party to the hearing 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, 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. The testimony may be taken orally or by deposition, and any party shall have such right of introducing evidence by deposition as may obtain in the circuit courts.
(d) Upon good cause shown, the commissioner shall permit to become a party to the hearing by intervention, if timely, only such persons who were not original parties thereto and whose pecuniary interests are to be directly and immediately affected by the commissioner’s order made upon the hearing.
(e) Formal rules of pleading or evidence need not be observed at any hearing.
(f) Upon written request seasonably made by a party to the hearing and at such person’s expense, the commissioner shall cause a full stenographic record of the proceedings to be made by a competent reporter. If transcribed, a copy of such stenographic record shall be furnished to the commissioner without cost to the commissioner or the state and shall be a part of the commissioner’s record of the hearing. If so transcribed, a copy of such stenographic record shall be furnished to any other party to such hearing at the request and expense of such other party. If no stenographic record is made or transcribed, the commissioner shall prepare an adequate record of the evidence and of the proceedings.
(g) Upon written request setting forth the reasons therefor of a party to a hearing filed with the commissioner within 30 days after any order made pursuant to a hearing has been mailed or delivered to the persons entitled to receive the same, the commissioner may, in his discretion, grant a rehearing or reargument of any matter involved in such hearing. Notice of such rehearing or reargument shall be given as provided in Section 27-2-29.
(h) This section does not apply as to hearings provided for in Chapter 13 of this title.
(Acts 1971, No. 407, p. 707, §45.)
(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 the 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 in any such rehearing or reargument, and shall give a copy of such order to the same persons given notice of the hearing and to all parties to the hearing.
(c) The order shall contain a concise statement of the facts as found by the commissioner, his conclusions therefrom, and the matters required by Section 27-2-18.
(d) The order may affirm, modify, or rescind action theretofore taken or may constitute the taking of new action within the scope of the notice of hearing.
(e) This section does not apply as to hearings provided for in Chapter 13 of this title.
(Acts 1971, No. 407, p. 707, §46.)
(a) An appeal from the commissioner shall be taken only from an order on hearing, or as to a matter on which the commissioner has refused or failed to hold a hearing after demand therefor under Section 27-2-28 or as to a matter as to which the commissioner has refused or failed to make his order on hearing as required by Section 27-2-31. Any person who was a party to such hearing or whose pecuniary interests are directly and immediately affected by any such refusal or failure to grant or hold a hearing and who is aggrieved by such order, refusal, or failure may appeal from such order or as to any such matter within 30 days after:
(1) The order on hearing has been mailed or delivered to the persons entitled to receive the same;
(2) The commissioner’s order denying rehearing or reargument has been so mailed or delivered;
(3) The commissioner has refused or failed to make his order on hearing as required under Section 27-2-31; or
(4) The commissioner has refused or failed to grant or hold a hearing as required under Section 27-2-28.
(b) The appeal shall be granted as a matter of right, and shall be taken to the Circuit Court of Montgomery County, Alabama, or in the case of denial, suspension or revocation of a license as agent, broker, solicitor, adjuster, and other licensed insurance representatives, the appeal may at the appellant’s option be taken to the circuit court of the county in Alabama of the appellant’s residence or principal place of business. The appeal shall be taken by filing notice of appeal or on writ of certiorari by filing petition therefor with the register or clerk of the court, together with a bond, with good and sufficient sureties to be approved by such register or clerk, conditioned to pay all costs which may be assessed against the appellant or petitioner in such proceedings and by service upon or delivery to the commissioner of a copy of such notice or petition.
(c) Upon receiving the notice of appeal or petition for review, the commissioner shall prepare, or cause to be prepared, an official record certified by him which shall contain a copy of all proceedings, findings, and orders of the commissioner and any transcript of testimony and exhibits or record thereof made as provided in subsection (f) of Section 27-2-30. Within 30 days after the notice of appeal or petition was filed, the commissioner shall file such official record with the court in which the appeal is pending.
(d) Upon filing of the notice of appeal or petition for review, the court shall have full jurisdiction of the proceeding and shall determine, and may so determine ex parte, whether such filing shall stay the enforcement of the commissioner’s decision or order appealed from.
(e) In hearing the appeal by the circuit court and by the Court of Civil Appeals of Alabama on appeal to it as provided in subsection (g) of this section, the commissioner’s decision or order shall be taken as prima facie just and reasonable. No new or additional evidence may be introduced in the circuit court except as to fraud or misconduct of some person engaged in the administration of this title and affecting the decision or order appealed from, but the court shall otherwise hear the case upon the certified record. The court shall reverse, vacate, or modify the commissioner’s decision or order in whole or in part if it finds that:
(1) The commissioner erred to the prejudice of appellant’s substantial rights in his application of the law;
(2) The decision or order was procured by fraud or was based upon a finding of facts contrary to the weight of the evidence; or
(3) The commissioner’s action was arbitrary or capricious.
(f) Instead of reversing, vacating, or setting aside the commissioner’s decision or order or part thereof, 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.
(g) From the judgment of the circuit court, either the commissioner or the interested party taking the appeal may appeal directly to the Court of Civil Appeals of Alabama by taking such appeal within 42 days after the date of the making and entering of its judgment by the circuit court. The interested party so appealing to the Court of Civil Appeals of Alabama shall give security for the costs of such appeal to be approved by the register or clerk of the circuit court. No such security shall be required of the commissioner.
(Acts 1971, No. 407, p. 707, §47.)
The Commissioner of Insurance is empowered to place an insurance company under supervision, after a hearing thereon, by appropriate order, for the following reasons:
(1) When an insurance company has been notified under the provisions of Section 27-27-41 of impairment or deficiency of assets and given 60 days to make good the impairment;
(2) A determination by the commissioner that an insurer is impaired or insolvent;
(3) A determination by the commissioner that an insurer’s condition is such as to render the continuation of its business hazardous to its policyholders following an examination of the operations and financial condition of an insurer by the commissioner;
(4) Any of the grounds for rehabilitation or liquidation of domestic insurers set forth in Sections 27-32-6 and 27-32-7.
(Acts 1975, No. 217, p. 742, §1; Acts 1977, No. 409, p. 547, §1.)
During the period of supervision the commissioner may appoint a supervisor and may provide that the insurer may not do the following things during the period of supervision without the prior approval of the commissioner or his duly appointed supervisors:
(1) Dispose of, convey, or encumber any of its assets or its business in force;
(2) Withdraw any of its bank accounts;
(3) Lend any of its funds;
(4) Invest any of its funds;
(5) Transfer any of its property;
(6) Incur any debt, obligation, or liability;
(7) Enter into any new reinsurance contract or treaty;
(8) Issue to the public policies of insurance.
(Acts 1975, No. 217, p. 742, §2; Acts 1977, No. 409, p. 547, §3.)
The commissioner shall withdraw the supervision order immediately upon determination that the reasons for the supervision set forth in Section 27-2-33 have been corrected or no longer exist, but in no event shall the supervision order last longer than 180 days without another notice and hearing being conducted in the same manner as set out in Section 27-2-38.
(Acts 1975, No. 217, p. 742, §3; Acts 1977, No. 409, p. 547, §4; Acts 1982, 2nd Ex. Sess., No. 82-788, p. 293.)
The provisions of Chapter 32 of this title concerning rehabilitation and liquidation shall not be stayed during the period of supervision and the commencement of delinquency proceedings under Section 27-32-4, may commence either before, during or after a supervision order or period of supervision.
(Acts 1975, No. 217, p. 742, §4; Acts 1977, No. 409, p. 547, §5.)
The order of supervision issuing after the hearing shall follow the provisions of Section 27-2-18, and may be appealed in the same manner as orders falling under the provisions of Section 27-2-32.
(Acts 1975, No. 217, p. 742, §5; Acts 1977, No. 409, p. 547, §6.)
No order of supervision shall be issued by the commissioner until the insurance company has been given notice of the commissioner’s intentions to place the company under supervision, the appropriate reasons for supervision set out in Section 27-2-33 and a hearing held thereon. The notice and hearing shall conform to the requirements set forth in Sections 27-2-26 through 27-2-31.
(Acts 1977, No. 409, p. 547, §2.)
(a) There is created a fund in the State Treasury designated the Insurance Department Fund to be used for the operation of the Department of Insurance. Receipts deposited into this fund shall be disbursed only by warrants of the state Comptroller drawn upon the State Treasury on itemized vouchers approved by the Commissioner of Insurance. No funds shall be withdrawn or expended except as budgeted and allotted according to Sections 41-4-80 to 41-4-96, inclusive, and 41-19-1 to 41-19-12, inclusive, and only in amounts as stipulated in the general appropriations act, other appropriation acts, or this section. At the end of each fiscal year, any unencumbered and unexpended balance of up to 25 percent of the amount appropriated for that fiscal year shall not revert to the State General Fund under Section 41-4-93, but shall carry over to the next fiscal year.
(b) Notwithstanding any other provision of law, the Commissioner of Insurance shall promptly pay all sums, fees, taxes, licenses, renewals, and other miscellaneous charges collected pursuant to Sections 27-2-16, 27-3-29, 27-4-2, 27-13-5, 27-13-24, 27-13-62, 27-21A-21, 27-34-6, 27-34-36, 27-34-47, and 27-39-6, other than those fines, penalties, and deposit requirements collected pursuant to Section 27-3-29, into the State Treasury with 50 percent credited to the Insurance Department Fund; one million five hundred thousand dollars ($1,500,000) credited each fiscal year to the Center for Risk and Insurance Research Fund; and the remainder credited to the State General Fund.
(Acts 1996, No. 96-692, p. 1161, §§1, 2; Act 98-613, p. 1351, §1; Act 2022-148, §2.)
(a) The Commissioner of Insurance shall establish and support the Center for Risk and Insurance Research, or its successor, connected with a state university in this state to carry out research, education, and outreach regarding risk management and insurance issues.
(b) There is created the Center for Risk and Insurance Research Fund in the State Treasury to be used to fund the center. No funds shall be withdrawn or expended except as budgeted and allotted according to Sections 41-4-80 to 41-4-96, inclusive, and 41-19-1 to 41-19-12, inclusive, and only in amounts as appropriated in the general appropriations act or other appropriation acts to the Department of Insurance for the operation of the center.
(c) The Commissioner of Insurance may transfer to the state university described in subsection (a) up to the amount appropriated from the Center for Risk and Insurance Research Fund each fiscal year to be used for the operation of the center.
(Act 2022-148, §1.)
The Commissioner of Insurance, in conformance with Section 36-26-10, may employ personnel to operate the Pharmacy Benefits Manager Division within the Department of Insurance, including two employees who are in the exempt service and not subject to the state Merit System. These positions are in addition to any other exempt position otherwise authorized by law for the department. The compensation of these employees shall be set by the commissioner.
(Act 2026-519, §1.)
There is hereby established within the Department of Insurance a Receivership Division to be managed and headed by a chief of said division. The chief of said Receivership Division shall be appointed by the Commissioner of Insurance and shall serve at his pleasure. The compensation of said chief shall be fixed by the commissioner; except, that said compensation shall not exceed that of the highest paid division chief in the Insurance Department under the Merit System.
(Acts 1975, No. 1039, p. 2083, §1.)
The Chief of the Receivership Division shall make bond payable to the State of Alabama in the amount of $75,000.00, conditioned upon faithful performance of his duties, the premiums of which shall be borne by the state. In addition each receivership court may require adequate bond of said receiver if the court deems it necessary, the premiums of which shall be paid from funds of the receivership.
(Acts 1975, No. 1039, p. 2083, §6.)
The Commissioner of Insurance shall furnish offices, equipment, operating expenses, and necessary personnel to maintain and operate the Receivership Division. The operating expenses of said division shall as far as practical be paid from the receiverships as administrative expenses on a pro rata basis, such expenses to be verified by the receiver to the receivership court having jurisdiction and paid on order of said court into the Special Examination Revolving Fund provided for in Section 27-2-25. To the extent of and limited to the funds paid into said revolving fund from receiverships, the Commissioner of Insurance is hereby authorized to draw upon said revolving fund on proper voucher, to pay for salaries, expenses, rent or equipment, or portion thereof, for the proper operation of the Receivership Division. Expenses and salaries not recoverable from receivership funds may be paid from funds appropriated to the Insurance Department. The Commissioner of Insurance is hereby authorized to assign one or more insurance examiners to the Receivership Division from time to time and to pay their salaries and expenses and to provide necessary equipment from the Special Examination Revolving Fund hereinabove mentioned.
(Acts 1975, No. 1039, p. 2083, §5.)
Upon the Commissioner of Insurance bringing delinquency proceedings against any insurer pursuant to this title, or other insurance laws of the state, the proper circuit court having jurisdiction thereof shall appoint the Chief of the Receivership Division as receiver of such impaired or insolvent insurer, or ancillary receiver if a foreign insurer is found to be impaired or insolvent.
(Acts 1975, No. 1039, p. 2083, §2.)
The Commissioner of Insurance, as receiver in any existing receivership, may petition the proper receivership court to name as receiver thereof the Chief of the Receivership Division as provided for in this article, and upon making an accounting of the assets of such receivership by the commissioner, the court shall so change receivers or ancillary receivers by releasing and discharging the commissioner from such duty and responsibility and shall name the Chief of the Receivership Division as receiver or ancillary receiver.
(Acts 1975, No. 1039, p. 2083, §3.)
All duties, rights, power, authority, and responsibility placed upon the Commissioner of Insurance by Sections 27-32-15 through 27-32-36, or by future law, as receiver of an insurer shall be vested in and assumed by the receiver appointed pursuant to this article, however, nothing herein shall divest the commissioner of the authority to examine insurers for solvency and to institute delinquency proceedings pursuant to law.
(Acts 1975, No. 1039, p. 2083, §4.)
The Legislature finds and declares the following:
(1) Alabama is susceptible to various natural and manmade disaster events, posing threats to the safety of its citizens, integrity of its infrastructure, prospects for its economic growth, and maintenance and protection of its unique natural resources. These threats also pose significant fiscal and operational risks to functions of the state and local government.
(2) For the purposes of this article, the term “resilience” shall be considered the capacity of individuals, communities, businesses, and systems to anticipate, prepare for, adapt to, and rapidly recover from adverse events. For the purposes of this article, resilience shall be guided by five principles: (i) individual responsibility; (ii) collective continuity and function; (iii) factual assessment of risk; (iv) integrated resilience efforts; and (v) focused support.
(3) The Alabama Resilience Council established by Executive Order No. 736, on May 5, 2023, has examined resilience policy needs to address current and future adverse events, and based on its findings, Alabama would benefit from a lasting, comprehensive approach to resilience.
(4) Coordinated statewide resilience efforts and development of a statewide resilience plan would be most effective under a single designated Chief Resilience Officer to coordinate activities of the Alabama Resilience Council.
(Act 2026-607, §1.)
(a) Commencing upon the Governor’s rescission of Executive Order No. 736, the Alabama Resilience Council shall be created as an appointed advisory group within the executive branch of state government for the purpose of coordinating resilience-related activities of state government and for facilitating interactions between state and local government and the private sector to proactively address harmful impacts on Alabama communities and infrastructure before they occur.
(b) The voting members of the council shall consist of the Governor or his or her designee, the Chief Resilience Officer, and the head of the following agencies or their designees:
(1) The Department of Agriculture and Industries.
(2) The Department of Commerce.
(3) The Department of Conservation and Natural Resources.
(4) The Alabama Department of Economic and Community Affairs.
(5) The Alabama Department of Environmental Management.
(6) The Department of Finance.
(7) The Department of Insurance.
(8) The Alabama Department of Public Health.
(9) The State Department of Transportation.
(10) The Alabama Emergency Management Agency.
(11) The State Forestry Commission.
(12) The State Military Department.
(13) The Alabama Office of Information Technology.
(14) The Alabama State Law Enforcement Agency.
(15) The Alabama Public Service Commission
(c) The following nonvoting members of the council shall be appointed by the Governor:
(1) One member representing property and casualty insurance companies regulated by the Department of Insurance.
(2) One member representing entities in the business of emergency management and disaster response.
(3) One member representing local government with knowledge and expertise in risk and resilience.
(4) One member representing general business entities with knowledge and expertise in risk and resilience.
(5) One member representing manufacturing entities with knowledge and expertise in risk and resilience.
(6) One member representing independent insurance agents licensed by the Department of Insurance.
(7) One member representing an academic research entity based at a public university in this state which focuses on risk and resilience.
(8) One member representing small business with knowledge and expertise in risk and resilience.
(9) One member representing the broadband and telecommunications industry.
(10) One member representing public utilities regulated by the Alabama Public Service Commission.
(11) Additional nonvoting members may be appointed to represent local, state, and federal government; critical infrastructure owners and operators; business, industry, and insurance sectors; nonprofit entities focused on risk and resilience; and other state agencies.
(d) The council membership shall be inclusive and reflect the racial, gender, geographic, urban, rural, and economic diversity of the state.
(Act 2026-607, §2.)
The duties of the Alabama Resilience Council shall be as follows:
(1) Develop strategies to guide statewide resilience efforts by prioritizing objectives reflecting pressing resilience challenges. To this end, the council shall regularly convene government and private-sector stakeholders with different perspectives and interests to facilitate planning across jurisdictions and sectors and thereby to avoid cascading failures. The council shall develop principles to guide the work of state government in carrying out its resilience initiatives.
(2) Assist the Chief Resilience Officer in the development, maintenance, and implementation of the statewide resilience plan.
(3) Solicit participation of the private sector in programs to collectively strengthen the resilience of businesses and communities. The council shall engage the private sector to reduce costs from lost productivity and pursue joint, public-private efforts to avoid infrastructure damages.
(4) Improve the public’s ability to assess risk management alternatives by reducing the complexity of risk information for nontechnical audiences, by generating and sharing reliable information that helps decision-makers identify and select risk-reduction alternatives, and by providing guidance about assistance programs and funding opportunities based on needs, cost effectiveness, feasibility, potential resources, and returns on investment.
(5) Develop, pursue, and support federal and state policies and programs that promote innovative and flexible solutions for achieving individual, community, and statewide resilience.
(6) Provide support and assistance in the preparation and maintenance of the state hazard mitigation plan, as contemplated by the federal Disaster Mitigation Act of 2000, 42 U.S.C § 5121 et seq., or any successor federal statute, provided that the Alabama Emergency Management Agency shall be responsible for administrative maintenance and day-to-day execution of the plan.
(7) Identify and pursue funding opportunities to promote resilience in the State of Alabama.
(Act 2026-607, §3.)
(a) The council shall be led by a chair, vice chair, co-chairs, or other leadership positions from within the voting membership on the council. Leadership positions shall be appointed by the Governor and shall serve at the pleasure of the Governor.
(b) The council shall develop, adopt, and maintain bylaws governing its activities, provided the bylaws are consistent with the provisions of this article. The council may establish working groups or subcommittees.
(c) The council shall meet at least twice each year and may meet more frequently upon the call of the chair, subject to the Open Meetings Act, Chapter 25A of Title 36. Members of the council may participate in a meeting of the council by means of telephone conference, video conference, or similar communications equipment by means of which all individuals participating in the meeting may hear each other at the same time. Participation by electronic means shall constitute presence in person at a meeting for all purposes.
(d) Members of the council shall serve without compensation except members who are public officials or public employees may elect to receive the per diem and travel allowance authorized by state law for individuals traveling on official state business.
(Act 2026-607, §4.)
(a) The Commissioner of Insurance shall designate a Chief Resilience Officer within the Department of Insurance to coordinate the activities of the council established pursuant to Section 27-2-81 and lead the development, maintenance, and implementation of the statewide resilience plan.
(b) The duties of the Chief Resilience Officer shall be as follows:
(1) Conduct a comprehensive inventory of Alabama’s resilience assets.
(2) Identify areas of collaboration among state agencies, areas of overlap, and potential shareable resources.
(3) Review resilience programs from both inside Alabama and among comparable states.
(4) Engage state agencies to examine how to best collect, organize, analyze, and communicate data in ways that advance Alabama’s resilience principles.
(5) Identify and enhance state agency knowledge of statewide resilience efforts.
(6) Identify and pursue funding through federal, state, and private opportunities to promote resilience in the State of Alabama.
(Act 2026-607, §5.)
(a) The Chief Resilience Officer shall develop, maintain, and implement a statewide resilience plan, with the general oversight and input from the council. The plan shall include the following components:
(1) Statewide Comprehensive Risk and Vulnerability Assessment. The plan shall evaluate the impacts of extreme weather and disasters; assess current and future risks across various hazards using historical data and future scenarios while factoring in land and water management practices; and examine effects on communities, infrastructure, the economy, and the environment. Additionally, a vulnerability assessment shall identify the social, economic, and environmental systems most at risk. The vulnerability assessment shall analyze risk exposure, potential costs, and impacts on state assets, government functions, local economies, and critical natural systems.
(2) Resilience Actions. The plan shall provide a prioritized list of resilience actions to address vulnerabilities, detailing their benefits, costs, and implementation timeline. Priority shall be given first to actions that reduce state costs associated with historic and persistent challenges or vulnerabilities that have calculable costs or expenditures and that remediate or prevent critical infrastructure failures that threaten public health, impair essential services, or place the state at risk of federal enforcement. Priority shall also be given to actions that effectively mitigate the impacts of future disasters, particularly those that provide multiple co-benefits, such as enhancing environmental stewardship, economic stability, or public health. Resilience actions that incorporate or restore natural features to achieve risk mitigation benefits shall also be prioritized, provided they are cost effective and demonstrate long-term advantages over alternative approaches. The plan shall also outline how these actions align with existing efforts by state agencies, local governments, and other entities, ensuring they complement the state hazard mitigation plan. Alabama state agencies engaged in resilience activities shall report those activities to the Chief Resilience Officer.
(3) Community Preparedness. The plan shall include strategies to enhance community awareness to prepare for, and protect against, hazards; to enable greater understanding of personal risks; to educate residents of the state about how to mitigate risks; and to increase knowledge of resources available for mitigation efforts.
(4) Implementation Strategy. The plan shall include an implementation strategy outlining how resilience actions will be enacted, funded, and tracked. It shall define roles, responsibilities, timelines, and metrics while prioritizing actions for high-risk vulnerabilities. The strategy shall also support partnerships, provide technical assistance, and ensure public access to data for planning and decision-making.
(b) The initial plan shall be completed by October 1, 2028, and shall be reviewed and updated at least every two years thereafter to ensure its continued effectiveness and relevance.
(Act 2026-607, §6.)
There is created a fund in the State Treasury to be designated the Alabama Resilience Council Fund to be used to support the activities of the Alabama Resilience Council and the Chief Resilience Officer. The Chief Resilience Officer may receive and deposit into or disburse from the fund any federal, state, or private monies, in accordance with applicable law. Receipts deposited into this fund shall be disbursed only by warrants of the Comptroller drawn upon the State Treasury on itemized vouchers approved by the Commissioner of Insurance. No funds deposited into the Alabama Resilience Council Fund shall be withdrawn or expended except as budgeted and allotted according to Sections 41-4-80 to 41-4-96, inclusive, and 41-19-1 to 41-19-12, inclusive, and only in amounts as stipulated in the general fund appropriations act or other appropriation acts. At the end of each fiscal year, any unencumbered and unexpended balance shall not revert to the State General Fund under Section 41-4-93, but shall carry over to the next fiscal year.
(Act 2026-607, §7.)
(a) There is created within the Department of Insurance the Office of Risk and Resilience. The office shall work to develop and implement programs that address risk and resilience issues facing the state and, therefore, promote a healthy insurance market. The senior director of the office shall be appointed by the Commissioner of Insurance.
(b) The Commissioner of Insurance, in conformance with Section 36-26-10, may employ personnel to operate the office including one employee who is in exempt service and not subject to the state Merit System. This position is in addition to any other exempt position otherwise authorized by law for the department. The compensation of this employee shall be set by the commissioner.
(Act 2026-607, §8.)
This chapter shall be known as the Alabama Disclosure of Material Transactions Act.
(Acts 1996, No. 96-784, p. 1426, §2.)
(a) Every insurer domiciled in this state shall file a report with the commissioner disclosing material acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements unless the acquisitions and dispositions of assets or material nonrenewals, cancellations, or revisions of ceded reinsurance agreements have been submitted to the commissioner for review, approval, or information purposes pursuant to other provisions of the insurance code, laws, regulations, or other requirements.
(b) The report required in subsection (a) is due within 15 days after the end of the calendar month in which any of the transactions in subsection (a) occur.
(c) One complete copy of the report, including any exhibits or other attachments, shall be filed with the following:
(1) The insurance department of the insurers state of domicile.
(2) The National Association of Insurance Commissioners.
(d) All reports obtained by or disclosed to the commissioner, pursuant to this section, shall be given confidential treatment and shall not be subject to subpoena and shall not be made public by the commissioner, the National Association of Insurance Commissioners, or any other person, except to insurance departments of other states, without the prior written consent of the insurer to which it pertains. The commissioner, after giving the insurer who would be affected notice and an opportunity to be heard, may determine that the interest of policyholders, shareholders, or the public will be served by publication, in which event the commissioner may publish all or any part of the information in the manner the commissioner may deem appropriate.
(Acts 1996, No. 96-784, p. 1426, §3.)
(a) Materiality. No acquisitions or dispositions of assets need be reported, pursuant to Section 27-2A-2, if the acquisitions or dispositions are not material. For purposes of this section, a material acquisition (or the aggregate of any series of related acquisitions during any 30-day period) or disposition (or the aggregate of any series of related dispositions during any 30-day period) is one that is nonrecurring and not in the ordinary course of business and involves more than five percent of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the insurance department of the insurer’s state of domicile.
(b) Scope.
(1) Asset acquisitions subject to this chapter include every purchase, lease, exchange, merger, consolidation, succession, or other acquisition, other than the construction or development of real property, by or for the reporting insurer or the acquisition of materials for that purpose.
(2) Asset dispositions subject to this chapter include every sale, lease, exchange, merger, consolidation, mortgage, hypothecation, assignment, whether for the benefit of creditors or otherwise, abandonment, destruction, or other disposition.
(c) Information to be reported.
(1) The following information is required to be disclosed in any report of a material acquisition or disposition of assets:
a. Date of the transaction.
b. Manner of acquisition or disposition.
c. Description of the assets involved.
d. Nature and amount of the consideration given or received.
e. Purpose of, or reason for, the transaction.
f. Manner by which the amount of consideration was determined.
g. Gain or loss recognized or realized as a result of the transaction.
h. Name of the person from whom the assets were acquired or to whom they were disposed.
(2) Insurers are required to report material acquisitions and dispositions on a nonconsolidated basis, unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurers reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars ($1,000,000) total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer’s capital and surplus.
(Acts 1996, No. 96-784, p. 1426, §4.)
(a) Materiality and scope.
(1) No nonrenewals, cancellations, or revisions of ceded reinsurance agreements need be reported pursuant to Section 27-2A-2 if the nonrenewals, cancellations, or revisions are not material. For purposes of this section, a material nonrenewal, cancellation, or revision is one that affects:
a. As respects property and casualty business, including accident and health business written by a property and casualty insurer:
More than 50 percent of the insurer’s total ceded written premium.
More than 50 percent of the insurer’s total ceded indemnity and loss adjustment reserves.
b. As respects life, annuity, and accident and health business: More than 50 percent of the total reserve credit taken for business ceded, on an annualized basis, as indicated in the insurer’s most recent annual statement.
c. As respects either property and casualty or life, annuity, and accident and health business, either of the following events shall constitute a material revision which shall be reported:
An authorized reinsurer representing more than 10 percent of a total cession is replaced by one or more unauthorized reinsurers.
Previously established collateral requirements have been reduced or waived as respects one or more unauthorized reinsurers representing collectively more than 10 percent of a total cession.
(2) However, no filing shall be required if:
a. As respects property and casualty business, including accident and health business written by a property and casualty insurer: The insurer’s total ceded written premium represents, on an annualized basis, less than 10 percent of its total written premium for direct and assumed business.
b. As respects life, annuity, and accident and health business: The total reserve credit taken for business ceded represents, on an annualized basis, less than 10 percent of the statutory reserve requirement prior to any cession.
(b) Information to be reported.
(1) The following information is required to be disclosed in any report of a material nonrenewal, cancellation, or revision of ceded reinsurance agreements:
a. Effective date of the nonrenewal, cancellation, or revision.
b. The description of the transaction with an identification of the initiator thereof.
c. Purpose of, or reason for, the transaction.
d. If applicable, the identity of the replacement reinsurers.
(2) Insurers are required to report all material nonrenewals, cancellations, or revisions of ceded reinsurance agreements on a nonconsolidated basis, unless the insurer is part of a consolidated group of insurers which utilizes a pooling arrangement or 100 percent reinsurance agreement that affects the solvency and integrity of the insurer’s reserves and the insurer ceded substantially all of its direct and assumed business to the pool. An insurer is deemed to have ceded substantially all of its direct and assumed business to a pool if the insurer has less than one million dollars ($1,000,000) total direct plus assumed written premiums during a calendar year that are not subject to a pooling arrangement and the net income of the business not subject to the pooling arrangement represents less than five percent of the insurer’s capital and surplus.
(Acts 1996, No. 96-784, p. 1426, §5.)
This chapter shall be known as the Alabama Risk-Based Capital (RBC) for Insurers Act.
(Acts 1996, No. 96-784, p. 1426, §6.)
As used in this chapter, these terms shall have the following meanings:
(1) ADJUSTED RBC REPORT. An RBC report which has been adjusted by the commissioner in accordance with subsection (e) of Section 27-2B-3.
(2) CORRECTIVE ORDER. An order issued by the commissioner specifying corrective actions which the commissioner has determined are required.
(3) DOMESTIC INSURER. Any insurer domiciled in this state.
(4) FOREIGN INSURER. Any insurer which is licensed to do business in this state but not domiciled in this state.
(5) FRATERNAL BENEFIT SOCIETY. Any insurer licensed under Chapter 34.
(6) HEALTH ORGANIZATION. Any health care service plan, health maintenance organization, limited health service organization, dental services corporation, or other managed care organization licensed under this title. This term does not include any life and disability insurer or property and casualty insurer.
(7) INSURER. As defined in Section 27-1-2, including, without limitation, any fraternal benefit society and any health organization.
(8) LIFE OR HEALTH INSURER. Any insurer licensed to do business in this state and authorized to transact life and/or disability insurance, including a property and casualty insurer writing only disability insurance, but shall not include fraternal benefit societies, health care service corporations, dental service organizations, health maintenance organizations, dental plan organizations, or mutual aid associations.
(9) NAIC. The National Association of Insurance Commissioners.
(10) NEGATIVE TREND. With respect to a life or health insurer or a fraternal benefit society, a negative trend over a period of time, as determined in accordance with the trend test calculation included in the RBC instructions.
(11) PROPERTY AND CASUALTY INSURER. Any insurer licensed to do business in this state and authorized to transact property, marine, casualty, and/or surety insurance, but shall not include monoline mortgage guaranty insurers, financial guaranty insurers and title insurers.
(12) RBC. Risk-based capital.
(13) RBC INSTRUCTIONS. The RBC report including risk-based capital instructions adopted by the NAIC, as the RBC instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC.
(14) RBC LEVEL. An insurer’s company action level RBC, regulatory action level RBC, authorized control level RBC, or mandatory control level RBC where:
a. “Company action level RBC” means, with respect to any insurer, the product of 2.0 and its authorized control level RBC.
b. “Regulatory action level RBC” means the product of 1.5 and its authorized control level RBC.
c. “Authorized control level RBC” means the number determined under the risk-based capital formula in accordance with the RBC instructions.
d. “Mandatory control level RBC” means the product of .70 and the authorized control level RBC.
(15) RBC PLAN. A comprehensive financial plan containing the elements specified in subsection (b) of Section 27-2B-4. If the commissioner rejects the RBC plan, and it is revised by the insurer, with or without the commissioner’s recommendation, the plan shall be called the revised RBC plan.
(16) RBC REPORT. The report required in Section 27-2B-3.
(17) STATUTORY CAPITAL AND SURPLUS. The combination of capital and surplus. As used in this definition, these terms shall have the following meanings:
a. Capital. At any particular time, the sum of (i) the par value of all shares of the insurer having a par value that have been issued, (ii) the amount of consideration received by the insurer for all shares of the insurer without par value that have been issued, except any part of the consideration therefor as may have been allocated to surplus in a manner permitted by law, and (iii) any amounts not included in clauses (i) and (ii) of this subdivision as have been transferred to capital of the insurer, whether upon the issue of shares as a share dividend or otherwise, minus all reductions from the sum as have been affected in a manner permitted by law.
b. Surplus. The excess of the net admitted assets of an insurer over its capital. As used in this definition, “net admitted assets” means the excess of admitted assets of an insurer over its liabilities.
(18) TOTAL ADJUSTED CAPITAL. The sum of:
a. An insurer’s statutory capital and surplus.
b. Other items, if any, as the RBC instructions may provide.
(Acts 1996, No. 96-784, p. 1426, §7; Act 2013-194, p. 365, §1; Act 2014-377, p. 1407, §2.)
(a) Every domestic insurer shall, on or prior to each March 1 (the “filing date”), prepare and submit to the commissioner a report of its RBC levels as of the end of the calendar year just ended, in a form and containing information as is required by the RBC instructions. In addition, every domestic insurer shall file its RBC report with:
(1) The NAIC according to the RBC instructions.
(2) The insurance commissioner in any state in which the insurer is authorized to do business, if the insurance commissioner has notified the insurer of its request in writing, in which case the insurer shall file its RBC report not later than the later of either of the following:
a. Fifteen days from the receipt of notice to file its RBC report with that state.
b. The filing date.
(b) A life and health insurer’s and a fraternal benefit society’s RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account, and may adjust for the covariance between, the following factors determined in each case by applying the factors in the manner set forth in the RBC instructions:
(1) The risk with respect to the insurer’s assets.
(2) The risk of adverse insurance experience with respect to the insurer’s liabilities and obligations.
(3) The interest rate risk with respect to the insurer’s business.
(4) All other business risks and other relevant risks as are set forth in the RBC instructions.
Subdivisions (1) to (4), inclusive, shall be determined in each case by applying the factors in the manner set forth in the RBC instructions.
(c) A property and casualty insurer’s and a health organization’s RBC shall be determined in accordance with the formula set forth in the RBC instructions. The formula shall take into account, and may adjust for the covariance between, the following factors determined in each case by applying the factors in the manner set forth in the RBC instructions:
(1) Asset risk.
(2) Credit risk.
(3) Underwriting risk.
(4) All other business risks and other relevant risks as are set forth in the RBC instructions.
Subdivisions (1) to (4), inclusive, shall be determined by applying the factors in the manner set forth in the RBC instructions.
(d) An excess of capital over the amount produced by the risk-based capital requirements contained in this chapter and the formulas, schedules, and instructions referenced in this chapter is desirable in the business of insurance. Accordingly, insurers should seek to maintain capital above the RBC levels required by this chapter. Additional capital is used and useful in the insurance business and helps to secure an insurer against various risks inherent in or affecting the business of insurance and not accounted for or only partially measured by the risk-based capital requirements contained in this chapter.
(e) If a domestic insurer files an RBC report which in the judgment of the commissioner is inaccurate, then the commissioner shall adjust the RBC report to correct the inaccuracy and shall notify the insurer of the adjustment. The notice shall contain a statement of the reason for the adjustment. An RBC report as so adjusted is referred to as an “adjusted RBC report.”
(Acts 1996, No. 96-784, p. 1426, §8; Act 2013-194, p. 365, §1; Act 2014-377, p. 1407, §2.)
(a) Company action level event means any of the following events:
(1) The filing of an RBC report by an insurer which indicates any of the following:
a. The insurer’s total adjusted capital is greater than or equal to its regulatory action level RBC, but less than its company action level RBC.
b. If a life or health insurer or fraternal benefit society, the insurer has total adjusted capital which is greater than or equal to its company action level RBC but less than the product of its authorized control level RBC and 3.0 and has a negative trend.
c. If a property and casualty insurer or a health organization, the insurer has total adjusted capital which is greater than or equal to its company action level RBC, but less than the product of its authorized control level RBC and 3.0, and triggers the trend test determined in accordance with the trend test calculation included in the property and casualty or health organization RBC instructions.
(2) The notification by the commissioner to the insurer of an adjusted RBC report that indicates an event in subdivision (1) of this subsection, provided the insurer does not challenge the adjusted RBC report under Section 27-2B-8.
(3) If, pursuant to Section 27-2B-8, an insurer challenges an adjusted RBC report that indicates the event in subdivision (1) of this subsection, the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(b) In the event of a company action level event, the insurer shall prepare and submit to the commissioner an RBC plan which shall include all of the following:
(1) Identify the conditions which contribute to the company action level event.
(2) Contain proposals of corrective actions which the insurer intends to take and would be expected to result in the elimination of the company action level event.
(3) Provide projections of the insurer’s financial results in the current year and at least the four succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory operating income, net income, capital, or surplus. The projections for both new and renewal business may include separate projections for each major line of business and separately identify each significant income, expense, and benefit component.
(4) Identify the key assumptions impacting the insurer’s projections and the sensitivity of the projections to the assumptions.
(5) Identify the quality of, and problems associated with, the insurer’s business, including, but not limited to, its assets, anticipated business growth and associated surplus strain, extraordinary exposure to risk, mix of business, and use of reinsurance, if any, in each case.
(c) The RBC plan shall be submitted as follows:
(1) Within 45 days of the company action level event.
(2) If the insurer challenges an adjusted RBC report pursuant to Section 27-2B-8, within 45 days after notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(d) Within 60 days after the submission by an insurer of an RBC plan to the commissioner, the commissioner shall notify the insurer whether the RBC plan shall be implemented or is, in the judgment of the commissioner, unsatisfactory. If the commissioner determines the RBC plan is unsatisfactory, the notification to the insurer shall set forth the reasons for the determination, and may set forth proposed revisions which will render the RBC plan satisfactory, in the judgment of the commissioner. Upon notification from the commissioner, the insurer shall prepare a revised RBC plan, which may incorporate by reference any revisions proposed by the commissioner, and shall submit the revised RBC plan to the commissioner as follows:
(1) Within 45 days after the notification from the commissioner.
(2) If the insurer challenges the notification from the commissioner under Section 27-2B-8, within 45 days after a notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(e) In the event of a notification by the commissioner to an insurer that the insurer’s RBC plan or revised RBC plan is unsatisfactory, the commissioner may, at the commissioner’s discretion, subject to the insurer’s right to a hearing under Section 27-2B-8, specify in the notification that the notification constitutes a regulatory action level event.
(f) Every domestic insurer that files an RBC plan or revised RBC plan with the commissioner shall file a copy of the RBC plan or revised RBC plan with the insurance commissioner in any state in which the insurer is authorized to do business if:
(1) The state has an RBC provision substantially similar to subsection (a) of Section 27-2B-9.
(2) The insurance commissioner of that state has notified the insurer of its request for the filing in writing, in which case the insurer shall file a copy of the RBC plan or revised RBC plan in that state no later than the later of either of the following:
a. Fifteen days after the receipt of notice to file a copy of its RBC plan or revised RBC plan with the state.
b. The date on which the RBC plan or revised RBC plan is filed under subsections (c) and (d) of this section.
(Acts 1996, No. 96-784, p. 1426, §9; Act 2013-194, p. 365, §1; Act 2014-377, p. 1407, §2.)
(a) “Regulatory action level event” means, with respect to any insurer, any of the following events:
(1) The filing of an RBC report by the insurer which indicates that the insurer’s total adjusted capital is greater than or equal to its authorized control level RBC but less than its regulatory action level RBC.
(2) The notification by the commissioner to an insurer of an adjusted RBC report that indicates the event in subdivision (1), provided the insurer does not challenge the adjusted RBC report under Section 27-2B-8.
(3) If, pursuant to Section 27-2B-8, the insurer challenges an adjusted RBC report that indicates the event in subdivision (1), the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(4) The failure of the insurer to file an RBC report by the filing date, unless the insurer has provided an explanation for the failure which is satisfactory to the commissioner and has cured the failure within 10 days after the filing date.
(5) The failure of the insurer to submit an RBC plan to the commissioner within the time period set forth in subsection (c) of Section 27-2B-4.
(6) Notification by the commissioner to the insurer of both of the following:
a. The RBC plan or revised RBC plan submitted by the insurer is, in the judgment of the commissioner, unsatisfactory.
b. The notification constitutes a regulatory action level event with respect to the insurer, provided the insurer has not challenged the determination under Section 27-2B-8.
(7) If, pursuant to Section 27-2B-8, the insurer challenges a determination by the commissioner under subdivision (6), the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the challenge.
(8) Notification by the commissioner to the insurer that the insurer has failed to adhere to its RBC plan or revised RBC plan, but only if the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event in accordance with its RBC plan or revised RBC plan and the commissioner has so stated in the notification, provided the insurer has not challenged the determination under Section 27-2B-8.
(9) If, pursuant to Section 27-2B-8, the insurer challenges a determination by the commissioner under subdivision (8), the notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the challenge.
(b) In the event of a regulatory action level event, the commissioner shall do all of the following:
(1) Require the insurer to prepare and submit an RBC plan or, if applicable, a revised RBC plan.
(2) Perform an examination or analysis as the commissioner deems necessary of the assets, liabilities, and operations of the insurer including a review of its RBC plan or revised RBC plan.
(3) Subsequent to the examination or analysis, issue an order specifying corrective action as the commissioner shall determine is required.
(c) In determining corrective actions, the commissioner may take into account the factors as are deemed relevant with respect to the insurer, based upon the commissioner’s examination or analysis of the assets, liabilities, and operations of the insurer, including, but not limited to, the results of any sensitivity tests undertaken pursuant to the RBC instructions. The RBC plan or revised RBC plan shall be submitted:
(1) Within 45 days after the occurrence of the regulatory action level event.
(2) If the insurer challenges an adjusted RBC report pursuant to Section 27-2B-8, and the challenge is not frivolous in the judgment of the commissioner, within 45 days after the notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(3) If the insurer challenges a revised RBC plan pursuant to Section 27-2B-8, and the challenge is not frivolous in the judgment of the commissioner, within 45 days after the notification to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(d) The commissioner may retain actuaries and investment experts and other consultants, as may be necessary in the judgment of the commissioner, to review the insurer’s RBC plan or revised RBC plan or to examine or analyze the assets, liabilities, and operations of the insurer, and to formulate the corrective order with respect to the insurer. The fees, costs, and expenses relating to consultants shall be borne by the affected insurer or other party as directed by the commissioner.
(Acts 1996, No. 96-784, p. 1426, §10.)
(a) “Authorized control level event” means any of the following events:
(1) The filing of an RBC report by the insurer which indicates that the insurer’s total adjusted capital is greater than or equal to its mandatory control level RBC but less than its authorized control level RBC.
(2) The notification by the commissioner to the insurer of an adjusted RBC report that indicates the event in subdivision (1), provided the insurer does not challenge the adjusted RBC report under Section 27-2B-8.
(3) If, pursuant to Section 27-2B-8, the insurer challenges an adjusted RBC report that indicates the event in subdivision (1), notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(4) The failure of the insurer to respond, in a manner satisfactory to the commissioner, to a corrective order, provided the insurer has not challenged the corrective order under Section 27-2B-8.
(5) If the insurer has challenged a corrective order under Section 27-2B-8 and the commissioner has, after a hearing, rejected the challenge or modified the corrective order, the failure of the insurer to respond, in a manner satisfactory to the commissioner, to the corrective order subsequent to rejection or modification by the commissioner.
(b) In the event of an authorized control level event with respect to an insurer, the commissioner shall:
(1) Take actions as required under Section 27-2B-5 regarding an insurer with respect to which a regulatory action level event has occurred, or
(2) If the commissioner deems it to be in the best interests of the policyholders and creditors of the insurer and of the public, take actions as necessary to cause the insurer to be placed under regulatory control, pursuant to Chapter 32. In the event the commissioner takes actions, the authorized control level event shall be deemed sufficient grounds for the commissioner to take action pursuant to Chapter 32, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in Chapter 32.
(Acts 1996, No. 96-784, p. 1426, §11.)
(a) “Mandatory control level event” means any of the following events:
(1) The filing of an RBC report which indicates that the insurer’s total adjusted capital is less than its mandatory control level RBC.
(2) Notification by the commissioner to the insurer of an adjusted RBC report that indicates the event in subdivision (1), provided the insurer does not challenge the adjusted RBC report under Section 27-2B-8.
(3) If, pursuant to Section 27-2B-8, the insurer challenges an adjusted RBC report that indicates the event in subdivision (1), notification by the commissioner to the insurer that the commissioner has, after a hearing, rejected the insurer’s challenge.
(b) In the event of a mandatory control level event:
(1) With respect to a life insurer, health organization, or fraternal benefit society, the commissioner shall take actions as necessary to place the insurer under regulatory control pursuant to Chapter 32. In that event, the mandatory control level event shall be deemed sufficient grounds for the commissioner to take action pursuant to Chapter 32, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in Chapter 32. Notwithstanding any of the foregoing, the commissioner may forego action for up to 90 days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the 90-day period.
(2) With respect to a property and casualty insurer, the commissioner shall take actions as necessary to place the insurer under regulatory control pursuant to Chapter 32. In the case of an insurer which is writing no business and which is running-off its existing business, the commissioner may allow the insurer to continue its run-off under his or her supervision. In either event, the mandatory control level event shall be deemed sufficient grounds for the commissioner to take action, pursuant to Chapter 32, and the commissioner shall have the rights, powers, and duties with respect to the insurer as are set forth in Chapter 32. Notwithstanding any of the foregoing, the commissioner may forego action for up to 90 days after the mandatory control level event if the commissioner finds there is a reasonable expectation that the mandatory control level event may be eliminated within the 90-day period.
(Acts 1996, No. 96-784, p. 1426, §12; Act 2014-377, p. 1407, §2.)
(a) An insurer shall have the right to a departmental hearing, on the record, at which the insurer may challenge a determination or action by the commissioner upon any of the following:
(1) Notification to an insurer by the commissioner of an adjusted RBC report.
(2) Notification to an insurer by the commissioner that:
a. The insurer’s RBC plan or revised RBC plan is unsatisfactory.
b. The notification constitutes a regulatory action level event with respect to the insurer.
(3) Notification to any insurer by the commissioner that the insurer has failed to adhere to its RBC plan or revised RBC plan and that the failure has a substantial adverse effect on the ability of the insurer to eliminate the company action level event with respect to the insurer in accordance with its RBC plan or revised RBC plan.
(4) Notification to an insurer by the commissioner of a corrective order with respect to the insurer.
(b) The insurer shall notify the commissioner of its request for a hearing within five days after the notification by the commissioner under subdivisions (1), (2), (3), or (4) of subsection (a). Upon receipt of the insurer’s request for a hearing, the commissioner shall set a date for the hearing, which date shall be no less than 10 nor more than 30 days after the date of the insurer’s request.
(Acts 1996, No. 96-784, p. 1426, §13.)
(a) All RBC reports, to the extent the information therein is not required to be set forth in a publicly available annual statement schedule, and RBC plans, including the results or report of any examination or analysis of an insurer performed pursuant hereto and any corrective order issued by the commissioner pursuant to examination or analysis, with respect to any domestic insurer or foreign insurer which are filed with the commissioner constitute information that may be damaging to the insurer if made available to its competitors and therefore shall be kept confidential by the commissioner. This information shall not be made public or be subject to subpoena, other than by the commissioner, and then only for the purpose of enforcement actions taken by the commissioner pursuant to this chapter or any other provision of the insurance laws of this state.
(b) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) In order to assist in the performance of the commissioner’s duties, the commissioner may do all of the following:
(1) Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a), with other state, federal, and international regulatory agencies, with the National Association of Insurance Commissioners (NAIC) and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information.
(2) Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
(3) Enter into agreements governing sharing and use of information consistent with this subsection.
(d) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (c).
(e) It is the judgment of the Legislature that the comparison of an insurer’s total adjusted capital to any of its RBC levels is a regulatory tool which may indicate the need for possible corrective action with respect to the insurer, and is not intended as a means to rank insurers generally. Therefore, except as otherwise required under the provisions of this chapter, the making, publishing, disseminating, circulating, or placing before the public, or causing, 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 an assertion, representation, or statement with regard to the RBC levels of any insurer, or of any component derived in the calculation, by any insurer, agent, broker, or other person engaged in any manner in the insurance business, would be misleading and is therefore prohibited. Except, if any materially false statement with respect to the comparison regarding an insurer’s total adjusted capital to its RBC levels, or any of them, or an inappropriate comparison of any other amount to the insurer’s RBC levels is published in any written publication, and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of the statement, or the inappropriateness, as the case may be, then the insurer may publish an announcement in a written publication if the sole purpose of the announcement is to rebut the materially false statement.
(f) It is the further judgment of the Legislature that the RBC instructions, RBC reports, adjusted RBC reports, RBC plans, and revised RBC plans are intended solely for use by the commissioner in monitoring the solvency of insurers and the need for possible corrective action with respect to insurers and shall not be used by the commissioner for ratemaking nor considered or introduced as evidence in any rate proceeding nor used by the commissioner to calculate or derive any elements of an appropriate premium level or rate of return for any line of insurance which an insurer or any affiliate is authorized to write.
(Acts 1996, No. 96-784, p. 1426, §14; Act 2017-228, §1.)
(a) The provisions of this chapter are supplemental to any other provisions of the laws of this state, and shall not preclude or limit any other powers or duties of the commissioner under other laws, including, but not limited to, Chapter 32, and Section 27-2-33.
(b) The commissioner may adopt reasonable rules necessary for the implementation of this chapter.
(c) The commissioner may exempt from the application of this chapter any domestic property and casualty insurer that meets all of the following criteria:
(1) Writes direct business only in this state.
(2) Writes direct annual premiums of two million dollars ($2,000,000) or less.
(3) Assumes no reinsurance in excess of five percent of direct premium written.
(d) The commissioner may exempt from the application of this chapter any health organization that meets all of the following criteria:
(1) Writes direct business only in this state.
(2) Assumes no reinsurance in excess of five percent of direct premium written.
(3) Meets either of the following criteria:
a. Writes direct annual premiums for comprehensive medical business of one million dollars ($1,000,000) or less.
b. Is a limited health services organization that covers less than 1,000 lives.
(Acts 1996, No. 96-784, p. 1426, §15; Act 2014-377, p. 1407, §3.)
(a) Any foreign insurer shall, upon the written request of the commissioner, submit to the commissioner an RBC report, as of the end of the calendar year just ended, the later of either:
(1) The date an RBC report would be required to be filed by a domestic insurer under this chapter.
(2) Fifteen days after the request is received by the foreign insurer.
Any foreign insurer shall, at the written request of the commissioner, promptly submit to the commissioner a copy of any RBC plan that is filed with the insurance commissioner of any other state.
(b) In the event of a company action level event, regulatory action level event, or authorized control level event with respect to any foreign insurer, as determined under the RBC statute applicable in the state of domicile of the insurer or, if no RBC statute is in force in that state, pursuant to this chapter, or if the insurance commissioner of the state of domicile of the foreign insurer fails to require the foreign insurer to file an RBC plan, in the manner specified under that state’s RBC statute or, if no RBC statute is in force in that state, under Section 27-2B-4, the commissioner may require the foreign insurer to file an RBC plan with the commissioner. In that event, the failure of the foreign insurer to file an RBC plan with the commissioner shall be grounds to order the insurer to cease and desist from writing new insurance business in this state.
(c) In the event of a mandatory control level event with respect to any foreign insurer, if no domiciliary receiver has been appointed with respect to the foreign insurer under the rehabilitation and liquidation statute applicable in the state of domicile of the foreign insurer, the commissioner may make application to the circuit court permitted under Chapter 32, with respect to the liquidation of property of foreign insurers found in this state. The occurrence of the mandatory control level event shall be considered adequate grounds for the application.
(Acts 1996, No. 96-784, p. 1426, §16; Acts 1997, No. 97-216, p. 331, §1.)
There shall be no liability on the part of, and no cause of action shall arise against, the commissioner or the Department of Insurance, or its employees or agents for any action taken by them in the performance of their powers and duties pursuant to this chapter.
(Acts 1996, No. 96-784, p. 1426, §17.)
All notices by the commissioner to an insurer that may result in regulatory action pursuant to this chapter, shall be effective upon dispatch if transmitted by registered or certified mail, or in the case of any other transmission shall be effective upon the insurer’s receipt of the notice.
(Acts 1996, No. 96-784, p. 1426, §18.)
(a) For RBC reports required to be filed by life insurers with respect to 1996, the following requirements shall apply in lieu of the provisions of Sections 27-2B-4, 27-2B-5, 27-2B-6, and 27-2B-7 as follows:
(1) In the event of a company action level event, with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder.
(2) In the event of a regulatory action level event under subdivisions (1), (2), or (3) of subsection (a) of Section 27-2B-5, the commissioner shall take the actions required under Section 27-2B-4.
(3) In the event of a regulatory action level event under subdivisions (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 27-2B-5, or an authorized control level event, the commissioner shall take the actions required under Section 27-2B-5 with respect to the insurer.
(4) In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under Section 27-2B-6.
(b) For RBC reports required to be filed by property and casualty insurers with respect to 1996, the following requirements shall apply in lieu of the provisions of Sections 27-2B-4, 27-2B-5, 27-2B-6, and 27-2B-7:
(1) In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder.
(2) In the event of a regulatory action level event under subdivisions (1), (2), or (3) of subsection (a) of Section 27-2B-5, the commissioner shall take the actions required under Section 27-2B-4.
(3) In the event of a regulatory action level event under subdivisions (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 27-2B-5, or an authorized control level event, the commissioner shall take the actions required under Section 27-2B-5 with respect to the insurer.
(4) In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under Section 27-2B-6.
(Acts 1996, No. 96-784, p. 1426, §19.)
For RBC reports required to be filed by health organizations and fraternal benefit societies with respect to 2015, the following requirements shall apply in lieu of the provisions of Sections 27-2B-4, 27-2B-5, 27-2B-6, and 27-2B-7:
(1) In the event of a company action level event with respect to a domestic insurer, the commissioner shall take no regulatory action hereunder.
(2) In the event of a regulatory action level event under subdivisions (1), (2), or (3) of subsection (a) of Section 27-2B-5, the commissioner shall take the actions required under Section 27-2B-4.
(3) In the event of a regulatory action level event under subdivisions (4), (5), (6), (7), (8), or (9) of subsection (a) of Section 27-2B-5, or an authorized control level event, the commissioner shall take the actions required under Section 27-2B-5 with respect to the organization or society.
(4) In the event of a mandatory control level event with respect to an insurer, the commissioner shall take the actions required under Section 27-2B-6.
(Act 2014-377, p. 1407, §3.)
(a) No person shall act as an insurer and no insurer shall transact insurance in this state unless so authorized by a subsisting certificate of authority issued to it by the commissioner, except as to such transactions as are expressly otherwise provided for in this title.
(b) No insurer shall from offices or by personnel or facilities located in this state solicit insurance applications or otherwise transact insurance in another state or country unless it holds a subsisting certificate of authority issued to it by the commissioner authorizing it to transact the same kind or kinds of insurance in this state.
(Acts 1971, No. 407, p. 707, §48.)
A certificate of authority shall not be required of an insurer with respect to the following:
(1) Transactions relative to 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, or delivered outside this state;
(3) Transactions pursuant to surplus lines coverages lawfully written under Chapter 10 of this title; and
(4) Reinsurance.
(Acts 1971, No. 407, p. 707, §49.)
A foreign insurer may transact business in this state without certificate of authority for the purpose, and to the extent only, of investing its funds in real estate located in this state, or in securities secured thereby, by complying with the requirements of Amendment 154 of the Constitution of Alabama. Such an insurer shall not be subject to any other provisions of this title.
(Acts 1971, No. 407, p. 707, §50.)
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 insurer or an incorporated mutual insurer or a reciprocal insurer, all 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 36 of this title applicable to the kind, or kinds, of insurance transacted by such insurer, wherever transacted in the United States, or which transacts insurance in the United States on the assessment premium plan, stipulated premium plan, cooperative plan, or any similar plan;
(2) Any foreign insurer which has transacted insurance as an authorized insurer in its state or country of domicile for less than five years shall not be authorized to transact insurance in this state unless it is otherwise qualified for such authority under this code and is:
a. The wholly owned subsidiary of an insurer authorized to transact insurance in this state;
b. The continuing corporation resulting from a merger or consolidation of insurers at least one of which insurers has been an authorized insurer in its state or country of domicile for at least five years; or
c. Is in compliance with the requirements as to capital and surplus provided therefor under Sections 27-3-7 and 27-3-8;
(3) The commissioner shall not grant or continue authority to transact insurance in this state as to any insurer the management of which is found by him, after thorough investigation, to be incompetent or untrustworthy, or so lacking in insurance company managerial experience as to make the proposed operation hazardous to the insurance-buying public or which, after thorough examination or investigation, he has good reason to believe is affiliated directly or indirectly through ownership, control, reinsurance transactions, or other insurance or business relations with any person, or persons, whose business operations are, or have been, marked to the injury of insurers, stockholders, policyholders, creditors, or the public by manipulation of assets, of accounts or of reinsurance or by bad faith;
(4) No insurer the voting control of which is held, in whole or substantial part, by any government or governmental agency shall be authorized to transact insurance in this state. Membership in a mutual insurer or subscribership in a reciprocal insurer shall not be deemed to be either an ownership or control of the insurer for the purposes of this subdivision; and
(5) Lloyd’s plan insurers may be authorized to transact insurance in this state as provided in Section 27-3-16.
(Acts 1971, No. 407, p. 707, §51.)
(a) No insurer shall be authorized to transact insurance which has or uses a name so similar to that of another insurer already so authorized as likely to mislead the public.
(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 so authorized which has or uses a name which tends to deceive or mislead as to the type of organization of the insurer.
(d) In case of conflict of names hereafter between two insurers, or a conflict otherwise prohibited under the foregoing subsections of this section, the commissioner may permit or require, as a condition to the issuance of an original certificate of authority to an applicant insurer, that such insurer shall use in Alabama such supplementation or modification of its name or such business name as may reasonably be necessary to avoid such conflict. No such name, supplementation, or modification shall contain the principal identifying factor contained in the name of any other insurer already authorized to transact insurance in this state.
(Acts 1971, No. 407, p. 707, §52.)
An insurer which otherwise qualifies therefor may be authorized to transact any one kind or combination of kinds of insurance as defined in Chapter 5 of this title, except:
(1) A life insurer may grant annuities and shall be authorized to transact in addition only disability insurance, and no insurer shall be authorized to transact life insurance in this state which transacts anywhere any kind of insurance in addition to life and disability insurances and annuities; except, that the commissioner shall, if the insurer otherwise qualifies therefor, continue to so authorize any life insurer which, immediately prior to the effective date of this title, was lawfully authorized to transact in this state a kind or kinds of insurance in addition to life and disability;
(2) A reciprocal or Lloyd’s plan insurer shall not transact life insurance; and
(3) A title insurer shall be a stock insurer and shall transact no other kind of insurance; except, that the commissioner may continue to so authorize any insurer which immediately prior to the effective date of this title was lawfully authorized to transact and was lawfully writing in this state a kind, or kinds, of insurance in addition to title insurance.
(Acts 1971, No. 407, p. 707, §53.)
(a) Notwithstanding the provisions of subdivision (3) of Section 27-3-6, a title insurer may issue closing or settlement protection to a person who is a party to a transaction in which a title insurance policy will be issued.
(b) The form of closing or settlement protection shall be submitted to and approved by the commissioner.
(c) The closing or settlement protection may indemnify a person only against loss of closing or settlement funds because of one of the following acts of a settlement agent, such as a title insurance agent or other settlement service provider which has been approved by the title insurer for such protection, under the terms and conditions of the closing protection as approved by the commissioner:
(1) Theft or misappropriation of settlement funds in connection with a transaction in which a title insurance policy or title insurance policies will be issued by or on behalf of the title insurer issuing the closing or settlement protection, but only to the extent that the theft relates to the status of the title to that interest in land or to the validity, enforceability, and priority of the lien of the mortgage on that interest in land.
(2) Failure to comply with the written closing instructions when agreed to by the settlement agent, title agent, or employee of the title insurer, but only to the extent that the failure to follow the instructions relates to the status of the title to that interest in land or the validity, enforceability, and priority of the lien of the mortgage on that interest in land.
(d) The fee charged by a title insurer for each party receiving closing protection coverage shall be submitted to and approved by the commissioner and shall not be subject to any agreement requiring a division of fees or premiums collected on behalf of the title insurer. The fee shall be not less than twenty-five dollars ($25) for each party receiving the benefit of closing protection in the case of a buyer or lender receiving a title insurance policy in connection with the real property transaction giving rise to the issuance of the closing or settlement protection. The fee shall be not less than fifty dollars ($50) in the case of a seller conveying title or providing owner financing and not receiving a loan policy of title insurance in connection with the real property transaction giving rise to the issuance of the closing or settlement protection.
(e) In connection with any transaction involving the purchase or sale of a fee simple or possessory interest in real property in this state in which closing or settlement protection has not been requested by the lender prior to closing, the title insurer shall obtain or cause its agent to obtain, at or before the closing of settlement and disbursement of any funds, a statement in writing from the parties acknowledging that the parties have received a notice that closing or settlement protection may be available in accordance with the guidelines of the title insurer and that the parties do or do not desire to purchase closing protection. The written notice of availability of closing or settlement protection shall contain all of the following:
(1) The address or legal description of the property.
(2) A disclosure that closing protection may be available in accordance with the guidelines of the title insurer and the fee therefor.
(3) A space to indicate the desire of the purchaser to either acquire or decline closing protection.
(4) The date the notice is executed by the purchaser.
(5) The signature of the purchaser or purchasers.
(f) In the event that the statement required in subsection (e) is not obtained from the purchaser at or before the closing of settlement and disbursement of any funds, the omission may be cured by the title agent or title insurer at any time subsequent to the closing of settlement, but prior to actual or constructive notice of a claim or possible claim which would have been covered by closing or settlement protection by sending a certified letter, return receipt requested, to the last known address of the purchaser, which includes the notification required in this section.
(g) A title insurer may not provide any other coverage which purports to indemnify against improper acts or omissions of a person with regard to settlement or closing services.
(Act 2011-556, p. 1039, §1.)
(a) To qualify for authority to transact any one kind of insurance, as defined in Chapter 5 of this title, or combination of kinds of insurance as shown below, an insurer applying for its original certificate of authority in this state after the effective date of this title or continuing such original certificate of authority shall possess and thereafter maintain unimpaired paid-in capital stock, if a stock insurer, or unimpaired surplus, if a foreign mutual or foreign reciprocal insurer, in amount not less than as applicable under the schedule below and shall possess when first so authorized such additional funds as surplus as are required under Section 27-3-8:
Kind or kinds of insuranceMinimum capital or surplus requiredLife$800,000.00Disability 500,000.00Life and disability 800,000.00Property 300,000.00Marine 300,000.00Casualty 400,000.00Surety 350,000.00Title 200,000.00Multiple lines -Any two or more: Property, marine, casualty, surety; and all kinds of insurance other than title and life insurance 500,000.00
(b) An insurer holding a valid certificate of authority to transact insurance in this state immediately prior to the effective date of this title may continue to be authorized to transact the same kinds of insurance as permitted by such certificate of authority by maintaining thereafter not less than the same amount of paid-in capital stock, if a stock insurer, or not less than the same amount of surplus, if a mutual or reciprocal insurer, as required by the laws of this state for such authority immediately prior to such effective date; but such insurer shall not thereafter be granted authority to transact any other or additional kind of insurance unless it then fully complies with the requirements as to capital and surplus, as applied to all kinds of insurance it then proposes to transact, as provided by this title with respect to insurers applying for original certificates of authority under this title.
(c) Capital and surplus requirements shall be based upon all the kinds of insurance actually transacted, or to be transacted, by the insurer in any and all areas in which it operates, whether or not only a portion of such kinds are to be transacted in this state.
(d) As to surplus required for qualification to transact one or more kinds of insurance and thereafter to be maintained, domestic mutual insurers shall be governed by Chapter 27 of this title, and domestic reciprocal insurers shall be governed by Chapter 31 of this title.
(e) A life insurer may also grant annuities without additional capital or additional surplus.
(f) A casualty insurer may be authorized to transact also disability insurance without additional capital or additional surplus.
(Code 1940, T. 28, §1; Acts 1965, 2nd Ex. Sess., No. 143, p. 194; Acts 1971, No. 407, p. 707, §54; Acts 1975, No. 1041, p. 2086, §1.)
(a) In addition to the minimum paid-in capital stock (stock insurers) or minimum surplus (mutual and reciprocal insurers) required by Section 27-3-7, special surplus shall be possessed by insurers hereafter applying for original certificates of authority in this state as follows:
(1) All stock insurers and foreign mutual and foreign reciprocal insurers which have actively transacted insurance in their states or countries of domicile as an authorized insurer for less than five years and which do not meet the requirements of paragraphs (2) a or (2) b of Section 27-3-4, when first authorized to transact insurance in this state shall have a surplus or additional surplus equal to 150 percent of the paid-up capital stock, if a stock insurer, or surplus, if a foreign mutual or foreign reciprocal insurer, otherwise required under Section 27-3-7 for the kinds of insurance to be transacted; and
(2) An insurer that has actively transacted insurance as an authorized insurer in its state or country of domicile for more than five years, or which meets the requirements of paragraphs (2) a or (2) b of Section 27-3-4, shall possess when first authorized in this state surplus, if a stock insurer, or additional surplus, if a mutual or reciprocal insurer, equal to 100 percent of the paid-in capital stock, if a stock insurer, or surplus, if a foreign mutual or foreign reciprocal insurer, otherwise required under Section 27-3-7.
(b) If within five years after date of its original certificate of authority to transact insurance in this state such an insurer requests authority to transact an additional kind or kinds of insurance, it shall not be so authorized unless it then possesses surplus, if a stock insurer, or additional surplus, if a mutual or reciprocal insurer, in such an amount as would be required under this section as for an original certificate of authority covering all the kinds of insurance the insurer then proposes to transact.
(c) After issuance of its original certificate of authority the insurer may use the special surplus required under this section in the normal course of its business only.
(d) Execution by a mutual or reciprocal surety insurer as sole surety of certain bonds or undertakings required or permitted by law or by certain political subdivisions, public bodies, or public officers is subject further to surplus requirement as provided in Section 27-24-3.
(Acts 1971, No. 407, p. 707, §55.)
The minimum capital required to form and organize a new domestic stock life insurance company shall be $1,000,000.00, and in addition thereto the minimum surplus to form such a company shall be $1,000,000.00.
(Acts 1973, No. 643, p. 953.)
(a) For the purposes of this section, the following words and phrases shall have the following meanings:
(1) DOMESTIC STOCK INSURER. A corporation incorporated under the laws of the State of Alabama with its capital divided into shares and owned by its stockholders which is engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance.
(2) CAPITAL SURPLUS. Such term shall have the meaning given thereto in the statutes of this state relating to the powers and procedures of domestic private corporations formed for profit.
(3) EARNED SURPLUS. Such term shall have the meaning given thereto in the statutes of this state relating to the powers and procedures of domestic private corporations formed for profit.
(b) A domestic stock insurer which has the minimum unimpaired paid-in capital stock required for the transaction of insurance by such domestic stock insurer by the statutes of this state governing domestic stock insurers may, by resolution of its board of directors, apply any part, or all, of its capital surplus to the reduction or elimination of any deficit, however incurred, but only after first eliminating the then earned surplus, if any, of the domestic stock insurer by applying such earned surplus against such deficit. Each such application of capital surplus shall, to the extent thereof, effect a reduction of capital surplus.
(Acts 1973, No. 825, p. 1292.)
(a) The commissioner shall not issue or permit to exist a certificate of authority as to any insurer, other than an alien insurer, unless it has deposited and maintains deposited in trust with the Treasurer of this state cash or securities eligible under Section 27-6-3 and having a value at all times of not less than $100,000.00 or the minimum paid-in capital stock, if a stock insurer, or surplus, if a mutual or reciprocal insurer, required to be maintained by the insurer under this title for authority to transact the kinds of insurance to be transacted, whichever is the smaller amount.
(b) The deposit shall be for the general benefit and protection of the insurer’s policyholders or its policyholders and creditors.
(c) In lieu of such deposit, or part thereof, in this state of a foreign insurer, the commissioner shall, subject to the retaliatory law, Section 27-3-29, accept the current certificate in proper form of the public official having supervision over insurers in any other state to the effect that a like deposit, or part thereof, of such insurer, comprised of cash or securities of substantially the same character as required under subsection (a) of this section, of similar deposits in this state, is being maintained under law in public custody or control in such state in trust for the purpose, among other reasonable purposes of protection of policyholders or policyholders and creditors, of the protection of all the insurer’s policyholders or of its policyholders and creditors in this state.
(d) All such deposits in this state shall be subject to the applicable provisions of Chapter 6 of this title.
(e) Any insurance company, with respect to its general account or separate accounts, is authorized to deposit or arrange for the deposit of securities which it may own in a clearing corporation, as defined in Section 7-8-102(3), or in a federal reserve bank under the book-entry system. When such securities are so deposited, certificates representing securities of the same class of the same insurer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other securities deposited in such clearing corporation by any person, regardless of the ownership of such securities, and securities of small denominations may be merged into one or more certificates of larger denominations. Title to such securities may be transferred by bookkeeping entry on the books of such clearing corporation or federal reserve bank without physical delivery of certificates representing such securities. Any company making deposits by means of such securities shall provide to the commissioner evidence customarily issued by federal reserve banks and clearing corporations establishing that the securities are actually recorded in a book-entry account or actually held in safekeeping by a clearing corporation. Securities deposited in a clearing corporation or in a book-entry account and used to meet the deposit requirements under the insurance laws of this state shall be under the control of the commissioner and shall not be withdrawn by the insurance company without the approval of the commissioner.
(Acts 1909, No. 43, p. 29; Acts 1915, No. 87, p. 132; Acts 1966, Ex. Sess., No. 241, p. 363, §2; Acts 1967, No. 97, p. 436, §2; Acts 1971, No. 407, p. 707, §56; Acts 1981, No. 81-541, p. 904, §1.)
(a) In addition to the deposit required under Sections 27-3-11 or 27-3-14, a surety insurer shall deposit and maintain deposited with the Treasurer of this state in trust for the benefit of holders, resident in this state, of the obligations of the insurer cash or securities eligible under Section 27-6-3 having a value at all times of at least $50,000.00; except, that a domestic surety insurer may take credit for the amount of such special deposit against the deposit otherwise required of it under Section 27-3-11, and except that a foreign insurer showing a deposit pursuant to subsection (c) of Section 27-3-11 in the amount of $200,000.00 shall not be required to comply with this section.
(b) Such deposits shall be subject to the applicable provisions of Chapter 6 of this title.
(Acts 1909, No. 43, p. 29; Acts 1971, No. 407, p. 707, §57.)
(a) For authority to transact such insurance in this state, a foreign title insurer shall have and maintain on deposit in this state for the better protection of its guaranty holders and creditors, resident in this state, under its contracts of title insurance, cash and securities eligible under Section 27-6-3 having a value at all times of not less than $50,000.00. The deposit shall be so made and maintained in trust with a bank or trust company located in this state, approved by the commissioner, having a capital and surplus of not less than $500,000.00.
(b) At its option, a domestic title insurer may maintain a deposit in like manner, amount, character and for like purposes as required for foreign insurers under subsection (a) of this section.
(c) Such deposits shall be subject to the applicable provisions of Chapter 6 of this title.
(Acts 1923, No. 485, p. 635; Acts 1971, No. 407, p. 707, §58.)
(a) An alien insurer shall not have authority to transact insurance in this state unless it has and maintains within the United States as deposits with trustees, public depositaries or in trust institutions approved by the commissioner under Section 27-3-15 assets available for discharge of its United States insurance obligations, which assets shall be in amount not less than the outstanding liabilities of the insurer arising out of its insurance transactions in the United States together with the greater of the following sums:
(1) The largest deposit required by Section 27-3-11 to be made by foreign insurers transacting like kinds of insurance; or
(2) $300,000.00.
(b) Of the amount deposited by an alien insurer, an amount not less than that required under subdivisions (a)(1) or (a)(2) of this section shall be deposited and maintained on deposit in cash or securities eligible for deposit under Section 27-6-3 with the Treasurer of this state or with or through the public official having supervision of insurance in another state and shall be held in trust exclusively for the benefit and protection of the insurer’s policyholders or policyholders and creditors in the United States.
(c) The amount so held on deposit under subdivisions (a)(1) or (a)(2) of this section shall, for the purposes of this title, be deemed to be the paid-in capital, if a stock insurer, or minimum surplus, if a mutual insurer, of the insurer required to be maintained.
(d) If the insurer transacts surety insurance in this state, it shall make and maintain in this state the special deposit required under Section 27-3-12.
(e) Any such deposit made in this state shall be subject to the applicable provisions of Chapter 6 of this title; except, that if this state is the state of entry into the United States of the alien insurer the deposit shall be subject to the provisions of Chapter 33 of this title.
(Code 1940, T. 28, §68; Acts 1967, No. 97, p. 436, §1; Acts 1971, No. 407, p. 707, §59.)
(a) In order to comply with the requirements of Section 27-3-14, an alien insurer shall appoint citizens of the United States of America or public depositaries or trust institutions located in the United States, all as approved by the commissioner, as trustee, or trustees, to hold its funds and assets in trust for the benefit of its policyholders or policyholders and creditors in the United States. Any such trustee, or trustees, shall be named by the board of directors or comparable directive body of the insurer, and a certified copy of the record of the appointment and of the deed of trust shall be filed with the commissioner.
(b) Funds and assets so held, to the extent that they consist of cash, securities and other assets of the same general character as are eligible for the investment of like funds of a domestic insurer, under Sections 27-1-8 and 27-1-9, shall constitute the assets of the insurer for the purposes of this title.
(c) Such trustees and assets, and all accounts and records relating thereto, shall be subject to examination by the commissioner in the same manner as the officers, agents, assets and affairs of insurers.
(d) Trusteed assets of an alien insurer using this state as its state of entry into the United States shall be subject to Chapter 32 of this title.
(Code 1940, T. 28, §69; Acts 1971, No. 407, p. 707, §60.)
Aggregations of individuals as underwriters, whether domestic, foreign, or alien, assuming insurance risks upon the plan known as “Lloyd’s,” whereby each underwriter is liable for the proportionate part assumed by him of the whole amount so insured by a policy issued by such underwriters, may be authorized to transact any kind, or kinds, of insurance in this state other than life or title insurances if the insurer is otherwise in compliance with this title, subject to the following conditions:
(1) If a foreign or alien insurer, it must have successfully been in business as an authorized insurer in the state or country of domicile for at least 10 years.
(2) If a domestic insurer, it must file with the commissioner evidence, satisfactory to him, that it has been soundly organized and that its insurance operations will, at all times, be competently conducted by individuals having the necessary experience in insurance underwriting and management to do so, that at all times it will be comprised of not less than 30 individual “underwriters,” that no such underwriter shall retain risk as to any one subject of insurance in amount exceeding two percent of his total net worth and that the liability of such underwriter, as to any such risk within the extent and amount of coverage provided by the amount of insurance, is unlimited. For the purpose of determining compliance with this provision, the commissioner may at any time require any and all such underwriters to file with him their individual financial statements, duly certified and sworn to under oath, in such form and scope of contents as the commissioner may reasonably require. The assets and insurance transactions of any or all such underwriters shall be subject to examination by the commissioner under the same conditions as apply to domestic insurers in general under Chapter 2 of this title.
(3) Such an insurer shall otherwise be subject to the same applicable requirements and obligations as apply under this title to a stock insurer transacting like kinds of insurance; and for the purposes of this title such an insurer’s deposit made and maintained as required under Section 27-3-11 or subdivision (a)(1) or (a)(2) of Section 27-3-14 shall be deemed to be the minimum capital required to be maintained by such an insurer, but subject to the requirements of Section 27-3-8 as to surplus.
(Code 1940, T. 28, §71; Acts 1971, No. 407, p. 707, §61.)
To apply for an original certificate of authority an insurer shall file with the commissioner its application therefor, accompanied by the applicable fees as specified in Section 27-4-2, showing its name, location of its home office or, if an alien insurer, principal office in the United States, kinds of insurance to be transacted, state or country of domicile and such additional information as the commissioner may reasonably require, together with the following documents, as applicable:
(1) A copy of its corporate charter, articles of incorporation or other charter documents with all amendments thereto, certified by the public officer with whom the originals are on file in the state or country of domicile;
(2) If a mutual insurer, a copy of its bylaws, as amended, certified by its secretary or other officer having custody thereof;
(3) If a foreign reciprocal insurer, copies of the power of attorney of its attorney-in-fact or its subscribers’ agreement, certified by its attorney-in-fact, and if a domestic reciprocal insurer, the declaration provided for by Section 27-31-7;
(4) A copy of its financial statement as of December 31, next preceding, on the “convention” form as then currently in general use for similar 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;
(5) Copy of report of last examination, if any, made of the insurer, certified by the insurance supervisory official of its state of domicile or of entry into the United States;
(6) Appointment of the commissioner pursuant to Section 27-3-24 as its attorney to receive service of legal process;
(7) If a foreign or alien insurer, a certificate of the public official having supervision of insurance in its state, or state of entry into the United States or country of domicile showing that it is legally organized and is authorized to transact the kinds of insurance proposed to be transacted in this state;
(8) 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;
(9) Evidence satisfactory to the commissioner of any deposit required under Sections 27-3-11, 27-3-12, 27-3-13, or 27-3-14; and
(10) If other than a life insurer, the affidavit, on a form furnished by the commissioner, of the insurer’s president or other chief officer that it has not violated any of the provisions of Section 27-3-27 during the preceding 12 months and an agreement that the insurer accepts the terms and the obligations of such section as part of the consideration for authority to transact insurance in this state.
(Acts 1935, No. 194, p. 256; Acts 1955, 2nd Ex. Sess., No. 77, p. 193, §2; Acts 1971, No. 407, p. 707, §62.)
(a) If upon completion of the application for a certificate of authority the commissioner finds that the insurer has met the requirements for and is entitled thereto 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 a certificate of authority within a reasonable period after its completion.
(b) The certificate, if issued, shall specify the kind, or kinds, of insurance the insurer is authorized to transact in this state. At the insurer’s request, the commissioner may issue a certificate of authority limited to particular types of insurance or insurance coverages within the scope of a kind of insurance as defined in Chapter 5 of this title.
(c) Although issued to the insurer, the certificate of authority is at all times the property of the State of Alabama. Upon any expiration, suspension, or termination thereof, the insurer shall promptly deliver the certificate of authority to the commissioner.
(Acts 1971, No. 407, p. 707, §63.)
(a) Certificates of authority issued or renewed under this title shall continue in force as long as the insurer is entitled thereto under this title and until suspended, revoked or terminated at the request of the insurer; subject, however, to continuance of the certificate by the insurer each year by:
(1) Payment prior to March 1 of the continuation fee provided in Section 27-4-2; and
(2) Due filing by the insurer of its annual statement for the calendar year preceding as required under Section 27-3-26.
(b) If not so continued by the insurer, its certificate of authority shall expire at midnight on the May 31, next following, such failure of the insurer so to continue it in force. The commissioner shall promptly notify the insurer of the occurrence of any such failure resulting in impending expiration of its certificate of authority.
(c) The commissioner may, in his discretion, 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 such expiration and upon payment by the insurer of the fee for reinstatement, in addition to the current continuation fee, in the amounts provided in Section 27-4-2. 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.
(d) The commissioner may amend a certificate of authority at any time to accord with changes in the insurer’s charter or insuring powers.
(Acts 1971, No. 407, p. 707, §64.)
(a) The commissioner shall suspend or revoke an insurer’s certificate of authority:
(1) If such action is required by any provision of this title;
(2) If the insurer no longer meets the requirements for the authority originally granted on account of deficiency of assets or otherwise; or
(3) If the insurer’s authority to transact insurance is suspended or revoked by its state of domicile or state of entry into the United States if an alien insurer.
(b) Except in cases of insolvency or impairment of required capital or surplus or suspension or revocation by another state as referred to in subdivision (a) (3) of this section, the commissioner shall give the insurer at least 10 days’ notice in advance of any such 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.
(Acts 1971, No. 407, p. 707, §65.)
(a) The commissioner may, in his discretion, suspend or revoke an insurer’s certificate of authority if, after a hearing thereon, he finds that the insurer has willfully violated any material provision of this title other than those for which suspension or revocation is mandatory or has failed to pay applicable taxes with respect to a preceding calendar year as required by this title.
(b) The commissioner shall, after a hearing thereon, suspend or revoke an insurer’s certificate of authority if he finds that the insurer:
(1) Is in unsound condition, or is in such condition or is using such methods and practices in the conduct of its business as to render its further transaction of insurance in this state hazardous to its policyholders or to the public;
(2) Has refused to be examined or to produce its accounts, records, and files for examination or if any of its officers or agents have refused to perform any legal obligation relative thereto or have refused to give information with respect to its affairs when required by the commissioner;
(3) Has failed to pay any final judgment entered against it in this state 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 appeal before final termination, whichever date is later;
(4) With such frequency as to indicate its general business practice in this state:
a. Has, without just cause, refused to pay proper claims arising under coverages provided by its policies, whether the claim is in favor of an insured or is in favor of a third person with respect to liability of an insured to such third person; or
b. With like frequency and without just cause, compels insureds or claimants in this state to accept less than the amount due them or compels them to employ attorneys or to bring an action against the insurer or such an insured to secure full payment or settlement of such claims; provided, that as a condition precedent to a revocation or suspension of the insurer’s certificate of authority under this subsection there has been a prior determination that the insured has engaged in an unfair method of competition or an unfair act or practice in the business of insurance; or
(5) Is affiliated with and under the same general management or interlocking directorate or ownership as another insurer which transacts direct insurance in this state without having a certificate of authority therefor, except as permitted as to surplus line insurers under Chapter 10 of this title.
(c) The commissioner may, in his discretion and without advance notice on 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 insurance supervisory official of such state.
(Acts 1971, No. 407, p. 707, §66.)
(a) Suspension or revocation of an insurer’s certificate of authority shall be by the commissioner’s order given to the insurer as provided by Section 27-2-18. The commissioner shall promptly also give notice of such suspension or revocation to the insurer’s agents in this state of record in the commissioner’s office. The insurer shall not solicit or write any new coverages in this state during the period of any such suspension or revocation.
(b) In his discretion, the commissioner may cause notice of any such revocation to be published in one or more newspapers of general circulation published in this state.
(c) Upon revocation or suspension of the certificate of authority of a surety insurer, the commissioner shall so notify each officer in this state authorized to approve official bonds by circular letter stating the grounds of such suspension or revocation.
(Acts 1971, No. 407, p. 707, §67.)
(a) Suspension of an insurer’s certificate of authority shall be for such period as is fixed by the commissioner in the order of suspension, but not to exceed one year from the date of suspension, unless the commissioner shortens or rescinds such suspension or the order upon which the suspension is based is modified, rescinded, or reversed.
(b) During the period of suspension the insurer shall file its annual statement, pay fees, licenses and taxes as required under this title as if the certificate had continued in full force, and it may service its outstanding policies and adjust losses thereunder.
(c) Upon expiration of the suspension period, if within such period the certificate of authority has not otherwise terminated, the insurer’s certificate of authority shall automatically reinstate unless the commissioner finds that the causes of the suspension have not been removed or that the insurer is otherwise not in compliance with the requirements of this title, of which the commissioner shall give the insurer notice not less than 30 days in advance of the expiration of the suspension period. If not so automatically reinstated, the certificate of authority shall be deemed to have expired as of the end of the suspension period or upon failure of the insurer to continue the certificate during the suspension period, whichever event first occurs.
(d) 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.
(Acts 1971, No. 407, p. 707, §68.)
(a) Each insurer applying for a certificate of authority to transact business in this state shall file with the commissioner an appointment of the commissioner and his successors in office, on a form as furnished by the commissioner, as its attorney upon whom may be served all lawful process in any action or proceeding against it in this state and therein shall agree that any such process served upon such attorney shall be of the same force and validity as if served on the insurer. 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 outstanding in this state any obligation or liability of the insurer resulting from its transactions therein.
(b) At the time of such appointment of the commissioner as its process agent, the insurer shall file with the commissioner designation of the name and address 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.
(Code 1940, T. 28, §65; Acts 1971, No. 407, p. 707, §69.)
(a) Service of process upon the commissioner as process agent of the insurer under Section 27-3-24 shall be made by the proper officer of Montgomery County by serving copies in triplicate of the process upon the commissioner or upon his assistant, deputy or other person in charge of his office. Upon receiving such service, the commissioner shall promptly forward a copy thereof by certified mail or registered mail, with return receipt requested, to the person last designated by the insurer to receive the same, as provided under subsection (b) of Section 27-3-24, return one copy with his admission of service and retain one copy in the files of the department. The commissioner shall keep a record of all actions filed against insurers wherein process is served on the commissioner, noting the name of the insurer, the date of service, and the type of action.
(b) Where process is served upon the commissioner as an insurer’s process agent, the insurer shall not be required to answer or plead except within 30 days after the date upon which the insurer’s designee received the copy of the process mailed by the commissioner, as shown by the return receipt therefor referred to in subsection (a) of this section.
(c) Process served upon the commissioner, and copy thereof forwarded as in this section provided, shall for all purposes constitute valid and binding service thereof upon the insurer.
(d) This section shall not be deemed to prohibit service of process upon an insurer by any other method provided for by law.
(Code 1940, T. 28, §65; Acts 1971, No. 407, p. 707, §70.)
(a) Each authorized insurer shall, annually on or before March 1, or within such extension of time not exceeding 30 days after March 1 as the commissioner for good cause shown may grant as to a particular insurer, file with the commissioner a full and true statement of its financial condition, transactions and affairs as of the December 31, preceding. The statement shall be in such general form and context as is in current use for similar reports to states in general with respect to the type of insurer and kinds of insurance to be reported upon and as supplemented by 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, 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 the insurer’s United States manager or other officer duly authorized and shall relate only to its transactions and affairs in the United States, unless the commissioner requires otherwise. If the commissioner requires a statement as to the alien insurer’s affairs throughout the world, the insurer shall file such statement with the commissioner as soon as reasonably possible.
(c) The commissioner may in his discretion suspend or revoke the certificate of authority of an insurer failing to file its annual statement when due. In addition the insurer shall be subject to a penalty of $250.00, such penalty to be collected by the commissioner, if necessary, by a civil action therefor brought by the commissioner in the Circuit Court of Montgomery County, unless waived by the commissioner upon a showing by the insurer of good cause for its failure to file its report on or before the date due.
(d) At time of filing, the insurer shall pay the fee for filing its annual statement as prescribed by Section 27-4-2.
(e) In addition to information called for and furnished in connection with its annual statement, an insurer shall furnish promptly to the commissioner such information with respect to any of its transactions or affairs as the commissioner may, from time to time, request in writing.
(Acts 1971, No. 407, p. 707, §71.)
(a) Every property or casualty insurer doing business in this state, unless otherwise exempted by law or by the domiciliary commissioner, shall annually submit the opinion of an appointed actuary entitled Statement of Actuarial Opinion. This opinion shall be filed in accordance with the appropriate annual statement instructions of the National Association of Insurance Commissioners (NAIC).
(b) An insurer may apply for an exemption from this requirement with its domiciliary commissioner, as provided in the appropriate NAIC annual statement instruction or as those instructions may change from time to time.
(c) For purposes of this section, “domiciliary commissioner” means the chief insurance regulator for the jurisdiction in which the insurer is domiciled.
(Acts 1993, No. 93-675, p. 1240, §10; Acts 1994, 1st Ex. Sess., No. 94-789, p. 92, §1; Act 2021-172, §1.)
(a) No insurer shall, in this state, directly or indirectly, accept applications for insurance, negotiate for or issue any policy or contract of insurance or assume direct liability as to a subject of insurance resident, located, or to be performed in this state unless through insurance producers duly licensed under the provisions of this title.
(b) This section shall not apply to title insurance or insurance of the rolling stock, vessels, or aircraft of any common carrier in interstate or foreign commerce or covering any liability or other risks incident to the ownership, maintenance, or operation thereof. This section shall not apply as to life or disability insurance not delivered or issued for delivery in this state and lawfully solicited outside this state.
(Acts 1936-37, Ex. Sess., No. 224, p. 267; Code 1940, T. 28, § 66; Acts 1971, No. 407, p. 707, § 72; Act 2001-702, p. 1509, § 15.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1935, No. 194, p. 256; Acts 1971, No. 407, p. 707, §§73, 74; Acts 1988, No. 88-123, p. 159, §1.)
(a) The purpose of this section is to aid in the protection of insurers formed under the laws of Alabama and transacting insurance in other states or countries against discriminatory or onerous requirements under the laws of such states or countries or the administration thereof.
(b) When by or pursuant to the laws of any other state or foreign country, any taxes, licenses, and other fees, in the aggregate, and any fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions are, or would be, imposed upon Alabama insurers, or upon the agents or representatives of such insurers, 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 obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insurers, of such other state or country under the statutes of this state, so long as such laws of such other state or country 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 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, of such other state or country doing business or seeking to do business in Alabama. Any tax, license, or other fee or other obligation imposed by any city, county, or other political subdivision or agency of such other state or country on Alabama insurers, or their agents or representatives, shall be deemed to be imposed by such state or country within the meaning of this section.
(c) This section shall not apply as to personal income taxes, nor as to ad valorem taxes on real or personal property, nor 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.
(d) 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 six months after the effective date of this title, whichever date is the later, and may be any one of the following states:
(1) That in which the insurer was first authorized to transact insurance;
(2) That in which is located the insurer’s principal place of business in the United States; or
(3) That in which is held the larger deposit of trusteed assets of the insurer for the protection of its policyholders or policyholders and creditors 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.
(e) In the case of an insurer formed under the laws of Canada or a province thereof, its domicile shall be deemed to be that province in which is located its head office.
(Acts 1935, No. 194, p. 256; Acts 1971, No. 407, p. 707, §75.)
Any insurer which is organized under the laws of any other state and is admitted to do business in this state for the purpose of writing insurance may become a domestic insurer by complying with all of the requirements of law relative to the organization and licensing of a domestic insurer of the same type and by designating its principal place of business at a place in this state. Said domestic insurer will be entitled to like certificates and licenses to transact business in this state and shall be subject to the authority and jurisdiction of this state. Articles of incorporation of such domestic insurer may be amended to provide that the corporation is a continuation of the corporate existence of the original foreign corporation through adoption of this state as its corporate domicile and that the original date of incorporation in its original domiciliary state is the date of incorporation of such domestic insurer.
(Acts 1991, No. 91-446, p. 816, §1.)
Any domestic insurer may, upon the approval of the Commissioner of Insurance, transfer its domicile to any other state in which it is admitted to transact the business of insurance, and upon such a transfer shall cease to be a domestic insurer, and shall be admitted to this state if qualified as a foreign insurer. The Commissioner of Insurance shall approve any such proposed transfer unless he shall determine such transfer is not in the interest of the policyholders of this state.
(Acts 1991, No. 91-446, p. 816, §2.)
The certificate of authority, agents appointments and licenses, rates, and other items which the Commissioner of Insurance allows, in his discretion, which are in existence at the time any insurer licensed to transact the business of insurance in this state transfers its corporate domicile to this or any other state by merger, consolidation or any other lawful method shall continue in full force and effect upon such transfer if such insurer remains duly qualified to transact the business of insurance in this state. All outstanding policies of any transferring insurer shall remain in full force and effect and need not be endorsed as to the new name of the company or its new location unless so ordered by the Commissioner of Insurance. Every transferring insurer shall file new policy forms with the Commissioner of Insurance on or before the effective date of the transfer, but may use existing policy forms with appropriate endorsements if allowed by and under such conditions as approved by the Commissioner of Insurance. However, every such transferring insurer shall notify the Commissioner of Insurance of the details of the proposed transfer, and shall file promptly any resulting amendments to corporate documents filed or required to be filed in accordance with Sections 10-2A-90 through 10-2A-284, 27-3-17, 27-27-5 and 27-27-22.
(Acts 1991, No. 91-446, p. 816, §3.)
The Commissioner of Insurance of this state may promulgate necessary rules and regulations to carry out the purposes of Sections 27-3-30 through 27-3-32.
(Acts 1991, No. 91-446, p. 816, §4.)
This chapter may be cited as the “Health Care Service Utilization Review Act.”
(Acts 1994, 1st Ex. Sess., No. 94-786, p. 80, §1.)
The purposes of this chapter are to:
(1) Promote the delivery of quality health care in a cost-effective manner.
(2) Assure that utilization review agents adhere to reasonable standards for conducting utilization review.
(3) Foster greater coordination and cooperation between health care providers and utilization review agents.
(4) Improve communications and knowledge of benefit plan requirements among all parties concerned before expenses are incurred.
(5) Ensure that utilization review agents maintain the confidentiality of medical records in accordance with applicable laws.
(Acts 1994, 1st Ex. Sess., No. 94-786, p. 80, §2.)
As used in this chapter, the following words and phrases shall have the following meanings:
(1) DEPARTMENT. The Alabama Department of Public Health.
(2) ENROLLEE. An individual who has contracted for or who participates in coverage under an insurance policy, a health maintenance organization contract, a health service corporation contract, an employee welfare benefit plan, a hospital or medical services plan, or any other benefit program providing payment, reimbursement, or indemnification for health care costs for the individual or the eligible dependents of the individual.
(3) PROVIDER. A health care provider duly licensed or certified by the State of Alabama.
(4) UTILIZATION REVIEW. A system for prospective and concurrent review of the necessity and appropriateness in the allocation of health care resources and services given or proposed to be given to an individual within this state. The term does not include elective requests for clarification of coverage.
(5) UTILIZATION REVIEW AGENT. Any person or entity, including the State of Alabama, performing a utilization review, except the following:
a. An agency of the federal government.
b. An agent acting on behalf of the federal government, but only to the extent that the agent is providing services to the federal government.
c. The internal quality assurance program of a hospital.
d. An employee of a utilization review agent.
e. Health maintenance organizations licensed and regulated by the state, but only to the extent of providing a utilization review to their own members.
f. Any entity that has a current accreditation from the Utilization Review Accreditation Commission (URAC). However, entities with current URAC accreditation shall file a URAC certification with the department annually.
g. An entity performing utilization reviews or bill audits, or both, exclusively for workers’ compensation claims pursuant to Section 25-5-312. If an entity also performs services for claims other than workers’ compensation, it shall be considered a private review agent subject to this chapter for those claims.
h. An entity performing utilization reviews or bill audits, or both, exclusively for the Medicaid Agency.
i. A person performing utilization reviews or bill audits, or both, exclusively for their company’s health plan, independent of a utilization review company.
j. An insurance company licensed by the State of Alabama performing utilization reviews or bill audits, or both, exclusively for their company’s health plan, independent of a utilization review company.
k. The Peer Review Committee of the Alabama State Chiropractic Association.
(Acts 1994, 1st Ex. Sess., No. 94-786, p. 80, §3.)
(a) Utilization review agents shall adhere to the minimum standards set forth in Section 27-3A-5.
(b) On or after July 1, 1994, a utilization review agent shall not conduct a utilization review in this state unless the agent has certified to the department in writing that the agent is in compliance with Section 27-3A-5. Certification shall be made annually on or before July 1 of each calendar year. In addition, a utilization review agent shall file the following information:
(1) The name, address, telephone number, and normal business hours of the utilization review agent.
(2) The name and telephone number of a person for the department to contact.
(3) A description of the appeal procedures for utilization review determinations.
(c) Any material changes in the information filed in accordance with this section shall be filed with the State Health Officer within 30 days of the change.
(d) Unless exempted pursuant to paragraph f. of subdivision (5) of Section 27-3A-3, each utilization review agent, upon filing the certification, shall pay an annual fee in the amount of one thousand dollars ($1,000) to the department. All fees paid pursuant to this subdivision shall be held by the department as expendable receipts for the purpose of administering this chapter.
(e) The department may adopt rules pursuant to the Administrative Procedure Act necessary to implement this chapter.
(Acts 1994, 1st Ex. Sess., No. 94-786, p. 80, §4.)
(a) Except as provided in subsection (b), all utilization review agents shall meet the following minimum standards:
(1) Notification of a determination by the utilization review agent shall be mailed or otherwise communicated to the provider of record or the enrollee or other appropriate individual within two business days of the receipt of the request for determination and the receipt of all information necessary to complete the review.
(2) Any determination by a utilization review agent as to the necessity or appropriateness of an admission, service, or procedure shall be reviewed by a physician or determined in accordance with standards or guidelines approved by a physician.
(3) Any notification of determination not to certify an admission, service, or procedure shall include the principal reason for the determination and the procedures to initiate an appeal of the determination.
(4) Utilization review agents shall maintain and make available a written description of the appeal procedure by which the enrollee or the provider of record may seek review of a determination by the utilization review agent. The appeal procedure shall provide for the following:
a. On appeal, all determinations not to certify an admission, service, or procedure as being necessary or appropriate shall be made by a physician in the same or a similar general specialty as typically manages the medical condition, procedure, or treatment under discussion as mutually deemed appropriate. A chiropractor must review all cases in which the utilization review organization has concluded that a determination not to certify a chiropractic service or procedure is appropriate and an appeal has been made by the attending chiropractor, enrollee, or designee.
b. Utilization review agents shall complete the adjudication of appeals of determinations not to certify admissions, services, and procedures no later than 30 days from the date the appeal is filed and the receipt of all information necessary to complete the appeal.
c. When an initial determination not to certify a health care service is made prior to or during an ongoing service requiring review, and the attending physician believes that the determination warrants immediate appeal, the attending physician shall have an opportunity to appeal that determination over the telephone on an expedited basis. A representative of a hospital or other health care provider or a representative of the enrollee or covered patient may assist in an appeal. Utilization review agents shall complete the adjudication on an expedited basis. Utilization review agents shall complete the adjudication of expedited appeals within 48 hours of the date the appeal is filed and the receipt of all information necessary to complete the appeal. Expedited appeals that do not resolve a difference of opinion may be resubmitted through the standard appeal process.
(5) Utilization review agents shall make staff available by toll-free telephone at least 40 hours per week during normal business hours.
(6) Utilization review agents shall have a telephone system capable of accepting or recording incoming telephone calls during other than normal business hours and shall respond to these calls within two working days.
(7) Utilization review agents shall comply with all applicable laws to protect the confidentiality of individual medical records.
(8) Physicians, chiropractors, or psychologists making utilization review determinations shall have current licenses from a state licensing agency in the United States.
(9) Utilization review agents shall allow a minimum of 24 hours after an emergency admission, service, or procedure for an enrollee or representative of the enrollee to notify the utilization review agent and request certification or continuing treatment for that condition.
(b) Any utilization review agent that has received accreditation by the utilization review accreditation commission shall be exempt from this section.
(Acts 1994, 1st Ex. Sess., No. 94-786, p. 80, §5.)
(a) Whenever the department has reason to believe that a utilization review agent subject to this chapter has been or is engaged in conduct that violates this chapter, the department shall notify the utilization review agent of the alleged violation. The agent shall respond to the notice not later than 30 days after the notice is made.
(b) If the department finds that the utilization review agent has violated this chapter, or that the alleged violation has not been corrected, the department may conduct a contested case hearing on the alleged violation in accordance with the Administrative Procedure Act.
(c) If, after the hearing, the department determines that the utilization review agent has engaged in a violation, the department shall reduce the findings to writing and shall issue and cause to be served upon the agent a copy of the findings and an order requiring the agent to cease and desist from engaging in the violation.
(d) The department may also exercise either or both of the following disciplinary powers:
(1) Impose an administrative fine of not more than five thousand dollars ($5,000) for a violation that occurred with such frequency as to indicate a general business pattern or practice.
(2) Suspend or revoke the certification of a utilization review agent if the agent knew the act was in violation of this chapter and repeated the act with such frequency as to indicate a general business pattern or practice.
(Acts 1994, 1st Ex. Sess., No. 94-786, p. 80, §6.)
(a) The Commissioner of Insurance shall collect in advance fees, licenses, and miscellaneous charges as follows:
(1) Certificate of authority:
a. Initial application for original certificate of authority, including the filing with the commissioner of all documents incidental thereto ..... $500
b. Issuance of original certificate of authority ..... 500
c. Annual continuation or renewal fee ..... 500
d. Reinstatement fee ..... 500
(2) Charter documents, filing with the commissioner amendment to articles of incorporation or of association, or of other charter documents or to bylaws ..... 25
(3) Solicitation permit, filing application and issuance ..... 250
(4) Annual statement of insurer, except when filed as part of application for original certificate of authority, filing ..... 25
(5) Producer license (resident or nonresident):
a. Individuals:
Application fee (For filing of initial application for license) ..... 30
License fee (For issuance of original license) ..... 50
b. Business entities:
Application fee (For filing of initial application for license) ..... 30
License fee (For original license and each biennial renewal) ..... 100
c. Examination fee (For producer examination or reexamination, each classification of examination), an amount set by the commissioner not to exceed ..... 100
(6) Producer appointment fee:
a. Filing notice of appointment ..... 40
b. Annual continuation of appointment ..... 25
c. Late fee, for failing to timely pay annual appointment continuation invoice .......... 250, plus an additional 250 for each additional month late
(7) Reinsurance intermediary license:
a. Filing application for license ..... 30
b. Issuance of initial license ..... 140
c. Annual continuation of license ..... 100
(8) Managing general agent license:
a. Application fee (For filing of initial application for license, each insurer) ..... 30
b. Issuance of initial license, each insurer ..... 125
c. Annual continuation of license, each insurer ..... 75
(9) Service representative license:
a. Application fee (For filing of initial application for license, each insurer) ..... 30
b. Appointment fee, property and casualty, each insurer (For original appointment and each annual renewal) ..... 40
(10) Surplus line broker:
a. Application fee (For filing of initial application for license) ..... 30
b. License fee (For original license and each annual renewal):
Individuals ..... 200
Business Entities ..... 500
(11) Adjusters (resident or nonresident):
a. Application fee (For filing of initial application for license; individuals and business entities) ..... 30
b. License fee (For original license and each biennial continuation):
Individuals ..... 80
Business Entities ..... 200
c. Examination fee, an amount set by the commissioner not to exceed ..... 100
(12) Miscellaneous services:
a. For copies of documents, records on file in Insurance Department, per page ..... 1
b. For each certificate under seal of the commissioner, other than licenses ..... 5
(13) The commissioner shall collect a fee of fifty dollars ($50) when, in acting as agent for service of process for any insurance company, fraternal benefit society, mutual aid association, nonresident producer, nonresident independent adjuster, or nonresident surplus line broker, he or she accepts the service of legal process as provided by the laws of this state. The commissioner shall refuse to receive and file or serve any process unless the process is accompanied by the aforementioned fee, which shall be taxed as costs in the action.
(b) The fees and licenses specified in subsection (a) shall be deposited in the State Treasury with 50 percent credited to the General Fund and 50 percent credited to the Insurance Department Fund.
(Acts 1935, No. 194, p. 256; Acts 1957, No. 598, p. 848, §4; Acts 1971, No. 407, p. 707, §76; Acts 1988, 1st Ex. Sess., No. 88-875, p. 410, §1; Act 2001-702, p. 1509, §15; Act 2006-299, p. 614, §1; Act 2011-637, p. 1544, §2; Act 2014-346, p. 1289, §1(b)(6); Act 2015-195, §1.)
Annuity considerations and premiums received by a life insurer licensed to transact business in this state and which is organized and operated without profit to any private shareholder or individual and exclusively for the purpose of aiding nonprofit education and scientific institutions by issuing insurance or annuity contracts only for the benefit of such institutions and individuals employed in the services thereof at the time such policy or contract is issued shall not be subject to the payment of a privilege tax based upon premiums or annuity considerations under the provisions of this chapter or any other law of this state. In lieu of such privilege tax upon premiums and annuity considerations, such nonprofit company shall pay an annual license fee of $5,000.00 to the commissioner for the privilege of transacting an insurance business in this state. The initial payment of such shall be due on the date that such insurer is licensed to do business in the State of Alabama and upon March 1, of each year succeeding that of admission, so long as such insurer shall be licensed to transact an insurance business in this state.
(Acts 1971, No. 407, p. 707, §83.)
(a) Where any taxpayer in the payment of taxes or payments of licenses which are paid directly to the commissioner and where by a mistake of fact or law has paid an amount in excess of the amount due or has made an erroneous payment, the Comptroller is authorized to draw his warrant on the Treasurer in favor of such taxpayer and the Treasurer is authorized to pay such warrant for the amount of such overpayment or erroneous payment.
(b) Before any refund under this section can be made the taxpayer, his heirs, successors or assigns shall file, in duplicate, a petition directed to the commissioner, setting up the fact relied on to procure the refunding of the money erroneously paid. Such application must be made within three years from the date of such payment.
(c) The commissioner shall examine said petition and the records of the Department of Insurance, and if the facts set forth in the petition are such as to entitle the petitioner to the refunding of the money as requested and the commissioner, upon the evidence adduced is satisfied that the petitioner is entitled to the refund as requested, he shall so certify to the Comptroller, stating the amount to be refunded by the state, the particular fund on which such warrant shall be drawn, including both the special revolving fund and the General Fund, and he shall forward to the Comptroller a copy of the petition with the certificate attached. If the Comptroller shall be satisfied that the petition is in form required by law, he shall draw his warrant on the Treasurer as provided in this section for the amount certified to him by the commissioner.
(Acts 1971, No. 407, p. 707, §86.)
This chapter shall be known and may be cited as “The Insurance Premium Tax Reform Act of 1993.”
(Acts 1993, No. 93-679, p. 1291, §1.)
For the purposes of this chapter only, the following terms, unless the context clearly indicates otherwise, shall have the meanings:
(1) ANNUITY CONSIDERATIONS. All sums received as consideration for annuity contracts.
(2) COMMISSIONER. The Commissioner of Insurance of the State of Alabama.
(3) DEPARTMENT. The Department of Insurance of the State of Alabama.
(4) DOMESTIC INSURER. Any insurer organized under the laws of the State of Alabama which maintains its principal office and chief place of business in the State of Alabama.
(5) FOREIGN INSURER. Any insurer organized under the laws of any country or of any state of the United States other than the State of Alabama and any insurer organized under the laws of Alabama which maintains its principal office or chief place of business outside the State of Alabama.
(6) INSURER. Every insurer as defined in Section 27-1-2, and every other insurance company or association charging a premium for contracts entered into by those companies, associations, or societies, which shall include every non-profit corporation organized pursuant to Sections 10-4-100 to 10-4-115, inclusive, every mutual aid association including those organized pursuant to Chapter 30, Title 27, and every health maintenance organization including those organized pursuant to Chapter 21A, Title 27. Notwithstanding the foregoing, societies exempt pursuant to Section 27-34-42, and self-insurance programs utilizing a trust fund or similar entity providing workers’ compensation, health, and other insurance-like coverage shall not be included within this definition of insurer.
(7) MEDICAL LIABILITY INSURANCE. Liability insurance provided to hospitals, physicians, dentists, and other persons licensed by the State of Alabama to provide healthcare services against legal liability resulting from the failure of such insureds to comply with the standard of care applicable to them in rendering medical care to patients, including general liability insurance written as a part of such insurance.
(8) PREMIUMS. All amounts received in cash or otherwise on risks in this state as consideration for contracts of insurance, less all of the following:
a. Insurance premiums returned.
b. Reinsurance premiums from insurance companies authorized to do business in Alabama and subject to the premium tax provided for in Chapter 4 of Title 27.
c. Dividends paid, applied, or left with the company to accumulate at interest.
Premiums shall not include: (i) annuity considerations; or (ii) charges by title insurers for abstracting, record searching, certificates as to the record title, escrow and closing services and other related services, or the costs and expenses of examinations of title.
(Acts 1993, No. 93-679, p. 1291, §2; Acts 1993, 1st Ex. Sess., No. 93-847, p. 67, §1.)
(a) Subject to the exceptions and exemptions hereinafter set forth, for the year beginning on January 1, 1995, and for each year thereafter, every insurer shall pay to the commissioner a premium tax equal to the percentage, as set out in this subsection, of the premiums received by the insurer for business done in this state, whether the same was actually received by the insurer in this state or elsewhere:
(1) PREMIUM TAX ON LIFE INSURANCE PREMIUMS.
a. Except as hereinafter provided, the rates of taxation on life insurance premiums shall be those amounts set out in the following schedule:
| Year | Foreign Insurers | Domestic Insurers | | --- | --- | --- | | 1995 | 2.9 | 1.3 | | 1996 | 2.8 | 1.6 | | 1997 | 2.7 | 1.8 | | 1998 | 2.5 | 2.1 | | Every Year Thereafter | 2.3 | 2.3 |
b. Individual life insurance policies in a face amount of greater than $5,000 and up to and including $25,000, excluding group life insurance policies, shall be taxed at the rate of one percent per annum.
c. Individual life insurance policies in a face amount of $5,000 or less, excluding group life insurance policies, shall be taxed at the rate of one-half percent per annum.
d. For the purposes of computing the face amount of life insurance policies, all life insurance policies issued within 60 days of another on the life of the same applicant or applicants shall be treated as one policy.
(2) PREMIUM TAX ON HEALTH INSURANCE PREMIUMS.
a. Except as hereinafter provided, the rates of taxation on premiums for health insurance, and accident and health insurance for which a separate premium is charged, shall be those amounts set out in the following schedule:
| Year | Foreign Insurers | Domestic Insurers | | --- | --- | --- | | 1995 | 2.9 | 1.3 | | 1996 | 2.8 | 1.6 | | 1997 | 2.4 | 1.6 | | 1998 | 2.0 | 1.6 | | Every Year Thereafter | 1.6 | 1.6 |
b. Premiums for hospital, medical, surgical, or other health care benefits provided pursuant to any employer-sponsored plan for groups with less than 50 insured participants shall be taxed at the rate of one-half percent per annum.
c. Premiums for hospital, medical, surgical, or other health care benefits supplementary to Medicare and Medicaid, or provided pursuant to an employer-sponsored plan for governmental employees, shall be exempt from the premium tax levied pursuant to this chapter.
(3) PREMIUM TAX ON OTHER INSURANCE PREMIUMS.
a. Except as hereinafter provided, the rate of taxation on insurance other than life insurance, health insurance, and accident health insurance shall be 3.6 percent per annum.
b. Premiums for all of the following types of insurance shall be taxed at the rate of one percent per annum:
All property and multi-peril insurance written in fire protection Classes 9 and 10.
Mobile homes, mobile homeowners, homeowners, and low value dwelling policies in a face amount of $40,000 or less.
c. Premiums for medical liability insurance shall be taxed at the rate of 1.6 percent per annum.
d. The tax imposed at the rate specified in paragraph a. of this subdivision shall be reduced by the following credits for certain economic development activities pursued in the State of Alabama.
| Number of Full-Time Employees in Office | Credit as a % of Premiums Taxable Under Paragraph a. | | --- | --- | | 1-3 | 0.0025% | | 4-10 | 0.0050% | | 11-50 | 0.0075% | | 51 or more | 0.0100% |
The total credit allowable for Alabama insurance office facilities shall not exceed one percent of an insurer’s Alabama premiums taxable at the rate specified in paragraph a. of this subdivision.
(i) Alabama real property investments which qualify for the Alabama real property investment credit include any improved Alabama real property owned by the insurer or an affiliate of the insurer on January 1, 1993, and any improved or unimproved Alabama real property acquired or new construction placed in service on or after January 1, 1993, by the insurer or an affiliate of the insurer.
(ii) For purposes of determining the Alabama real property investment credit, Alabama real property investments shall be valued at cost and not at book value or fair market value. The cost of capital improvements to existing Alabama real property investments, such as the renovation of shopping centers, hotels, or other buildings, completed and placed in service by the insurer or an affiliate of the insurer on or after January 1, 1993, shall be considered an Alabama real estate investment.
(iii) For purposes of determining the value of Alabama real property investments, funds borrowed to finance Alabama real property investments shall be subtracted from cost so that only the net cost in the investment properties borne from assets belonging to the insurer or an affiliate of the insurer qualifies for the Alabama real property investment credit. The cost of debt-financed Alabama real property investments of an insurer shall be increased pro tanto as the underlying debt is paid off by the insurer or an affiliate of the insurer.
(iv) The Alabama real property investment credit shall not be allowed for properties in the State of Alabama used in an insurer’s insurance operations and for which the Alabama insurance office facilities credit is allowed or allowable, without regard to the one percent limitation on the credit. However, the cost of real property owned in the State of Alabama and used in part as an Alabama real property investment and in part for the insurer’s insurance operations shall be allocated on a square-foot basis so that the cost allocated to that portion of the property not used for insurance operations shall qualify for the Alabama real property investment credit.
(v) Mortgages held by an insurer that are secured by real property located in the State of Alabama shall not be considered Alabama real property investments for purposes of the Alabama real property investment credit.
(i) For purposes of determining the economic development credits allowed under this section, the term affiliate means any business entity, other than a life or health insurance company, which is wholly owned by the insurer subject to tax under paragraph a. of this subdivision or any other insurer and its wholly owned subsidiaries, other than a life or health insurance company, which is part of a group of companies, including the insurer, which are under common control and management. For an insurer having affiliates, all premiums of the insurer and its insurance company affiliates subject to tax at the rate specified in paragraph a. of this subdivision may be aggregated; all Alabama insurance office facilities and all Alabama real property investments may be aggregated; and, subject to the specific credit limitations, the total allowable tax credits may be determined as if all the aggregated premiums, office facilities, and Alabama real property investments were owned by one insurer. Once the total allowable credits have been determined, the credits may be allocated to the insurer and its insurance company affiliates at the sole discretion of the insurer subject to the specific credit limitations on a per insurance company basis. The computation of allowable credits and their allocation to affiliates shall be made on forms to be supplied by the Alabama Department of Insurance, which forms shall be filed with the insurer’s annual statement.
(b) Notwithstanding any provision of law to the contrary, all premium tax payments made subsequent to passage of this chapter shall be remitted in accordance with this subsection. Beginning January 1, 1993, and all years thereafter, each insurer shall pay its premium taxes on a quarterly basis, as follows: on or before May 15, a payment estimated on the basis of 25 percent of its business done in this state during the preceding calendar year or, at the option of the insurer, on the basis of its actual business done in the state from January 1 through March 31 of the same calendar year; on or before August 15, a payment estimated on the basis of 45 percent of its business done in this state during the preceding calendar year or, at the option of the insurer, on the basis of 180 percent of its actual business done in this state from April 1 through June 30 of the same calendar year; on or before November 15, a payment estimated on the basis of 25 percent of its business done in this state during the preceding calendar year or, at the option of the insurer, on the basis of its actual business done in this state from July 1 through September 30 of the same calendar year; on or before March 1, a payment in the amount of the remainder of the actual premium taxes due on its business done in the state during the preceding calendar year. Every authorized insurer shall file with the commissioner a statement, on a form as furnished or approved by the commissioner, setting forth the total amount of premiums received by it for business done in this state during the period covered by the tax payment. The statement shall be verified by an affidavit of an officer of the insurer having knowledge of the facts. It is the intent and meaning of this subsection that any taxes paid on an estimated quarterly basis during the calendar year shall be reconciled to actual premiums received on risks in this state for such calendar year on the March 1 payment date in the succeeding calendar year.
(c) The tax imposed by this section shall be subject to credit and deduction of the full amount, with 25 percent of the full amount paid, or estimated to be paid, being credited or deducted on each quarterly payment date, for all of the following:
(1) Ad valorem property taxes paid by an insurer on any building and real estate in this state which is owned and occupied, in whole or in part, by the insurer for the full period of the tax year as its principal office in the State of Alabama.
(2) All ad valorem taxes paid by an insurer during the calendar year on any other real estate and improvements thereon in this state which is owned and at least 50 percent occupied by the insurer for the full period of the tax year.
(3) Ad valorem property taxes paid by an insurer on the insurer’s offices in this state during the calendar year, but with respect to the office apportioned to the square foot area occupied by the insured, whether the ad valorem taxes are paid directly by the insurer or in the form of rent to a third-party landlord.
(4) All license fees and taxes paid to any county in this state during the calendar year for the privilege of engaging in the business of insurance within the county.
(5) All expenses of examination of the insurer by the commissioner paid during the calendar year.
(6) Sixty percent of the franchise or privilege taxes paid by the insurer to the State of Alabama for the calendar year.
(7) All credits for assessments as provided under Sections 27-42-16 and 27-44-13, or assessments for any insurance guaranty fund or pool now or hereafter created by statute paid during the calendar year.
(8) It is the intent of this subsection that any estimated allowable credits or deductions claimed on quarterly returns be reconciled to actual expenditures made during the calendar year on the return due for March 1 in the succeeding calendar year.
(d) The premium taxes collected under this section shall be deposited in the State Treasury and credited as follows:
(1) To the credit of the State General Fund:
a. One hundred percent of the premium tax paid by all health maintenance organizations, domestic and foreign.
b. Fifty percent of the premium tax paid by domestic life insurers.
c. No part of the premium tax paid by nonprofit corporations organized pursuant to Sections 10-4-100 to 10-4-115, inclusive.
d. Twenty-five percent of the premium tax paid by all other domestic insurers.
e. One hundred percent of the premium tax paid by foreign life insurers.
f. Sixty-two and one-half percent of the premium tax paid by all foreign property insurers.
g. Seventy-five percent of the premium tax paid by all other foreign insurers.
(2) To the credit of the Education Trust Fund:
a. Fifty percent of the premium tax paid by domestic life insurers.
b. No part of the premium tax paid by nonprofit corporations organized pursuant to the provisions of Sections 10-4-100 to 10-4-115, inclusive.
c. Seventy-five percent of the premium tax paid by all other domestic insurers.
d. Thirty-seven and one-half percent of the premium tax paid by foreign property insurers.
e. Twenty-five percent of the premium tax paid by all other foreign insurers.
(3) To the credit of the Alabama Special Mental Health Trust Fund, 100 percent of the premium taxes paid by nonprofit corporations organized pursuant to Sections 10-4-100 to 10-4-115, inclusive.
(4) Any provision of this subsection to the contrary notwithstanding, the amount credited to the Education Trust Fund and the Alabama Special Mental Health Trust Fund for any fiscal year after the fiscal year ending September 30, 1992, under this subsection shall be limited to no more than the amount so credited in the fiscal year ending September 30, 1992. Any premium tax that would have been credited to the Education Trust Fund or the Alabama Special Mental Health Trust Fund but for this limitation, shall be credited to the state General Fund.
(5) Effective for the fiscal year beginning on October 1, 2020, and for each fiscal year thereafter, the amount credited to the Education Trust Fund under subdivision (4) shall be deposited into the State General Fund.
(e) For the purposes of this section, the term insurer shall not include counties, municipalities, municipal corporations, political subdivisions of the state, instrumentalities of counties, municipalities, municipal corporations, or the State of Alabama, or corporations or associations owned solely by counties, municipalities, or the State of Alabama.
(Acts 1993, No. 93-679, p. 1291, §3; Acts 1993, 1st Ex. Sess., No. 93-847, p. 67, §1; Act 98-498, p. 1069, §1; Act 99-665, 2nd Sp. Sess., p. 131, §5; Act 2019-392, §3.)
Every insurer failing to comply with the requirements of this chapter shall be subject to a penalty of not less than $1,000 nor exceeding $10,000, recoverable in an action brought by the Attorney General for the commissioner. Upon any violation, the commissioner may suspend or revoke the insurer’s certificate of authority. Penalties recovered under this section shall be paid to the State Treasury to the credit of the State General Fund.
(Acts 1993, No. 93-679, p. 1291, §4.)
The premium tax levied by this chapter is exclusive and shall be in lieu of all other and additional taxes and licenses of the state or county imposed on, based upon or measured by premiums received by the insurer for business done in this state. No license or privilege tax shall be charged any insurer paying the premium tax levied by this chapter by or on behalf of any county.
(Acts 1993, No. 93-679, p. 1291, §5.)
Nothing in this chapter shall be construed to repeal any existing laws or statutes which exempt or exclude insurers from the payment of fees, taxes, or licenses other than the tax imposed by this chapter. Without limiting the generality of the preceding sentence, insurers upon which this section imposes a tax upon their premium income or in lieu thereof, shall be exempt from income taxes imposed by the State of Alabama under the provisions of Chapter 18 of Title 40, or any other similar law.
(Acts 1993, No. 93-679, p. 1291, §6; Act 2000-705, p. 1442, §3.)
Mutual aid associations shall be subject to the provisions of this chapter and subject to the annual premium tax to be paid by insurers on insurance premiums.
(Acts 1993, No. 93-679, p. 1291, §10.)
(a) 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.
(b) The definitions contained in this chapter shall not be applicable to the construction of Sections 11-51-120 and 11-51-121.
(Acts 1971, No. 407, p. 707, §87.)
“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, burial insurance, and optional modes of settlement of proceeds of life insurance. Life insurance does not include workmen’s compensation coverages.
(Acts 1971, No. 407, p. 707, §88.)
For the purpose of this title, an “annuity” is a contract under which obligations are assumed with respect to periodic payments for a specific term, or terms, or where the making or continuance of all or of some of such payments or the amount of any such payment is dependent upon the continuance of human life, except payments made pursuant to optional modes of settlement under the authority of Section 27-5-2. Such a contract, which includes extra benefits of the kinds set forth in Sections 27-5-2 and 27-5-3, shall, nevertheless, be deemed to be an annuity if such extra benefits constitute a subsidiary or incidental part of the entire contract.
(Acts 1971, No. 407, p. 707, §88.1.)
“Disability 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. Disability insurance does not include workmen’s compensation coverages.
(Acts 1971, No. 407, p. 707, §89.)
“Property insurance” is insurance on real or personal property of every kind and of every interest therein, whether on land, water, or in the air, against loss or damage from any and every hazard or cause and against loss consequential upon such loss or damage other than noncontractual legal liability for any such loss or damage.
(Acts 1971, No. 407, p. 707, §90.)
(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 death or accidental injury to individuals, 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 and 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 under a personal property floater;
(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) LIVESTOCK. Insurance against loss or damage to livestock and services of a veterinarian for such animals;
(12) ELEVATORS. 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 inspections of and issue certificates of inspection upon elevators;
(13) 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; and
(14) 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 chapter, 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 (a) (1), (a) (2), (a) (4), and (a) (10) of this section 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 or disability insurances.
(Acts 1971, No. 407, p. 707, §91.)
“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; and
(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, necklaces, bracelets, 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.
(Acts 1971, No. 407, p. 707, §92.)
“Marine insurance” includes:
(1) Insurance against any and all kinds of loss or damage to:
a. 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, evidence 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, transshipment, or reshipment incident thereto, including marine builder’s risks and all personal property floater risks;
b. 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;
c. 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
d. 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; and 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.
(Acts 1971, No. 407, p. 707, §93.)
For the purposes of this title, “wet marine and transportation insurance” is that part of marine insurance which includes only:
(1) Insurance upon vessels, crafts, hulls and of interests therein or with relation thereto;
(2) Insurance of marine builder’s 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 section; and
(4) Insurance of personal property and interests therein in course of exportation from, or importation into, any country and 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, transshipment or reshipment incident thereto.
(Acts 1971, No. 407, p. 707, §93.)
“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.
(Acts 1971, No. 407, p. 707, §94.)
(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 percent 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 such other hazard insured against.
(c) Reinsurance ceded as authorized by Section 27-5-12 shall be deducted in determining risk retained. As to surety risks, deduction shall also be made of the amount assumed by any established incorporated cosurety 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 disability insurance, 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 27-27-15.
(Acts 1971, No. 407, p. 707, §95.)
[Repealed]
Repealed by Act 2013-209, §2, effective January 1, 2014.
(Acts 1971, No. 407, p. 707, §96; Acts 1990, No. 90-767, p. 1566; Acts 1994, 1st Ex. Sess., No. 94-788, p. 87, §1; Act 2003-346, p. 879, §1.)
Notwithstanding any other provision of law, any insurance company doing business within the state which offers health or disability insurance, is hereby prohibited from denying coverage to applicants because the applicant has been diagnosed as having sickle-cell anemia, and is hereby required to pay any valid claim made involving treatment or care of sickle-cell anemia in accordance with other policy provisions.
(Acts 1982, No. 82-542, p. 893, §1.)
This chapter may be cited as the Alabama Reinsurance Intermediary Act.
(Acts 1993, No. 93-673, p. 1215, §1.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) ACTUARY. A person who is a member in good standing of the American Academy of Actuaries.
(2) COMMISSIONER. The Alabama Commissioner of Insurance.
(3) CONTROLLING PERSON. Any person, firm, association, or corporation who directly or indirectly has the power to direct or cause to be directed, the management, control, or activities of the reinsurance intermediary.
(4) INSURER. Any person, firm, association, or corporation duly licensed in this state pursuant to the applicable provisions of the insurance law as an insurer.
(5) LICENSED PRODUCER. An insurance producer or reinsurance intermediary licensed pursuant to the applicable provision of the insurance law.
(6) QUALIFIED U.S. FINANCIAL INSTITUTION. An institution that:
a. Is organized or, in the case of a U.S. office of a foreign banking organization, licensed, pursuant to the laws of the United States or any state.
b. Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.
c. Has been determined by either the commissioner, or the Securities Valuation Office of the National Association of Insurance Commissioners, to meet the standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
(7) REINSURANCE INTERMEDIARY. A reinsurance intermediary-broker or a reinsurance intermediary-manager as these terms are defined in subdivisions (8) and (9).
(8) REINSURANCE INTERMEDIARY-BROKER. Any person, other than an officer or employee of the ceding insurer, firm, association, or corporation who solicits, negotiates, or places reinsurance cessions or retrocessions on behalf of a ceding insurer without the authority or power to bind reinsurance on behalf of such insurer.
(9) REINSURANCE INTERMEDIARY-MANAGER. Any person, firm, association, or corporation who has authority to bind or manages all or part of the assumed reinsurance business of a reinsurer, including the management of a separate division, department, or underwriting office, and acts as an agent for such reinsurer whether known as a reinsurance intermediary-manager, manager, or other similar term. Notwithstanding the above, the following persons shall not be considered a reinsurance intermediary-manager, with respect to such reinsurer, for the purposes of this chapter:
a. An employee of the reinsurer.
b. A U.S. manager of the United States branch of an alien reinsurer.
c. An underwriting manager which, pursuant to contract, manages all or part of the reinsurance operations of the reinsurer, is under common control with the reinsurer, subject to Chapter 29 of this title, and whose compensation is not based on the volume of premiums written.
d. The manager of a group, association, pool, or organization of insurers which engages in joint underwriting or joint reinsurance, but only if the group, association, pool, or organization of insurers, as distinguished from its members, is subject to examination by the Commissioner of Insurance of the state in which the manager’s principal business office is located.
(10) REINSURER. Any person, firm, association, or corporation duly licensed in this state pursuant to the applicable provisions of the insurance law as an insurer with the authority to assume reinsurance.
(11) TO BE IN VIOLATION. The reinsurance intermediary, insurer, or reinsurer for whom the reinsurance intermediary was acting failed to substantially comply with the provisions of this chapter.
(Acts 1993, No. 93-673, p. 1215, §2; Act 2001-702, p. 1509, §13.)
(a) No person, firm, association, or corporation shall act as a reinsurance intermediary-broker in this state if the reinsurance intermediary-broker maintains an office either directly, or as a member or employee of a firm or association, or an officer, director, or employee of a corporation:
(1) In this state, unless the reinsurance intermediary-broker is a licensed producer in this state.
(2) In another state, unless the reinsurance intermediary-broker is a licensed producer in this state or another state having a law substantially similar to this law or the reinsurance intermediary-broker is licensed in this state as a nonresident reinsurance intermediary.
(b) No person, firm, association, or corporation shall act as a reinsurance intermediary-manager:
(1) For a reinsurer domiciled in this state, unless the reinsurance intermediary-manager is a licensed producer in this state.
(2) In this state, if the reinsurance intermediary-manager maintains an office either directly or as a member or employee of a firm or association, or an officer, director, or employee of a corporation in this state, unless the reinsurance intermediary-manager is a licensed producer in this state.
(3) In another state for a nondomestic insurer, unless the reinsurance intermediary-manager is a licensed producer in this state or another state having a law substantially similar to this law or the person is licensed in this state as a nonresident reinsurance intermediary.
(c) The commissioner may require a reinsurance intermediary-manager subject to subsection (b) to:
(1) File a bond in an amount from an insurer acceptable to the commissioner for the protection of the reinsurer.
(2) Maintain an errors and omissions policy in an amount acceptable to the commissioner.
(d) (1) The commissioner may issue a reinsurance intermediary license to any person, firm, association, or corporation who has complied with the requirements of this chapter. Any license issued to a firm or association shall authorize all the members of the firm or association and any designated employees to act as reinsurance intermediaries pursuant to the license, and all the persons shall be named in the application and any supplements to the application. Any license issued to a corporation shall authorize all of the officers, and any designated employees and directors of the corporation to act as reinsurance intermediaries on behalf of the corporation, and all the persons shall be named in the application and any supplements thereto.
(2) If the applicant for a reinsurance intermediary license is a nonresident, the applicant, as a condition precedent to receiving or holding a license, shall designate the commissioner as agent for service of process in the manner, and with the same legal effect, provided for by this chapter for designation of service of process upon unauthorized insurers; and also shall furnish the commissioner with the name and address of a resident of this state upon whom notices or orders of the commissioner or process affecting such nonresident reinsurance intermediary may be served. A licensee shall promptly notify the commissioner in writing of every change in its designated agent for service of process, and any change shall not become effective until acknowledged by the commissioner.
(e) The commissioner may refuse to issue a reinsurance intermediary license if, in his judgment, the applicant, any one named on the application, or any member, principal, officer, or director of the applicant, is not trustworthy, or that any controlling person of the applicant is not trustworthy to act as a reinsurance intermediary, or that any of the foregoing has given cause for revocation or suspension of such license, or has failed to comply with any prerequisite for the issuance of the license. Upon a refusal, the commissioner shall promptly give written notice to the applicant that the license is refused, stating the reasons for the refusal.
(f) Licensed attorneys at law of this state, when acting in their professional capacity, shall be exempt from this section.
(Acts 1993, No. 93-673, p. 1215, §3.)
Transactions between a reinsurance intermediary-broker and the insurer it represents in that capacity shall only be entered into pursuant to a written authorization, specifying the responsibilities of each party. The authorization shall, at a minimum, provide that:
(1) The insurer may terminate the reinsurance intermediary-broker’s authority at any time.
(2) The reinsurance intermediary-broker shall render accounts to the insurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing, to the reinsurance intermediary-broker, and remit all funds due to the insurer within 30 days of receipt.
(3) All funds collected for the insurer’s account shall be held by the reinsurance intermediary-broker in a fiduciary capacity in a bank which is a qualified U.S. financial institution as defined herein.
(4) The reinsurance intermediary-broker shall comply with Section 27-5A-5.
(5) The reinsurance intermediary-broker shall comply with the written standards established by the insurer for the cession or retrocession of all risks.
(6) The reinsurance intermediary-broker shall disclose to the insurer any relationship with any reinsurer to which business will be ceded or retroceded.
(Acts 1993, No. 93-673, p. 1215, §4.)
(a) For at least 10 years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-broker, the reinsurance intermediary-broker shall keep a complete record for each transaction showing all of the following:
(1) The type of contract, limits, underwriting restrictions, classes, or risks and territory.
(2) Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation.
(3) Reporting and settlement requirements of balances.
(4) Rate used to compute the reinsurance premium.
(5) Names and addresses of assuming reinsurers.
(6) Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-broker.
(7) Related correspondence and memoranda.
(8) Proof of placement.
(9) Details regarding retrocessions handled by the reinsurance intermediary-broker including the identity of retrocessionaires and percentage of each contract assumed or ceded.
(10) Financial records, including, but not limited to, premium and loss accounts.
(11) When the reinsurance intermediary-broker procures a reinsurance contract on behalf of a licensed ceding insurer:
a. Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk.
b. If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.
(b) The insurer shall have access and the right to copy and audit all accounts and records maintained by the reinsurance intermediary-broker related to its business in a form usable by the insurer.
(Acts 1993, No. 93-673, p. 1215, §5.)
(a) An insurer shall not engage the services of any person, firm, association, or corporation to act as a reinsurance intermediary-broker on its behalf unless the person is licensed as required by subsection (a) of Section 27-5A-3.
(b) An insurer may not employ an individual who is employed by a reinsurance intermediary-broker with which it transacts business, unless such reinsurance intermediary-broker is under common control with the insurer and subject to Chapter 29, Title 27.
(c) The insurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-broker with which it transacts business.
(Acts 1993, No. 93-673, p. 1215, §6.)
Transactions between a reinsurance intermediary-manager and the reinsurer it represents in that capacity shall only be entered into pursuant to a written contract, specifying the responsibilities of each party, which shall be approved by the reinsurer’s board of directors. At least 30 days before a reinsurer assumes or cedes business through a producer, a true copy of the approved contract shall be filed with the commissioner for approval. The contract shall, at a minimum, provide that:
(1) The reinsurer may terminate the contract for cause upon written notice to the reinsurance intermediary-manager. The reinsurer may immediately suspend the authority of the reinsurance intermediary-manager to assume or cede business during the pendency of any dispute regarding the cause for termination.
(2) The reinsurance intermediary-manager shall render accounts to the reinsurer accurately detailing all material transactions, including information necessary to support all commissions, charges, and other fees received by, or owing to the reinsurance intermediary-manager, and remit all funds due under the contract to the reinsurer on not less than a monthly basis.
(3) All funds collected for the reinsurer’s account shall be held by the reinsurance intermediary-manager in a fiduciary capacity in a bank which is a qualified U.S. financial institution as defined herein. The reinsurance intermediary-manager may retain no more than three months estimated claims payments and allocated loss adjustment expenses. The reinsurance intermediary-manager shall maintain a separate bank account for each reinsurer that it represents.
(4) For at least 10 years after expiration of each contract of reinsurance transacted by the reinsurance intermediary-manager, the reinsurance intermediary-manager shall keep a complete record for each transaction showing all of the following:
a. The type of contract, limits, underwriting restrictions, classes, or risks and territory.
b. Period of coverage, including effective and expiration dates, cancellation provisions, and notice required of cancellation, and disposition of outstanding reserves on covered risks.
c. Reporting and settlement requirements of balances.
d. Rate used to compute the reinsurance premium.
e. Names and addresses of reinsurers.
f. Rates of all reinsurance commissions, including the commissions on any retrocessions handled by the reinsurance intermediary-manager.
g. Related correspondence and memoranda.
h. Proof of placement.
i. Details regarding retrocessions handled by the reinsurance intermediary-manager, as permitted by subsection (d) of Section 27-5A-9, including the identity of retrocessionaires and percentage of each contract assumed or ceded.
j. Financial records, including, but not limited to, premium and loss accounts.
k. When the reinsurance intermediary-manager places a reinsurance contract on behalf of a ceding insurer:
Directly from any assuming reinsurer, written evidence that the assuming reinsurer has agreed to assume the risk.
If placed through a representative of the assuming reinsurer, other than an employee, written evidence that the reinsurer has delegated binding authority to the representative.
(5) The reinsurer shall have access and the right to copy all accounts and records maintained by the reinsurance intermediary-manager related to its business in a form usable by the reinsurer.
(6) The contract cannot be assigned in whole or in part by the reinsurance intermediary-manager.
(7) The reinsurance intermediary-manager shall comply with the written underwriting and rating standards established by the insurer for the acceptance, rejection, or cession of all risks.
(8) Sets forth the rates, terms, and purposes of commissions, charges, and other fees which the reinsurance intermediary-manager may levy against the reinsurer.
(9) If the contract permits the reinsurance intermediary-manager to settle claims on behalf of the reinsurer:
a. All claims shall be reported to the reinsurer in a timely manner.
b. A copy of the claim file shall be sent to the reinsurer at its request or as soon as it becomes known that the claim:
Has the potential to exceed the lesser of an amount determined by the commissioner or the limit set by the reinsurer.
Involves a coverage dispute.
May exceed the reinsurance intermediary-manager’s claims settlement authority.
Is open for more than six months.
Is closed by payment of the lesser of an amount set by the commissioner or an amount set by the reinsurer.
c. All claim files shall be the joint property of the reinsurer and reinsurance intermediary-manager. However, upon an order of liquidation of the reinsurer, the files shall become the sole property of the reinsurer or its estate; the reinsurance intermediary-manager shall have reasonable access to and the right to copy the files on a timely basis.
d. Any settlement authority granted to the reinsurance intermediary-manager may be terminated for cause upon the reinsurer’s written notice to the reinsurance intermediary-manager or upon the termination of the contract. The reinsurer may suspend the settlement authority during the pendency of the dispute regarding the cause of termination.
(10) If the contract provides for a sharing of interim profits by the reinsurance intermediary-manager, that the interim profits shall not be paid until one year after the end of each underwriting period for property business and five years after the end of each underwriting period for casualty business (or a later period set by the commissioner for specified lines of insurance), and not until the adequacy of reserves on remaining claims has been verified pursuant to subsection (c) of Section 27-5A-9.
(11) The reinsurance intermediary-manager shall annually provide the reinsurer with a statement of its financial condition prepared by an independent certified accountant.
(12) The reinsurer shall periodically (at least semiannually) conduct an on-site review of the underwriting and claims processing operations of the reinsurance intermediary-manager.
(13) The reinsurance intermediary-manager shall disclose to the reinsurer any relationship it has with any insurer prior to ceding or assuming any business with such insurer pursuant to this contract.
(14) Within the scope of its actual or apparent authority the acts of the reinsurance intermediary-manager shall be deemed to be the acts of the reinsurer on whose behalf it is acting.
(Acts 1993, No. 93-673, p. 1215, §7.)
The reinsurance intermediary-manager shall not:
(1) Cede retrocessions on behalf of the reinsurer, except that the reinsurance intermediary-manager may cede facultative retrocessions pursuant to obligatory facultative agreements if the contract with the reinsurer contains reinsurance underwriting guidelines for such retrocessions. The guidelines shall include a list of reinsurers with which any automatic agreements are in effect, and for each such reinsurer, the coverages and amounts or percentages that may be reinsured, and commission schedules.
(2) Commit the reinsurer to participate in reinsurance syndicates.
(3) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of reinsurance for which the producer is appointed.
(4) Without prior approval of the reinsurer, pay or commit the reinsurer to pay a claim, net of retrocessions, that exceeds the lesser of an amount specified by the reinsurer or one percent of the reinsurer’s policyholder’s surplus as of December 31 of the last complete calendar year.
(5) Collect any payment from a retrocessionaire or commit the reinsurer to any claim settlement with a retrocessionaire, without prior approval of the reinsurer. If prior approval is given, a report shall be promptly forwarded to the reinsurer.
(6) Jointly employ an individual who is employed by the reinsurer unless such reinsurance intermediary-manager is under common control with the reinsurer subject to the Chapter 29, Title 27.
(7) Appoint a sub-reinsurance intermediary-manager.
(Acts 1993, No. 93-673, p. 1215, §8.)
(a) A reinsurer shall not engage the services of any person, firm, association, or corporation to act as a reinsurance intermediary-manager on its behalf unless such person is licensed as required by subsection (b) of Section 27-5A-3.
(b) The reinsurer shall annually obtain a copy of statements of the financial condition of each reinsurance intermediary-manager which such reinsurer has engaged prepared by an independent certified accountant in a form acceptable to the commissioner.
(c) If a reinsurance intermediary-manager establishes loss reserves, the reinsurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the reinsurance intermediary-manager. This opinion shall be in addition to any other required loss reserve certification.
(d) Binding authority for all retrocessional contracts or participation in reinsurance syndicates shall rest with an officer of the reinsurer who shall not be affiliated with the reinsurance intermediary-manager.
(e) Within 30 days of termination of a contract with a reinsurance intermediary-manager, the reinsurer shall provide written notification of such termination to the commissioner.
(f) A reinsurer shall not appoint to its board of directors any officer, director, employee, controlling shareholder, or subproducer of its reinsurance intermediary-manager. This subsection shall not apply to relationships governed by Chapter 29, Title 27.
(Acts 1993, No. 93-673, p. 1215, §9.)
(a) A reinsurance intermediary shall be subject to examination by the commissioner. The commissioner shall have access to all books, bank accounts, and records of the reinsurance intermediary in a form usable to the commissioner.
(b) A reinsurance intermediary-manager may be examined as if it were the reinsurer.
(Acts 1993, No. 93-673, p. 1215, §10.)
(a) A reinsurance intermediary, insurer, or reinsurer found by the commissioner, after a hearing conducted in accordance with Section 27-2-28, to be in violation of this chapter, shall:
(1) For each separate violation, pay a penalty in an amount not exceeding $5,000.
(2) Be subject to revocation or suspension of its license.
(3) If a violation was committed by the reinsurance intermediary, the reinsurance intermediary shall make restitution to the insurer, reinsurer, rehabilitator, or liquidator of the insurer or reinsurer for the net losses incurred by the insurer or reinsurer attributable to such violation.
(b) The decision, determination, or order of the commissioner pursuant to subsection (a) of this section shall be subject to judicial review pursuant to Section 27-2-32.
(c) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided in the insurance law.
(d) Nothing contained in this chapter is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, creditors, or other third parties or confer any rights to those persons.
(Acts 1993, No. 93-673, p. 1215, §11.)
The commissioner may adopt reasonable rules and regulations for the implementation and administration of the provisions of this chapter.
(Acts 1993, No. 93-673, p. 1215, §12.)
No insurer or reinsurer may continue to utilize the services of a reinsurance intermediary on and after May 17, 1993, unless utilization is in compliance with this chapter.
(Acts 1993, No. 93-673, p. 1215, §15.)
The purpose of this chapter is to protect the interest of insureds, claimants, ceding insurers, assuming insurers, and the public generally. The Legislature declares its intent is to ensure adequate regulation of insurers and reinsurers and adequate protection for those to whom they owe obligations. In furtherance of that state interest, the Legislature provides a mandate that upon the insolvency of a non-U.S. insurer or reinsurer that provides security to fund its U.S. obligations in accordance with this chapter, the assets representing the security shall be maintained in the United States and claims shall be filed with and valued by the Commissioner of Insurance with regulatory oversight, and the assets shall be distributed, in accordance with the insurance laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic U.S. insurance companies. The Legislature declares that the matters contained in this chapter are fundamental to the business of insurance in accordance with 15 U.S.C. §§ 1011-1012.
(Act 2013-209, p. 463, §1.)
(a) An insurer authorized under this title may accept reinsurance only of such risks and retain risk thereon within such limits as it is otherwise authorized to insure.
(b) An insurer authorized under this title may reinsure all, or any part, of any particular risk with any solvent insurer.
(Act 2013-209, p. 463, §1.)
(a) Credit for reinsurance shall be allowed a domestic ceding insurer as either an asset or a reduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of Section 27-5B-4, 27-5B-5, 27-5B-6, 27-5B-7, 27-5B-8, 27-5B-8.1, or 27-5B-9.
(b) The commissioner may adopt by rule specific additional requirements relating to any of the following:
(1) The valuation of assets or reserve credits.
(2) The amount and forms of security supporting reinsurance arrangements described in subsection (b) of Section 27-5B-19.
(3) The circumstances pursuant to which credit shall be reduced or eliminated.
(c) Credit shall be allowed under Section 27-5B-4, 27-5B-5, or 27-B5-6 only as respects cessions of those kinds or classes of business which the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile or, in the case of a U.S. branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under Section 27-5B-6 or 27-5B-7 only if the applicable requirements of Section 27-5B-10 have been satisfied.
(Act 2013-209, p. 463, §1; Act 2021-235, §1.)
Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is licensed to transact insurance or reinsurance in this state.
(Act 2013-209, p. 463, §1.)
Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited by the commissioner as a reinsurer in this state. In order to be eligible for accreditation, a reinsurer must do all of the following:
(1) File with the commissioner evidence of its submission to this state’s jurisdiction.
(2) Submit to this state’s authority to examine its books and records.
(3) Be licensed to transact insurance or reinsurance in at least one state, or in the case of a U.S. branch of an alien assuming insurer, be entered through and licensed to transact insurance or reinsurance in at least one state.
(4) File annually with the commissioner a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement.
(5) Demonstrate to the satisfaction of the commissioner that it has adequate financial capacity to meet its reinsurance obligations and is otherwise qualified to assume reinsurance from domestic insurers. An assuming insurer is deemed to meet this requirement as of the time of its application if it maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000) and its accreditation has not been denied by the commissioner within 90 days after submission of its application.
(Act 2013-209, p. 463, §1.)
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled in, or in the case of a U.S. branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this chapter and the assuming insurer or U.S. branch of an alien assuming insurer does both of the following:
(1) Maintains a surplus as regards policyholders in an amount not less than twenty million dollars ($20,000,000).
(2) Submits to the authority of this state to examine its books and records.
(b) The requirement of subdivision (1) of subsection (a) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.
(Act 2013-209, p. 463, §1.)
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified U.S. financial institution, as defined in subsection (b) of Section 27-5B-15, for the payment of the valid claims of its U.S. ceding insurers, their assigns and successors in interest. To enable the commissioner to determine the sufficiency of the trust fund, the assuming insurer shall report annually to the commissioner information substantially the same as that required to be reported on the NAIC Annual Statement form by licensed insurers. The assuming insurer shall submit to examination of its books and records by the commissioner and bear the expense of examination.
(b)(1) Credit for reinsurance shall not be granted under this section unless the form of the trust and any amendments to the trust have been approved by either:
a. The commissioner of the state where the trust is domiciled.
b. The commissioner of another state who, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust.
(2) The form of the trust and any trust amendments also shall be filed with the commissioner of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in its trustees for the benefit of the assuming insurer’s U.S. ceding insurers, their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the commissioner.
(3) The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year the trustee of the trust shall report to the commissioner in writing the balance of the trust and listing the trust’s investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the following December 31.
(c) The following requirements apply to the following categories of assuming insurer:
(1) The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. ceding insurers, and, in addition, the assuming insurer shall maintain a trusteed surplus of not less than twenty million dollars ($20,000,000), except as provided in subdivision (2).
(2) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the commissioner with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30 percent of the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. ceding insurers covered by the trust.
(3)a. In the case of a group including incorporated and individual unincorporated underwriters:
For reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after August 1, 1995, the trust shall consist of a trusteed account in an amount not less than the respective underwriter’s several liabilities attributable to business ceded by U.S. domiciled ceding insurers to any underwriter of the group.
For reinsurance ceded under reinsurance agreements with an inception date on or before July 31, 1995, and not amended or renewed after that date, notwithstanding the other provisions of this chapter, the trust shall consist of a trusteed account in an amount not less than the respective underwriter’s several insurance and reinsurance liabilities attributable to business written in the United States.
In addition to these trusts, the group shall maintain in trust a trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of the U.S. domiciled ceding insurers of any member of the group for all years of account.
b. The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group’s domiciliary regulator as are the unincorporated members.
c. Within 90 days after its financial statements are due to be filed with the group’s domiciliary regulator, the group shall provide to the commissioner an annual certification by the group’s domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the group.
(4) In the case of a group of incorporated underwriters under common administration, the group shall do all of the following:
a. Have continuously transacted an insurance business outside the United States for at least three (3) years immediately prior to making application for accreditation.
b. Maintain aggregate policyholders’ surplus of at least ten billion dollars ($10,000,000,000).
c. Maintain a trust fund in an amount not less than the group’s several liabilities attributable to business ceded by U.S. domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group.
d. In addition, maintain a joint trusteed surplus of which one hundred million dollars ($100,000,000) shall be held jointly for the benefit of U.S. domiciled ceding insurers of any member of the group as additional security for these liabilities.
e. Within 90 days after its financial statements are due to be filed with the group’s domiciliary regulator, make available to the commissioner an annual certification of each underwriter member’s solvency by the member’s domiciliary regulator and financial statements of each underwriter member of the group prepared by its independent public accountant.
(Act 2013-209, p. 463, §1.)
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is certified by the commissioner as a reinsurer in this state and secures its obligations in accordance with the requirements of this section. In order to be eligible for certification, the assuming insurer shall meet all of the following requirements:
(1) The assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the commissioner pursuant to subsection (c).
(2) The assuming insurer must maintain minimum capital and surplus, or its equivalent, in an amount to be determined by the commissioner pursuant to regulation.
(3) The assuming insurer must maintain financial strength ratings from two or more rating agencies deemed acceptable by the commissioner pursuant to regulation.
(4) The assuming insurer must agree to submit to the jurisdiction of this state, appoint the commissioner as its agent for service of process in this state, and agree to provide security for 100 percent of the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. ceding insurers if it resists enforcement of a final U.S. judgment.
(5) The assuming insurer must agree to meet applicable information filing requirements as determined by the commissioner, both with respect to an initial application for certification and on an ongoing basis.
(6) The assuming insurer must satisfy any other requirements for certification deemed relevant by the commissioner.
(b) An association including incorporated and individual unincorporated underwriters may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying requirements of subsection (a):
(1) The association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents (net of liabilities) of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in an amount determined by the commissioner to provide adequate protection.
(2) The incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association’s domiciliary regulator as are the unincorporated members.
(3) Within 90 days after its financial statements are due to be filed with the association’s domiciliary regulator, the association shall provide to the commissioner an annual certification by the association’s domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.
(c)(1) The commissioner shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the commissioner as a certified reinsurer.
(2) In order to determine whether the domiciliary jurisdiction of a non-U.S. assuming insurer is eligible to be recognized as a qualified jurisdiction, the commissioner shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits and the extent of reciprocal recognition afforded by the non-U.S. jurisdiction to reinsurers licensed and domiciled in the U.S. A qualified jurisdiction must agree to share information and cooperate with the commissioner with respect to all certified reinsurers domiciled within the jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the commissioner has determined that the jurisdiction does not adequately and promptly enforce final U.S. judgments and arbitration awards. Additional factors may be considered in the discretion of the commissioner.
(3) A list of qualified jurisdictions shall be published through the National Associations of Insurance Commissioners committee process. The commissioner shall consider this list in determining qualified jurisdictions. If the commissioner approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, the commissioner shall provide thoroughly documented justification in accordance with criteria to be developed under regulations.
(4) U.S. jurisdictions that meet the requirement for accreditation under the National Associations of Insurance Commissioners financial standards and accreditation program shall be recognized as qualified jurisdictions.
(5) If a certified reinsurer’s domiciliary jurisdiction ceases to be a qualified jurisdiction, the commissioner has the discretion to suspend the reinsurer’s certification indefinitely, in lieu of revocation.
(d) The commissioner shall assign a rating to each certified reinsurer, giving due consideration to the financial strength ratings that have been assigned by rating agencies deemed acceptable by the commissioner pursuant to regulation. The commissioner shall publish a list of all certified reinsurers and their ratings.
(e)(1) A certified reinsurer shall secure obligations assumed from U.S. ceding insurers under this subsection at a level consistent with its rating, as specified in regulations promulgated by the commissioner.
(2) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the commissioner and consistent with the provisions of Section 27-5B-14, or in a multibeneficiary trust in accordance with Section 27-5B-7, except as otherwise provided in this section.
(3) If a certified reinsurer maintains a trust to fully secure its obligations subject to Section 27-5B-7, and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this section or comparable laws of other U.S. jurisdictions and for its obligations subject to Section 27-5B-7. It shall be a condition to the grant of certification under this section that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the commissioner with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account.
(4) The minimum trusteed surplus requirements provided in Section 27-5B-7 are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this section, except that such trust shall maintain a minimum trusteed surplus of ten million dollars ($10,000,000).
(5) With respect to obligations incurred by a certified reinsurer under this section, if the security is insufficient, the commissioner shall reduce the allowable credit by an amount proportionate to the deficiency, and has the discretion to impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer’s obligations will not be paid in full when due.
(6)a. For purposes of this section, a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure 100 percent of its obligations.
b. As used in this section, the term “terminated” refers to revocation, suspension, voluntary surrender, and inactive status.
c. If the commissioner continues to assign a higher rating as permitted by other provisions of this chapter, this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.
(f) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, the commissioner has the discretion to defer to that jurisdiction’s certification, and has the discretion to defer to the rating assigned by that jurisdiction, and such assuming insurer shall be considered to be a certified reinsurer in this state.
(g) A certified reinsurer that ceases to assume new business in this state may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this section, and the commissioner shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.
(Act 2013-209, p. 463, §1.)
(a) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the following conditions:
(1) The assuming insurer shall have its head office or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. A reciprocal jurisdiction is a jurisdiction that meets one of the following:
a. A non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union. For purposes of this subsection, a covered agreement is an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 31 U.S.C. §§313 and 314, that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this state or for allowing the ceding insurer to recognize credit for reinsurance.
b. A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program.
c. A qualified jurisdiction, as determined by the commissioner pursuant to subsection (c) of Section 27-5B-8, which is not otherwise described in paragraph a. or b. and which meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the commissioner by rule.
(2) The assuming insurer shall have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth in regulation. If the assuming reinsurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, minimum capital and surplus equivalents, net of liabilities, calculated according to the methodology applicable in its domiciliary jurisdiction, and a central fund containing a balance in amounts to set forth by rule.
(3) The assuming insurer shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, which shall be set forth by rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it shall have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.
(4) The assuming insurer shall agree and provide adequate assurance to the commissioner, in a form specified by the commissioner pursuant to rule, to all of the following:
a. The assuming insurer shall provide prompt written notice and explanation to the commissioner if it falls below the minimum requirements set forth in subdivisions (2) and (3), or if any regulatory action is taken against it for serious noncompliance with applicable law.
b. The assuming insurer shall consent in writing to the jurisdiction of the courts of this state and to the appointment of the commissioner as agent for service of process. The commissioner may require that consent for service of process be provided to the commissioner and included in each reinsurance agreement. Nothing in this paragraph shall limit, or in any way alter, the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent the agreements are unenforceable under applicable insolvency or delinquency laws.
c. The assuming insurer shall consent in writing to pay all final judgments, wherever enforcement is sought, obtained by a ceding insurer or its legal successor, which have been declared enforceable in the jurisdiction where the judgment was obtained.
d. Each reinsurance agreement shall include a provision requiring the assuming insurer to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate.
e. The assuming insurer shall confirm that it is not presently participating in any solvent scheme of arrangement which involves this state’s ceding insurers, and agrees to notify the ceding insurer and the commissioner and to provide security in an amount equal to 100 percent of the assuming insurer’s liabilities to the ceding insurer should the assuming insurer enter into such a solvent scheme of arrangement. The security shall be in a form consistent with Sections 27-5B-8 and 27-5B-14 and as specified by the commissioner by rule.
(5) The assuming insurer or its legal successor shall provide, if requested by the commissioner, on behalf of itself and any legal predecessors, certain documentation to the commissioner as specified by the commissioner by rule.
(6) The assuming insurer shall maintain a practice of prompt payment of claims under reinsurance agreements pursuant to criteria set forth by rule.
(7) The assuming insurer’s supervisory authority shall confirm to the commissioner on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complies with the requirements set forth in subdivisions (2) and (3).
(8) Nothing in this subsection precludes an assuming insurer from providing the commissioner with information on a voluntary basis.
(b)(1) The commissioner shall timely create and publish a list of reciprocal jurisdictions.
(2) A list of reciprocal jurisdictions is published through the NAIC Committee Process. The commissioner’s list shall include any reciprocal jurisdiction, as defined in paragraph a. or b. of subdivision (a)(1), and shall consider any other reciprocal jurisdiction included on the NAIC list. The commissioner may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed under rules adopted by the commissioner.
(3) The commissioner may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction in accordance with a process set forth in rules adopted by the commissioner, except that the commissioner shall not remove from the list a reciprocal jurisdiction as defined in paragraph a. or b. of subdivision (1) of subsection (a). Upon removal of a reciprocal jurisdiction from this list, credit for reinsurance ceded to an assuming insurer which has its home office or is domiciled in that jurisdiction shall be allowed, if otherwise allowed pursuant to this chapter.
(c) The commissioner shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this section and to which cessions shall be granted credit in accordance with this section. The commissioner may add an assuming insurer to the list if an NAIC accredited jurisdiction has added the assuming insurer to a list of assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the commissioner as required under subdivision (a)(4) and complies with any additional requirements that the commissioner may impose by rule, except to the extent that they conflict with an applicable covered agreement.
(d) If the commissioner determines that an assuming insurer no longer meets one or more of the requirements under this section, the commissioner may revoke or suspend the eligibility of the assuming insurer for recognition under this section in accordance with procedures set forth by rule.
(1) While an assuming insurer’s eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer’s obligations under the contract are secured in accordance with Section 27-5B-14.
(2) If an assuming insurer’s eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into prior to the date of revocation, except to the extent that the assuming insurer’s obligations under the contract are secured in a form acceptable to the commissioner and consistent with Section 27-5B-14.
(e) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer, or its representative, may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.
(f) Nothing in this section shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement, except as expressly prohibited by this chapter or other applicable law or rule.
(g)(1) Credit may be taken under this section only for reinsurance agreements entered into, amended, or renewed on or after January 1, 2022, and only with respect to losses incurred and reserves reported on or after the later of: a. the date on which the assuming insurer has met all eligibility requirements pursuant to subsection (a), and b. the effective date of the new reinsurance agreement, amendment, or renewal.
(2) This subsection does not alter or impair a ceding insurer’s right to take credit for reinsurance, to the extent that credit is not available under this section, as long as the reinsurance qualified for credit under any other applicable provision of this chapter.
(3) Nothing in this section shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.
(4) Nothing in this section shall limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement.
(Act 2021-235, §2.)
Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of Section 27-5B-4, 27-5B-5, 27-5B-6, 27-5B-7, 27-5B-8, or 27-5B-8.1, but only as to the insurance of risks located in jurisdictions where the reinsurance is required by applicable law or regulation of that jurisdiction.
(Act 2013-209, p. 463, §1; Act 2021-235, §1.)
(a) If the assuming insurer is not licensed, accredited or certified to transact insurance or reinsurance in this state, the credit permitted by Sections 27-5B-6 and 27-5B-7 shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:
(1) That in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give the court jurisdiction, and will abide by the final decision of the court or of any appellate court in the event of an appeal.
(2) To designate the commissioner or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding insurer.
(b) This section is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if this obligation is created in the agreement.
(Act 2013-209, p. 463, §1.)
If the assuming insurer does not meet the requirements of Section 27-5B-4, 27-5B-5, 27-5B-6, or 27-5B-8.1, the credit permitted by Section 27-5B-7 or 27-5B-8 shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:
(1) Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by subsection (c) of Section 27-5B-7, or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the commissioner with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the commissioner with regulatory oversight all of the assets of the trust fund.
(2) The assets shall be distributed by and claims shall be filed with and valued by the commissioner with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies.
(3) If the commissioner with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the commissioner with regulatory oversight to the trustee for distribution in accordance with the trust agreement.
(4) The grantor shall waive any right otherwise available to it under U.S. law that is inconsistent with this provision.
(Act 2013-209, p. 463, §1; Act 2021-235, §1.)
(a) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, the commissioner may suspend or revoke the reinsurer’s accreditation or certification.
(b) The commissioner must give the reinsurer notice and opportunity for hearing. The suspension or revocation may not take effect until after the commissioner’s order on hearing, unless any of the following occurs:
(1) The reinsurer waives its right to hearing.
(2) The commissioner’s order is based on regulatory action by the reinsurer’s domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer’s eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subsection (f) of Section 27-5B-8.
(3) The commissioner finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the commissioner’s action.
(c) While a reinsurer’s accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer’s obligations under the contract are secured in accordance with Section 27-5B-14. If a reinsurer’s accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation except to the extent that the reinsurer’s obligations under the contract are secured in accordance with subsection (e) of Section 27-5B-8 or Section 27-5B-14.
(Act 2013-209, p. 463, §1.)
(a) A ceding insurer shall take steps to manage its reinsurance recoverables proportionate to its own book of business. A domestic ceding insurer shall notify the commissioner within 30 days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds 50 percent of the domestic ceding insurer’s last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
(b) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the commissioner within 30 days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than 20 percent of the ceding insurer’s gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.
(Act 2013-209, p. 463, §1.)
(a) An asset or a reduction from liability for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of Section 27-5B-3, 27-5B-4, 27-5B-5, 27-5B-6, 27-5B-7, 27-5B-8, 27-5B-8.1, 27-5B-9, 27-5B-10, 27-5B-11, 27-5B-12, or 27-5B-13 shall be allowed in an amount not exceeding the liabilities carried by the ceding insurer.
(b) In addition to any other authority of the commissioner, the commissioner, by rule adopted pursuant to subsection (b) of Section 27-5B-19, may adopt specific additional requirements relating to any of the following:
(1) The valuation of assets or reserve credits.
(2) The amount and forms of security supporting reinsurance arrangements described in subsection (b) of Section 27-5B-19.
(3) The circumstances pursuant to which credit will be reduced or eliminated.
(c) The reduction shall be in the amount of funds held by or on behalf of the ceding insurer, including funds held in trust for the ceding insurer, under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified U.S. financial institution, as defined in subsection (b) of Section 27-5B-15. This security may be in the form of any of the following:
(1) Cash.
(2) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office, and qualifying as admitted assets.
(3) Clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified U.S. financial institution, as defined in subsection (a) of Section 27-5B-15, effective no later than December 31 of the year for which the filing is being made, and in the possession of, or in trust for, the ceding insurer on or before the filing date of its annual statement.
(4) Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance (or confirmation) shall, notwithstanding the issuing (or confirming) institution’s subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever first occurs.
(5) Any other form of security acceptable to the commissioner.
(Act 2013-209, p. 463, §1; Act 2021-235, §1.)
(a) For purposes of subdivision (3) of Section 27-5B-14, a qualified U.S. financial institution means an institution that meets all of the following:
(1) Is organized or, in the case of a U.S. office of a foreign banking organization, licensed, under the laws of the United States or any state thereof.
(2) Is regulated, supervised, and examined by U.S. federal or state authorities having regulatory authority over banks and trust companies.
(3) Has been determined by either the commissioner or the Securities Valuation Office of the National Association of Insurance Commissioners to meet such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the commissioner.
(b) A qualified U.S. financial institution means, for purposes of those provisions of this law specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that meets both of the following:
(1) Is organized, or, in the case of a U.S. branch or agency office of a foreign banking organization, licensed, under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers.
(2) Is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.
(Act 2013-209, p. 463, §1.)
Except as provided in Section 27-5B-17, no credit shall be allowed, as an admitted asset or deduction from liability, to any ceding insurer for reinsurance placed with a reinsurer qualified under this chapter, unless the reinsurance contract provides, in substance, that in the event of the insolvency of the ceding insurer, the reinsurance shall be payable under a contract reinsured by the assuming insurer on the basis of reported claims allowed by the liquidation court, without diminution because of the insolvency of the ceding insurer. The payments shall be made directly to the ceding insurer or to its domiciliary liquidator except in either of the following instances:
(1) Where the contract or other written agreement specifically provides another payee of the reinsurance in the event of the insolvency of the ceding insurer.
(2) Where the assuming insurer, with the consent of the direct insured, has assumed the policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under the policies and in substitution for the obligations of the ceding insurer to the payees.
(Act 2013-209, p. 463, §1.)
Notwithstanding Section 27-5B-16, in the event that a life and health insurance guaranty association has made the election to succeed to the rights and obligations of the insolvent insurer under the contract of reinsurance, the reinsurer’s liability to pay covered reinsured claims shall continue under the contract of reinsurance subject to the payment to the reinsurer of the reinsurance premiums for the coverage. Payment for the reinsured claims shall only be made by the reinsurer pursuant to the direction of the guaranty association or its designated successor. Any payment made at the direction of the guaranty association or its designated successor by the reinsurer shall discharge the reinsurer of all further liability to any other party for the claim payment.
(Act 2013-209, p. 463, §1.)
The reinsurance agreement may provide that the domiciliary liquidator of an insolvent ceding insurer shall give written notice to the assuming insurer of the pendency of a claim against the ceding insurer on the contract within a reasonable time after the claim is filed in the liquidation proceeding. During the pendency of the claim, any assuming insurer may investigate the claim and interpose, at its own expense, in the proceeding where the claim is to be adjudicated any defenses which it deems available to the ceding insurer, or its liquidator. The expense may be filed as a claim against the insolvent ceding insurer to the extent of a proportionate share of the benefit which may accrue to the ceding insurer solely as a result of the defense undertaken by the assuming insurer. Where two or more assuming insurers are involved in the same claim and a majority in interest elect to interpose a defense to the claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement as though the expense had been incurred by the ceding insurer.
(Act 2013-209, p. 463, §1.)
(a) The commissioner may adopt rules implementing this chapter.
(b) In addition to the authority of the commissioner pursuant to subsection (a), the commissioner may adopt rules applicable to reinsurance arrangements as provided in this subsection.
(1) A rule adopted pursuant to this subsection may apply only to reinsurance relating to any of the following:
a. Life insurance policies with guaranteed nonlevel gross premiums or guaranteed nonlevel benefits.
b. Universal life insurance policies with provisions resulting in the ability of a policyholder to keep a policy in force over a secondary guarantee period.
c. Variable annuities with guaranteed death or living benefits.
d. Long-term care insurance policies.
e. Any other life and health insurance and annuity product for which the NAIC adopts model regulatory requirements with respect to credit for reinsurance.
(2) A rule adopted pursuant to paragraph a. or b. of subdivision (1) may apply to any reinsurance agreement containing any of the following:
a. Policies issued on or after January 1, 2015.
b. Policies issued prior to January 1, 2015, if risk pertaining to the pre-2015 policies is ceded in connection with the reinsurance agreement, in whole or in part, on or after January 1, 2015.
c. Reinsurance agreements meeting both items a. and b.
(3) A rule adopted pursuant to this subsection may require the ceding insurer, in calculating the amounts or forms of security required to be held under rules adopted under this authority, to use the valuation manual adopted by the NAIC as described in subdivision (b)(1) of Section 27-36A-15, including all amendments adopted by the NAIC and in effect on the date as of which the calculation is made, to the extent applicable.
(4) A rule adopted pursuant to this subsection does not apply to cessions to an assuming insurer that meets any of the following:
a. The conditions set forth in Section 27-5B-8.1.
b. Is certified in this state.
c. Maintains at least two hundred fifty million dollars ($250,000,000) in capital and surplus when determined in accordance with the Accounting Practices and Procedures Manual of the NAIC, including all amendments thereto adopted by the NAIC, excluding the impact of any permitted or prescribed practices, and is either of the following:
Licensed in at least 26 states.
Licensed in at least 10 states, and licensed or accredited in a total of at least 35 states.
(5) The authority to adopt rules pursuant to this subsection does not limit the commissioner’s general authority to adopt rules pursuant to subsection (a).
(Act 2013-209, p. 463, §1; Act 2021-235, §1.)
The amendments of this chapter and the additions to this chapter by Act 2021-235 shall apply to all cessions after January 1, 2022, under reinsurance agreements that have an inception, anniversary, or renewal date on or after July 1, 2022.
(Act 2021-235, §2.)
The following deposits of insurers, when made through the commissioner, shall be accepted and held and shall be subject to the provisions of this chapter:
(1) Deposits required under this title for authority to transact insurance in this state;
(2) 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;
(3) Deposits of reserves made by domestic life insurers under laws heretofore in force; and
(4) Deposits in such additional amounts as are permitted to be made under Section 27-6-11.
(Acts 1971, No. 407, p. 707, §97.)
Such deposits shall be held for purposes as follows:
(1) Deposits made in this state under Sections 27-3-11, 27-3-12, and 27-3-14 of this title shall be held for the purposes stated in the respective sections;
(2) 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 state, province, or country shall be held for the protection of the insurer’s policyholders or policyholders and creditors;
(3) Deposits of reserves made by domestic life insurers under laws heretofore in force shall be held for the purpose or purposes specified in such laws or in the policies or contracts by which such deposit was required or declared; and
(4) Deposits required pursuant to the retaliatory provision, Section 27-3-29, shall be held for such purposes as are required by such laws and as specified by the commissioner’s order by which the deposit is required.
(Acts 1971, No. 407, p. 707, §98.)
(a) All such deposits required under Sections 27-3-11, 27-3-12, and 27-3-14 for authority to transact insurance in this state shall consist of certified checks, or certificates of deposit or any combination of securities, the market value of which is readily ascertainable, and, if negotiable by delivery or assignment, of the kinds described below:
(1) United States government obligations;
(2) State, county, municipal, and school obligations;
(3) Public improvement obligations;
(4) Housing authority obligations;
(5) Obligations, stock of certain federal agencies;
(6) Canadian governmental obligations;
(7) International banks;
(8) Corporate obligations;
(9) Equipment trust obligations; and
(10) Railroad leased lines, terminal obligations.
(b) All such deposits required of a domestic insurer pursuant to the laws of another state, province, or country shall be comprised of securities, if negotiable by delivery or assignment, of the kind, or kinds, required or permitted by the laws of such state, province, or country, except common stocks, mortgages of any kind, and real estate.
(c) Deposits of the reserves of a domestic life insurer under laws heretofore in force shall consist of securities, if negotiable by delivery or assignment, eligible for investment of the insurer’s reserves.
(d) Deposits of foreign insurers made in this state under the retaliatory provision, Section 27-3-29, shall consist of such securities or assets as are required by the commissioner pursuant to such provision.
(e) Any insurance company, with respect to its general account or separate accounts, is authorized to deposit or arrange for the deposit of securities which it may own in a clearing corporation, as defined in Section 7-8-102(3), or in a federal reserve bank under book-entry system. When such securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other securities deposited in such clearing corporation by any person, regardless of the ownership of such securities, and securities of small denominations may be merged into one or more certificates of larger denominations. Title to such securities may be transferred by bookkeeping entry on the books of such clearing corporation or federal reserve bank without physical delivery of certificates representing such securities. Any company making deposits by means of such securities shall provide to the commissioner evidence customarily issued by federal reserve banks and clearing corporations establishing that the securities are actually recorded in a book-entry account or actually held in safekeeping by a clearing corporation. Securities deposited in a clearing corporation or in a book-entry account and used to meet the deposit requirements under the insurance laws of this state shall be under the control of the commissioner and shall not be withdrawn by the insurance company without the approval of the commissioner.
(Acts 1971, No. 407, p. 707, §99; Acts 1981, No. 81-541, p. 904, §2.)
(a) Deposits made in this state under Sections 27-3-11, 27-3-12, and 27-3-14, together with deposit of reserves of domestic life insurers under registered policies heretofore issued, shall be made through the commissioner with the Treasurer of the State of Alabama.
(b) The State Treasurer, in his official capacity, shall take receipt for and hold deposits made under this title as provided in subsection (a) of this section, subject to the provisions of this chapter.
(c) The State Treasurer shall hold all such deposits in safekeeping in the vaults located in his offices or, if space in such vaults is not reasonably adequate and safe for all securities and property otherwise to be contained therein, the Treasurer may keep such securities in safe deposit boxes rented by him for the purpose and under his control in established safe deposit institutions located in the City of Montgomery, Alabama.
(d) The Treasurer shall be the custodian only of such deposits and shall have no powers or responsibility as to the character or amount thereof. He shall accept, permit substitutions, and release securities or assets so deposited only upon written authorization of the commissioner and the insurer or upon order of the court and shall have no obligation to determine in any instance whether such authorization or order, if genuine, is otherwise lawful or proper.
(e) For all securities and assets deposited as provided in this section, the faith and credit of the State of Alabama is pledged that the same will be returned to the parties entitled to receive them or disposed of as provided in this chapter.
(Code 1940, T. 28, §73; Acts 1971, No. 407, p. 707, §100.)
The commissioner shall keep a record of the securities and assets comprising each deposit, showing by item the amount and market value and of all his transactions relative thereto.
(Acts 1971, No. 407, p. 707, §101.)
(a) All securities not negotiable by delivery and deposited by an insurer shall be duly assigned to the commissioner and his successors in office. All other assets so deposited shall be duly transferred or conveyed to the commissioner. Upon release of any such security or asset to the insurer, the commissioner shall reassign, or transfer or reconvey the same to the insurer.
(b) The commissioner may, in his discretion, prior to acceptance for deposit of any security or asset 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.
(Acts 1971, No. 407, p. 707, §102.)
In lieu of the assignment, transfer, or conveyance of securities and assets to the commissioner as provided for in subsection (a) of Section 27-6-6 and at all events in connection with any deposit heretofore or hereafter made through the commissioner, the commissioner may require or permit the depositing insurer to deliver to him a power of attorney, executed by the lawful owner of such securities or assets, authorizing the commissioner to transfer, sell, or exchange the same for the purposes of the law under which the same are deposited or held on deposit. The power of attorney shall specifically describe each of the securities and assets covered thereby and shall not be a general power of attorney covering all securities and assets on deposit or thereafter deposited.
(Acts 1953, No. 727, p. 981, §1; Acts 1971, No. 407, p. 707, §103.)
The commissioner shall exercise the power granted by the power of attorney provided for in Section 27-6-7 or otherwise sell any security or asset under any assignment, transfer or conveyance pursuant to Section 27-6-6, only pursuant to, and in accordance with, an order of a court of competent jurisdiction in a proper proceeding or action to which the insurer owning such securities or assets is a party. This section shall not apply as to the special deposits of surety insurers which are subject to Section 27-6-13.
(Acts 1953, No. 727, p. 981, §2; Acts 1971, No. 407, p. 707, §104.)
The power of attorney provided for in Section 27-6-7 shall be kept by the commissioner in a place of safekeeping and may be physically attached to the securities or assets described therein. Whenever such securities or assets, or any portion thereof, are returned to the insurer which deposited them, the power of attorney shall be returned to the insurer or to the trustee or other representative authorized for that purpose.
(Acts 1953, No. 727, p. 981, §3; Acts 1971, No. 407, p. 707, §105.)
If less than all of the securities or assets covered by any such power of attorney is returned to the insurer or its trustee or agent, the commissioner may require the insurer to deliver to him, as a condition precedent to the return of such power of attorney, a new power of attorney covering the securities and assets not then being withdrawn. The new power of attorney shall be held and exercised under the same restrictions and upon the same conditions as prescribed in this chapter for the original power of attorney.
(Acts 1953, No. 727, p. 981, §4; Acts 1971, No. 407, p. 707, §106.)
An insurer may so deposit assets or securities in an amount exceeding its deposit required or otherwise permitted under this title by not more than 20 percent of such required or permitted deposit or $100,000.00, whichever is the larger amount, for the purpose of absorbing fluctuations in the value of securities and assets deposited and to facilitate the exchange and substitution of such securities and 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 subdivision (b) (3) of Section 27-6-15.
(Acts 1971, No. 407, p. 707, §107.)
So long as the insurer remains solvent and is in compliance with this title, it may:
(1) Demand, receive, maintain actions for, and recover the income from the securities or assets deposited;
(2) Exchange and substitute for the deposited securities or assets, or any part thereof, other eligible securities and assets of equivalent or greater value; and
(3) At any reasonable time, inspect any such deposit.
(Code 1940, T. 28, §73; Acts 1971, No. 407, p. 707, §108.)
(a) If any surety insurer which has made the deposit provided for in Section 27-3-12 fails or refuses to pay any final judgment entered against it upon any bond or undertaking from which no appeal and supersedeas has been taken for 30 days after the entry of such judgment, the clerk or register of the court in which such judgment was entered shall certify a copy thereof to the commissioner, together with the fact that it remains unpaid, and the commissioner shall sell as many of the securities or other assets deposited by such insurer as may be necessary to pay such judgment, and the interest and costs thereon, and to pay to the clerk or register of the court, from the proceeds of the sale, the amount of the judgment, with interest and costs. The commissioner shall sell such securities or other assets at private or public sale, with or without notice, or so many as may be necessary for the best price he can obtain in the market, shall assign the same to the purchaser and shall apply the proceeds, or so much thereof as may be necessary, to the payment of such judgment, with interest and costs, the surplus, if any, remaining on deposit in lieu of the securities or other assets so sold.
(b) Of such sale, the commissioner must forthwith notify the insurer and require it to supply the deficiency, if any, in the deposit within 30 days as required in Section 27-6-14; and, if the insurer fails to do so, the commissioner shall revoke its certificate of authority.
(Acts 1909, No. 147, p. 329; Acts 1971, No. 407, p. 707, §109.)
(a) If for any reason the market value of assets and securities of an insurer held on deposit in this state under this title falls below the amount so required, the insurer shall promptly deposit other or additional assets or securities eligible for deposit sufficient to cure such deficiency. If the insurer has failed to cure the deficiency within 30 days after receipt of notice thereof by registered or certified mail from the commissioner, the commissioner shall revoke the insurer’s certificate of authority.
(b) If for any reason the market value of assets and securities of a domestic life insurer, representing deposit of the reserves of certain of its outstanding registered policies and registered annuity contracts under laws heretofore in force, falls below the amount so required and as determined from the insurer’s most recent annual statement or most recent examination of the insurer by the commissioner, the insurer shall promptly deposit other or additional assets or securities eligible for deposit sufficient to cure such deficiency. If the insurer has failed to cure the deficiency, after the commissioner has given the insurer notice thereof by registered or certified mail, within such reasonable time not exceeding 90 days as may be allowed therefor by the commissioner and so specified in his notice, the insurer shall be deemed to be insolvent and the commissioner shall revoke its certificate of authority and institute delinquency proceedings against the insurer under Chapter 31 of this title.
(Acts 1971, No. 407, p. 707, §110.)
(a) All deposits in this state made under this title shall be held on deposit as long as there is outstanding any liability of the insurer with respect to which the deposit was made.
(b) Any such deposit shall be released and returned:
(1) To the insurer upon extinguishment by reinsurance in an insurer authorized to transact such insurance in this state, or otherwise, of all liability of the insurer for the security of which the deposit is held;
(2) To the insurer during solvency, to the extent such deposit is in excess of the amount required; or
(3) Upon proper order of a court of competent jurisdiction, 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.
(c) The Treasurer shall release any such deposit, or part thereof, upon written authorization of the commissioner and of the insurer or order of court, as provided in subsection (d) of Section 27-6-4.
(d) In the case of deposits of title insurers made under Section 27-3-13, the deposit or excess portion thereof shall be released by the trustee bank or trust company upon written authorization of the commissioner or upon order of a court of competent jurisdiction. If a foreign title insurer which has made such a deposit reincorporates under the laws of the State of Alabama and qualifies under this code as a domestic title insurer and if all of the liabilities of such foreign insurer in this state are assumed by such new domestic insurer and the foreign insurer does not thereafter transact business in this state, its deposit shall be delivered by such trustee to such new domestic insurer upon its application and the written authorization of the commissioner.
(e) This section shall not apply as to deposits held with respect to registered life insurance policies or registered annuity contracts insured under laws heretofore in force. Such deposits shall be released only as provided under the laws pursuant to which such policies and contracts were so issued and registered.
(Acts 1971, No. 407, p. 707, §111.)
(a) Before authorizing the release of any deposit or excess portion thereof to the insurer, as provided in Section 27-6-15, the commissioner shall require the insurer to file with him a statement under its seal and the oath of its chief executive officer, or of its United States manager in the case of an alien insurer, setting forth the facts upon which it bases its entitlement to such release.
(b) If release of the deposit is claimed by the insurer upon the ground that its liabilities in this state, as to which the deposit was originally made and is held, have been assumed by another insurer authorized to transact insurance in this state, the insurer shall file with the commissioner a copy of the contract or agreement of such reinsurance.
(c) Upon being satisfied by such statement and such other information and evidence as he may reasonably require and by such examination, if any, of the affairs of the insurer as he deems advisable to make that the insurer is entitled to the release of its deposits or excess portions thereof as provided in Section 27-6-15, the commissioner shall authorize the Treasurer or the trustee bank or trust company in the case of deposits of title insurers made under Section 27-3-13 to release the deposit or excess portion thereof to the insurer or its authorized representative. The commissioner shall have no liability as to any such release so made by him in good faith.
(Acts 1971, No. 407, p. 707, §112.)
Sections 27-6A-2 through 27-6A-8, inclusive, of this chapter may be cited as the “Alabama Managing General Agents Act.”
(Acts 1993, No. 93-675, p. 1240, §9.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) ACTUARY. A person who is a member in good standing of the American Academy of Actuaries.
(2) INSURER. A person defined in subdivisions (2) and (3) of Section 27-1-2.
(3) MANAGING GENERAL AGENT. Any person, firm, or association who does both of the following:
a. Manages all or part of the insurance business of an insurer, including the management of a separate division, department, or underwriting office.
b. Acts as a producer for an insurer whether known as a managing general agent, manager, or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium equal to or more than five percent of the policyholder surplus as reported in the last annual statement of the insurer in any one quarter or year together with one or more of the following activities related to the business produced:
Adjusts or pays claims in excess of an amount determined by the commissioner.
Negotiates reinsurance on behalf of the insurer.
c. Notwithstanding the above, the following persons shall not be considered as managing general agents for the purposes of this chapter:
An employee of the insurer.
A United States manager of the United States branch of an alien insurer.
An underwriting manager who, pursuant to contract, manages all or part of the insurance operations of the insurer, is under common control with the insurer, subject to the Alabama Insurance Holding Company System Regulatory Act, Chapter 29, commencing with Section 27-29-1, of this title, and whose compensation is not based on the volume of premiums written.
The attorney-in-fact authorized by and acting for the subscribers of a reciprocal insurer or inter-insurance exchange under powers of attorney.
(4) POLICYHOLDER SURPLUS. The excess of assets over liabilities.
(5) UNDERWRITE. The authority to accept or reject risk on behalf of the insurer.
(Acts 1993, No. 93-675, p. 1240, §3; Act 2001-702, p. 1509, §13.)
(a) No person, firm, association, or corporation shall act in the capacity of a managing general agent with respect to risks located in this state for an insurer licensed in this state unless then licensed in this state as a managing general agent of the insurer.
(b) No person, firm, association, or corporation shall act in the capacity of a managing general agent representing an insurer domiciled in this state with respect to risks located outside this state unless then licensed in this state as a managing general agent of the insurer. Where applicable, the license may be a nonresident license pursuant to this chapter.
(c) The commissioner may require the managing general agent to maintain a bond in an amount acceptable to the commissioner for the protection of the insurer.
(d) The commissioner may require the managing general agent to maintain an errors and omissions policy.
(Acts 1993, No. 93-675, p. 1240, §4; Act 2001-702, p. 1509, §13.)
No person, firm, association, or corporation acting in the capacity of a managing general agent shall place business with an insurer unless there is in force a written contract between the parties that sets forth the responsibilities of each party and where both parties share responsibility for a particular function, specifies the division of such responsibilities, and that contains the following minimum provisions:
(a) The insurer may terminate the contract for cause upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of any dispute regarding the cause for termination.
(b) The managing general agent shall render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.
(c) All funds collected for the account of an insurer will be held by the managing general agent in a fiduciary capacity in a bank that is a member of the Federal Reserve System. This account shall be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months estimated claims payments and allocated loss adjustment expenses.
(d) Separate records of business written by the managing general agent shall be maintained. The insurer shall have access and right to copy all accounts and records related to its business in a form usable by the insurer and the commissioner shall have access to all books, bank accounts, and records of the managing general agent in a form usable to the commissioner. The records shall be retained according to Section 27-7-33.
(e) The contract may not be assigned in whole or in part by the managing general agent.
(f) The contract shall contain appropriate underwriting guidelines including the following:
(1) The maximum annual premium volume.
(2) The basis of the rates to be charged.
(3) The types of risks that may be written.
(4) Maximum limits of liability.
(5) Applicable exclusions.
(6) Territorial limitations.
(7) Policy cancellation provisions.
(8) The maximum policy period.
(g) The insurer shall have the right to cancellation or non-renewal of any policy of insurance subject to the applicable laws and regulations concerning the cancellation and non-renewal of insurance policies.
(h) If the contract permits the managing general agent to settle claims on behalf of the insurer:
(1) All claims shall be reported to the company in a timely manner.
(2) A copy of the claim file shall be sent to the insurer at its request or as soon as it becomes known to the managing general agent that the claim:
a. Has the potential to exceed an amount determined by the commissioner or exceeds the limit set by the company, whichever is less.
b. Involves a coverage dispute.
c. May exceed the managing general agent’s claims settlement authority.
d. Has been open for more than six months.
e. Is closed by payment of an amount set by the commissioner or an amount set by the company, whichever is less.
(3) All claim files shall be the joint property of the insurer and managing general agent. Upon an order of liquidation of the insurer, the files shall become the sole property of the insurer or its estate. The managing general agent shall have reasonable access to and the right to copy the files on a timely basis.
(4) Any settlement authority granted to the managing general agent may be terminated for cause upon the insurer’s written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the settlement authority during the pendency of any dispute regarding the cause for termination.
(i) Where electronic claims files are in existence, the contract shall address the timely transmission of the data.
(j) If the contract provides for a sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments, or in any other manner, interim profits shall not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business and not until the profits have been verified pursuant to Section 27-6A-5.
(k) The managing general agent shall not:
(1) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which such automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured and commission schedules.
(2) Commit the insurer to participate in insurance or reinsurance syndicates.
(3) Appoint any producer without assuring that the producer is lawfully licensed to transact the type of insurance for which he or she is appointed.
(4) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, which shall not exceed one percent of the insurer’s policyholder’s surplus as of December 31 of the last completed calendar year.
(5) Collect any payment from a reinsurer or commit the insurer to any claim settlement with a reinsurer without prior approval of the insurer. If prior approval is given, a report shall be promptly forwarded to the insurer.
(6) Permit its subagent to serve on the insurer’s board of directors.
(7) Jointly employ an individual who is employed by the insurer.
(8) Appoint a sub-managing general agent.
(Acts 1993, No. 93-675, p. 1240, §5; Act 2001-702, p. 1509, §13.)
Insurers shall have the following duties:
(1) The insurer shall have on file an independent financial examination, in a form acceptable to the commissioner, of each managing general agent with which it has done business.
(2) If a managing general agent establishes loss reserves, the insurer shall annually obtain the opinion of an actuary attesting to the adequacy of loss reserves established for losses incurred and outstanding on business produced by the managing general agent. This is in addition to any other required loss reserve certification.
(3) The insurer shall periodically, and at least semi-annually, conduct an onsite review of the underwriting and claims processing operations of the managing general agent.
(4) Binding authority for all reinsurance contracts or participation in insurance or reinsurance syndicate shall rest with an officer of the insurer, who shall not be affiliated with the managing general agent.
(5) Within 30 days of entering into or terminating a contract with a managing general agent, the insurer shall provide written notification of the appointment or termination to the commissioner. Notices of appointment of a managing general agent shall include a statement of duties which the applicant is expected to perform on behalf of the insurer, the lines of insurance for which the applicant is to be authorized to act, and any other information the commissioner may request.
(6) An insurer shall review its books and records each quarter to determine if any producer has become, by operation of subdivision (3) of Section 27-6A-2, a managing general agent as defined in that section. If the insurer determines that a producer has become a managing general agent, the insurer shall promptly notify the producer and the commissioner of the determination and the insurer and the producer shall fully comply with the provisions of this chapter within 30 days of the notification.
(7) An insurer shall not appoint to its board of directors an officer, director, employee, subagent, or controlling shareholder of its managing general agents. This subsection shall not apply to relationships governed by the Alabama Insurance Holding Company System Regulatory Act, Chapter 29, commencing with Section 27-29-1, of this title.
(Acts 1993, No. 93-675, p. 1240, §6; Act 2001-702, p. 1509, §13.)
The acts of the managing general agent are considered to be the acts of the insurer on whose behalf it is acting. A managing general agent may be examined as if it were the insurer.
(Acts 1993, No. 93-675, p. 1240, §7.)
(a) If the commissioner finds after a hearing conducted in accordance with Section 27-2-28, that any person has violated this chapter, the commissioner may order:
(1) For each separate violation, a penalty in an amount of up to $5,000.
(2) Revocation or suspension of the managing general agent’s license.
(3) The managing general agent to reimburse the insurer, the rehabilitator, or liquidator of the insurer for any losses incurred by the insurer caused by a violation of this chapter committed by the managing general agent.
(b) The decision, determination, or order of the commissioner pursuant to subsection (a) of this section shall be subject to judicial review pursuant to Section 27-2-31.
(c) No provision of this section shall affect the right of the commissioner to impose any other penalties provided for in the insurance law, rule, or regulation.
(d) No provision of this chapter is intended to or shall in any manner limit or restrict the rights of policyholders, claimants, and auditors.
(Acts 1993, No. 93-675, p. 1240, §8.)
No insurer may continue to use the services of a managing general agent after midnight December 31, 1993, unless the insurer is in compliance with this chapter.
(Acts 1993, No. 93-675, p. 1240, §9.)
Sections 27-6B-2 to 27-6B-6, inclusive, of this chapter may be cited as the “Alabama Business Transacted With Producer Controlled Property and Casualty Insurer Law.”
(Acts 1993, No. 93-675, p. 1240, §14.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) ACCREDITED STATE. A state in which the Department of Insurance meets the minimum financial qualifications and regulatory standards promulgated and established, from time to time, by the National Association of Insurance Commissioners.
(2) COMMISSIONER. The Commissioner of Insurance.
(3) CONTROL or CONTROLLED. The same as defined in Section 27-29-1.
(4) CONTROLLED INSURER. A licensed insurer who is controlled, directly or indirectly, by a producer.
(5) CONTROLLING PRODUCER. A producer who, directly or indirectly, controls an insurer.
(6) LICENSED INSURER or INSURER. Any person, firm, association, or corporation duly licensed to transact a property and casualty insurance business in this state. For the purposes of this chapter, the following are not licensed insurers:
a. A residual market pool and a joint underwriting authority or association.
b. A captive insurer other than risk retention groups as defined in 15 U.S.C. Section 3901 et seq. and 42 U.S.C. Section 9671, which, for the purposes of this chapter, are insurers owned by another organization whose exclusive purpose is to insure risks of the parent organization and affiliated companies or, in the case of groups and associations, insurance organizations owned by the insureds whose exclusive purpose is to insure risks to member organizations and group members and their affiliates.
(7) PRODUCER. An insurance broker or brokers or any other person, firm, association, or corporation, when, for any compensation, commission, or other thing of value, the person, firm, association, or corporation acts or aids in any manner in soliciting, negotiating, or procuring the making of any insurance contract on behalf of another insured person, firm, association, or corporation. The term is not intended to include an exclusive agent or any independent agent acting on behalf of the controlled insurer and any subagent or representative of the agent, who acts in the solicitation of, negotiation for, or procurement or making of an insurance contract, if the agent is not also acting in the capacity of an insurance broker in the transaction in question.
(Acts 1993, No. 93-675, p. 1240, §15; Act 2014-377, p. 1407, §4.)
This chapter shall apply to any licensed insurer as defined in Section 27-6B-2, either domiciled in this state or domiciled in a state that is not an accredited state but having in effect a substantially similar law. The Alabama Insurance Holding Company System Regulatory Act, Chapter 29 (commencing with Section 27-29-1) of Title 27, to the extent it is not superseded by this chapter, shall continue to apply to all parties within holding company systems subject to this chapter.
(Acts 1993, No. 93-675, p. 1240, §16.)
(a) Unless there is a written contract between the controlling producer and the insurer approved by the board of directors of the insurer and specifying the responsibilities of each party, a controlled insurer shall not accept business from a controlling producer and a controlling producer shall not place business with a controlled insurer. The contract between a controlling producer and a controlled insurer shall, as a minimum, contain all of the following:
(1) A provision that, upon written notice to the controlling producer, the controlled insurer may terminate the contract for cause. The controlled insurer shall suspend the authority of the controlling producer to write business during any pending dispute regarding the cause for the termination.
(2) A provision requiring the controlling producer to give a detailed accounting to the controlled insurer on any material transaction, including information necessary to support all commissions, charges, and other fees received by, or owing to, the controlling producer.
(3) A provision requiring the controlling producer to send all funds due, under the terms of the contract, to the controlled insurer on at least a monthly basis. The contract shall require the due date to be fixed so that premiums or any installment collected are remitted no later than ninety days after the effective date of any policy placed with the controlled insurer under the contract.
(4) A provision requiring all funds collected for the account of the controlled insurer to be held by the controlling producer in a fiduciary capacity, in one or more appropriately identified bank accounts in a bank that is a member of the Federal Reserve System, in accordance with any applicable insurance law. Funds of a controlling producer, not required to be licensed in this state, shall be maintained in compliance with the requirements of the domiciliary jurisdiction of the controlling producer.
(5) A provision requiring the controlling producer to maintain separate identifiable records of business written for the controlled insurer.
(6) A provision prohibiting the controlling producer from assigning the contract in whole or in part.
(7) A provision that the rates and terms of the commissions, charges, and other fees of the controlling producer shall be no greater than those applicable to comparable business placed with the controlled insurer by producers other than controlling producers. For purposes of this subdivision and subdivision (11), examples of “comparable business” includes the same lines of insurance, the same kinds of insurance, the same kinds of risks, similar policy limits, and similar quality of business.
(8) A provision that if the contract provides that the controlling producer, on insurance business placed with the insurer, is to be compensated contingent upon the insurer’s profits on that business, the compensation shall not be determined and paid until at least five years after the premiums on liability insurance are earned and at least one year after the premiums are earned on any other insurance. In no event may the commissions be paid until the adequacy of the controlled insurer’s reserves on remaining claims has been independently verified pursuant to subsection (e).
(9) A provision specifying a limit on the controlling producer’s writings in relation to the controlled insurer’s surplus and total writing and that the insurer may establish a different limit for each line or sub-line of business written by the controlling producer. The controlled insurer shall notify the controlling producer when the limit is approached and shall not accept business from the controlling producer if the applicable limit is reached. The controlling producer shall not place business with the controlled insurer if it has been notified by the controlled insurer that the limit has been reached.
(10) A provision that the controlling producer may negotiate but shall not bind reinsurance on behalf of the controlled insurer on business the controlling producer places with the controlled insurer, except that the controlling producer may bind facultative reinsurance contracts pursuant to obligatory facultative agreements if the contract with the controlled insurer contains underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which the automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules.
(11) The controlled insurer shall provide the controlling producer with its underwriting standards, rules, and procedures, and manuals setting forth the rates to be charged, and the conditions for the acceptance or rejection of risks. The controlling producer shall adhere to the standards, rules, procedures, rates, and conditions. The standards, rules, procedures, rates, and conditions shall be the same as those applicable to comparable business placed with the controlled insurer by a producer other than the controlling producer.
(b) This section shall apply if, in any calendar year, the aggregate amount of gross written premium on business placed with a controlled insurer by a controlling producer is equal to or greater than five percent of the admitted assets of the controlled insurer, as reported by the controlled insurer in the quarterly statement filed as of September 30 of the year immediately preceding.
(c) This section shall not apply if:
(1) The controlling producer:
a. Places insurance only with the controlled insurer, or only with the controlled insurer and one or more members of the holding company system of the controlled insurer, or only with the parent, affiliate, or subsidiary of the controlled insurer and receives no compensation based upon the amount of premium written in connection with the insurance, and
b. Accepts insurance placements only from non-affiliated subproducers and not directly from insureds, and
(2) The controlled insurer, except for insurance business written through a residual market facility such as the Automobile Assigned Risk Plan, accepts insurance business only from a controlling producer, a producer controlled by the controlled insurer, or a producer that is a subsidiary of the controlled insurer.
(d) Every controlled insurer shall have an audit committee of the board of directors composed of independent directors. The audit committee shall annually meet with management, the insurer’s independent certified public accountants, and an independent casualty actuary or other independent loss reserve specialist acceptable to the commissioner to review the adequacy of the insurer’s loss reserves.
(e) The controlled insurer shall report the following:
(1) In addition to any other required loss reserve certification, the controlled insurer shall annually, on April 1 of each year, file with the commissioner an opinion of an independent casualty actuary (or other independent loss reserve specialist acceptable to the commissioner) reporting loss ratios for each line of business written and attesting to the adequacy of loss reserves established for losses incurred and outstanding as of year-end (including incurred but not reported) on business placed by the producer.
(2) At least annually, the controlled insurer shall report to the commissioner, the amount of the commissions to be paid to the producer, the percentage the amount represents of the net premiums written, and comparable amounts and percentage paid to noncontrolling producers for placements of the same kinds of insurance.
(Acts 1993, No. 93-675, p. 1240, §17; Act 2014-377, p. 1407, §4.)
The producer, prior to the effective date of the policy, shall deliver written notice to the prospective insured disclosing the relationship between the producer and the controlled insurer. Except that, if the business is placed through a subproducer who is not a controlling producer, the controlling producer shall retain records of a signed commitment from the subproducer that the subproducer is aware of the relationship between the insurer and the producer and that the subproducer has or will notify the insured.
(Acts 1993, No. 93-675, p. 1240, §18.)
(a) If the commissioner believes that the controlling producer or any other person has not materially complied with this chapter, or any regulation or order promulgated hereunder, after notice and opportunity to be heard, the commissioner may order the controlling producer to cease placing business with the controlled insurer.
(b) If it was found that because of the material non-compliance that the controlled insurer or any policyholder thereof has suffered any loss or damage, the commissioner may maintain a civil action or intervene in an action brought by or on behalf of the insurer or policyholder for recovery of compensatory damages for the benefit of the insurer or policyholder, or other appropriate relief.
(c) If an order for liquidation or rehabilitation of the controlled insurer has been entered, pursuant to Chapter 32 of Title 27, and the receiver appointed under that order believes that the controlling producer or any other person has not substantially complied with this chapter, or any regulation or order promulgated under this chapter, and the insurer suffers any loss or damage because of the noncompliance, the receiver may maintain a civil action for recovery of damages or other appropriate sanctions or remedies for the benefit of the insurer.
(d) Nothing contained in this section shall affect the right of the commissioner to impose any other penalties provided for in the insurance law.
(e) This chapter shall be construed to preserve the rights of policyholders, claimants, creditors, or other third parties.
(Acts 1993, No. 93-675, p. 1240, §19.)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) BUSINESS ENTITY. A corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
(2) COMMISSIONER. The Alabama Commissioner of Insurance.
(3) HOME STATE. The District of Columbia and any state or territory of the United States in which an insurance producer maintains his or her principal place of residence or principal place of business and is licensed to act as an insurance producer.
(4) INSURANCE. As defined in Section 27-1-2.
(5) INSURANCE PRODUCER or PRODUCER. A person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.
(6) INSURER. As defined in Section 27-1-2. For the purposes of this chapter, insurer shall also mean an insurance company licensed pursuant to Chapter 3, commencing with Section 27-3-1 of this title; a health care service plan licensed pursuant to Article 6, commencing with Section 10A-20-6.01 of Chapter 20 of Title 10A; a dental service corporation licensed pursuant to Article 12, commencing with Section 22-21-360 of Chapter 21 of Title 22; a health maintenance organization licensed pursuant to Chapter 21A, commencing with Section 27-21A-1 of this title; a mutual aid association licensed pursuant to Chapter 30, commencing with Section 27-30-1 of this title; a fraternal benefit society licensed pursuant to Chapter 34, commencing with Section 27-34-1 of this title; an automobile club or association licensed pursuant to Chapter 39, commencing with Section 27-39-1 of this title; and a legal service insurance corporation licensed pursuant to Chapter 43, commencing with Section 27-43-1 of this title.
(7) LICENSE. A document issued by the commissioner authorizing a person to act as an insurance producer for the lines of authority specified in the document. The license itself does not create any authority, actual, apparent, or inherent, in the holder to represent or commit an insurance carrier.
(8) LICENSEE. A producer or service representative licensed in accordance with this chapter; a reinsurance intermediary licensed in accordance with Chapter 5A; a managing general agent licensed in accordance with Chapter 6A; and a surplus line broker licensed in accordance with Chapter 10.
(9) LICENSEE PENALTIES. For a producer or service representative licensed in accordance with this chapter, the penalties set forth in Section 27-7-19; for a reinsurance intermediary licensed in accordance with Chapter 5A, the penalties set forth in Section 27-5A-11; for a managing general agent licensed in accordance with Chapter 6A, the penalties set forth in Section 27-6A-7; and for a surplus line broker licensed in accordance with Chapter 10, the penalties set forth in Section 27-10-32.
(10) LIFE LINES OF AUTHORITY. Any one or more of the following lines as defined in Section 27-7-14.1: Life; accident and health or sickness, also known as disability; and variable life and variable annuity products.
(11) LIMITED LINE CREDIT INSURANCE. Credit life, credit disability, credit property, credit unemployment, creditor-placed, also known as forced-placed, nonfiling, involuntary unemployment, mortgage life, mortgage guaranty, mortgage disability, guaranteed automobile protection (GAP), family and medical leave insurance, and any other form of insurance offered in connection with an extension of credit that is limited to partially or wholly extinguishing that credit obligation that the commissioner determines should be designated a form of limited line credit insurance.
(12) LIMITED LINE CREDIT INSURANCE PRODUCER. A person who sells, solicits, or negotiates one or more forms of limited line credit insurance coverage to individuals through a master, corporate, group, or individual policy.
(13) LIMITED LINES INSURANCE. Limited line credit insurance, insurance on rental vehicles as defined in Section 27-7-5.1, travel insurance as defined in Section 27-7-5.2, self-service storage facility insurance as defined in Section 27-7-5.3, crop insurance as defined in Section 27-7-14.1, portable electronics insurance as defined in Chapter 22A, and any other line of insurance that the commissioner deems necessary to recognize for the purposes of complying with subsection (e) of Section 27-7-28.
(14) LIMITED LINES PRODUCER. A person authorized by the commissioner to sell, solicit, or negotiate limited lines insurance.
(15) NAIC. The National Association of Insurance Commissioners.
(16) NEGOTIATE. The act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.
(17) PERSON. An individual or a business entity.
(18) PROPERTY LINES OF AUTHORITY. Any one or more of the following lines as defined in Section 27-7-14.1: Property; casualty; and personal lines.
(19) SELL. To exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company.
(20) SERVICE REPRESENTATIVE. A natural person, other than an officer, manager, or managing general agent of the insurer, employed on salary or at an hourly rate by an insurer, managing general agent, or a captive producer to work for, with or through producers in selling, soliciting, or negotiating insurance in the insurer or in the insurers represented by the managing general agent or a captive producer, but only in the property lines of authority. Officers and salaried nonresident traveling representatives of a mutual insurer operating on the premium deposit plan or of a reciprocal insurer not using resident producers for the solicitation of business who inspect risks or solicit insurance in this state and who receive no commissions from the insurer shall be deemed also to be service representatives. A service representative shall otherwise qualify and be licensed as a service representative under this chapter, but shall not be required to take and pass an examination nor be a resident of Alabama if qualified as a service representative in the state of his or her domicile. The service representative must be appointed for each insurer or association of insurers represented and for each class of insurance handled by the insurer or insurers in this state.
(21) SOLICIT. Attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.
(22) TERMINATE. The cancellation of the relationship between an insurance producer and the insurer or the termination of a producer’s authority to transact insurance.
(23) UNIFORM BUSINESS ENTITY APPLICATION. The current version of the NAIC Uniform Business Entity Application for resident and nonresident business entities.
(24) UNIFORM APPLICATION. The current version of the NAIC Uniform Application for resident and nonresident producer licensing.
(Acts 1957, No. 530, p. 726, §2; Acts 1971, No. 407, p. 707, §§114-118.1; Acts 1988, No. 88-123, p. 159, §1, Act 2001-702, p. 1509, §1; Act 2006-294, p. 599, §1; Act 2012-312, p. 685, §1; Act 2013-213, p. 489, §2; Act 2018-455, §1.)
(a) This chapter governs the qualifications and procedures for the licensing of insurance producers and service representatives. It simplifies and organizes some statutory language to improve efficiency, permits the use of new technology, and reduces costs associated with issuing and renewing insurance licenses.
(b) This chapter does not apply to surplus line brokers licensed pursuant to Section 27-10-24, except as provided in Section 27-7-28.
(c) This chapter does not apply to title insurance.
(Acts 1957, No. 530, p. 726, § 1; Acts 1971, No. 407, p. 707, § 113; Acts 1988, No. 88-123, p. 159, § 1; Act 2001-702, p. 1509, § 1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §140; Acts 1988, No. 88-123, p. 159, §1.)
(a) No person shall in this state sell, solicit, or negotiate insurance for any class or classes of insurance unless the person is then licensed for that line of authority in accordance with this chapter. Any insurer accepting business directly from a person not licensed for that line of authority and not appointed by the insurer shall be liable to a fine up to three times the premium received from the person.
(b) No producer shall act on behalf of any insurer for which an appointment is not held under this chapter. A producer who is not acting on behalf of an insurer is not required to become appointed. For purposes of this section, a producer who refers business to an appointed producer pursuant to Section 27-7-34 shall not be deemed to be acting on behalf of the insurer with whom the business is placed, regardless of whether commissions on this business are shared.
(c) The commissioner shall prescribe and furnish on request all forms required in connection with application for, issuance, continuation, or termination of licenses and appointments.
(Acts 1957, No. 530, p. 726, §3; Acts 1971, No. 407, p. 707, §119; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §1.)
(a) No insurer or producer shall pay, directly or indirectly, any commission or other valuable consideration to any person for services as a producer or service representative within this state unless the person holds a currently valid license as a producer or service representative as to the kind or class of business involved as required by this chapter.
(b) Any insurer or producer violating this section shall be liable for a fine in an amount of up to three times the amount of the commission paid. The fine shall be levied and collected by the commissioner. Upon failure to pay the fine the commissioner may, in the commissioner’s discretion, revoke the license of the producer or the insurer’s certificate of authority.
(c) The provisions of this section shall not prevent any of the following:
(1) Payment of renewal or other deferred commissions to any person solely because the person has ceased to hold a license to act as a producer.
(2) Payment to the personal representative of a deceased producer.
(3) Payment to a person holding a temporary producer license.
(Act 2001-702, p. 1509, §2.)
(a) Nothing in this chapter shall be construed to require an insurer to obtain an insurance producer license. In this section, the term “insurer” does not include an insurer’s officers, directors, employees, subsidiaries, or affiliates.
(b) A license as an insurance producer shall not be required of any of the following:
(1) An officer, director, or employee of an insurer or of an insurance producer, provided that the officer, director, or employee does not receive any commission on policies written or sold to insure risks residing, located, or to be performed in this state and any of the following:
a. The officer, director, or employee’s activities are executive, administrative, managerial, clerical, or a combination of these, and are only indirectly related to the sale, solicitation, or negotiation of insurance.
b. The officer, director, or employee’s function relates to underwriting, loss control, inspection, or the processing, adjusting, investigating, or settling of a claim on a contract of insurance.
c. The officer, director, or employee is acting in the capacity of a special agent or agency supervisor assisting insurance producers where the person’s activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation, or negotiation of insurance.
(2) A person who secures and furnishes information for the purpose of group life insurance, group property and casualty insurance, group annuities, group or blanket accident and health insurance; or for the purpose of enrolling individuals under plans; issuing certificates under plans or otherwise assisting in administering plans; or performs administrative services related to mass marketed property and casualty insurance; where no commission is paid to the person for the service.
(3) An employer or association or its officers, directors, employees, or the trustees of an employee trust plan, to the extent that the employers, officers, employees, directors, or trustees are engaged in the administration or operation of a program of employee benefits for the employer’s or association’s own employees or the employees of its subsidiaries or affiliates, which program involves the use of insurance issued by an insurer, as long as the employers, associations, officers, directors, employees, or trustees are not in any manner compensated, directly or indirectly, by the company issuing the contracts.
(4) Employees of insurers or organizations employed by insurers who are engaging in the inspection, rating, or classification of risks, or in the supervision of the training of insurance producers and who are not individually engaged in the sale, solicitation, or negotiation of insurance.
(5) A person whose activities in this state are limited to advertising without the intent to solicit insurance in this state through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the state, provided that the person does not sell, solicit, or negotiate insurance that would insure risks residing, located, or to be performed in this state.
(6) A person who is not a resident of this state who sells, solicits, or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under that contract, provided that the person is otherwise licensed as an insurance producer to sell, solicit, or negotiate that insurance in the state where the insured maintains its principal place of business and the contract of insurance insures risks located in that state.
(7) A salaried full-time employee who counsels or advises his or her employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer provided that the employee does not sell or solicit insurance or receive a commission.
(c) Persons who provide general insurance advice, or collect insurance premiums in transactions, in connection with providing other professional services such as legal services, trust services, tax and accounting services, or financial planning and investment advisory services are not deemed to be soliciting the sale of insurance under this chapter.
(Act 2001-702, p. 1509, §2.)
(a) A resident individual applying for an insurance producer license shall pass a written examination unless exempt pursuant to Section 27-7-5 or 27-7-29.1. The examination shall test the knowledge of the individual concerning the lines of authority for which application is made, the duties and responsibilities of an insurance producer, and the insurance laws and regulations of this state. Examinations required by this section shall be developed and conducted under rules and regulations prescribed by the commissioner.
(b) The commissioner may make arrangements, including contracting with an outside testing service, for administering examinations and collecting the nonrefundable fee set forth in Section 27-4-2.
(c) Each individual applying for an examination shall remit a nonrefundable fee prescribed by the commissioner as set forth in Section 27-4-2.
(d) An individual who fails to appear for the examination as scheduled or fails to pass the examination shall reapply for an examination and remit all required fees and forms before being rescheduled for another examination.
(e) No individual who has taken and failed to pass two examinations given pursuant to this section for a particular line of insurance shall be entitled to take any further examination for that line of insurance until after the expiration of three months from the date of the last examination which the individual failed to pass. If the individual thereafter fails to pass the examination after two more attempts, the individual shall not be eligible to take any further examination for that line of insurance until after the expiration of six months from the date of the last unsuccessful examination. An examination fee shall be paid for each and every examination.
(f) If the commissioner has contracted with an outside testing service as provided for in subsection (b), fees approved by the commissioner for the examinations may, in the commissioner’s discretion, be paid directly to the outside testing service and the fee shall be in lieu of, but not in excess of, the fees for the examination required under this section as specified in Section 27-4-2.
(Act 2001-702, p. 1509, §2.)
(a) In order to make a determination of insurance producer license eligibility, the commissioner is authorized to require fingerprints of initial resident applicants for an insurance producer license and to submit the fingerprints and the fee required to perform the criminal history record checks to the Alabama Department of Public Safety and the Federal Bureau of Investigation (FBI) for state and national criminal history record checks.
(b) The commissioner shall require a criminal history record check on each initial resident applicant for insurance producer license in accordance with this section. The commissioner shall require each applicant to submit a full set of fingerprints, including a scanned file from a hard copy fingerprint, in order for the commissioner to obtain and receive national criminal history records from the FBI Criminal Justice Information Services Division.
(c) The commissioner may contract for the collection, transmission, and resubmission of fingerprints required under this section. If the commissioner does so, the fee for collecting, transmitting, and retaining fingerprints shall be payable directly to the contractor by the applicant. The commissioner may agree to a reasonable fingerprinting fee to be charged by the contractor and both the contractor’s fee and the fee required to perform the criminal history check shall be collected from the applicant by the contractor.
(d) The commissioner is authorized to receive criminal history record information in lieu of the Alabama Department of Public Safety that submitted the fingerprints to the FBI.
(e) The commissioner shall treat and maintain an applicant’s fingerprints and any criminal history record information obtained under this section as confidential and shall apply security measures consistent with the Criminal Justice Information Services Division of the Federal Bureau of Investigation standards for the electronic storage of fingerprints and necessary identifying information and limit the use of records solely to the purposes authorized in this section. The fingerprints and any criminal history record information shall not be subject to subpoena, other than one issued in a criminal action or investigation, and shall be confidential.
(f) As used in this section, initial resident applicant means an initial home state license and an additional line of authority under an existing home state license where a criminal history record check has not been obtained.
(g) This section shall not apply to limited lines producers as defined in Section 27-7-1.
(h) The commissioner may promulgate reasonable regulations as are necessary or proper to carry out the purposes of this section in accordance with Chapter 2 of this title. The commissioner may by regulation provide for the delayed enforcement of this section for up to 24 months following April 8, 2014, to allow for implementation.
(Act 2012-312, p. 685, §2; Act 2014-296, p. 1072, §1.)
(a) An individual applying for a resident insurance producer license shall make application to the commissioner on the Uniform Application declaring under penalty of refusal, suspension, or revocation of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. Before approving the application, the commissioner shall find that the individual has satisfied all of the following:
(1) Is at least 18 years of age.
(2) Has not committed any act that is a ground for denial, suspension, or revocation set forth in Section 27-7-19.
(3) Has successfully passed the examination for the lines of authority for which the individual has applied, except that no examination shall be required of an applicant as follows:
a. All applicants for a license to transact only one or more of the limited lines insurance.
b. All applicants for a license to transact the variable life and variable annuity products line of authority.
c. All producers lawfully licensed as such for a particular line of authority immediately prior to January 1, 2013, are exempt from the requirements of this subdivision for that line of authority unless, after January 1, 2013, the license is permitted to expire or is otherwise terminated and remains out of effect for a period of 12 consecutive months, in which case the exemption from examination shall no longer be applicable.
d. All service representatives.
(4) Has paid the fees set forth in Section 27-4-2.
(b) All producers seeking to be licensed for or holding the variable life and variable annuity product line of authority must also hold the life line of authority as an insurance producer and must also successfully complete the appropriate securities examinations and be registered under applicable federal and state securities laws.
(c) A business entity acting as an insurance producer is required to obtain an insurance producer license. Application shall be made using the Uniform Business Entity Application. Before approving the application, the commissioner shall find that the business entity has satisfied both of the following:
(1) A licensed individual producer has been designated responsible for the business entity’s compliance with the insurance laws, rules, and regulations of this state.
(2) The business entity has paid the fees set forth in Section 27-4-2.
(d) The commissioner may require any documents reasonably necessary to verify the information contained in an application.
(e) Each insurer that sells, solicits, or negotiates any form of limited line credit insurance shall provide a program of instruction to each individual whose duties will include selling, soliciting, or negotiating limited line credit insurance.
(f)(1) A new license as a service representative may not be issued by the commissioner after January 1, 2024.
(2) Any person holding a valid service representative license on January 1, 2024, may continue to renew the license after that date if the person otherwise meets the requirements of this section.
(3) If any service representative license expires and is not renewed for a period of 12 consecutive months, the license shall not be renewed by the commissioner or otherwise reactivated.
(Acts 1957, No. 530, p. 726, §4; Acts 1959, 2nd Ex. Sess., No. 73, p. 250; Acts 1971, No. 407, p. 707, §120; Acts 1971, 3rd Ex. Sess., No. 261, p. 4529; Acts 1979, No. 79-748, p. 1332; Acts 1988, No. 88-123, p. 159, §1; Acts 1989, No. 89-815, p. 1629; Acts 1997, No. 97-555, p. 982, §1; Act 2001-702, p. 1509, §3; Act 2006-299, p. 614, §1; Act 2012-312, p. 685, §1; Act 2023-104, §1.)
(a) As used in this section, the following terms shall have the following meanings:
(1) RENTAL AGREEMENT. Any written agreement setting forth the terms and conditions governing the use of a vehicle provided by the rental company for rental or lease.
(2) RENTAL COMPANY. Any person or entity in the business of providing rental vehicles to the public under a rental agreement for a period not to exceed 90 days.
(3) RENTAL PERIOD. The term of the rental agreement.
(4) RENTER. Any person obtaining the use of a vehicle from a rental company under the terms of a rental agreement for a period not to exceed 90 days.
(5) VEHICLE OR RENTAL VEHICLE. A motor vehicle of the private passenger type (including passenger vans, minivans, and sport utility vehicles) and of the cargo type (including cargo vans, pickup trucks, and trucks with gross vehicle weight of less than 26,000 pounds, which do not require the operator to possess a commercial driver’s license).
(b) Notwithstanding any other provision of law, the commissioner may issue to a rental company that has complied with the requirements of this section a limited license authorizing the rental company to offer or sell insurance in connection with the rental of vehicles.
(c) All rental companies licensed pursuant to this section shall be exempt from the 40-hour prelicensing course and written examination requirements of Section 27-7-5, and the continuing education requirements of Chapter 8A of this title.
(d) A rental company licensed pursuant to this section may offer or sell insurance only in connection with and incidental to the rental of vehicles, whether at the rental office or by preselection of coverage in a master, corporate, individual, or group rental agreement, in any of the following general categories:
(1) Personal accident insurance covering the risks of travel, including, but not limited to, accident and health insurance that provides coverage, as applicable, to renters and other rental vehicle occupants for accidental death or dismemberment and reimbursement for medical expenses resulting from an accident that occurs during the rental period.
(2) Liability insurance, including uninsured and underinsured motorist coverage whether offered separately or in combination with other liability insurance, that provides coverage, as applicable, to renters and other authorized drivers of rental vehicles for liability arising from the operation of the rental vehicle.
(3) Personal effects insurance that provides coverage, as applicable, to renters and other vehicle occupants for the loss of, or damage to, personal effects that occurs during the rental period.
(4) Roadside assistance and emergency sickness protection programs.
(5) Any other travel or auto-related coverage that a rental company offers in connection with and incidental to the rental of vehicles.
(e) No insurance may be issued by a rental company licensed pursuant to this section except subject to all of the following conditions:
(1) The rental period of the rental agreement does not exceed 90 consecutive days.
(2) At every rental location where rental agreements are executed, brochures or other written materials are readily available to the prospective renter that meet all of the following criteria:
a. Summarize clearly and correctly the material terms of coverage offered to renters, including the identity of the insurer.
b. Disclose that the coverage offered by the rental company may provide a duplication of coverage provided by a renter’s personal automobile insurance policy, homeowner’s insurance policy, personal liability insurance policy, or other source of coverage.
c. State that the purchase by the renter of the kinds of coverage specified in this section is not required in order to rent a vehicle.
d. Describe the process for filing a claim in the event the renter elects to purchase coverage and in the event of a claim.
(3) Evidence of coverage in the rental agreement is disclosed to every renter who elects to purchase the coverage.
(f) Notwithstanding any other law, a rental company licensed pursuant to this section may authorize and pay compensation to any employee or authorized representative of the rental company to act individually on behalf of and under the supervision of the rental company to offer or sell insurance coverage permitted under this section, and the employee or authorized representative is not required to be licensed with respect to the kinds of coverage specified in this section. An employee or authorized representative may not be compensated based primarily on the number of customers who elect to purchase insurance coverage, but may receive compensation incidental to his or her overall compensation.
(g) Each rental company licensed pursuant to this section shall conduct a training program in which employees being trained shall receive basic instruction about the kinds of coverage specified in this section and offered for purchase by prospective renters of rental vehicles.
(h) Notwithstanding any other provision of this section, or any rule adopted by the commissioner, a rental company licensed pursuant to this section shall not be required to treat monies collected from renters purchasing insurance when renting vehicles as funds received in a fiduciary capacity, provided that the charges for coverage shall be itemized and be ancillary to a rental transaction. The sale of insurance not in conjunction with a rental transaction is prohibited.
(i) This section shall be construed prospectively from August 1, 2000.
Act 2000-690, p. 1401, §§2, 3; Act 2001-702, p. 1509, §3; Act 2015-155, §1.)
THIS SECTION WAS REPEALED IN THE 2022 REGULAR SESSION BY ACT 2022-152 EFFECTIVE JUNE 1, 2022. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Act 2013-213, p. 489, §1.)
(a) As used in this section, the following terms shall have the following meanings:
(1) LIMITED LICENSEE. A person or entity authorized to sell certain coverages for personal property maintained in self-service storage facilities pursuant to this section.
(2) OCCUPANT. A person, his or her sublessee, successor, or assign entitled to the use of the storage space at a self-service storage facility under a rental agreement, to the exclusion of others.
(3) OWNER. The owner, operator, lessor, or sublessor of a self-service storage facility, his or her agent, or any other person authorized by him or her to manage the self-service storage facility or to receive rent from an occupant under a rental agreement.
(4) PERSONAL PROPERTY. Any movable property not affixed to land including, but not limited to, goods, wares, merchandise, motor vehicles, watercraft, and household items and furnishings.
(5) RENTAL AGREEMENT. Any agreement or lease, written or oral, that establishes or modifies the terms, conditions, rules, or any other provisions concerning the use and occupancy of storage space at a self-service storage facility.
(6) SELF-SERVICE STORAGE FACILITY. Any real property designed and used for the purpose of renting or leasing individual storage space to occupants who are to have access to the facility for the purpose of storing and removing personal property and not for residential purposes. The term does not include a safe-deposit box or vault maintained by banks, trust companies, or other financial entities or a public warehouse within the meaning of Article 1, commencing with Section 8-15-1, of Chapter 15, Title 8.
(7) SUPERVISING ENTITY. Any business entity that is a licensed insurance producer or insurer.
(b) Any other provision of law to the contrary notwithstanding, the commissioner may issue to an owner that is in compliance with the requirements of this section a limited license authorizing the limited licensee to offer, sell, solicit, or negotiate insurance through a licensed insurer in connection with a self-service storage facility.
(c) All limited licensees shall be exempt from the pre-qualification course and written examination requirements of Section 27-7-5, and the continuing education requirements of Chapter 8A.
(d) A limited licensee may offer, sell, solicit, or negotiate insurance on behalf of a licensed insurer, or as part of a group, commercial, or master policy to provide insurance for that limited licensee’s occupants, only in connection with a rental agreement, and only for either an individual policy issued to an individual occupant or as a group, commercial, or master policy for occupants for personal property insurance. A limited licensee shall only be authorized to provide to occupants insurance coverage for the following:
(1) The loss of or damage to personal property stored at a self-service storage facility where the loss or damage occurs at the self-service storage facility or while the personal property is in transit to or from the self-storage facility during the time period covered by the occupant’s rental agreement.
(2) Other loss directly related to an occupant’s rental agreement.
(e) No insurance may be issued by a limited licensee pursuant to this section unless the limited licensee provides to a prospective purchaser written material that provides all of the following:
(1) A summary of the terms of insurance coverage, including the identity of the insurer.
(2) A conspicuous disclosure that the policy of insurance may provide a duplication of coverage already provided by an existing policy of insurance.
(3) A description of the process for filing a claim in the event the occupant elects to purchase coverage and experiences a covered loss.
(4) Information regarding the price, deductible, benefits, exclusions, conditions, and any other limitations of the policy.
(5) A statement that the purchase by the occupant of the kinds of coverage specified in this section from the limited licensee is not required in order to rent storage space.
(6) A statement that the limited licensee is not authorized to evaluate the adequacy of the occupant’s existing insurance coverages, unless the limited licensee is otherwise licensed.
(7) A statement that the occupant may cancel the insurance at any time, and any unearned premium shall be refunded in accordance with applicable law.
(f) Any other provision of law to the contrary notwithstanding, if the kinds of coverage described in this section are required as a condition of a rental agreement, that requirement may be satisfied by an occupant or a prospective occupant:
(1) Purchasing coverage that is offered, sold, solicited, or negotiated by the limited licensee; or
(2) Presenting to the self-service storage facility evidence of other applicable insurance coverage.
(g) Any other provision of law or any rule adopted by the commissioner to the contrary notwithstanding, a limited licensee licensed pursuant to this section may not be required to treat monies collected from occupants as funds received in a fiduciary capacity, provided that the charges for coverage shall be itemized and be ancillary to a rental agreement. The sale of insurance not in conjunction with a rental agreement is not permitted.
(h) A limited licensee licensed pursuant to this section may authorize any employee or authorized representative of the limited licensee to act individually on behalf and under the supervision of the limited licensee with respect to the kinds of coverage specified in this section.
(i) Each owner licensed pursuant to this section shall provide a training program, which may be provided to the owner by a supervising entity, in which employees and authorized representatives of the owner shall receive basic instruction about the kind of coverage authorized in this section and offered for purchase by occupants or prospective occupants.
(j) As a prerequisite for issuance of a limited license under this section, there shall be filed with the commissioner an application for a limited license in such form or forms, and supplements thereto, and containing such information as the commissioner may prescribe.
(k) No limited licensee licensed pursuant to this section shall advertise, represent, or otherwise hold itself or any of its employees out as licensed insurers, insurance agents, or insurance brokers.
(l) A limited licensee may receive compensation from a supervising entity for sales, billing, and collection services. The compensation may be dependent on the sale of the types of coverage described in this section.
(Act 2018-455, §2.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §4; Acts 1959, 2nd Ex. Sess., No. 73, p. 250; Acts 1971, No. 407, p. 707, §121; Acts 1988, No. 88-123, p. 159, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §5; Acts 1971, No. 407, p. 707, §122; Acts 1988, No. 88-123, p. 159, §1; Acts 1988, 1st Ex. Sess., No. 88-875, p. 410, §1; Acts 1990, No. 89-990, p. 35, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §5; Acts 1971, No. 407, p. 707, §123; Acts 1988, No. 88-123, p. 159, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §5; Acts 1971, No. 407, p. 707, §124; Acts 1988, No. 88-123, p. 159, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §6; Acts 1971, No. 407, p. 707, §125; Acts 1988, No. 88-123, p. 159, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1991, No. 91-483, p. 875, §2.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §6; Acts 1971, No. 407, p. 707, §126; Acts 1982, No. 82-401, p. 606, §1; Acts 1988, No. 88-123, p. 159, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §8; Acts 1971, No. 407, p. 707, §127.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §6; Acts 1971, No. 407, p. 707, §128; Acts 1988, No. 88-123, p. 159, §1.)
The commissioner shall, from time to time as an aid to the efficient administration of this chapter, consult with individuals experienced in the insurance business, to include officers, employees, managing general agents, managers, and licensed producers engaged in the business, to the end that an orderly and effective program be developed as to scope, type, and conduct of written examinations and the times and places in the state when and where they shall be held.
(Acts 1957, No. 530, p. 726, §7; Acts 1971, No. 407, p. 707, §129; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §3.)
(a) Unless denied licensure pursuant to Section 27-7-19, persons who have met the requirements of Sections 27-7-4.3 and 27-7-5 shall be issued an insurance producer license. An insurance producer may receive qualification for a license in one or more of the following lines of authority:
(1) LIFE. Insurance coverage on human lives including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income.
(2) ACCIDENT AND HEALTH OR SICKNESS, COMMONLY KNOWN AS DISABILITY. Insurance coverage for sickness, bodily injury, or accidental death and may include benefits for disability income.
(3) PROPERTY. Insurance coverage for the direct or consequential loss or damage to property of every kind.
(4) CASUALTY. Insurance coverage against legal liability, including that for death, injury, or disability or damage to real or personal property, and surety.
(5) VARIABLE LIFE AND VARIABLE ANNUITY PRODUCTS. Insurance coverage provided under variable life insurance contracts and variable annuities.
(6) PERSONAL LINES. Property and casualty insurance coverage sold to individuals and families for primarily noncommercial purposes.
(7) CREDIT. Limited line credit insurance.
(8) BAIL BOND. Surety coverage for bail, as defined in Chapter 13 of Title 15.
(9) RENTAL VEHICLE. As described in Section 27-7-5.1.
(10) CROP. Insurance providing protection against damage to crops from unfavorable weather conditions, fire, or lightning, flood, hail, insect infestation, disease or other yield-reducing conditions or peril provided by the private insurance market, or that is subsidized by the Federal Crop Insurance Corporation, including Multi-Peril Crop Insurance.
(11) PORTABLE ELECTRONICS. As defined in Section 27-22A-1.
(12) TRAVEL. As described in Section 27-7-5.2.
(13) Any other line of insurance permitted under state law or rule.
(b) An insurance producer or service representative license shall remain in effect unless revoked or suspended as long as the license renewal fee set forth in Section 27-8A-9 is paid and education requirements for resident individual producers and service representatives set forth in Chapter 8A of this title are met by the due date.
(c) An individual insurance producer who allows his or her license to lapse, within 12 months from the due date of the renewal fee, may reinstate the same license without the necessity of passing a written examination. A service representative who allows his or her license to lapse, within 12 months from the due date of the renewal fee, may reinstate the same license. However, a penalty in the amount of double the unpaid renewal fee shall be required for any renewal fee received after the due date.
(d) A licensed insurance producer or service representative who is unable to comply with license renewal procedures due to military service or some other extenuating circumstance, e.g., a long-term medical disability, may request a waiver of those procedures. The producer or service representative may also request a waiver of any examination requirement or any other fine or sanction imposed for failure to comply with renewal procedures.
(Act 2001-702, p. 1509, §4; Act 2012-312, p. 685, §1; Act 2013-213, p. 489, §2; Act 2023-104, §1.)
(a) Every license for the automobile and industrial fire lines of authority in force immediately prior to January 1, 2013, and existing under any law amended by Act 2012-312 is valid until its expiration date on or after January 1, 2013, unless earlier terminated in accordance with applicable law. Upon the next renewal of a license for the automobile line of authority, the license shall be replaced with a license for the personal lines line of authority. Upon the next renewal of a license for the industrial fire line of authority, the license shall be replaced with a license for the property line of authority.
(b) Any appointment for the automobile or industrial fire lines of authority in place immediately prior to January 1, 2013, and existing under any law amended by Act 2012-312 is valid until its expiration date on or after January 1, 2013, unless earlier terminated in accordance with applicable law. Upon the next renewal of an appointment for the automobile line of authority, the appointment shall be replaced with an appointment for the personal lines line of authority, and upon the next renewal of an appointment for the industrial fire line of authority, the appointment shall be replaced with an appointment for the property line of authority, and the appointments shall thereafter be subject to continuation or termination as though originally issued in accordance with Act 2012-312.
(Act 2012-312, p. 685, §4.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §6; Acts 1971, No. 407, p. 707, §130.)
[Repealed]
Repealed by Acts 1991, No. 91-483, p. 875, §3, effective July 29, 1991.
(Acts 1957, No. 530, p. 726, §6, Act 1971, No. 407, p. 707, §131.)
(a) The license of a producer or service representative shall state the name and address of the licensee, the personal identification number, date of issuance, the lines of authority, the expiration date, and any other information the commissioner deems necessary.
(b) Licensees shall inform the commissioner by any means acceptable to the commissioner of a change in legal name, mailing address, or electronic mail address within 30 days of the change. Failure to timely inform the commissioner of a change in legal name, mailing address, or electronic mail address shall result in a penalty of fifty dollars ($50).
(c) In order to assist in the performance of the commissioner’s duties, the commissioner may contract with nongovernmental entities, including the NAIC or any affiliates or subsidiaries that the NAIC oversees, to perform any ministerial functions, including the collection of fees, related to producer licensing that the commissioner may deem appropriate.
(d) The commissioner may participate, in whole or in part, with the NAIC or any affiliates or subsidiaries the NAIC oversees in a centralized producer license registry where the producer licenses and appointments may be centrally or simultaneously effected for all states that require a producer license and participate in the centralized producer license registry.
(e) If the commissioner finds that participation in a centralized producer license registry is in the public interest, the commissioner may adopt any uniform standards and procedures as are necessary to participate in the registry, to include the central collection of all fees for licenses or appointments that are processed through the registry.
(Acts 1971, No. 407, p. 707, §132; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §5; Act 2012-312, p. 685, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §133; Acts 1988, No. 88-123, p. 159, §1.)
(a) The commissioner may place on probation, refuse to issue or renew, suspend, or revoke the license of any licensee under this chapter, or may levy a civil penalty in accordance with subsection (c), or any combination of actions, for any one or more of the following causes:
(1) Any cause for which issuance of the license could have been refused had it then existed and been known to the commissioner.
(2) Providing incorrect, misleading, incomplete, or materially untrue information in any application or in any communication to the commissioner.
(3) Obtaining or attempting to obtain a license through misrepresentation or fraud.
(4) Intentionally misrepresenting the terms of any actual or proposed insurance contract or application for insurance.
(5) Having admitted or been found to have committed any insurance unfair trade practice or fraud.
(6) For inducing, persuading, or advising any policyholder to surrender or cause to be cancelled any policy of insurance issued to the policyholder by any authorized insurer in exchange for a policy offered by the licensee where the surrender or cancellation shall proximately result to the financial detriment of such policyholder, unless the policyholder shall have been fully advised of that fact by the licensee.
(7) Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business under a license in this state or elsewhere.
(8) Improperly withholding, misappropriating, or converting any monies or properties belonging to the insurers, insureds, or others received by the licensee in the exercise of his or her license.
(9) Violating insurance laws or violating any valid order, subpoena, rule, or regulation issued by the commissioner or issued by another state’s insurance commissioner.
(10) Having been convicted of a felony.
(11) Having an insurance producer license, or its equivalent, denied, suspended, or revoked in any other state, province, district, or territory.
(12) Forging another’s name to an application for insurance or to any document related to an insurance transaction.
(13) Improperly using notes or any other reference material to complete an examination for an insurance license.
(14) Knowingly accepting insurance business from an individual who is not licensed.
(15) Failing to comply with an administrative or court order imposing a child support obligation.
(16) Failing to pay state income tax or failing to comply with any administrative or court order directing payment of state income tax.
(b) The license of a business entity may be suspended, revoked, or refused if the commissioner finds, after hearing, that an individual licensee’s violation was known or should have been known by one or more of the partners, officers, or managers acting on behalf of the business entity and the violation was not reported timely to the commissioner nor corrective action taken in relation thereto.
(c) In the absence of a greater fine specifically provided elsewhere in this code, and in addition to or in lieu of any applicable probation, denial, suspension, or revocation of a license under this section, a person may, in the sole discretion of the commissioner after hearing, be subject to a civil fine in an amount not to exceed ten thousand dollars ($10,000) per violation.
(d) The commissioner shall retain the authority to enforce the provisions of and impose any penalty or remedy authorized by this chapter and this title against any person who is under investigation for or charged with a violation of this chapter or this title even if the person’s license or registration has been surrendered or has lapsed by operation of law.
(Acts 1957, No. 530, p. 726, §8; Acts 1971, No. 407, p. 707, §151; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §5.)
[Repealed]
Repealed by Act 2012-312, §5, effective January 1, 2013.
(Acts 1957, No. 530, p. 726, §11; Acts 1971, No. 407, p. 707, §152.)
[Repealed]
Repealed by Act 2012-312, §5, effective January 1, 2013.
(Acts 1957, No. 530, p. 726, §9; Acts 1971, No. 407, p. 707, §153.)
(a) All licenses issued under this chapter, though issued to a licensee, at all times are the property of the State of Alabama, and upon notice of any suspension, revocation, refusal to renew, expiration, or other termination of the license, the licensee, or other person having possession or custody thereof, shall promptly deliver the license to the commissioner for cancellation.
(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.
(Acts 1971, No. 407, p. 707, §154.)
(a) The commissioner may, in his or her discretion, issue a temporary producer license without requiring an examination or prelicensing course if the commissioner deems the temporary license is necessary for the servicing of an insurance business in any of the following cases:
(1) To the surviving spouse or court-appointed personal representative of a licensed producer who dies or becomes mentally or physically disabled to allow adequate time for the sale of the insurance business owned by the producer or for the recovery or return of the producer to the business or to provide for the training and licensing of new personnel to operate the producer’s business.
(2) To a member or employee of a business entity which is licensed as a producer, upon the death or disability of the individual designated in the business entity application or the license.
(3) To the designee of a licensed producer entering active service in the Armed Forces of the United States of America.
(4) In any other circumstance where the commissioner deems that the public interest will best be served by the issuance of this license.
(b) The temporary license shall be valid for a period of not over six months and, except as to one renewal in the case of disabling or confining illness or injury of the producer, shall not be renewed either to the then holder of the temporary license or to any other person for, or on behalf of, the producer.
(c) The holder of a temporary license may be granted a regular producer’s license upon taking and passing an examination as required under this chapter, if then otherwise qualified for the regular license.
(d) If the temporary licensee becomes entitled to receive a regular license prior to expiration of the temporary license, he or she shall surrender the temporary license to the commissioner at the time the regular license is issued.
(e) The applicant for a temporary license shall pay to the commissioner, prior to the issuance thereof, the applicable license fee as specified in Section 27-4-2.
(f) The commissioner may by order limit the authority of any temporary licensee in any way deemed necessary to protect insureds and the public. The commissioner may require the temporary licensee to have a suitable sponsor who is a licensed producer or insurer and who assumes responsibility for all acts of the temporary licensee and may impose other similar requirements designed to protect insureds and the public. The commissioner may by order revoke a temporary license if the interests of insureds or the public are endangered. The temporary license may not continue after the owner or the personal representative disposes of the business.
(Acts 1957, No. 530, p. 726, §12; Acts 1971, No. 407, p. 707, §135; Act 2001-702, p. 1509, §5.)
(a) The commissioner may, in his or her discretion, issue a temporary license as producer to an applicant who is qualified for the license except as to having taken and passed a written examination therefor, if the applicant is actively engaged in a course of study, instruction, and field training approved by the commissioner and under the supervision of the insurer. The producer application shall be accompanied by the notice of appointment required by Section 27-7-30, along with the insurer’s request for the issuance of a temporary license for the producer. The insurer shall be responsible for all acts and omissions of the licensee under the temporary license and within the scope of his or her employment or appointment.
(b) The temporary license shall be valid for six months, within which period the licensee shall submit to a written examination for a regular producer’s license and for such further time until the commissioner has notified the applicant of the result of the examination.
(c) Subsections (a) and (b) of Section 27-10-1 also shall apply as to producers holding temporary licenses.
(Acts 1957, No. 530, p. 726, § 12; Acts 1971, No. 407, p. 707, § 136; Act 2001-702, p. 1509, § 5.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §12; Acts 1971, No. 407, p. 707, §137.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §139.)
(a) Unless denied licensure pursuant to Section 27-7-19, a nonresident person shall receive a nonresident producer license if all of the following are satisfied:
(1) The person has submitted or transmitted to the commissioner a copy of the application for licensure that the person submitted to his or her home state or, in lieu of the same, a completed Uniform Application.
(2) The person has submitted the proper request for licensure and has paid the fees required under Section 27-4-2.
(3) The person’s home state awards nonresident producer licenses to residents of this state on the same basis.
(4) The person is currently licensed as a resident producer and is in good standing in the state of his or her residence.
(b) The commissioner may verify the producer’s licensing status through the database maintained by the NAIC, its affiliates or subsidiaries.
(c) A nonresident producer who moves from one state to another state or a resident producer who moves from this state to another state shall file a change of address and provide certification from the new resident state within 30 days of the change of legal residence. No fee or license application is required.
(d) Notwithstanding any other provision of this chapter, a person licensed as a surplus line broker in his or her home state shall receive a nonresident surplus line broker license pursuant to subsection (a). Except as provided in subsection (a), nothing in this section otherwise amends or supersedes any provision of Article 2 of Chapter 10 of this title.
(e) Notwithstanding any other provision of this chapter, a person licensed as a limited lines insurance producer in his or her home state shall receive a nonresident limited lines producer license, pursuant to subsection (a), granting the same scope of authority as granted under the license issued by the producer’s home state. For the purposes of this subsection, limited lines insurance is any authority granted by the home state which restricts the authority of the license to less than the total authority prescribed in the associated major lines pursuant to subdivisions (1) to (6), inclusive, of subsection (a) of Section 27-7-14.1.
(f) A nonresident producer’s satisfaction of his or her home state’s continuing education requirements for licensed insurance producers shall constitute satisfaction of this state’s continuing education requirements if the nonresident producer’s home state recognizes the satisfaction of its continuing education requirements imposed upon producers from this state on the same basis.
(g) Except for the requirements imposed by this section and Section 27-7-29, the commissioner shall waive any requirements for a nonresident license applicant, including the provisions of Section 27-3-29, with a valid license from his or her home state if the applicant’s home state awards nonresident licenses to residents of this state on the same basis.
(Acts 1957, No. 530, p. 726, §14; Acts 1971, No. 407, p. 707, §141; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §5.)
(a) Each licensed nonresident producer shall be considered to have performed acts equivalent to and constituting an appointment of the commissioner as his or her attorney to receive service of legal process issued against the nonresident producer in this state upon causes of action arising within this state out of transactions under the nonresident producer’s license. Service upon the commissioner as such attorney shall constitute effective legal service upon the nonresident producer.
(b) The appointment shall be irrevocable for as long as there may be any such cause of action in this state against the nonresident producer.
(c) Service of process under this section shall be made by leaving three copies of the summons and complaint, or other process, with the commissioner, along with payment of the fee prescribed in Section 27-4-2, and the service shall be sufficient service upon the nonresident if notice of the service and a copy of the summons and complaint or other process are forthwith sent by registered or certified mail to the defendant by the commissioner; and the defendant’s return and the certificate of the commissioner certifying compliance herewith shall be filed in the office of the clerk of court, or in the court or tribunal wherein the action is pending. The certificate of the commissioner shall show the date of the mailing by registered or certified mail of the notice of the service and copy of the summons and complaint, or other process, to the nonresident defendant and the date of the receipt of the return card and shall be signed by the commissioner. The commissioner may give the nonresident defendant notice of such service upon him or her, in lieu of the notice of service hereinabove provided to be given by registered or certified mail, in the following manner:
(1) By having a notice of such service and a copy of the summons and complaint, or other process, served upon the nonresident defendant, if found within the State of Alabama, by any officer duly qualified to serve legal process within the State of Alabama or, if the nonresident defendant is found to be outside the State of Alabama, by a sheriff, deputy sheriff, or United States marshal or deputy United States marshal, or any duly constituted officer qualified to serve like process in the state or the jurisdiction where the nonresident defendant is found; and
(2) The officer’s return showing such service, when made, shall be filed in the office of the clerk of the court, or in the court or tribunal wherein the action is pending, on or before the return day of the process or within such further times as the court or tribunal may allow, and the court or tribunal in which the action is pending may order such continuance, or continuances, as may be necessary to afford the nonresident defendant reasonable opportunity to defend the action.
(d) The commissioner shall keep on file for a period of not less than three years a copy of the summons and complaint or other process so served upon the commissioner, together with a record of all such process and of the day, hour, and manner of service.
(Acts 1957, No. 530, p. 726, §14; Acts 1971, No. 407, p. 707, §142; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §5.)
(a) An individual who applies for an insurance producer license in this state who was previously licensed for the same lines of authority in another state shall not be required to complete any prelicensing education or examination. This exemption is only available if the person is currently licensed in that state or if the application is received within 90 days of the cancellation of the applicant’s previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the state’s producer database records, maintained by the NAIC, its affiliates or subsidiaries, indicate that the producer is or was licensed in good standing for the line of authority requested.
(b) A person licensed as an insurance producer in another state who moves to this state shall, within 90 days of establishing legal residence, make application to become a resident licensee pursuant to Section 27-7-5. No prelicensing education or examination shall be required of that person to obtain any line of authority previously held in the prior state except where the commissioner determines otherwise by regulation.
(Act 2001-702, p. 1509, §6.)
An insurance producer doing business under any name other than the producer’s legal name is required to notify the commissioner prior to using the assumed name.
(Act 2001-702, p. 1509, §6.)
(a) Each insurer appointing a producer in this state shall file with the commissioner, in a format approved by the commissioner, a notice of appointment within 15 days from the date the agency contract is executed or the first insurance application is submitted, whichever occurs first. An insurer may also elect to appoint a producer to all or some insurers within the insurer’s holding company system or group by the filing of a single appointment request.
(b) Upon receipt of the notice of appointment, the commissioner shall verify within 30 days that the insurance producer is eligible for appointment. If the insurance producer is determined to be ineligible for appointment, the commissioner shall notify the insurer within five days of the commissioner’s determination.
(c) An insurer shall pay an appointment fee as set forth in Section 27-4-2 for each insurance producer appointed by the insurer.
(d) An insurer shall remit, in a manner prescribed by the commissioner, a renewal appointment fee as set forth in Section 27-4-2.
(e) Subject to the producer’s contract rights, if any, an insurer or authorized representative of the insurer may terminate a producer’s appointment at any time. An insurer or authorized representative of the insurer that terminates the appointment, employment, or contract with a producer for any reason shall within 30 days following the effective date of the termination, using a format prescribed by the commissioner, give notice of the termination to the commissioner.
(f) Upon written request of the commissioner, the insurer or authorized representative shall file with the commissioner a statement of the facts relative to the termination and the cause thereof.
(g) The insurer or the authorized representative of the insurer shall promptly notify the commissioner in a format acceptable to the commissioner if, upon further review or investigation, the insurer discovers additional information that would have been reportable to the commissioner in accordance with subsection (f) had the insurer then known of its existence.
(h) Any such information or statement, and information or statements supplemental thereto, shall be privileged and shall not form the basis of, or be admitted as evidence in, any action or proceeding against the insurer, or any director, officer, employee, or representative of the insurer by, or on behalf of, any person affected by the termination.
(i) Each insurer shall give its producers timely written notice of all appointments and renewal of appointments.
(Acts 1971, No. 407, p. 707, §134; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §7.)
(a) Within 15 days after making the notification required by subsection (e) of Section 27-7-30, the insurer shall mail a copy of the notification to the producer at his or her last known address. If the producer is terminated for cause for any of the reasons listed in Section 27-7-19, the insurer shall provide a copy of the notification to the producer at his or her last known address by certified mail, return receipt requested, postage prepaid or by overnight delivery using a nationally recognized carrier.
(b) Within 30 days after the producer has received the original or additional notification, the producer may file written comments concerning the substance of the notification with the commissioner. The producer shall, by the same means, simultaneously send a copy of the comments to the reporting insurer, and the comments shall become a part of the commissioner’s file and accompany every copy of a report distributed or disclosed for any reason about the producer as permitted under Section 27-7-30.3.
(Act 2001-702, p. 1509, §8.)
(a) In the absence of actual malice, an insurer, the authorized representative of the insurer, a producer, the commissioner, or an organization of which the commissioner is a member and that compiles the information and makes it available to other insurance commissioners or regulatory or law enforcement agencies shall not be subject to civil liability, and a civil cause of action by a producer or other person named in the report as having acted in concert with the producer of any nature shall not arise against these entities or their respective agents or employees, as a result of any statement or information required by or provided pursuant to Section 27-7-30, or any information relating to any statement that may be requested in writing by the commissioner, from an insurer or producer; or a statement by a terminating insurer or producer to an insurer or producer limited solely and exclusively to whether a termination for cause under Section 27-7-30 was reported to the commissioner, provided that the propriety of any termination for cause under Section 27-7-30 is certified in writing by an officer or authorized representative of the insurer or producer terminating the relationship.
(b) In any action brought against a person that may have immunity under subsection (a) for making any statement required by this section or providing any information relating to any statement that may be requested by the commissioner, the party bringing the action shall plead specifically in any allegation that subsection (a) does not apply because the person making the statement or providing the information did so with actual malice.
(c) Subsection (a) or (b) shall not abrogate or modify any existing statutory or common law privileges or immunities.
(Act 2001-702, p. 1509, §8.)
(a) Any documents, materials, or other information in the control or possession of the department that is furnished by an insurer, producer, or an employee or agent thereof acting on behalf of the insurer or producer, or obtained by the commissioner in an investigation pursuant to Section 27-7-30, shall be confidential by law and privileged, shall not be subject to any open records or freedom of information laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s duties.
(b) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) With the exception of those documents created by or at the request of a company specifically in connection with the investigation of a producer pursuant to subsections (e) to (h), inclusive, of Section 27-7-30, the confidentiality and privileges extended to the documents pursuant to subsection (a) above do not apply to documents, materials, or other information in the control or possession of an insurer, producer, or an employee or agent thereof, acting on behalf of an insurer or producer. Copies of all documents, materials, and information furnished to the department by an insurer, producer, or an employee or agent on behalf of an insurer or producer, shall be retained in their ordinary and customary location by the insurer or producer for the period provided by law.
(d) In order to assist in the performance of the commissioner’s duties under this chapter, the commissioner may do any of the following:
(1) Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a), with other state, federal, and international regulatory agencies, with the NAIC, its affiliates or subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information.
(2) Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC, its affiliates or subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
(3) Enter into agreements governing sharing and use of information consistent with this section.
(e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (c).
(f) Nothing in this chapter shall prohibit the commissioner from releasing final, adjudicated actions including for cause terminations that are open to public inspection to a database or other clearinghouse service maintained by the NAIC, its affiliates, or subsidiaries of the NAIC.
(Act 2001-702, p. 1509, §8.)
An insurer, the authorized representative of the insurer, or producer that fails to report as required under the provisions of Section 27-7-30, or that is found to have reported with actual malice by a court of competent jurisdiction may, after notice and hearing, have its license or certificate of authority suspended or revoked and may be fined in accordance with Section 27-1-12.
(Act 2001-702, p. 1509, §8.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §3; Acts 1971, No. 407, p. 707, §145; Acts 1988, No. 88-123, p. 159, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 530, p. 726, §13; Acts 1971, No. 407, p. 707, §143.)
(a) A producer shall keep for a period of not less than three years, or two years for business produced under limited lines credit insurance authority, at his or her place of business complete records pertaining to transactions under the producer’s license.
(b) Upon the commissioner’s request, the producer shall furnish a verified copy of these records to the commissioner to aid in the collection of all privilege taxes due in this state.
(c) The licensee shall exhibit to an insured, at any reasonable time during business hours, records in the producer’s office pertaining to policies of the insured upon the insured’s demand.
(Acts 1957, No. 530, p. 726, §13; Acts 1971, No. 407, p. 707, §144; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §9.)
(a) On an occasional basis, a producer may place with an insurer for which he or she is not appointed only a kind of insurance or classification thereof for which the producer is licensed by placing the insurance through a duly appointed producer of the insurer.
(b) In addition to any other penalties provided for, the licenses of any licensee violating or participating in the violation of this section may be suspended or revoked in the discretion of the commissioner; and, if so suspended or revoked, the licenses shall not be restored for a period of at least one year.
(c) The commissioner may, by rules or regulations, establish basic responsibilities and limitations for producers operating under this section.
(Acts 1957, No. 530, p. 726, §15; Acts 1971, No. 407, p. 707, §146; Acts 1988, No. 88-123, p. 159, §1; Act 2001-702, p. 1509, §9.)
(a) No licensee shall divide with others or share in any commissions payable on account of the exercise of a license under this title except a producer may divide or share in the commissions with other producers licensed as to the same kinds of insurance or classifications thereof.
(b) Violation of this section shall be punishable as provided in subsection (b) of Section 27-7-34.
(Acts 1957, No. 530, p. 726, §15; Acts 1971, No. 407, p. 707, §147; Act 2001-702, p. 1509, §9.)
(a) An insurance company or insurance producer shall not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance in this state if that person is required to be licensed under this chapter and is not so licensed.
(b) A person shall not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, or negotiating insurance in this state if that person is required to be licensed under this chapter and is not so licensed.
(c) Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance in this state if the person was required to be licensed under this chapter at the time of the sale, solicitation, or negotiation and was so licensed at that time.
(d) An insurer or insurance producer may pay or assign commissions, service fees, brokerages, or other valuable consideration to an insurance agency or to persons who do not sell, solicit, or negotiate insurance in this state, unless the payment would violate Chapter 12 of this title.
(e) Any insurer or producer violating this section shall be liable for a fine in an amount of up to three times the amount of the commission paid. The fine shall be levied and collected by the commissioner. Upon failure to pay the fine the commissioner may, in his or her discretion, revoke the license of the producer or the insurer’s certificate of authority, or both.
(Act 2001-702, p. 1509, §10.)
(a) All premiums, return premiums, or other funds belonging to others received by a producer in transactions under the producer’s license shall be trust funds so received by the licensee in a fiduciary capacity, and the licensee in the applicable regular course of business shall account for and pay the same to the insurer, insured, producer, or other person entitled thereto.
(b) Any producer who, not being lawfully entitled thereto, diverts or appropriates such funds, or any portion thereof, to his or her own use shall, upon conviction, be guilty of theft of property punishable as provided in Article 1, commencing with Section 13A-8-1, of Chapter 8 of Title 13A.
(Acts 1971, No. 407, p. 707, §148; Act 2001-702, p. 1509, §11.)
(a) The department shall institute a proceeding against a licensee for the imposition of licensee penalties by filing and serving a complaint as to the licensee, giving notice thereof to the licensee and all insurers the licensee is licensed or appointed to represent.
(b)(1) Any person having an interest and feeling aggrieved may file a complaint with the commissioner against any licensee seeking the imposition of licensee penalties against the licensee. The third-party complaint shall be in writing and shall specify in reasonable detail the charge or charges made, the truth of which shall be sworn to by the complainant or some other person who has knowledge of the facts averred.
(2) If, upon reviewing a third-party complaint, the commissioner finds that the charges made therein constitute grounds for the imposition of licensee penalties against the licensee, the commissioner shall forthwith notify the licensee against whom the complaint has been made and serve the licensee with a copy of the complaint and giving notice thereof to all insurers the licensee is licensed or appointed to represent.
(c) The commissioner shall by regulation prescribe the methods through which service of a complaint and other documents are made, which methods may include personal service, service by first class mail or certified mail, service by publication, service by electronic means, or such other alternative or dual methods of service as the commissioner may determine to be reasonably calculated to furnish notice under the circumstances.
(d) Within 30 days after service upon the licensee of the copy of the complaint, the licensee shall file with the commissioner an answer in writing to the charges, either specifically admitting or denying or specifically confessing and avoiding each of the charges made. If the licensee against whom the complaint has been made stands in default for answer, the charges set forth in the complaint shall be taken as admitted and the commissioner may enter an order imposing such licensee penalties as may be warranted without the need for a hearing.
(e) After receipt of the licensee’s answer, the commissioner shall fix a time and place for the hearing of the complaint at the commissioner’s office or elsewhere as provided in Section 27-2-30 and shall serve notice thereof upon the licensee and any third-party complainant as provided by regulation adopted as directed in subsection (c) of this section. Such notice shall be served at least 20 days before the date fixed for the hearing.
(f) At the time fixed by the commissioner for the hearing, the complaint shall be heard before the commissioner or a deputy appointed by the commissioner, and any third-party complainant and licensee may each be represented by an attorney-at-law and may give the testimony and offer proof, documentary or ore tenus, as to the truth of the charges and any denial thereof.
(g) The commissioner shall have any power of subpoena, subpoena duces tecum or discovery obtaining in the circuit courts of this state, and any party shall have the right, upon request in writing filed with the commissioner, to cause a writ of subpoena to issue out of the office of the commissioner which shall be signed by the commissioner or his or her deputy and directed to the sheriff of any county of this state returnable to the office of the commissioner. The cost of issuing and serving subpoenas and witness fees shall be the same as such costs and fees in the circuit court and shall be recoverable by the prevailing party from the other party. The commissioner shall tax such costs, and, upon the same not being paid within a period of 10 days therefrom, payment thereof may be enforced in any court having jurisdiction over the person of the defaulting party.
(h) The testimony may be taken orally or by deposition, and any party shall have the right of introducing proof by deposition as may obtain in the circuit courts of this state.
(i) The commissioner or a deputy appointed by the commissioner shall preside over the hearing and shall make a written finding of facts upon which his or her decisions shall be based.
(j) The commissioner or the deputy shall, as soon as practicable after the conclusion of the hearing, make a ruling in writing fully disposing of the complaint and a copy of the ruling shall be served upon any third-party complainant, the licensee and all insurers represented by the licensee, as provided by regulation adopted as directed in subsection (c) of this section, addressed to the licensee at the address shown by the records of the commissioner.
(k) Pursuant to such hearing, if the commissioner or deputy finds that the grounds therefor exist under the applicable statute, the commissioner or deputy may impose licensee penalties against the licenses of the licensee complained against.
(l) An order imposing licensee penalties may be appealed within the time stated in, and according to the provisions of, Section 27-2-32.
(Acts 1957, No. 530, p. 726, §10; Acts 1971, No. 407, p. 707, §149; Acts 1975, No. 216, p. 740, §1; Act 2012-312, p. 685, §1.)
(a) Any communications, complaint, evidence, testimony, document, deposition, affidavit, statement, or other proof filed, given, or proffered at the hearing provided for in Section 27-7-37 shall be absolutely privileged to the same extent as in a court of law and shall never form the subject matter of any action, claim, or proceeding against the person filing, giving, or proffering the same nor against the principal or representative of such person.
(b) Reports of investigation, copies thereof, and information furnished the commissioner by any insurer, agent, solicitor, broker, managing general agent, or service representative and any other person shall be absolutely privileged communications, and no such report, copy, information or document, affidavit, statement, deposition, or testimony so furnished to the commissioner shall ever form the subject matter of any action, claim, or proceeding against any such person.
(Acts 1957, No. 530, p. 726, §10; Acts 1971, No. 407, p. 707, §150.)
(a) A producer shall report to the commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. This report shall include a copy of the order, consent to order, or other relevant legal documents.
(b) Within 30 days of the initial pretrial hearing date, a producer shall report to the commissioner any criminal prosecution of the producer taken in any jurisdiction. The report shall include a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant legal documents.
(Act 2001-702, p. 1509, §12.)
All fines collected pursuant to this chapter shall be deposited to the credit of the State General Fund.
(Act 2001-702, p. 1509, §12.)
(a) Every agent, broker, and solicitor license in force immediately prior to January 1, 2002, and existing under any law repealed or amended by Act 2001-702, is valid until its original expiration date, unless earlier terminated in accordance with applicable law. Upon the first renewal under Act 2001-702, the respective licenses shall be replaced by a producer license in a form as provided by Act 2001-702, and shall thereafter be subject to continuation, suspension, revocation, or termination as though originally issued under Act 2001-702.
(b) Any agent appointment in place immediately prior to January 1, 2002, and existing under any law repealed or amended by Act 2001-702 is valid until its original expiration date, unless earlier terminated in accordance with applicable law. Upon the first renewal under Act 2001-702, the agent appointment shall be replaced by a producer appointment in a form as provided by Act 2001-702, and shall thereafter be subject to continuation or termination as though originally issued under Act 2001-702 as follows:
(1) A life agent appointment shall be replaced with a life producer appointment.
(2) A disability agent appointment shall be replaced with an accident and health or sickness, commonly known as disability, producer appointment.
(3) A credit life agent appointment shall be replaced with a credit producer appointment.
(4) A credit disability agent appointment shall be replaced with a credit producer appointment.
(5) A variable annuities agent appointment shall be replaced with a variable life and variable annuity products producer appointment.
(6) A comprehensive property, casualty, and surety agent appointment shall be replaced with a property and a casualty producer appointment.
(7) An automobile, full coverage, agent appointment shall be replaced with an automobile producer appointment.
(8) An industrial fire, commonly known as debit fire, agent appointment shall be replaced with an industrial fire, commonly known as debit fire, producer appointment.
(9) A bail bond agent appointment shall be replaced with a bail bond producer appointment.
(10) A physical damage on household goods agent appointment shall be replaced with a credit producer appointment.
(11) An automobile physical damage only agent appointment shall be replaced with a credit producer appointment.
(12) A credit property and casualty agent appointment shall be replaced with a credit producer appointment.
(13) A rental vehicle agent appointment shall be replaced with a rental vehicle producer appointment.
(c) Every service representative license in force immediately prior to January 1, 2002, and existing under any law repealed or amended by Act 2001-702 is valid until its original expiration date, unless earlier terminated in accordance with applicable law. Upon the first renewal under Act 2001-702, the respective licenses shall be replaced by a service representative license in a form as provided by Act 2001-702, and shall thereafter be subject to continuation, suspension, revocation, or termination as though originally issued under Act 2001-702.
(d) Any service representative appointment in place immediately prior to January 1, 2002, and existing under any law repealed or amended by Act 2001-702 is valid until its original expiration date, unless earlier terminated in accordance with applicable law. Upon the first renewal under Act 2001-702, the service representative appointment shall be replaced by a service representative appointment in a form as provided by Act 2001-702, and shall thereafter be subject to continuation or termination as though originally issued under Act 2001-702, as follows:
(1) A comprehensive property, casualty, and surety service representative appointment shall be replaced with a property and a casualty service representative appointment.
(2) An automobile, full coverage, service representative appointment shall be replaced with an automobile service representative appointment.
(3) An industrial fire, commonly known as debit fire, service representative appointment shall be replaced with an industrial fire, commonly known as debit fire, service representative appointment.
(4) A bail bond service representative appointment shall be replaced with a bail bond service representative appointment.
(5) A physical damage on household goods service representative appointment shall be replaced with a credit service representative appointment.
(6) An automobile physical damage only service representative appointment shall be replaced with a credit service representative appointment.
(Act 2001-702, p. 1509, §17.)
Any law of this state remaining in force after January 1, 2002, which refers to an insurance agent or broker required prior to January 1, 2002, to be licensed in accordance with Chapter 7 or Chapter 8 of this title shall be deemed a reference to an insurance producer required to be licensed in accordance with Act 2001-702.
(Act 2001-702, p. 1509, §19.)
(a) The commissioner may adopt reasonable rules and regulations for the implementation and administration of Act 2001-702.
(b) Prior to the adoption, amendment, or repeal of any regulation to implement Act 2001-702, the commissioner shall give at least 35 days’ notice of the intended action by filing notice of the intended action with the Legislative Reference Service for publication in the Alabama Administrative Monthly. The date of publication in the Alabama Administrative Monthly shall constitute the date of the notice. The notice shall include a statement of either the terms or substance of the intended action or description of the subject and issues involved, shall specify a notice period ending not less than 35 days or more than 90 days from the date of this notice, during which period interested persons may present their views thereon, and shall specify the place where, and the manner in which, interested persons may present their views thereon.
(c) All regulations adopted by the commissioner after May 30, 2001, which have not been repealed or revised shall be codified in the Alabama Administrative Code. Regulations adopted prior to May 30, 2001, and still in effect shall be codified in the Alabama Administrative Code within 24 months after May 30, 2001.
(Act 2001-702, p. 1509, §20.)
Subject to the requirements of subsection (b) of Section 27-7-43, the commissioner may make reasonable rules and regulations for any person engaged in providing insurance necessary to implement and enforce the privacy provisions of 15 U.S.C. Sections 6801, et seq., being Sections 501, et seq., of Public Law 106-102, commonly known as the “Gramm-Leach-Bliley Act.” Notwithstanding the foregoing, rules and regulations adopted by the commissioner pursuant to this section shall not apply to workers’ compensation claims, workers’ compensation insurance, workers’ compensation programs, or employee welfare benefit plans as defined in 29 U.S.C. Section 1002(1) or any third-party administrator to the extent it provides services to a workers’ compensation program or employee welfare benefit plan.
(Act 2001-702, p. 1509, §21.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §1; Acts 1971, No. 407, p. 707, §156; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §155; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §§3, 4; Acts 1971, No. 407, p. 707, §157; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §158; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §4; Acts 1971, No. 407, p. 707, §159; Acts 1981, No. 81-862, p. 1635, §1; Acts 1988, 1st Ex. Sess., No. 88-875, p. 410, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §5; Acts 1971, No. 407, p. 707, §160; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
Acts 1957, No. 598, p. 848, §6; Acts 1971, No. 407, p. 707, §161; Acts 1981, No. 81-862, p. 1635, §1; Act 98–613, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §6; Acts 1971, No. 407, p. 707, §162; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §6; Acts 1971, No. 407, p. 707, §164; Acts 1991, No. 91-483, p. 875, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §6; Acts 1971, No. 407, p. 707, §165; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §7; Acts 1971, No. 407, p. 707, §166; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §167; Acts 1981, No. 81-862, p. 1635, §1; Acts 1989, No. 89-258, p. 373, §4.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §10; Acts 1971, No. 407, p. 707, §168; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §11; Acts 1971, No. 407, p. 707, §172; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §14; Acts 1971, No. 407, p. 707, §178; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §§14, 15; Acts 1971, No. 407, p. 707, §179; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §18; Acts 1971, No. 407, p. 707, §182.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §180)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §14; Acts 1971, No. 407, p. 707, §181; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §12; Acts 1971, No. 407, p. 707, §169; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §8; Acts 1971, No. 407, p. 707, §170; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §171.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §13; Acts 1971, No. 407, p. 707, §173.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §10; Acts 1971, No. 407, p. 707, §174.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §16; Acts 1971, No. 407, p. 707, §175; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1957, No. 598, p. 848, §3; Acts 1971, No. 407, p. 707, §176; Acts 1981, No. 81-862, p. 1635, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §177; Acts 1981, No. 81-862, p. 1635, §1.)
(a) Any individual licensed in this state as an insurance producer or service representative for the lines of insurance listed in subsection (b), and not exempt under subsection (c), shall satisfactorily complete a minimum of 24 classroom hours of courses, programs of instruction, or seminars as may be approved by the commissioner pursuant to this chapter, three hours of which shall be on the topic of insurance producer ethics, reported to the commissioner on a biennial basis in conjunction with the license renewal cycle. No person licensed for more than one line of authority shall be required to complete a greater number of classroom hours than is required of a person holding a license for a single line of authority.
(b) This chapter shall apply to all individuals licensed in this state as insurance producers and service representatives for the following kinds of insurance:
(1) The life lines of authority.
(2) The property lines of authority.
(3) All other lines of insurance for which an examination is required for licensing.
(4) Any combination thereof.
(c) The continuing education requirements of this chapter shall not apply to:
(1) Any person exempt from licensing pursuant to subsection (b) of Section 27-3-27.
(2) Any person licensed only for any kind or kinds of insurance for which an examination is not required by law of this state.
(3) Any person licensed only for limited lines insurance.
(4) Newly licensed producers and service representatives for 12 months following the effective date of their license.
(d) In lieu of the 24 hours required in subsection (a), any producer or service representative employed by another producer or by an insurer to work only in the office of the employer and who is not licensed as a nonresident in any other state shall satisfactorily complete a minimum of 12 classroom hours biennially, two hours of which shall be on the topic of insurance producer ethics.
(e) Any individual exempt from the requirements of this section immediately prior to January 1, 2013, shall continue to be exempt from the requirements of this section after January 1, 2013, as long as the individual remains exempt as set forth in this section as it existed immediately prior to January 1, 2013, unless the license is permitted to expire or is otherwise terminated and remains out of effect for a period of 12 consecutive months, in which case the exemption shall no longer be applicable.
(Acts 1996, No. 96-343, p. 423, §1; Act 2001-702, p. 1509, §14; Act 2006-299, p. 614, §1; Act 2012-312, p. 685, §1; Act 2018-196, §1.)
Any person failing to meet the requirements imposed by this chapter or who has submitted to the commissioner a false or fraudulent certificate of compliance, after a hearing thereon which hearing may be waived by the person, may be subject to the suspension of all licenses issued for any kind or kinds of insurance or to a civil fine as further provided in this section, and no further license shall be issued to the person for any kind or kinds of insurance until the person has demonstrated to the satisfaction of the commissioner that he or she has complied with all of the requirements of the chapter and all other laws applicable thereto. In lieu of suspension of a license and in the sole discretion of the commissioner, for those licensees who have submitted a false or fraudulent certificate of compliance, a licensee may be subject to a civil fine in an amount not to exceed ten thousand dollars ($10,000) after a hearing. The hearing may be waived by the licensee.
(Acts 1996, No. 96-343, p. 423, §2; Act 2001-702, p. 1509, §14; Act 2018-196, §1.)
The courses or programs subject to this chapter shall include any course, seminar, industry recognized certification program, and out-of-state reciprocal program, program of classroom instruction, or independent self-study course authorized, developed, or sanctioned by an authorized insurer or recognized statewide association of insurance producers and shall, subject to the approval of the commissioner, qualify for the equivalency of the number of classroom hours assigned thereto by the commissioner. Any independent self-study course authorized, developed, or sanctioned by any authorized insurers or recognized state producers association, which includes an appropriate testing instrument administered by a third-party proctor requiring a passing grade of 70 percent to successfully complete and is approved by the commissioner, shall qualify for the equivalency of the number of classroom hours assigned thereto by the commissioner. Programs or courses shall be directly related to the producer’s insurance product and contribute to the technical competence of the producer. All courses, course providers, and certifications, pursuant to this chapter, are subject to audit by the commissioner at any time. Course or course providers may be disqualified at the discretion of the commissioner. The commissioner may contract for computer services and equipment necessary to administer the provisions of this chapter, but there shall be no additional cost or fee to licensees except as otherwise specifically provided in this title.
(Acts 1996, No. 96-343, p. 423, §3; Act 98-613, p. 1351, §1; Act 2001-702, p. 1509, §14.)
The commissioner shall appoint an advisory committee to advise him or her on continuing education and other insurance matters to consist of the following members: One representative of a statewide association of life and health insurance producers, one representative of a statewide association of property and casualty insurance producers, one representative of an association of Alabama-based life insurance companies, one representative of a property and casualty insurance company, one representative of a statewide association representing health insurance producers, one member of the Alabama Senate, and one member of the Alabama House of Representatives. Members of this committee shall be appointed for terms concurrent with the term of office of the Governor of the State of Alabama and shall be entitled to a per diem allowance equal to the per diem allowance paid to state employees in the amount current at the time of the meeting.
(Acts 1996, No. 96-343, p. 423, §4; Act 2001-702, p. 1509, §14.)
A person teaching any approved course of instruction or lecturing at any approved seminar shall qualify for the same number of classroom hours as would be granted to a person taking and successfully completing such course, seminar, or program.
(Acts 1996, No. 96-343, p. 423, §5.)
Neither an employer of a producer or service representative nor any insurer appointing a producer or service representative shall be responsible or liable in any way for the failure of any producer or service representative to meet the requirements of this chapter or to maintain the necessary records. No employer or insurer shall be required to investigate or inquire whether the producer or service representative has met the requirements specified herein prior to the individual becoming appointed as a producer or service representative for the employer or insurer. The responsibility for complying with the requirements of Sections 27-8A-1 and 27-8A-2 shall rest solely on the producer or service representative.
(Acts 1996, No. 96-343, p. 423, §6; Act 2001-702, p. 1509, §14; Act 2012-312, p. 685, §1.)
Every person subject to this chapter, or the employer of the person, and every authorized provider of continuing education courses and programs shall furnish upon request, in a form satisfactory to the commissioner, written certification as to the courses, programs, or seminars of instruction taken and successfully completed by the person to meet the requirements of this chapter.
(Acts 1996, No. 96-343, p. 423, §7.)
Any person who files a false statement under this chapter, with knowledge of the falsity of the statement, is guilty of deceit. The commissioner may, after notice and hearing, revoke any license issued by the commissioner to a person found guilty of deceit under this section.
(Acts 1996, No. 96-343, p. 423, §8.)
(a) The commissioner shall collect the following fees in the administration and enforcement of this chapter:
(1) License renewal fees paid in connection with the biennial application for license renewal by producers and service representatives........... $70.
(2) Late filing fee, to be paid by each producer and service representative failing to timely renew a license........... $50.
(3) Provider authority initial filing fee, a one-time fee to be paid by each education course provider for authority to offer continuing education courses in this state........... $300.
(4) Provider authority annual renewal fee, to be paid by each education course provider for continuation of authority to offer continuing education courses in this state........... $100.
(5) Course approval filing fee, to be paid by the provider for the approval of each education course or program to be offered in this state (one-time fee per course, with no need for renewal)........... $50.
(b) The fees collected pursuant to this section shall be deposited in the State Treasury to the credit of the Insurance Department Fund.
(Acts 1996, No. 96-343, p. 423, §9; Act 2001-702, p. 1509, §14; Act 2006-299, p. 614, §1; Act 2015-195, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1996, No. 96-343, p. 423, §10.)
(a) Any fees paid by a course provider prior to April 23, 1996, for qualification to become a course provider shall be applied as credits against future fees due to the department for qualification to become a course provider under this chapter.
(b) Agents, service representatives, and brokers who have, within one year prior to April 23, 1996, completed continuing education courses approved by the commissioner and which have not been applied for continuing education requirements in a state other than Alabama, shall receive appropriate credit toward future continuing education requirements after April 23, 1996.
(Acts 1996, No. 96-343, p. 423, §11.)
[Repealed]
Repealed by Act 2001-702, p. 1509, §16, effective January 1, 2002.
(Acts 1996, No. 96-343, p. 423, §12.)
The commissioner may conduct background investigations, to include criminal history inquiries, for all applicants for license as an insurance producer prior to the issuance of the license.
(Acts 1996, No. 96-343, p. 423, §13; Act 2001-702, p. 1509, §14.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
(a) An “adjuster” is a person who, for compensation as an independent contractor, or as the employee of such an independent contractor or for fee or commission, investigates and negotiates settlement of claims arising under insurance contracts on behalf of the insurer.
(b) The definition of adjuster shall not include, nor require, a license of the following:
(1) A licensed attorney-at-law who is qualified to practice law in this state; or
(2) A salaried employee of an insurer.
(Acts 1971, No. 407, p. 707, §183.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
(a) No person shall in this state act as, or hold himself out to be, an adjuster unless then licensed therefor under this chapter. Application for license shall be made to the commissioner according to forms as prescribed and furnished by him.
(b) The commissioner shall promptly issue a license to each person who has properly completed application therefor and who is qualified for the license under this chapter.
(c) At time of application for the license, the applicant shall tender to the commissioner the license fee specified in Section 27-4-2. If the license is refused, the commissioner shall refund the license fee to the applicant or person entitled thereto.
(d) Firms and corporations, as well as individuals, may be licensed as an adjuster. Each individual associated in such firm or corporation and who exercises, or proposes to exercise, license powers shall file application with the commissioner, pay the license fee and qualify as though for an individual license. The license issued to a firm or corporation shall list thereon all individuals who are thereby authorized to act as an adjuster or, in lieu thereof, the commissioner may issue a separate license as to each such individual.
(e) The license fee provided for in this section is payable to the state, as provided in Section 27-4-2, and no license or fee shall be paid to the county.
(Acts 1971, No. 407, p. 707, §184.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
To be licensed as an adjuster, the applicant must be qualified therefor as follows:
(1) Must be an individual 19 years of age or more;
(2) Must be a resident in and of Alabama or resident of another state which will permit residents of Alabama regularly to act as adjusters in such other state;
(3) Must be a full-time salaried employee of a licensed adjuster, or 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 sufficient duration and extent reasonably to make him competent to fulfill the responsibilities of an adjuster; and
(4) Must be trustworthy and of good character.
(Acts 1971, No. 407, p. 707, §185.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
No such adjuster’s license, or qualifications therefor, shall be required as to any adjuster who is sent into this state by, and on behalf of, an insurer for the purpose of investigating or making adjustment of a particular loss of unique and unusual character under an insurance policy or for the adjustment of a series of losses resulting from a catastrophe common to all such losses and on behalf of, as authorized by, an insurer as to which he is licensed as agent under this title. An agent may, from time to time, act as an adjuster without a license as an adjuster, but no such agent shall act as an adjuster for an insurer with which he has a contract providing for compensation retrospectively contingent upon losses incurred under insurance sold or serviced by him.
(Acts 1971, No. 407, p. 707, §186.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
(a) An adjuster license shall continue in force until expired, suspended, revoked or otherwise terminated, but subject to payment to the commissioner biennially, on or before December 31, of the renewal year, of the continuation fee stated in Section 27-4-2, accompanied by written request for the continuation.
(b) Any license as to which the fee and request for continuation is not received by the commissioner as required in subsection (a) of this section, shall be deemed to have expired at midnight on December 31, mentioned in subsection (a) of this section. Request for continuation of any such license and/or payment of the continuation fee therefor which is received by the commissioner after such December 31, but before the next following February 15, may be accepted and effectuated by the commissioner, in his discretion, if accompanied by a continuation fee of one and one-half times the continuation fee otherwise required.
(Acts 1971, No. 407, p. 707, §187; Act 2006-299, p. 614, §1.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
(a) The commissioner may suspend for not more than 12 months or may revoke or refuse to continue any adjuster license if, after a hearing held on not less than 20 days’ advance notice to the licensee of such hearing and of the charges against him by registered or certified mail as provided in subsection (c) of Section 27-2-18, 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 obtaining or attempting to obtain any such license through misrepresentation or fraud;
(3) For violation of or noncompliance with any applicable provision of this title or for willful violation of any lawful rule, regulation, or order of the commissioner;
(4) For misappropriation or conversion to his own use or illegal withholding of moneys or property belonging to policyholders, or insurers, or beneficiaries, or others and received in conduct of business under the license;
(5) Conviction, by final judgment, of a felony involving moral turpitude; or
(6) If in the conduct of his affairs under the license the licensee has used fraudulent or dishonest practices or has shown himself to be incompetent or untrustworthy.
(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 the license to exercise its powers.
(c) Any party to the hearing, referred to in subsection (a) of this section, who is aggrieved by the suspension, revocation or refusal to continue a license may appeal from the commissioner’s order relative thereto as provided in Section 27-2-32.
(Acts 1971, No. 407, p. 707, §189.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
(a) All licenses issued under this chapter, although issued and delivered to the licensee, shall at all times be the property of the State of Alabama. 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.
(Acts 1971, No. 407, p. 707, §190.)
[Repealed]
Repealed by Act 2011-637, §3, effective January 1, 2012.
Each adjuster 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. Records relative to a particular transaction shall be so retained for not less than one year thereafter. This section shall not be deemed to prohibit maintenance of such an office in the home of the licensee. The license of the adjuster shall show the address of his office, and the licensee shall promptly give written notice to the commissioner of any change of such address.
(Acts 1971, No. 407, p. 707, §188.)
This chapter governs the qualifications and procedures for licensing independent adjusters. It specifies the duties of and restrictions on independent adjusters.
(Act 2011-637, §1.)
For purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) APPRENTICE INDEPENDENT ADJUSTER. As defined in Section 27-9A-11.
(2) BUSINESS ENTITY. A corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
(3) COMMISSIONER. The Alabama Commissioner of Insurance.
(4) HOME STATE. The District of Columbia and any state or territory of the United States in which an independent adjuster maintains the principal place of residence or business of the adjuster and in which the adjuster is licensed to act as a resident independent adjuster. In the case of a resident of a Canadian province, or if the resident state or territory does not license independent adjusters for the line of authority sought, the home state of the independent adjuster shall be any state in which the independent adjuster is licensed and in good standing, as designated by the adjuster.
(5) INDEPENDENT ADJUSTER. As defined in Section 27-9A-3.
(6) INDIVIDUAL. A natural person.
(7) INSURER. As defined in Section 27-1-2.
(8) NAIC. The National Association of Insurance Commissioners, its subsidiaries and affiliates, and any successor thereof.
(9) PERSON. An individual or business entity.
(10) STATE OF EMERGENCY. An event for which the existence of a state of emergency has been declared by the Governor or the Legislature under Section 31-9-8.
(11) UNIFORM INDIVIDUAL APPLICATION. The versions of the NAIC Uniform Individual Application for a license and for renewal or continuation of a license current as of the time of use.
(12) UNIFORM BUSINESS ENTITY APPLICATION. The versions of the NAIC Uniform Business Entity Application for a license and for renewal or continuation of a license current as of the time of use.
(Act 2011-637, §1.)
(a) For purposes of this chapter, an “independent adjuster” is a person who, for compensation as an independent contractor or as an employee of an independent contractor, undertakes on behalf of an insurer to ascertain and determine the amount of any claim, loss, or damage payable under a contract of property, casualty, or workers’ compensation insurance or to effect settlement of such claim, loss, or damage. This chapter shall not be construed to permit persons not licensed as attorneys to engage in activities constituting the practice of law.
(b) An independent adjuster does not include any of the following:
(1) Attorneys-at-law admitted to practice in this state when acting in their professional capacity as an attorney.
(2) A salaried employee of an insurer.
(3) A person employed solely to obtain facts surrounding a claim or to furnish technical assistance to a licensed independent adjuster.
(4) An individual who is employed to investigate suspected fraudulent insurance claims but who does not adjust losses or determine claims payments.
(5) A person who solely performs executive, administrative, managerial, or clerical duties or any combination thereof and who does not investigate, negotiate, or settle claims with policyholders, claimants, or their legal representative.
(6) A licensed health care provider or its employee who provides managed care services so long as the services do not include the determination of compensability.
(7) A managed care organization or any of its employees or an employee of any organization providing managed care services so long as the services do not include the determination of compensability.
(8) A person who settles only reinsurance or subrogation claims.
(9) An officer, director, manager, or employee of an authorized insurer, surplus lines insurer, a risk retention group, or an attorney-in-fact of a reciprocal insurer.
(10) A U.S. manager of the United States branch of an alien insurer.
(11) A person who investigates, negotiates, or settles life, accident and health, annuity, or disability insurance claims.
(12) Under a self-insured arrangement, an individual employee who adjusts claims on behalf of his or her employer.
(13) A licensed insurance producer appointed to represent the insurer, attorney-in-fact of a reciprocal insurer, or managing general agent of the insurer, to any of whom claim authority has been granted by the insurer.
(14)a. An individual who collects portable consumer electronic device insurance claim information from insureds or claimants, enters such data into an automated claims adjudication system, and furnishes claim information to the insureds or claimants from the results of such system.
b. For purposes of this subdivision, the individual must be an employee of a licensed independent adjuster or of a licensed insurance producer exempt from adjuster licensure pursuant to subdivision (13) or of an affiliate of either a licensed independent adjuster or a licensed insurance producer exempt from adjuster licensure pursuant to subdivision (13), but in any case where no more than 25 such individuals are under the supervision of a single individual licensed independent adjuster or insurance producer.
c. For purposes of this subdivision, “automated claims adjudication system” means a preprogrammed computer system designed for the collection, data entry, calculation, and system-generated final resolution of claims which meets all of the following:
It shall only be utilized by a licensed independent adjuster, licensed insurance producer, or by individuals supervised by a licensed independent adjuster or insurance producer pursuant to this subdivision.
It shall comply with all claims payment requirements of the insurance code.
d. For purposes of this subdivision, “portable consumer electronic device” means a personal, self-contained, easily carried by an individual, battery-operated electronic communication, viewing, listening, recording, gaming, computing, or global position device, and other similar devices and their accessories.
e. The licensed independent adjuster or insurance producer who supervises the individuals shall file a report with the commissioner indicating an intention to operate pursuant to this subdivision.
(Act 2011-637, §1.)
A person shall not act or hold the person out as an independent adjuster in this state unless the person is licensed as an independent adjuster in accordance with this chapter.
(Act 2011-637, §1.)
(a) In the event of a state of emergency, a person who is otherwise qualified to adjust claims, but is not already licensed as an independent adjuster in this state, may act as an emergency independent adjuster and adjust claims for an insurer in this state in accordance with this section.
(b) The insurer shall file with the commissioner a registration of each individual that will act as an emergency independent adjuster on behalf of the insurer within five days of deployment to adjust claims arising from the state of emergency.
(c) The registration shall be in a format prescribed by the commissioner and shall provide the following information:
(1) Name of the individual.
(2) Social Security number of the individual.
(3) Name of insurer the independent adjuster will represent.
(4) Effective date of the contract between the insurer and independent adjuster.
(5) Catastrophe or loss control number.
(6) Catastrophe event name.
(7) Any other information the commissioner deems necessary.
(d) An emergency independent adjuster’s registration shall remain in force for a period not to exceed 90 days unless extended by the commissioner.
(e) At the time of registration, the commissioner shall collect from the insurer a fee set by the commissioner not to exceed fifty dollars ($50) for each emergency independent adjuster registered. The fee shall be deposited in the State Treasury to the credit of the Insurance Department Fund.
(f) The commissioner may establish by rule any additional standards or procedures necessary to allow for the registration of emergency independent adjusters in this state in accordance with this section.
(g) A registered emergency independent adjuster shall be subject to Sections 27-9A-12, 27-9A-14, 27-9A-15, and Chapter 12 of this title to the same extent as if licensed as an independent adjuster in this state.
(Act 2011-637, §1.)
(a) An individual applying for a resident independent adjuster license shall apply to the commissioner on the appropriate NAIC Uniform Individual Application and declare under penalty of suspension, revocation, or refusal of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. Before approving the application, the commissioner shall find that the individual meets all of the following:
(1) Is at least 18 years of age.
(2) Is eligible to designate this state as his or her home state.
(3) Has not committed any act that is a ground for probation, suspension, revocation, or refusal of an independent adjuster’s license as set forth in Section 27-9A-12.
(4) Has successfully passed the examination for the line of authority for which the individual has applied.
(5) Has paid the fees set forth in Section 27-4-2.
(b) The commissioner may contract with non-governmental entities, including the NAIC, to perform any ministerial functions, including the collection of fees and data, related to licensing that the commissioner may deem appropriate. The commissioner may require that license applications, license renewal applications, and supporting documentation be filed and all required fees and charges be paid electronically through systems operated or maintained by the non-governmental entities.
(c) No resident of another state or of the District of Columbia or of Canada may be licensed pursuant to this section or may designate Alabama as his or her home state unless the individual has successfully passed the independent adjuster examination and has otherwise complied with the other applicable portions of this section.
(d) A business entity applying for a resident independent adjuster license shall apply to the commissioner on the appropriate NAIC Uniform Business Entity Application and declare under penalty of suspension, revocation, or refusal of the license that the statements made in the application are true, correct, and complete to the best of the business entity’s knowledge and belief. Before approving the application, the commissioner shall find that the business entity meets all of the following:
(1) Is eligible to designate this state as its home state.
(2) As applicable, has qualified or registered with the office of the Secretary of State to engage in business in this state.
(3) Has designated an individual independent adjuster licensed in this state as responsible for the business entity’s compliance with this chapter and with the insurance laws and rules of this state.
(4) Has not committed an act that is a ground for probation, suspension, revocation, or refusal of an independent adjuster’s license as set forth in Section 27-9A-12.
(5) Has paid the fees set forth in Section 27-4-2.
(e) The commissioner may require any documents reasonably necessary to verify the information contained in the application.
(Act 2011-637, p. 1544, §1; Act 2023-104, §1.)
(a) Unless denied licensure pursuant to Section 27-9A-12, a person who meets the requirements of Sections 27-9A-6 and 27-9A-8 shall be issued an independent adjuster license. An independent adjuster may qualify for a license in one or more of the following lines of authority:
(1) Property and casualty.
(2) Workers’ compensation.
(3) Crop.
(b) An independent adjuster license shall be initially renewed in accordance with a schedule prescribed by the commissioner and shall thereafter be subject to renewal on a biennial basis. A renewal shall be effected by submitting a renewal application, by paying the fee for renewal prescribed in Section 27-4-2, and by meeting the requirements for renewal, including any applicable continuing education requirements, before the due date for renewal. A license expires if not renewed by the due date for renewal.
(c) Within the first 30 days following the date an independent adjuster license expires, a reinstatement retroactive to the expiration date shall be effected by submitting a renewal application, by paying a fee of one and one-half times the renewal fee required in Section 27-4-2, and by meeting the other requirements for renewal including any applicable continuing education requirements.
(d) After the first 30 days following the date an independent adjuster license expires, but within 12 months after the expiration date, the license may be reinstated effective as of the reinstatement by submitting a renewal application, by paying a fee of double the renewal fee required in Section 27-4-2, and by meeting the other requirements for renewal including any applicable continuing education requirements.
(e) After an independent adjuster license has been expired 12 months, the person shall reapply pursuant to Section 27-9A-6 to again become licensed.
(f) An independent adjuster who is unable to comply with license renewal procedures and requirements due to military service, long-term medical disability, or some other extenuating circumstance may request a waiver of same and a waiver of any examination requirement, fine, or other sanction imposed for failure to comply with renewal procedures.
(g) The license shall contain the licensee’s name, address, personal identification number, the dates of issuance and expiration, and any other information the commissioner deems necessary.
(h) The independent adjuster shall inform the commissioner of a change in legal name or address within 30 days of the change in a manner prescribed by the commissioner. Failure to timely inform the commissioner of a change in legal name or address shall result in a penalty of fifty dollars ($50). If the penalty is not paid within 30 days after notice of the penalty assessment, the license shall be suspended until the penalty is paid.
(Act 2011-637, §1.)
(a) An individual intending to apply for an independent adjuster license shall pass a written examination unless exempt pursuant to Section 27-9A-9.
(b) The examination shall test the knowledge of the individual concerning the lines of authority for which application is made, the duties and responsibilities of an independent adjuster, and the insurance laws and rules of this state. Examinations required by this section shall be developed and conducted under rules prescribed by the commissioner.
(c) Each individual applying for an examination shall pay a nonrefundable fee prescribed by the commissioner as set forth in Section 27-4-2.
(d) The commissioner may make arrangements, including contracting with an outside testing service, for administering examinations and collecting the nonrefundable fee set forth in Section 27-4-2.
(e) An individual who fails to appear for the examination as scheduled or fails to pass the examination shall reapply for an examination and remit all required fees and forms before being rescheduled for another examination.
(f) No individual who has taken and failed to pass two examinations given pursuant to this section for a particular line of insurance shall be entitled to take any further examination for that line of insurance until after the expiration of three months from the date of the last examination which the individual failed to pass. If the individual fails to pass the examination after two more attempts, the individual shall not be eligible to take any further examination for that line of insurance until after the expiration of six months from the date of the last unsuccessful examination. An examination fee shall be paid for each examination.
(Act 2011-637, p. 1544, §1; Act 2023-104, §1.)
(a) An individual applicant for an independent adjuster license in this state shall not be required to complete an examination if the individual is currently licensed in another state for the same line or lines of authority based on an independent adjuster examination or if the state license has expired and the application is received by this state within 90 days of expiration. The applicant shall either provide certification from the other state that the applicant’s license is currently in good standing or was in good standing at the time of expiration or the state’s producer database records maintained by the NAIC must indicate that the applicant is or was licensed in good standing. The certification must be of a license with the same line of authority for which the individual has applied.
(b) An individual licensed as an independent adjuster in another state based on an independent adjuster examination who, within 90 days of establishing legal residency in this state, applies to become a resident independent adjuster licensee pursuant to Section 27-9A-6 shall not be required to complete an examination.
(c) An individual who applies for an independent adjuster license in this state who was previously licensed as an independent adjuster in this state shall not be required to complete an examination, but this exemption is only available if the application is received within 12 months of the cancellation of the applicant’s previous license in this state and if, at the time of cancellation, the applicant was in good standing in this state.
(d) An individual applicant for an independent adjuster license in this state shall not be required to complete an examination if the applicant was previously employed for a minimum of 20 years as an adjuster in this state by an insurance company licensed in this state and the applicant submits his or her application within 12 months of leaving the employment of the company. The insurance company, upon request, shall certify to the department the time period that the applicant was employed by the insurance company.
(Act 2011-637, p. 1544, §1; Act 2016-341, p. 845, §1; Act 2017-431, §1; Act 2023-104, §1.)
(a) Unless refused licensure pursuant to Section 27-9A-12, a nonresident person shall receive a nonresident independent adjuster license if:
(1) The person is currently licensed in good standing as an independent adjuster in the resident or home state of the person.
(2) The person has applied for a license and has paid the fees required by Section 27-4-2.
(3) If a business entity, and as applicable, the entity has qualified or registered with the office of the Secretary of State to engage in business in this state.
(4) The person’s designated home state awards nonresident independent adjuster licenses to persons of this state on the same basis.
(b) The commissioner may verify the independent adjuster’s licensing status through any appropriate database, including the Producer Database maintained by the NAIC or may request certification of good standing as described in subsection (a) of Section 27-9A-9.
(c) As a condition to the continuation of a nonresident independent adjuster license in this state, the licensee shall maintain a resident independent adjuster license in the adjuster’s home state. A licensee shall notify the commissioner within 30 days if the independent adjuster license terminates for any reason and shall include the new address if the licensee has obtained a resident license in a new resident or home state. Termination of a resident or home state license shall terminate the nonresident independent adjuster license in this state unless the termination is due to the independent adjuster being issued a new resident independent adjuster license in a new resident or home state, provided the new resident or home state awards nonresident independent adjuster licenses to persons of this state on the same basis.
(d) No resident of Canada may be licensed as a non-resident independent adjuster unless the person has obtained a resident or home state independent adjuster license.
(Act 2011-637, §1.)
(a) The apprentice independent adjuster license is a temporary license for an individual residing in this state who is qualified for an independent adjuster license except for taking and passing the examination for independent adjuster.
(b) An individual applying for an apprentice independent adjuster license shall apply to the commissioner on the appropriate NAIC Uniform Individual Application and declare under penalty of suspension, revocation, or refusal of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. Before approving the application, the commissioner shall find that the individual meets all of the following:
(1) Is at least 18 years of age.
(2) Is a resident of this state.
(3) Has a business or mailing address in this state.
(4) Has not committed any act that is a ground for probation, suspension, revocation, or denial of licensure as set forth in Section 27-9A-12.
(5) Has paid the fees for an individual independent adjuster license as set forth in Section 27-4-2.
(c) The apprentice independent adjuster license shall be subject to all of the following terms and conditions:
(1) Accompanying the apprentice adjuster application shall be an attestation from an independent adjuster licensed in this state with the same lines of authority for which the apprentice has applied certifying that the apprentice will be subject to training, direction, and control by the licensed independent adjuster and further certifying that the licensed independent adjuster assumes responsibility for the actions of the apprentice in the apprentice’s capacity as an independent adjuster. A licensed independent adjuster shall not supervise more than five active apprentice adjuster licensees at any given time.
(2) The apprentice independent adjuster is only authorized to adjust claims in this state.
(3) The apprentice licensee is restricted to participation in the adjusting of claims subject to the review and final determination of the claim by the supervising licensed independent adjuster.
(4) Compensation of an apprentice independent adjuster shall be on a salaried or hourly basis only.
(5) At any time during the period of the license the apprentice independent adjuster may take the examination required by Section 27-9A-8. If the apprentice independent adjuster successfully completes the independent adjuster examination, the apprentice independent adjuster license shall automatically terminate and an independent adjuster license shall be issued in place thereof.
(6) The apprentice independent adjuster license is valid for a period not to exceed 12 months and is nonrenewable. An individual may only hold an apprentice independent adjuster license once in his or her lifetime.
(7) An apprentice independent adjuster shall be subject to Sections 27-9A-12, 27-9A-14, 27-9A-15, and Chapter 12 to the same extent as if licensed as an independent adjuster in this state.
(Act 2011-637, p. 1544, §1; Act 2023-104, §1.)
(a) The commissioner may place on probation, suspend, revoke, or refuse to issue or renew an independent adjuster’s license, an apprentice independent adjuster’s license, or the registration of an emergency independent adjuster, or may levy a civil penalty in accordance with subsection (d), or any combination of these actions, for any one or more of the following causes:
(1) Providing incorrect, misleading, incomplete, or materially untrue information in the license application.
(2) Violating any insurance laws, rules, subpoena, or order of the commissioner or of another state’s insurance regulator.
(3) Obtaining or attempting to obtain a license or registration through misrepresentation or fraud.
(4) Improperly withholding, misappropriating, or converting any monies or properties received in the course of acting as an adjuster of any type or in otherwise doing insurance business in this state or elsewhere.
(5) Intentionally misrepresenting the terms of an actual insurance contract.
(6) Having been convicted of a felony.
(7) Having admitted or been found to have committed any insurance unfair trade practice or fraud.
(8) Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility, in the course of acting as an adjuster of any type or otherwise in the conduct of business in this state or elsewhere.
(9) Having an independent adjuster license, company or employee adjuster license, public adjuster license, emergency adjuster license or registration or its equivalent, or insurance producer license or its equivalent suspended, revoked, or refused in any other state, province, district, or territory.
(10) Forging another’s name to any document related to an insurance transaction or in connection with a claim being adjusted by the adjuster.
(11) Cheating, including improperly using notes or any other reference material, to complete an examination for a license.
(12) Failing to comply with an administrative or court order imposing a child support obligation.
(13) Failing to pay state income tax or comply with any administrative or court order directing payment of state income tax which remains unpaid.
(b) In the event the action by the commissioner is to refuse application for licensure or renewal of an existing license, the commissioner shall notify the applicant or licensee in writing, advising of the reason for the refusal. The applicant or licensee may make written demand upon the commissioner within 30 days for a hearing before the commissioner to determine the reasonableness of the refusal. The hearing shall be held pursuant to Chapter 2 of this title.
(c) If the commissioner finds, after a hearing, that an individual licensee’s violation occurred while acting on behalf of or representing the business entity and that the violation was known by one or more of the business entity’s partners in the partnership, corporate officers in a corporation, or managers of the limited liability company and that the violation was neither reported to the commissioner nor was corrective action taken in relation thereto, the licenses of such individual employees or personnel of a business entity may be placed on probation, suspended, or revoked.
(d) In the absence of a greater fine specifically provided elsewhere in this title, and in addition to or in lieu of any applicable probation, suspension, revocation, or refusal, a person may, in the sole discretion of the commissioner after a hearing, additionally be subject to a civil fine in an amount not to exceed ten thousand dollars ($10,000) per violation.
(e) The commissioner shall retain the authority to enforce the provisions of and impose any penalty or remedy authorized by this chapter or elsewhere in this title against any person who is under investigation for or charged with a violation of this chapter or this title even if the person’s license or registration has been surrendered or has expired by operation of law.
(Act 2011-637, §1.)
(a) An individual who holds an independent adjuster license and who is not exempt under subsection (b) shall satisfactorily complete a minimum of 24 hours of continuing education courses as may be approved by the commissioner, of which three hours must be in ethics, reported to the commissioner on a biennial basis in conjunction with the license renewal cycle.
(b) This section shall not apply to:
(1) Licensees not licensed for one full year prior to the end of the applicable continuing education biennium.
(2) Licensees holding nonresident independent adjuster licenses who have met the continuing education requirements of their designated home state and whose home state gives credit to residents of this state on the same basis.
(3) Licensees holding a certification from a person or entity approved by the commissioner that provides adjuster education and training and that requires, as a condition to maintenance of such certification, continuing education coursework substantially equivalent to that of this state.
(c) Only continuing education courses and providers approved by the commissioner shall be used to satisfy the continuing education requirements of this section. Continuing education providers and courses shall be subject to the same requirements and fees set forth in Chapter 8A of this title.
(d) The commissioner shall prescribe the number of hours of continuing education credit for each continuing education course approved. Continuing education courses submitted in accordance with a reciprocal agreement the commissioner enters with other states shall be approved according to the provisions of the reciprocal agreement.
(e) If a continuing education course requires successful completion of a written examination, no continuing education credit shall be given to licensees who do not successfully complete the written examination.
(f) An individual teaching any approved continuing education course shall qualify for the same number of hours of continuing education credit as would be granted to a licensee taking and satisfactorily completing the course.
(Act 2011-637, p. 1544, §1; Act 2017-431, §1.)
An independent adjuster shall maintain a copy of each contract between the independent adjuster and the insurer and comply with the record retention policy as agreed to in that contract. Records retained by an independent adjuster shall be made available for review or inspection if requested by the commissioner or authorized representatives of the commissioner.
(Act 2011-637, §1.)
In the conduct of business in this state, each independent adjuster, apprentice adjuster, and emergency independent adjuster shall:
(1) Be honest and fair in all communications with the insured, the insurer, and the public.
(2) Give policyholders and claimants prompt, knowledgeable service, and courteous, fair, and objective treatment at all times.
(3) Not give legal advice or engage in activities which are the unauthorized practice of law, and not deal directly with any policyholder or claimant who is represented by legal counsel without the consent of the legal counsel involved.
(4) Comply with all local, state, and federal privacy and information security laws, if applicable.
(5) Identify himself or herself as an independent adjuster and, if applicable, identify his or her employer when dealing with any policyholder or claimant.
(6) Not have any financial interest in any adjustment or acquire any interest or title in salvage without first receiving written authority from the principal.
(7) Comply with Chapter 12 of this title and any regulations implementing that chapter.
(Act 2011-637, §1.)
(a) An independent adjuster shall report to the commissioner any administrative action taken against the independent adjuster by a governmental agency in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. This report shall include a copy of the order, consent order, and any other relevant legal documents.
(b) Within 30 days of the initial pretrial hearing date, an independent adjuster shall report to the commissioner any criminal action taken against the independent adjuster in this or any jurisdiction. The report shall include a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant legal documents.
(Act 2011-637, §1.)
(a) In order to make a determination of license eligibility, the commissioner may require fingerprints of applicants and to submit the fingerprints and the fee required to perform the criminal history record checks to the Alabama Department of Public Safety and the Federal Bureau of Investigation for state and national criminal history record checks.
(b) The commissioner may require a criminal history record check on each applicant in accordance with this section. The commissioner shall require each applicant to submit a full set of fingerprints, including a scanned file from a hard copy fingerprint, in order for the commissioner to obtain and receive national criminal history records from the Criminal Justice Information Services Division of the Federal Bureau of Investigation. In the case of business entity applicants, the commissioner shall require the submission of fingerprints of all of the following:
(1) All executive officers and directors of the applicant.
(2) Any individual owning, directly or indirectly, 51 percent or more of the outstanding voting securities of the applicant.
(3) All executive officers and directors of entities owning 51 percent or more of the outstanding voting securities of the applicant.
(c) The commissioner may contract for the collection, transmission, and resubmission of fingerprints required under this section. If the commissioner does so, the fee for collecting, transmitting, and retaining fingerprints shall be payable directly to the contractor by the person. The commissioner may agree to a reasonable fingerprinting fee to be charged by the contractor.
(d) The commissioner may receive criminal history record information from the Federal Bureau of Investigation in lieu of the information being submitted to the Alabama Department of Public Safety.
(e) The commissioner shall treat and maintain an applicant’s fingerprints and any criminal history record information obtained under this section as confidential and shall apply security measures consistent with the Criminal Justice Information Services Division of the Federal Bureau of Investigation standards for the electronic storage of fingerprints and necessary identifying information and limit the use of records solely to the purposes authorized in this section. The fingerprints and any criminal history record information shall not be subject to subpoena, other than one issued in a criminal action or investigation, and shall be confidential.
(f) The commissioner, by regulation, may provide for the delayed enforcement of this section for up to 24 months April 8, 2014, to allow for implementation.
(Act 2011-637, p. 1544, §1; Act 2014-296, p. 1072, §1.)
(a) The commissioner may promulgate reasonable rules as are necessary or proper to carry out the purposes of this chapter in accordance with Chapter 2 of this title.
(b) The commissioner, by regulation, may provide for delayed enforcement dates of up to 24 months following the effective date of this chapter to allow for implementation of the provisions of this chapter relating to apprentice independent adjuster licensing, fingerprinting, the prelicensing course and examination, and continuing education.
(Act 2011-637, §1.)
(a) In this state, no person shall act as agent for, or otherwise represent, directly or indirectly, any insurer not authorized to transact insurance in this state in the solicitation, negotiation, or effectuation of insurance or annuity contracts, forwarding of applications, delivery of policies or contracts, inspection of risks, fixing of rates, investigation or adjustment of losses, collection of premiums, or in any other manner in the transaction of insurance with respect to subjects of insurance located or performed in this state.
(b) This section shall not apply to:
(1) Acceptance of service of process by the commissioner under Section 27-10-52;
(2) Surplus lines insurance or coverage specified in Section 27-10-34;
(3) Adjustment of losses as authorized in Section 27-10-35;
(4) Transactions for which a certificate of authority to do business is not required of an insurer under the laws of this state;
(5) Reinsurance effectuated in accordance with this title; or
(6) The property and operations of the shipbuilding or ship repair industry engaged in interstate or foreign commerce and vessels, cargoes, watercraft, piers, wharves, graven docks, dry docks, marine railways, and building ways, commonly known as wet marine.
(c) No insurance contract entered into in violation of this section shall preclude the insured from enforcing his or her rights under the contract in accordance with the terms and provisions of the contract and the laws of this state to the same degree those rights would have been enforceable had the contract been lawfully procured.
(Acts 1963, No. 521, p. 1112, §4; Acts 1971, No. 407, p. 707, §191; Act 2024-71, §1.)
(a) Any person who willfully represents or aids an unauthorized insurer in violation of Section 27-10-1, in addition to any other applicable penalty, shall be liable for the full amount of any loss sustained by the insured under any such contract and for any premium taxes which may be payable under Section 27-10-35 by reason of the contract.
(b) Any independent adjuster who, directly or indirectly, investigates any loss arising under an insurance or annuity contract issued by an unauthorized insurer and covering a subject of insurance located or performed in this state shall be liable for the full amount of any loss suffered by the insured under the contract. The commissioner, after a hearing, may revoke the license of the independent adjuster. This subsection does not apply as to surplus lines contracts lawfully written under this chapter or exempted under Section 27-10-34, to insurance contracts procured by the insured on his or her own behalf and on which the tax is paid as required by Section 27-10-35, or to transactions as to which the insurer is not required to have a certificate of authority.
(Acts 1963, No. 521, p. 1112, §5; Acts 1971, No. 407, p. 707, §192; Act 2024-71, §1.)
(a) No unauthorized insurer shall institute or file, or cause to be instituted or filed, any action or proceeding in this state to enforce any right, claim, or demand arising out of any insurance transaction in this state until such insurer has obtained a certificate of authority to transact such insurance in this state.
(b) This section does not apply as to:
(1) Transactions for which a certificate of authority is not required;
(2) Surplus line coverages written under this chapter; or
(3) Coverages exempted from the surplus line law under Section 27-10-34.
(Acts 1963, No. 521, p. 1112, §6; Acts 1971, No. 407, p. 707, §193.)
If certain insurance coverages cannot be procured on terms acceptable to the insureds from authorized insurers, the coverages, designated “surplus lines,” may be procured from unauthorized insurers subject to the terms and conditions of either subdivisions (1) or (2):
(1)a. The insurance must be procured through a licensed surplus line broker;
b. 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 transacting that kind and class of insurance in this state or has been procured to the full extent such insurers are willing to insure;
c. A surplus line transaction conducted in accordance with 15 U.S.C. § 8205 may be exempt from the diligent effort requirement;
d. The insurance must not be procured for the purpose of securing advantages as to a lower premium rate than would be accepted by an authorized insurer; and
e. This section, and this surplus line law, does not apply as to life insurance or disability insurance.
(2) The insurance contracts are issued to an industrial insured, defined as an insured:
a. Which procures the insurance of any risk by use of services of a full-time employee acting as an insurance manager or buyer or the services of a regularly and continuously retained, qualified insurance consultant;
b. Whose aggregate annual premiums for insurance on all risks other than workers’ compensation and group insurance total at least twenty-five thousand dollars ($25,000); and
c. Which has at least 25 employees.
(Acts 1963, No. 521, p. 1112, §7; Acts 1971, No. 407, p. 707, §195; Act 2024-71, §2.)
If surplus line insurance was transacted in the preceding calendar quarter, the surplus line broker shall file a quarterly report as prescribed by the commissioner setting forth facts from which it can be determined whether the coverage has been lawfully placed as a surplus line. If required by the commissioner, the report shall be accompanied by a written statement signed by the insured acknowledging the coverage was placed with an unauthorized insurer with the insured’s knowledge and consent.
(Acts 1963, No. 521, p. 1112, §8; Acts 1971, No. 407, p. 707, §196; Act 2024-71, §2.)
Every insurance contract procured and delivered as a surplus line coverage pursuant to this article shall bear the name and license number of the surplus line broker who procured it and shall have stamped upon it the following:
“This contract is registered and delivered as a surplus line coverage under the Alabama Surplus Line Insurance Law.”
(Acts 1963, No. 521, p. 1112, §9; Acts 1971, No. 407, p. 707, §197; Act 2024-71, §2.)
Insurance contracts procured as surplus line coverages from unauthorized insurers in accordance with this article shall be valid and enforceable as to all parties and shall be recognized in all matters to the same effect and extent as like contracts issued by authorized insurers.
(Acts 1963, No. 521, p. 1112, §10; Acts 1971, No. 407, p. 707, §198; Act 2024-71, §2.)
(a) Any person licensed as a resident insurance producer in this state for the property and casualty lines of authority and deemed by the commissioner sufficiently experienced in the insurance business may be licensed as a surplus line broker for the same types of insurance that he or she is currently licensed to handle as follows:
(1) An application shall be submitted on a form as required by the commissioner.
(2) The license fee required by Section 27-4-2 shall be paid to the commissioner. The license shall expire on December 31 next after its issue.
(3) Prior to the issuance of the license, the applicant shall file with the commissioner a bond in favor of the State of Alabama in the penal sum of at least fifty thousand dollars ($50,000), aggregate liability, with authorized corporate sureties approved by the commissioner to remain in force for the duration of the license or any renewal. The amount of the bond may be increased if deemed necessary by the commissioner, considering the amount of surplus line taxes paid in previous years. The bond shall be conditioned that the broker will conduct business under the license in accordance with the provisions of the surplus line insurance law and will promptly remit the taxes as provided by the law. No bond shall be terminated unless at least 30 days’ prior written notice is given to the broker and the commissioner.
(b) A business entity acting as a surplus line broker shall designate each licensed individual producer acting under the license, each of whom shall be responsible for the business entity’s compliance with the insurance laws, rules, and regulations of this state. A separate fee shall be paid for each individual producer acting under a business entity license as surplus line broker, as in Section 27-4-2.
(c) A nonresident person may be licensed as a surplus line broker for the same types of insurance that he or she is currently licensed in good standing to handle in his or her domiciled state, as follows:
(1) An application shall be submitted on a form as required by the commissioner.
(2) The license fee required by Section 27-4-2 shall be paid to the commissioner. The license shall expire on December 31 next after its issue.
(3) Each licensed nonresident surplus line broker shall be considered to have performed acts equivalent to and constituting an appointment of the commissioner to receive service of legal process issued against the nonresident in this state upon causes of action arising within this state out of transactions under the nonresident’s surplus line broker license. Service upon the commissioner shall constitute effective legal service upon the nonresident.
(4) The appointment shall be irrevocable for as long as there may be any such cause of action in this state against the nonresident.
(5) Service of process under this section shall be made by leaving three copies of the summons and complaint, or other process, with the commissioner, along with payment of the fee prescribed in Section 27-4-2, and the service shall be sufficient service upon the nonresident if notice of the service and a copy of the summons and complaint or other process are sent by registered or certified mail to the defendant by the commissioner. The defendant’s return and the certificate of the commissioner certifying compliance herewith shall be filed in the office of the clerk of court, or in the court or tribunal wherein the action is pending. The certificate of the commissioner shall show the date of the mailing by registered or certified mail of the notice of the service and copy of the summons and complaint, or other process, to the nonresident defendant and the date of the receipt of the return card and shall be signed by the commissioner. The commissioner may give the nonresident defendant notice of the service upon him or her, in lieu of the notice of service provided for in this subdivision by registered or certified mail, in the following manner:
a. By having a notice of service and a copy of the summons and complaint, or other process, served upon the nonresident defendant, if found within the State of Alabama, by any officer duly qualified to serve legal process within the State of Alabama or, if the nonresident defendant is found to be outside of the State of Alabama, by a sheriff, deputy sheriff, or United States marshal or deputy United States marshal, or any duly constituted officer qualified to serve like process in the state or the jurisdiction where the nonresident defendant is found.
b. The officer’s return showing service, when made, shall be filed in the office of the clerk of the court, or in the court or tribunal wherein the action is pending, on or before the return day of the process or as the court or tribunal may allow, and the court or tribunal in which the action is pending may order a continuance, or continuances, as may be necessary to afford the nonresident defendant reasonable opportunity to defend the action.
(6) The commissioner shall keep on file for a period of not less than three years a copy of the summons and complaint or other process served upon the commissioner, together with a record of all such process and of the day, hour, and manner of service.
(Acts 1963, No. 521, p. 1112, §11; Acts 1971, No. 407, p. 707, §199; Acts 1994, 1st Ex. Sess., No. 94-790, p. 92, §2; Act 2001-702, p. 1509, §15; Act 2024-71, §2; Act 2025-271, §1.)
(a) A licensed surplus line broker may accept and place surplus line business for any insurance producer licensed in this state for the kind and class of insurance involved and may compensate the producer therefor. No producer shall knowingly misrepresent to the broker any material fact involved in any insurance or in the eligibility thereof for placement with an unauthorized insurer.
(b) Notwithstanding Section 27-12-17(b), a reasonable fee for each policy may be charged by the filing surplus lines broker for each policy placed in lawful compliance with Section 27-10-20. This per-policy fee shall be itemized separately to the customer before purchase, enumerated in the policy or a notice delivered with the policy, and is subject to the surplus line broker tax required under Section 27-10-31.
(Acts 1963, No. 521, p. 1112, §12; Acts 1971, No. 407, p. 707, §200; Act 2001-702, p. 1509, §15; Act 2024-71, §2.)
(a) A surplus line broker shall not knowingly place surplus line insurance with an insurer that is unsound financially or that is ineligible under this section. The broker shall ascertain the financial condition of the unauthorized insurer before placing insurance therewith.
(b) The broker may only place insurance with an insurer meeting one of the following:
(1) An insurer authorized in at least one state of the United States for the kind of insurance involved, and with capital or surplus, or both, amounting to at least five million dollars ($5,000,000); or guaranteed trust fund amounting to at least five million dollars ($5,000,000).
(2) An alien insurer authorized to transact insurance in at least one state of the United States or an unauthorized insurer listed on the Quarterly Listing of Alien Insurers maintained by the International Insurers Department of the National Association of Insurance Commissioners and the insurer shall have established an effective trust fund of at least two million five hundred thousand dollars ($2,500,000) within the United States administered by a recognized financial institution and held for the benefit of all its policyholders or policyholders and creditors in the United States, and with capital or surplus, or both, amounting to at least fifteen million dollars ($15,000,000).
(3) A foreign or alien insurer that has transacted insurance as an authorized insurer in its domicile state or country for not less than five years, unless it is a wholly owned subsidiary of an insurer authorized to transact insurance in this state or unless it makes a deposit in this state as may be permitted under subsection (c).
(4) An insurer controlled, in whole or substantial part, by any government or governmental agency.
(5) Any insurer made ineligible as a surplus line insurer by order of the commissioner received by or known to the broker. The commissioner may issue an order of ineligibility if he or she finds that the insurer:
a. Does not meet the financial requirements of this section;
b. Has without just cause refused to pay valid claims arising under its contracts in this state or has otherwise conducted its affairs in a manner as to result in injury or loss to the insuring public of this state; or
c. Has conducted its affairs in a manner as to result in the avoidance of payment of tax as required by Sections 27-10-31 and 27-10-35.
(c) When it appears after a search of surplus lines insurers that any particular insurance risk that is eligible to be placed in accordance with the surplus line law but on which insurance coverage, in whole or in part, is not procurable from foreign or alien insurers meeting all of the requirements of subsection (b) but is procurable from a foreign or alien insurer meeting all of the requirements of subsection (b) except for subdivision (3), then the surplus line broker may file a supplemental signed statement setting forth the facts and advising the department that the part of the risk as shall be unprocurable, as aforesaid, is being placed with named unauthorized insurers that meet all of the requirements of subsection (b) except for subdivision (3), in the amounts and percentages set forth in the statement. These named unauthorized insurers, before accepting any risk in this state, shall deposit with the department cash or securities acceptable to the commissioner and with a market value of not less than one million dollars ($1,000,000), which deposit shall be held by the department for the benefit of Alabama policyholders only. The deposit shall be held in the same manner as other deposits as described in Section 27-3-11. The commissioner may adopt reasonable rules for the implementation and administration of this section.
(Acts 1963, No. 521, p. 1112, §13; Acts 1971, No. 407, p. 707, §201; Acts 1975, No. 219, p. 746, §1; Acts 1994, 1st Ex. Sess., No. 94-790, p. 92, §2; Act 2010-217, p. 359, §1; Act 2024-71, §2.)
(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 for 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 coverage 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 provided in this section, 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 (c) of this section shall, upon conviction, be subject to the penalties provided by Section 27-1-12 or to any greater applicable penalty otherwise provided by law.
(Acts 1963, No. 521, p. 1112, §14; Acts 1971, No. 407, p. 707, §202.)
(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 direct risk under this surplus line insurance law shall be deemed thereby to have subjected itself to the terms of this section.
(Acts 1963, No. 521, p. 1112, §15; Acts 1971, No. 407, p. 707, §203.)
(a) Each surplus line broker shall keep in his office in this state a full and true record of each surplus line contract procured by him, including a copy of the policy, certificate, cover note or other confirmation of insurance and of the daily report, if any, and showing such of the following items as may be applicable:
(1) Amount of the insurance and risks insured against;
(2) Gross premium charged;
(3) Return premium paid, if any;
(4) Rate of premium charged upon the several items of property;
(5) Effective date of the contract and the terms thereof;
(6) Name and address of the insurer;
(7) Name and address of the insured;
(8) Brief general description of property insured and where located;
(9) Amount of tax and other sums collected from the insured; and
(10) Other information as may be required by the commissioner.
(b) The record shall at all times be open to examination by the commissioner and shall be kept available and open to the commissioner for five years next following the issuance of the contract.
(Acts 1971, No. 407, p. 707, §204.)
(a) Each surplus line broker, on or before the first day of March of each year, shall file with the commissioner a verified statement of all surplus line insurance transacted by him or her during the preceding calendar year. If no surplus line insurance was transacted in the preceding calendar year, no statement is required.
(b) The statement shall be on forms as prescribed and furnished by the commissioner and shall show:
(1) Gross amount of each kind of insurance transacted;
(2) Aggregate gross premiums charged, exclusive of sums collected to cover state or federal taxes;
(3) Aggregate of returned premiums and taxes paid to insureds;
(4) Aggregate of net premiums; and
(5) Additional information as required by the commissioner.
(Acts 1963, No. 521, p. 1112, §17; Acts 1971, No. 407, p. 707, §205; Act 2024-71, §2.)
(a) On or before the first day of March each year, the surplus line broker shall remit to the State Treasurer through the commissioner, as a tax imposed for the privilege of transacting business as a surplus line broker in this state, a tax of six percent on the direct premiums, less return premiums and exclusive of sums collected to cover state or federal taxes, on surplus line insurance issued to insureds whose home state is this state as the term “home state” is defined in 15 U.S.C. § 8206, subject to tax transacted by the broker during the preceding calendar year as shown by the annual statement filed with the commissioner.
(b) The tax under this section shall be subject to deduction of the full amount of all expenses of examination of the surplus line broker by the commissioner in the same manner as that allowed for domestic insurers for examination expenses under Section 27-4A-3(c)(5). All taxes collected under this section shall be deposited in the State Treasury to the credit of the State General Fund.
(Acts 1963, No. 521, p. 1112, §18; Acts 1971, No. 407, p. 707, §206; Acts 1980, No. 80-774, p. 1608, §2; Acts 1993, No. 93-679, p. 1291, §7; Act 2011-537, p. 949, §§4, 5; Act 2024-71, §2.)
(a) The commissioner may revoke or suspend any surplus line broker’s license for any one or more of the following:
(1) If the broker fails to file an annual statement or to remit the tax as required by law.
(2) If the broker fails to keep the records or to allow the commissioner to examine the broker’s records as required by law.
(3) For any of the causes for which a producer’s license may be revoked.
(b) The commissioner may suspend or revoke the broker’s license if the commissioner finds that the broker has, willfully or without exercise of due care, placed any insurance coverage with an unauthorized insurer in violation of any of the requirements or conditions of Section 27-10-20.
(c) The procedures and rights provided by Section 27-7-19 as for the suspension or revocation of producers’ licenses shall be applicable to suspension or revocation of a surplus line broker’s license.
(d) No broker whose license has been so revoked shall again be so licensed within one year thereafter nor until any fines or delinquent taxes owing by the broker have been paid.
(Acts 1963, No. 521, p. 1112, §19; Acts 1971, No. 407, p. 707, §207; Act 2001-702, p. 1509, §15.)
(a) Any unauthorized insurer issuing a policy or assuming a direct insurance risk under this surplus line law shall be deemed thereby to have appointed the commissioner as its attorney upon whom may be served all lawful process in any action or proceeding against it in this state arising out of such insurance.
(b) Service of process upon the commissioner as process agent of the insurer shall be made by the proper officer of Montgomery County by serving copies in triplicate of the process upon the commissioner or upon his assistant, deputy, or other person in charge of his office. Upon receiving such service, the commissioner shall promptly forward a copy thereof by certified mail or registered mail to the person last designated to receive the same, as provided in subsection (c) of this section, return one copy with his admission of service, and retain one copy in the files of the department.
(c) Each such policy, or the certificate of insurance issued by the broker, shall contain a provision stating the substance of this section and designating the person to whom the commissioner shall mail process as provided for in subsection (b) of this section. The broker shall, likewise, file the name of such person with the commissioner. As to the same unauthorized insurer and all insurance coverages issued or accepted by it under this surplus line law, no more than one person shall at any one time be the designee to whom copies of process against the insurer, served upon the commissioner, shall be forwarded.
(d) Where process is served upon the commissioner as an insurer’s process agent, the insurer shall not be required to answer or plead except within 30 days after the date upon which the commissioner mailed a copy of the process served upon him as required by subsection (b) of this section.
(e) Process served upon the commissioner, and copy thereof forwarded as in this section provided, shall for all purposes constitute valid and binding service thereof upon the insurer.
(Acts 1963, No. 521, p. 1112, §20; Acts 1971, No. 407, p. 707, §208.)
The provisions of this surplus line insurance law controlling the placing of insurance with unauthorized insurers shall not apply to reinsurance or to the following insurances when so placed by licensed agents or 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 property or operation of railroads engaged in interstate commerce;
(4) Insurance of aircraft owned or operated by manufacturers of aircraft or aircraft operated in scheduled interstate flight, or cargo of such aircraft or against liability, other than workmen’s compensation and the employer’s liability, arising out of the ownership, maintenance, or use of such aircraft; and
(5) The property and operations of the shipbuilding and ship repair industry engaged in interstate or foreign commerce and vessels, cargoes, watercraft, piers, wharves, graving docks, dry docks, marine railways and building ways, commonly known as wet marine.
(Acts 1963, No. 521, p. 1112, §21; Acts 1971, No. 407, p. 707, §209.)
(a) Anyone who may desire to place his insurance in a foreign insurer not authorized to do business in this state may place such insurance, and any insured who in this state procures, or causes to be procured, or continues or renews insurance in an unauthorized foreign insurer or any self-insurer who in this state so procures or continues excess loss, catastrophe, or other insurance, upon a subject of insurance resident, located or to be performed within this state, other than insurance procured through a surplus line broker pursuant to the surplus lines law of this state or exempted from such law under Section 27-10-34 shall, within 90 days after the date such insurance was so procured, continued, or renewed, file a written report of the same with the commissioner on forms designated by the commissioner and furnished to such an insured upon request. The report shall show the name and address of the insured or insureds, name and address of the insurer, the subject of the insurance, a general description of the coverage, the amount of premium currently charged therefor, and such additional pertinent information as is reasonably requested by the commissioner. If any such insurance covers also subjects of insurance resident, located or to be performed outside this state, a proper pro rata portion of the entire premium payable for all such insurance shall be allocated as to the subjects of insurance resident, located or to be performed in this state for the purposes of this section.
(b) Any insurance in an unauthorized insurer procured through negotiations or an application, in whole or in part, occurring or made within or from within this state or for which premiums, in whole or in part, are remitted, directly or indirectly, from within this state shall be deemed to be insurance procured, or continued or renewed in this state within the intent of subsection (a) of this section.
(c) For the general support of the government of this state, there is levied upon the obligation, chose in action or right represented by the premium charged or payable for such insurance a tax at the rate of four percent of the gross amount of such premium. The insured shall withhold the amount of the tax from the amount of premium charged by and otherwise payable to the insurer for such insurance; and, within 30 days after the insurance was so procured, continued, or renewed and coincidentally with the filing with the commissioner of the report provided for in subsection (a) of this section, the insured shall pay the amount of the tax to the State Treasurer through the commissioner.
(d) If the insured fails to withhold from the premium the amount of tax levied by this section, the insured shall be liable for the amount thereof and shall pay the same to the commissioner within the time stated in subsection (c) of this section.
(e) The tax imposed under this section, if delinquent, shall bear interest at the rate of six percent per annum, compounded annually.
(f) Payment of such tax shall be enforced by the commissioner by civil action against any person failing to pay the tax provided for in this section.
(g) A licensed adjuster may lawfully investigate and adjust any loss occurring or claim made under any such contract of insurance as to which the tax has been paid as provided in this section.
(h) This section does not apply as to life or disability insurances.
(Acts 1963, No. 521, p. 1112, §22; Acts 1971, No. 407, p. 707, §210.)
Every person as to whom insurance is placed with an unauthorized insurer, upon the commissioner’s order, shall produce for his examination all policies and other documents evidencing the insurance and shall disclose to the commissioner the amount of gross premiums paid, or agreed to be paid, for the insurance. For each willful refusal to obey such order, such person shall be liable to a fine of not more than $500.00.
(Acts 1963, No. 521, p. 1112, §23; Acts 1971, No. 407, p. 707, §211.)
(a) Any person who in this state represents or aids a nonadmitted insurer in willful violation of the provisions of this surplus lines insurance law shall, upon conviction thereof, be guilty of a misdemeanor and be subject to a fine not in excess of $1,000.00 or imprisonment for not more than one year, or by both such fine and imprisonment, in the discretion of the court.
(b) In addition to the penalties provided for in subsection (a) of this section, such violator shall be liable, personally, jointly and severally, with any other person, or persons, liable therefor for payment of taxes payable on account of such insurance.
(c) In addition to any other penalty provided for in this section or otherwise provided by law, including suspension, revocation, or refusal to renew license, any person, firm, association, or corporation willfully violating any provision of this article shall be liable to a penalty not exceeding $1,000.00 for the first offense and not exceeding $2,000.00 for each succeeding offense.
(Acts 1963, No. 521, p. 1112, §25; Acts 1971, No. 407, p. 707, §212.)
This article constitutes, and may be referred to as, “the surplus line insurance law.”
(Acts 1971, No. 407, p. 707, §194.)
The purpose of this article is to subject certain insurers to the jurisdiction of courts of this state in actions by, or on behalf of, insureds or beneficiaries under insurance contracts. The Legislature declares that it is a subject of concern that many residents of this state hold policies of insurance issued or delivered in this state by insurers while not authorized to do business in this state, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies. In furtherance of such state interest, the Legislature provides in this article a method of substituted service of process upon such insurers and declares that in so doing it exercises its power to protect its residents and to define, for the purpose of this article, what constitutes doing business in this state and also exercises powers and privileges available to the state by virtue of the federal Insurance Regulation Act, which declares that the business of insurance and every person engaged therein shall be subject to the laws of the several states.
(Acts 1951, No. 768, p. 1335, §1; Acts 1971, No. 407, p. 707, §214.)
Any of the following acts in this state, effected by mail or otherwise, by an unauthorized foreign or alien insurer:
is equivalent to, and shall constitute, an appointment by such insurer of the commissioner and his successor or successors in office to be its true and lawful attorney, upon whom may be served all lawful process in any action or proceeding instituted by, or on behalf of, an insured or beneficiary arising out of any such contract of insurance; and any such act shall be signification of the insurer’s agreement that such service of process is of the same legal force and validity as personal service of process in this state upon such insurer.
(Acts 1951, No. 768, p. 1335, §2; Acts 1971, No. 407, p. 707, §215.)
(a) Service of process upon an insurer pursuant to Section 27-10-51 shall be made by delivering to, and leaving with, the commissioner, or some person in apparent charge of his office, two copies thereof and the payment to him of such fees as may be prescribed by law. The commissioner shall forthwith mail by registered mail one of the copies of the process to the defendant at its last known principal place of business and shall keep a record of all process so served upon him. Such service of process is sufficient, provided notice of the service and a copy of the process are sent promptly after such service by the commissioner by registered mail 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, 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 certificate of the commissioner showing a compliance herewith are filed with the clerk or register 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 or proceeding shall in addition to the manner provided in subsection (a) of this section, be valid if served in the manner provided by law upon any person within this state, who, in this state on behalf of such insurer, is:
(1) Soliciting insurance;
(2) Making, issuing, or delivering any contract of insurance; or
(3) Collecting or receiving any premium, membership fee, assessment, or other consideration for insurance; and a copy of such process is sent within 10 days thereafter by registered mail by the clerk or register of the court in which the action or proceeding is pending 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, showing the name of the sender of the letter and the name and address of the person to whom the letter is addressed, are filed with the clerk or register of the court in which the 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 date of the completion of service as provided in this section.
(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.
(Acts 1951, No. 768, p. 1335, §2; Acts 1971, No. 407, p. 707, §216.)
(a) Before an unauthorized insurer shall file, or cause to be filed, any pleading in any action or proceeding instituted against it under Sections 27-10-51 and 27-10-52, 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 entered 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 an action 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 27-10-52, 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) of this section, and to defend such action.
(c) Nothing in subsection (a) of this section 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 27-10-52 on the ground either:
(1) That such unauthorized insurer has not done any of the acts enumerated in Section 27-10-51; or
(2) That the person on whom service was made pursuant to subsection (b) of Section 27-10-52 was not doing any of the acts therein enumerated.
(Acts 1951, No. 768, p. 1335, §3; Acts 1971, No. 407, p. 707, §217.)
Nothing in the Unauthorized Insurers Process Act shall be construed to authorize or permit the transaction of any insurance business in this state by any unauthorized insurer nor relieve any such insurer from any penalty provided by law in the transaction of business in this state.
(Acts 1951, No. 768, p. 1335, §5; Acts 1971, No. 407, p. 707, §218.)
This Unauthorized Insurers Process Act shall not apply as to surplus line insurance lawfully effectuated under this title nor to any action or proceeding against an unauthorized insurer arising out of:
(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, or with respect to, 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 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 contract or where the insurer enters a general appearance in any such action or proceeding.
(Acts 1951, No. 768, p. 1335, §6; Acts 1971, No. 407, p. 707, §219.)
(a) This article constitutes and may be cited as the Unauthorized Insurers Process Act.
(b) This article shall be so interpreted as to effectuate its general purpose to make uniform the law of those states which enact it.
(Acts 1951, No. 768, p. 1335, §7; Acts 1971, No. 407, p. 707, §213.)
The Legislature declares its concern that insurers not licensed to transact the business of insurance in this state are soliciting the sale of insurance and selling insurance to residents of this state, thus presenting the commissioner with the problem of resorting to courts of foreign jurisdictions for the purposes of enforcing the insurance laws of this state for the protection of its residents. It is the purpose of this unauthorized insurers law to make it unlawful for insurers that are not licensed to transact the business of insurance in this state and to subject said insurers to the jurisdiction of the courts of this state in actions or proceedings brought by the commissioner in transactions involving unauthorized insurers or for the protection of insureds and claimants residing in this state and for the protection of the public. This chapter constitutes and may be referred to as the “Unauthorized Insurers Law.”
(Acts 1971, No. 407, p. 707, §220.)
It shall be unlawful for any insurer to transact the business of insurance in this state or to enter into a contract for insurance in this state without first obtaining a license or certificate of authority from the commissioner. This unauthorized insurers law shall not apply to:
(1) Contracts of insurance procured pursuant to the surplus line insurance law;
(2) Transactions in this state involving contracts of insurance lawfully entered into, written and the policy delivered outside of this state covering subjects of insurance not resident, located or expressly to be performed in this state at the time of issuance and transactions subsequent to the making of such contract and the issuance of such policy;
(3) Reinsurance contracts;
(4) Transactions in this state involving group or blanket insurance and group annuities where the master policy or contract was lawfully issued and delivered in a state in which the insurer was authorized to transact business;
(5) Transportation insurance;
(6) Insurance on property or operation of railroads engaged in interstate commerce;
(7) Insurance of aircraft owned or operated by manufacturers of aircraft or aircraft operated in scheduled interstate flight or cargo of such aircraft or against liability, other than workmen’s compensation and the employer’s liability, arising out of the ownership, maintenance, or use of such aircraft;
(8) The property and operations of shipbuilding and ship repair industry engaged in interstate or foreign commerce and vessels, cargoes, watercraft, piers, wharves, graving docks, dry docks, marine railways and building ways, commonly known as wet marine;
(9) Transactions in this state involving a policy or contract of insurance issued prior to 60 days after the effective date of this title; or
(10) Contracts of insurance issued to an industrial insured, defined as an insured:
a. Which procures the insurance of any risk by use or services of a full-time employee acting as an insurance manager or buyer or the services of a regularly and continuously retained, qualified insurance consultant;
b. Whose aggregate annual premiums for insurance on all risks other than workmen’s compensation and group insurance, total at least $25,000.00; and
c. Which has at least 25 employees.
(Acts 1971, No. 407, p. 707, §221.)
Any of the following occurrences or acts in this state, whether effected by mail or otherwise, by an insurer not licensed to do business in this state shall be included among those occurrences and acts deemed to constitute the transacting of the business of insurance in this state:
(1) The issuance or delivery of contracts or policies of insurance covering subjects resident, located, or expressly to be performed in this state;
(2) The solicitation of applications for such insurance;
(3) The collection of premiums, membership fees, assessments, or other considerations for such insurance; or
(4) The transacting of matters subsequent to the execution of such contracts and arising out of them or concerning them.
(Acts 1971, No. 407, p. 707, §222.)
Whenever the commissioner believes, from evidence satisfactory to him, that any insurer is violating or not complying with the provisions of this unauthorized insurers law, the commissioner may, and is hereby empowered to, bring an action or proceeding against such insurer in the Circuit Court of Montgomery County, Alabama, to enjoin or restrain such violation or continuing noncompliance or the engaging therein or doing of any act in furtherance of such violation. The Circuit Court of Montgomery County, Alabama, shall have jurisdiction of the proceedings and shall have the power and authority to make and enter such order or judgment as to such court shall be deemed proper.
(Acts 1971, No. 407, p. 707, §223.)
(a) Any insurer not qualified under the laws of this state to transact the business of insurance as evidenced by a license or certificate of authority from the Commissioner of Insurance which shall transact, or attempt to transact, the business of insurance in this state or which shall do, or attempt to do, any of the acts and occurrences set out in Section 27-11-3 shall, by the doing of such business or the performing or attempting to perform any of such acts, be deemed to have appointed the Secretary of State, or his successor or successors in office, to be the true and lawful attorney or agent of such insurer whom process may be served in any action accrued or accruing from the transacting of such business or the performing of such act by any such insurer, or by its agent, servant, or employee. Service of such process shall be made by serving three copies of the process on the said Secretary of State, and such service shall be sufficient service upon the said insurer, provided, that notice of such service and a copy of the process are forthwith sent by registered or certified mail by the Secretary of State to the defendant at its last known address, which shall be stated in the affidavit of the plaintiff or complainant, marked “deliver to addressee only” and “return receipt requested,” and provided, further, that such return receipt shall be received by the Secretary of State purporting to have been signed by said insurer, or the Secretary of State shall be advised by the postal authority that delivery of said registered or certified mail was refused by said insurer; and the date on which the Secretary of State receives said return receipt, or advice by the postal authority that delivery of said registered or certified mail was refused shall be treated and considered as the date of service of process on said insurer. The Secretary of State shall make an affidavit as to the service of said process on him, and as to his mailing a copy of the same and notice of such service to the insurer and as to the receipt of said return receipt, or advice of the refusal of said registered or certified mail, and the respective dates thereof, and shall attach said affidavit, return receipt or advice from the postal authority to a copy of the process and shall return the same to the clerk or register who issued the same, and all of the same shall be filed in the action by the clerk or register. The commissioner, or his agent or attorney, desiring to obtain service upon an insurer under the provisions of this unauthorized insurers law shall make and file in the action an affidavit stating facts showing that this section is applicable and stating the last known address of the insurer, and the clerk or register of the court in which the action is filed shall attach a copy of the affidavit to the writ or process and a copy of the affidavit to each copy of the writ or process and forward the original writ or process and three copies thereof to the Sheriff of Montgomery County, Alabama, for service on the Secretary of State; and it shall be the duty of the sheriff to serve the same on the Secretary of State and to make due return of such service. The court in which the action is pending may order such continuance of the action as may be necessary to afford the defendant, or defendants, reasonable opportunity to make defense. Any insurer who was licensed to transact the business of insurance in this state at the time of the doing of business or the performing of the act complained of, but which is not so licensed or authorized at the time of the pendency of an action involving the transacting of the business of insurance or the act or occurrence complained of, shall be deemed to be an unauthorized insurer within the meaning of this chapter, and service of process under such circumstances may be had as provided in this section.
(b) Service of summons when obtained upon any such insurer as provided in subsection (a) of this section for the service of process shall be deemed sufficient service of summons and process to give to the Circuit Court of Montgomery County, Alabama, jurisdiction over the cause of action and over such insurer and shall warrant and authorize personal judgment against such defendant, or defendants, in the event that the plaintiff prevails in the action. There shall be paid to the Secretary of State for services under this section fees as may be provided for service of process on nonresidents doing business or performing work or service in this state.
(Acts 1971, No. 407, p. 707, §224.)
The failure of an insurer to obtain a license or certificate of authority shall not impair the validity of any act or contract of such insurer and shall not prevent such insurer, its assigns or successors in interest, from defending any action in any court of this state; but no insurer transacting insurance business in this state without a license or certificate of authority shall be permitted to maintain an action in any court of this state to enforce any right, claim, or demand arising out of the transaction of such business until such company, its assigns or successors in interest shall have:
(1) Obtained a license or certificate of authority; or
(2) Deposited 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 entered in such action; provided, that the court may, in its discretion and after reasonable notice to the opposing parties and upon a hearing, make an order dispensing with such deposit or bond where the insurer makes a showing satisfactory to such 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.
No action shall be maintained, except upon the conditions provided in this section, in any court of this state by any successor or assignee or assumptor of such unauthorized insurer which has acquired all or substantially all of the assets of such unauthorized insurer.
(Acts 1971, No. 407, p. 707, §225.)
Any insurer which willfully violates the provisions of the unauthorized insurers law shall, upon proof thereof, forfeit and pay to the State of Alabama a sum of not less than $50.00 and not more than $500.00 for each offense, which may be recovered in a civil action brought by the commissioner under the provision of this unauthorized insurers law.
(Acts 1971, No. 407, p. 707, §226.)
(a) The purpose of this chapter is to regulate trade practices in the business of insurance in accordance with the intent of congress as expressed in the Insurance Regulation Act by defining, or providing for the determination of, all such 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.
(b) This chapter shall constitute, and may be referred to, as the “Trade Practices Law.”
(Acts 1957, No. 608, p. 865, §1; Acts 1971, No. 407, p. 707, §227.)
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.
(Acts 1957, No. 608, p. 865, §3; Acts 1971, No. 407, p. 707, §228.)
No person shall make or issue, or cause to be made or issued, any written or oral statement misrepresenting or making misleading 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.
(Acts 1971, No. 407, p. 707, §232.)
(a) 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.
(b) 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.
(c) Any insurer willfully making a false annual or other statement required of it under this title and individuals knowingly making oath to and subscribing the same shall be punished by a fine of not less than $500.00 nor exceeding $5,000.00.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §233.)
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 monopoly in, the business of insurance.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §234.)
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 calculated to injure any person engaged, or proposing to engage, in the business of insurance.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §235.)
(a) No person shall issue or deliver, or permit its agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities, or any special or advisory board contract or other contract of any kind promising returns and profits as an inducement to insurance. The commissioner shall refuse to issue a certificate of authority or license to any insurer or other person that is in violation of this section and shall revoke the certificate of authority or license of any such violating insurer or person if such authority or license is already outstanding.
(b) No person shall issue or deliver, or permit its agents, officers, or employees to issue or deliver, in this state, any life insurance policy or contract of annuity in which are used such words as “investment plan,” “expansion plan,” “profit-sharing,” “charter plan,” “founders’ plan,” “surplus-sharing,” or similar language in such context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospective purchaser of life insurance to believe that he will receive or that it is probable he will receive something other than an insurance policy, or contract, or some benefit not provided in the policy or contract or some benefit not available to other persons of the same class and equal expectation of life.
(c) No insurer shall issue or deliver, or permit its agents, officers, or employees to issue or deliver, in this state a policy of life insurance containing benefits in the form of “coupons” or “guaranteed annual endowment” benefits unless the premium charged for the insurance coverage and the premium charged for the “coupons” or “guaranteed annual endowment” benefits are prominently specified in the policy separately from each other in dollar amounts. This shall not apply to any policy in which the amount of any pure endowment or periodic benefit, or benefits, payable during any policy year is greater than the total annual premium for such year.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §236.)
(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 amount of premium, policy fees or rates charged for any policy or contract of disability insurance, or in the benefits payable thereunder, or in any of the terms or conditions of such contract or in any other manner whatever.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §237.)
(a) No person shall knowingly permit or offer to make, or make, any contract of life insurance, annuity or disability 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, as an 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 of any insurance company or other corporation, association, or partnership or any dividends or profits accrued, or to accrue thereon, or offer, promise, or give anything of value whatsoever not specified in the contract.
(b) The commissioner may, after hearing, revoke the certificate of authority of any insurer and the licenses of any agent or other licensed representative that has willfully violated this section.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §238.)
Nothing in Sections 27-12-11 and 27-12-12 shall be construed as including within the definition of discrimination, rebates, or special inducements any of the following practices:
(1) In the case of any contract of life insurance or 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 is fair and equitable to policyholders and for the best interests of the insurer and its policyholders;
(2) In the case of life or disability insurance policies issued on the industrial debit or weekly premium 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) In the case of life insurers, allowing its bona fide employees to receive a commission or reduction on the premiums paid by them on policies on their own lives or on the lives of their children or spouse;
(5) Issuing life or disability insurance policies on a salary savings, bank draft, preauthorized check or payroll deduction plan or other similar plan at a reduced rate reasonably related to the savings made by the use of such plan;
(6) In the case of life insurance, a written agreement between the parties for an extension of time for payment of a second or subsequent premium on the policy upon condition that the failure to pay the amount as and when so agreed shall lapse the policy; but no such agreement shall impair any right to extended or paid-up insurance which the insured may have under the policy nor any right to have the premiums, or any part thereof, or the amount payable for such extension charged against the policy under the terms of the policy. No such agreement need be attached to or made a part of the policy so affected; or
(7) Paying commissions or other compensation to duly licensed agents or allowing or returning to participating policyholders dividends or savings.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §239.)
(a) No property, casualty, or surety insurer, or any employee 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 in the policy except to the extent provided for in rating systems filed with the commissioner by, or on behalf of, the insurer and approved by the commissioner.
(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.
(c) Nothing in this section shall be construed as prohibiting the payment of commissions or other compensation to duly licensed agents, brokers, or solicitors or as prohibiting any insurer from allowing or returning to its participating policyholders, members, or subscribers, dividends, savings, or the unused or unabsorbed portion of premiums and premium deposits.
(d) Nothing in this section or in this title shall be deemed to invalidate any insurance contract, or any amendment of, or agreement as to, such contract or the continuance or renewal of such contract which does not comply with Chapters 12 or 14 of this title or any other provisions of this title, and no insured named in the policy and no officer or employee of such insured shall be deemed to have violated any provision of this title by knowingly receiving or accepting such contract, amendment, agreement, continuance, or renewal, provided, that this subsection shall not be deemed to relieve any authorized insurer or licensed agent, broker, solicitor, or surplus line broker of any forfeiture or penalty otherwise applicable under this title on account of any such violation, nor relieve any person otherwise liable therefor with respect to any tax payable on account of such insurance, nor relieve any insured named in the policy nor any employee of such insured who knowingly receives or accepts any rebate, discount, abatement, credit, or reduction of the premium in violation of subsection (b) of this section, of any penalty otherwise applicable under this title on account of any such violation.
(e) No person in this state shall advertise, offer, or provide free insurance as an inducement to the purchase or sale of real or personal property or of services, directly or indirectly, connected with such real or personal property.
(1) For the purposes of this subsection, “free insurance” is insurance for which no identifiable and additional charge is made to the purchase of such real property or personal property or services or insurance for which an identifiable or additional charge is made in an amount less than the cost of such insurance as to the seller or other person, other than the insurer providing the same.
(2) This subsection does not apply to:
a. Insurance for loss of, or damage to, the real or personal property involved in any such sale or services under a policy covering the interests therein of the seller or vendor;
b. Blanket disability insurance as defined in Section 27-20-4;
c. Credit life insurance or credit disability insurance;
d. Any individual, isolated, nonrecurring, unadvertised transaction not in regular course of business; or
e. Title insurance.
(3) No person shall use the word “free” to describe life or disability insurance in connection with the advertising or offering for sale of any kind of goods, merchandise, or services.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §240.)
No person, firm, or corporation engaged in selling real or personal property or of lending money on the security of real or personal property and no trustee, director, officer, agent, or other employee of any such person, firm, or corporation shall require, or attempt or purport to require, as a condition precedent, concurrent, or subsequent, to the sale or to financing the purchase of such property or to lending money upon the security of a mortgage thereon nor as a condition precedent, concurrent, or subsequent, for the renewal or extension of any such loan or mortgage or for the performance of any other act in connection therewith that the person, firm, or corporation purchasing such property, or for whom such purchase is to be financed, or to whom the money is to be loaned, or for whom such extension, renewal, or other act is to be granted or performed negotiate any policy of insurance, or renewal thereof, covering such property or covering any liability arising from the ownership, maintenance, or use thereof through a particular insurer, agent, solicitor, or broker. This section shall not prevent the exercise by any person, firm, or corporation of its right to designate reasonable and nondiscriminatory financial requirements as to insurer, the terms and provisions of the policy and the adequacy of the coverage with respect to insurance on property pledged or mortgaged to such person, firm, or corporation; provided, however, that nothing in this section shall be construed as to prohibit the right of any person, firm, or corporation from voluntarily negotiating for or soliciting the placing of such insurance.
(Acts 1957, No. 608, p. 865, §4; Acts 1971, No. 407, p. 707, §241.)
(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.
(b) Any person otherwise qualified may be a director of two or more insurers which are competitors, unless the effect thereof is to lessen substantially competition between insurers generally.
(Acts 1971, No. 407, p. 707, §242.)
(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 permitted 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 the 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 title to be so filed and approved, the premiums and charges shall not be in excess of those specified in the policy and as fixed by the insurer. This section shall not be deemed to prohibit the charging and collection by surplus line brokers licensed under Chapter 10 of this title of the amount of applicable state and federal taxes 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; nor shall it be deemed to prohibit an Alabama licensed producer from charging a collection fee of up to one and one-half percent per month on unpaid balances for insurance premiums; nor shall it be deemed to prohibit the charging of administrative fees by an Alabama licensed producer to process property and casualty insurance applications when the fees have been approved by the commissioner.
(c) Each violation of this section shall be punishable under Section 27-1-12.
(Acts 1971, No. 407, p. 707, §243; Acts 1994, No. 94-118, p. 146, §1; Act 2001-702, p. 1509, §15.)
(a) If the commissioner believes that any person has been engaged, or is engaging, in this state in any unfair method of competition or any unfair or deceptive act or practice expressly prohibited in this trade practices law and that a proceeding by him in respect thereto would be to the interest of the public, he shall issue and serve upon such person a statement of the charges in that respect and a notice of a hearing thereon to be held at a time and place fixed in the notice, which shall not be less than 10 days after the date of the service thereof.
(b) At the hearing, such person shall have an opportunity to be heard and to show cause why an order should not be made by the commissioner requiring such person to cease and desist from the acts, methods, or practices so complained of. Upon good cause shown, the commissioner shall permit any person to intervene, appear, and be heard at such hearing by counsel or in person.
(c) Provisions of Chapter 2 of this title relative to the powers of the commissioner, witnesses, evidence, and hearings shall apply as to procedures under this trade practices law, except where in conflict with the express provisions of this trade practices law.
(d) If, after such hearing, the commissioner finds that the method of competition, or the act or practice in question is defined in this chapter and that the person complained of has engaged in such method of competition, act, or practice in violation of this chapter, he shall reduce his findings to writing and issue, and cause to be served upon such person, an order requiring such person to cease and desist from engaging in such method of competition, act, or practice.
(e) Until the expiration of the time allowed under Section 27-2-32 for filing a petition for review, if no such petition has been duly filed within such time, or if a petition for review has been filed within such time, then until the transcript of the record in the proceeding has been filed in the court, the commissioner may, at any time upon such notice and in such manner as he shall deem proper, modify or set aside, in whole or in part, any order issued by him under this section.
(f) After the expiration of the time allowed for filing such a petition for review, if no such petition has been duly filed within such time, the commissioner may, at any time after notice and opportunity for hearing, reopen and alter, modify or set aside, in whole or in part, any order issued by him under this section whenever in his opinion conditions of fact or of law have so changed as to require such action or if the public interest so requires.
(g) A cease and desist order issued by the commissioner under this section shall become final:
(1) Upon the expiration of the time allowed for filing of petition for review, if no such petition has been duly filed within such time; except, that the commissioner may thereafter modify or set aside his order to the extent provided in subsection (e) of this section; or
(2) Upon the final decision of the court if the court directs that the order of the commissioner be affirmed or the petition for review dismissed.
(h) No order of the commissioner pursuant to this trade practices law 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.
(i) Violation of any such desist order shall be deemed to be, and shall be, punishable as a violation of this title.
(j) 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.
(Acts 1957, No. 608, p. 865, §7; Acts 1971, No. 407, p. 707, §244.)
Statements of charges, notices, orders, and other processes of the commissioner under this trade practices law may be served by anyone duly authorized by the commissioner, either in the manner provided by law for service of process in civil actions or by registering or certifying and mailing a copy thereof to the person affected by such statement, notice, order, or other process at his, or its, residence or principal office or place of business. The verified return by the person so serving such statement, notice, order, or other process, setting forth the manner of such service, shall be proof of the same, and the return postcard receipt for such statement, notice, order, or other process, registered or certified and mailed as aforesaid, shall be proof of the service of the same.
(Acts 1957, No. 608, p. 865, §6; Acts 1971, No. 407, p. 707, §245.)
Any person required by an order of the commissioner under Section 27-12-18 to cease and desist from engaging in any unfair method of competition or any unfair or deceptive act or practice defined in this trade practices law may obtain a review of such order by filing an appeal therefrom in accordance with the provisions and procedures for appeals from the orders of the commissioner in general under Section 27-2-32. To the extent that the commissioner’s order is affirmed on such review, the court shall issue its own order commanding obedience to the terms of the commissioner’s order.
(Acts 1957, No. 608, p. 865, §8; Acts 1971, No. 407, p. 707, §246.)
(a) Whenever the commissioner has reason to believe that any person engaged in the business of insurance is engaging in this state in any method of competition, or in any act or practice in the conduct of such business which is not defined in this trade practices law, that such method of competition is unfair or that such act or practice is unfair or deceptive and that a proceeding by him in respect thereto would be to the interest of the public, he may issue and serve such person a statement of the charges in that respect and a notice of a hearing thereon to be held at a time and place fixed in the notice, which shall not be less than 10 days after the date of the service thereof. Each such hearing shall be conducted in the same manner as the hearings provided for in Section 27-12-18. The commissioner shall, after such hearing, make a report in writing in which he shall state his findings as to the facts, and he shall serve a copy thereof upon such person.
(b) If such report charges a violation of this trade practices law and if such method of competition, act, or practice has not been discontinued, the commissioner may, through the Attorney General of this state, at any time after 30 days after the service of such report, cause a petition to be filed in the circuit court of this state, within the circuit wherein the person resides or has his principal place of business, to enjoin and restrain such person from engaging in such method, act, or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue such writs as are ancillary to its jurisdiction or are necessary in its judgment to prevent injury to the public pendente lite.
(c) A transcript of the proceedings before the commissioner, including all evidence taken, and the report and findings shall be filed with such petition. If either party applies to the court for leave to adduce additional evidence and shows, to the satisfaction of the court, that such additional evidence is material and there were reasonable grounds for the failure to adduce such evidence in the proceeding before the commissioner, the court may order such additional evidence to be taken before the commissioner and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The commissioner may modify his findings of fact or make new findings by reason of the additional evidence so taken, and he shall file such modified or new findings with the return of such additional evidence.
(d) If the court finds that the method of competition complained of is unfair or that the act or practice complained of is unfair or deceptive, that the proceeding by the commissioner with respect thereto is to the interest of the public and that the findings of the commissioner are supported by the weight of the evidence, it shall issue its order enjoining and restraining the continuance of such method of competition, act, or practice.
(Acts 1957, No. 608, p. 865, §9; Acts 1971, No. 407, p. 707, §247.)
If the report of the commissioner under Section 27-12-21 does not charge a violation of this chapter, then any intervenor in the proceedings may, within 30 days after the service of such report, cause a notice of appeal to be filed in the Circuit Court of Montgomery County for a review of such report. Upon such review, the court shall have authority to issue appropriate orders and judgments in connection therewith, including, if the court finds that it is to the interest of the public, orders enjoining and restraining the continuance of any method of competition, act, or practice which it finds, notwithstanding such report of the commissioner, constitutes a violation of this trade practices law. Subsection (c) of Section 27-12-21 shall apply as to any such review.
(Acts 1957, No. 608, p. 865, §10; Acts 1971, No. 407, p. 707, §248.)
No agent, broker, solicitor, examining physician, or other person shall knowingly make a false or fraudulent statement or representation in, or relative to, an application for insurance. Violations of this section shall be punishable under Section 27-1-12.
(Acts 1971, No. 407, p. 707, §249.)
No insurer shall, without just cause, refuse to pay or settle claims arising under coverages provided by its policies in this state and with such frequency as to indicate a general business practice in this state, which general business practice is evidenced by:
(1) A substantial increase in the number of complaints against the insurer received by the Insurance Department;
(2) A substantial increase in the number of lawsuits against the insurer or its insureds by claimants; and
(3) Other relevant evidence.
(Acts 1971, No. 407, p. 707, §249.1.)
(a) Notwithstanding any other provision of law, any health insurer, any health care service plan organized under Article 6, Chapter 20, Title 10A, or any health maintenance organization organized under Chapter 21A of this title, which contracts for health insurance or pays for health care services, may not deny, delay, or defer payment of an otherwise valid claim for payment of health care services, because the insured, who is the injured person, has been or is being treated for injuries received under circumstances giving rise to a possible injury liability claim or a claim for benefits under an individual or group automobile insurance policy that provides uninsured motorist or medical payment coverage. Any provision in a health insurance policy or any provision in a hospital contract with a health care payor, as defined in Section 35-11-371, issued, entered into, amended, or renewed in this state on or after August 1, 2021, which attempts to coordinate benefits in violation of this section is void and unenforceable.
(b) This section does not restrict a health insurer, health care service plan, or health maintenance organization from recouping payments by exercising available subrogation rights against a responsible third party or by exercising available reimbursement rights against an injured person who is attempting to recover from, or has previously recovered from, a responsible third party or the injured party’s uninsured or underinsured motorist insurance coverage, or both. Where a health insurer, health care service plan, or health maintenance organization seeks recoupment from a responsible third party, the amount of the recoupment may not exceed the amount paid by the health insurer, health care service plan, or health maintenance organization for health care services.
(c) The Department of Insurance shall adopt rules to carry out this section.
(Act 2021-379, §2.)
As used in this chapter, the following terms shall have the following meanings:
(1) COMMISSIONER. The Alabama Commissioner of Insurance or his or her designee.
(2) DEPARTMENT. The Alabama Department of Insurance.
(3) INSURANCE. As defined in Section 27-1-2, and specifically including any contract, arrangement, or agreement, in which one undertakes to do any one of the following:
a. Pay or indemnify another as to loss from certain contingencies called risks.
b. Pay or grant a specified amount or determinable benefit to another in connection with ascertainable risk contingencies.
c. Pay an annuity to another.
d. Act as surety.
For the purposes of this chapter, insurance also includes any health benefit plan as defined in Section 27-53-1.
(4) INSURANCE PRODUCER or PRODUCER. As defined in Section 27-7-1.
(5) INSURER. A person entering into agreements, contracts of insurance, arrangements, or reinsurance, or a health benefit plan, or a group health plan as defined in Section 607(1) of the Employee Retirement Income Security Act of 1974, or any entity offering a service benefit plan, and who agrees to perform any of the acts set forth in subdivision (3), including but not limited to, fraternal benefit societies, mutual aid associations, health maintenance organizations, and health care service plans, regardless of whether the person is acting in violation of laws requiring a certificate of authority or regardless of whether the person denies being an insurer.
(6) NAIC. The National Association of Insurance Commissioners or its successor in interest.
(7) NICB. The National Insurance Crime Bureau or its successor in interest.
(8) PERSON. An individual, corporation, partnership, association, joint stock company, trust, unincorporated organization, or any similar entity or any combination of the foregoing.
(9) POLICY. An individual or group insurance policy, agreement, group certificate, contract, evidence of insurance, or arrangement of insurance affecting the rights of a resident of this state or bearing a reasonable relation to this state, regardless if delivered or issued for delivery in this state.
(10) PRACTITIONER. A person licensed in this state authorized to practice medicine and surgery, psychology, chiropractic, dentistry, optometry, pharmacy, nursing, physical therapy or law, or any other licensee of the state or person required to be licensed in this state.
(11) REINSURANCE. A contract, binder of coverage, including placement slip, or arrangement under which an insurer procures insurance for itself in another insurer as to all or part of an insurance risk of the originating insurer.
(12) TRANSACT or TRANSACTION. As defined in Section 27-1-2.
(13) UNIT. The Insurance Fraud Unit of the Alabama Department of Insurance.
(Act 2012-429, p. 1170, §2.)
The Legislature finds that the business of insurance involves many transactions that have potential for fraud, abuse, and other illegal activities. This chapter is intended to permit full utilization of the expertise of the Department of Insurance to investigate, discover, and prosecute insurance fraud and assist and receive assistance from state, local, and federal law enforcement and regulatory agencies in enforcing laws prohibiting insurance fraud.
(Act 2012-429, p. 1170, §1.)
A person commits the crime of insurance fraud if, knowingly and with intent to defraud, he or she commits, or conceals any material information concerning, one or more of the following acts:
(1) The solicitation or acceptance of new or renewal insurance risks on behalf of an insurer, reinsurer, or other person engaged in the transaction of the business of insurance, by a person who knows the insurer, reinsurer, or other person responsible for the risk is financially unable to pay its claims at the time of the transaction.
(2) The removal, concealment, alteration, or destruction of the assets or records relating to the transaction of the business of insurance of an insurer, reinsurer, or other person engaged in the transaction of the business of insurance. This section does not prohibit an insurer, reinsurer, or other person engaged in the transaction of the business of insurance from destroying records or documents relating to the transaction of the business of insurance in accordance with record retention and destruction standards set forth in state or federal law or the record retention policy of the insurer, reinsurer, or other person.
(3) The embezzlement, abstraction, theft, or conversion of monies, funds, premiums, credits, or other property relating to the transaction of the business of insurance of an insurer, reinsurer, or other person engaged in the transaction of the business of insurance.
(4) Presenting, causing to be presented, or preparing with knowledge or belief that it will be presented to or by an insurer, reinsurer, producer, or any of their respective agents, false information as part of, in support of, or concerning a fact material to, one or more of the following:
a. An application for the issuance or renewal of an insurance policy or reinsurance agreement.
b. The rating of an insurance policy or reinsurance agreement.
c. A claim for payment or benefit pursuant to an insurance policy or reinsurance agreement.
d. A claim for payment or benefit based on an advertisement or promises to provide a good or service under an insurance policy.
e. Premiums paid on an insurance policy or reinsurance agreement.
f. Payments made in accordance with the terms of an insurance policy or reinsurance agreement.
g. A document filed with the commissioner.
i. Audit information submitted to the commissioner or an insurer.
j. The formation, acquisition, merger, reconsolidation, or dissolution of one or more insurance entities, or the withdrawal from one or more lines of insurance in all or part of this state by an insurer or reinsurer.
k. The issuance of written evidence of insurance.
l. The reinstatement of an insurance policy.
m. Issuance, acceptance, change, endorsement, or continuance of an insurance policy or reinsurance agreement.
n. A construction or structure mitigation inspection report provided for the issuance or renewal of an insurance policy or discounts or credits related to an insurance policy.
(5) The failure to decline or refusal to return an insurance payment for a loss or a recovery to which the person is not entitled by reason of an insurer’s mistake or other facts or circumstances connected with the person’s claim or the coverage provided by an applicable insurance policy.
(6) Overcharging an insurer or insured an amount for a good or service that exceeds the usual and customary charge by the person providing the good or performing the service as a part of an insurance claim for damage.
(Act 2012-429, p. 1170, §2; Act 2013-397, p. 1513, §1.)
(a) An act prohibited by Section 27-12A-2, in cases where the loss or potential loss exceeds one thousand dollars ($1,000), constitutes insurance fraud in the first degree.
(b) Insurance fraud in the first degree is a Class B felony.
(Act 2012-429, p. 1170, §2.)
(a) An act prohibited by Section 27-12A-2, in cases where the loss or potential loss does not exceed one thousand dollars ($1,000), constitutes insurance fraud in the second degree.
(b) Insurance fraud in the second degree is a Class C felony.
(Act 2012-429, p. 1170, §2.)
(a) A person commits the crime of transacting insurance without a license if he or she knowingly transacts the business of insurance in violation of laws requiring a license, certificate of authority, or other legal authority for the transaction of the business of insurance.
(b) Transacting insurance without a license is a Class A misdemeanor.
(Act 2012-429, p. 1170, §2.)
(a) No prosecution may be commenced under this article more than seven years after the alleged violation was detected.
(b) An individual who has been convicted of insurance fraud in the first degree or insurance fraud in the second degree shall be disqualified from engaging in the business of insurance in this state.
(c) A person may not willfully permit another person who has been convicted of insurance fraud in the first degree or insurance fraud in the second degree to transact in the business of insurance in this state.
(d) For the purposes of Article 4A of Chapter 18 of Title 15, insurance fraud shall be considered criminal activity.
(Act 2012-429, p. 1170, §2; Act 2024-371, §1; Act 2024-382, §1.)
(a) The enforcement of this chapter shall be vested in the Department of Insurance. It shall be the duty of the department to see that the provisions of this chapter are at all times obeyed and to take such measures and to make such investigations as will prevent or detect the violation of any provision thereof. The department may present to the Attorney General any credible evidence coming to its knowledge of criminality under this chapter. In the event of the neglect or refusal of the Attorney General to institute and prosecute the violation, the department shall be authorized to proceed therein with all the rights, privileges, and powers conferred by law upon the Attorney General including the power to appear before grand juries and to interrogate witnesses before grand juries.
(b) Nothing in this article limits the power of the state to punish any person for any conduct which constitutes a crime by statute or at common law.
(c) Nothing in this chapter shall be construed as state regulation of self-insured employee welfare benefit plans as defined in the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq.
(d) Nothing in this chapter shall be construed as expanding the authority of the Department of Insurance to investigate or audit the records of the sponsor or members of a sponsor group of self-insured employee welfare benefit plans as defined in the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq.
(Act 2012-429, p. 1170, §2.)
(a) A producer who violates this chapter may be subject to the suspension or revocation of any insurance license held by the producer or civil penalties of up to five thousand dollars ($5,000) per violation, or both. Suspension or revocation of an insurance license or certificate of authority and the imposition of civil penalties shall be pursuant to action brought before the commissioner. Suspension or revocation of any insurance licenses and the imposition of civil penalties shall be pursuant to action brought before the commissioner in accordance with this title.
(b) An insurer who, with such frequency as to indicate its general business practice in this state, is in violation of this chapter may be subject to the suspension or revocation of any certificate of authority held by insurer or civil penalties of up to five thousand dollars ($5,000) per violation, or both. Suspension or revocation of a certificate of authority and the imposition of civil penalties shall be pursuant to action brought before the commissioner in accordance with Section 27-3-21 and subject to the right of appeal in accordance with Section 27-2-32.
(c) The commissioner shall also notify the proper licensing authority of a practitioner for the appropriate disciplinary action including the revocation or suspension of any professional license when a practitioner is convicted of a violation of this chapter and whose services are compensated in whole or in part, directly or indirectly, by insurance proceeds.
(Act 2012-429, p. 1170, §2.)
Whenever it appears to the commissioner that any person has engaged in or is about to engage in any act or practice constituting a violation of any provision of this chapter or any rule or order hereunder, the commissioner may, in the commissioner’s discretion, do either or both of the following:
(1) Issue a cease and desist order, with or without a prior hearing, against the person or persons engaged in the prohibited activities, directing them to cease and desist from engaging in the act or practice.
(2) Bring an action in any court of competent jurisdiction to enjoin the act or practice and to enforce compliance with this chapter or any rule or order issued hereunder. Upon a proper showing, a permanent injunction, temporary restraining order, or writ of mandamus shall be granted and a receiver or conservator may be appointed for the defendant or the defendant’s assets. In addition, upon a proper showing by the commissioner, the court may enter an order of rescission, restitution, or disgorgement directed at any person who has engaged in an act constituting a violation of this chapter or any rule or order adopted or issued pursuant to this chapter. The commissioner shall not be required to post a bond.
(Act 2012-429, p. 1170, §2.)
The Commissioner of Insurance may adopt reasonable rules for the implementation and administration of this chapter.
(Act 2012-429, p. 1170, §5.)
(a) A fraud warning shall be included on at least one of the following: Claim release forms, applications, reinstatements for insurance, participation agreements, declaration pages, and claim documents, regardless of the method or form of transmission and shall contain the following statement or a substantially similar statement:
“Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or who knowingly presents false information in an application for insurance is guilty of a crime and may be subject to restitution, fines, or confinement in prison, or any combination thereof.”
(b) The lack of a statement required by subsection (a) shall not constitute a defense in any prosecution for insurance fraud.
(c) Policies issued by unauthorized insurers shall contain a statement disclosing the status of the insurer to do business in the state where the policy is delivered or issued for delivery or the state where coverage is in force.
(d) Insurers shall comply with subsection (a) not later than February 1, 2013.
(e) This section does not require notice to persons insured under existing policies, except to the extent the persons receive, after August 1, 2012, a document listed in subsection (a) which has been selected by the insurer to contain the fraud warning.
(f) None of the requirements of this section shall be deemed to apply to reinsurers, reinsurance contracts, reinsurance agreements, or reinsurance claims transacted.
(g) As used in this section, insurer refers only to those entities defined in Section 27-12A-1(5) which hold a certificate of authority from the commissioner, and unauthorized insurers refers only to those entities operating pursuant to Article 2, beginning with Section 27-10-20, of Chapter 10.
(Act 2012-429, p. 1170, §2.)
(a) Persons engaged in the business of insurance, having knowledge or a reasonable belief that insurance fraud is being, will be, or has been committed, shall provide to the department such information that is required by, and in a manner prescribed by, the department. As used in this section, persons engaged in the business of insurance refers only to those entities defined in Section 27-12A-1(5) which hold a certificate of authority from the commissioner.
(b) A person other than an insurer having knowledge or having a reasonable belief that insurance fraud is being, will be, or has been committed may provide the information to the Attorney General, the department, or both.
(Act 2012-429, p. 1170, §2.)
(a) Except as otherwise provided in subsection (b), there shall be no civil liability imposed on and no cause of action shall arise against a person for furnishing or receiving information concerning suspected, anticipated, or completed insurance fraud. This shall not abrogate or modify common law or statutory privileges or immunities enjoyed by a person, and the limit on civil liability applies only to the act of reporting and does not limit civil liability against a person for committing fraud or other tortuous conduct.
(b) Subsection (a) shall not apply to false statements made with actual malice by a person furnishing or receiving information concerning suspected, anticipated, or completed insurance fraud. In any action brought against a person for filing a report or furnishing other information concerning insurance fraud, the party bringing the action shall plead specifically any allegations that subsection (a) shall not apply because the person filing the report or furnishing the information did so with actual malice.
(Act 2012-429, p. 1170, §2.)
(a) Documents and evidence provided pursuant to Section 27-12A-21 or obtained by the department in an investigation of suspected or actual insurance fraud shall be privileged and confidential, shall not be a public record, and shall not be subject to discovery or subpoena in a civil or criminal action.
(b) Notwithstanding subsection (a), the department may release documents and evidence obtained by the unit in an investigation of suspected or actual insurance fraud pursuant to any of the following:
(1) Administrative or judicial bodies hearing proceedings to enforce laws administered by the department.
(2) Federal, state, or local law enforcement or regulatory agencies, including, but not limited to, the Attorney General and the Chief Examiner of Public Accounts; the NICB; or the NAIC.
(3) At the discretion of the commissioner, a person in the transaction of the business of insurance that is aggrieved by the insurance fraud.
(c) Release of documents and evidence under subsection (b) shall not abrogate or modify the privilege granted in subsection (a).
(d) The confidentiality of records imposed by this section shall not extend to any documents or evidence submitted as part of an investigative report that are public documents. A document that is a public record pursuant to any other statute shall not be affected by this section.
(e) Employees, directors, agents, servants, staff investigators, staff attorneys, and others engaged by or on behalf of the State of Alabama for the purpose of implementing or performing the duties, obligations, and responsibilities under this chapter, shall not be subject to subpoena in civil actions by any court in this state to testify concerning any matter of which they have knowledge that arises out of or is related to a pending or continuing insurance fraud investigation being conducted by the unit.
(f) With the exception of those documents created by or at the request of a company specifically in connection with the investigation of suspected or actual insurance fraud, subsection (a) shall not be construed to prevent the discovery of documents otherwise subject to discovery in a civil matter from the insurer or producer. Copies of all documents, materials, and information furnished to the department by an insurer, producer, or an employee or agent on behalf of an insurer or producer, shall be retained in their ordinary and customary location by the insurer or producer for the period provided by law.
(Act 2012-429, p. 1170, §2.)
This chapter shall not be construed to do any of the following:
(1) Preempt the authority or relieve other law enforcement or regulatory agencies of the duty to investigate, examine, and prosecute suspected violations of law.
(2) Prevent or prohibit a person from voluntarily disclosing information concerning insurance fraud to a law enforcement or regulatory agency other than the unit.
(3) Limit the powers granted by law to the Attorney General, the commissioner, the department, or the unit to investigate and examine possible violations of law and to take appropriate action against wrongdoers.
(4) Create a private cause of action.
(Act 2012-429, p. 1170, §2.)
(a) There is established within the department the Insurance Fraud Unit. The commissioner shall appoint the necessary full-time supervisory and investigative personnel of the unit who shall be qualified by training and experience to perform the duties of their positions. The commissioner shall furnish offices, equipment, operating expenses, and necessary personnel to maintain and operate the unit.
(b) The unit shall perform all of the following duties:
(1) Initiate independent inquiries and conduct independent investigations when the unit has cause to believe that any insurance fraud may be, is being, or has been, committed.
(2) Review reports or complaints of alleged insurance fraud from federal, state, and local law enforcement and regulatory agencies, persons engaged in the business of insurance, and the public to determine whether the reports or complaints require further investigation and, if so, to conduct these investigations.
(3) Conduct independent examinations of alleged insurance fraud and undertake independent studies to determine the extent of insurance fraud.
(c) In performing its duties, the unit may do all of the following:
(1) Inspect, copy, or collect records and evidence.
(2) Issue and serve subpoenas.
(3) Administer oaths and affirmations.
(4) Share records and evidence with federal, state, or local law enforcement and regulatory agencies.
(5) Execute arrest warrants for criminal violations of this chapter or other state laws.
(6) Arrest upon probable cause without warrant a person found in the act of violating or attempting to violate this chapter or other state laws.
(7) Make criminal referrals to the Attorney General.
(8) Conduct investigations outside of this state. If the information the unit seeks to obtain is located outside of this state, the person from whom the information is sought may make the information available to the unit to examine at the place where the information is located. The unit may designate representatives, including officials of the state in which the matter is located, to inspect the information on behalf of the unit, and the unit may respond to similar requests from officials of other states.
(d) Investigators of the unit shall have all the powers vested in law enforcement officers of the State of Alabama, including, but not limited to, the powers of arrest and the power to serve process for any violation of this chapter or any violation of other state laws discovered during the course of an investigation. The investigators shall perform the duties, responsibilities, and functions as may be required for the unit to carry out its duties and responsibilities to enforce this chapter. An individual may not serve as investigator of the unit unless he or she has met the minimum standards established for law enforcement officers by the Alabama Peace Officers’ Standards and Training Commission, or other standards as may be provided by law.
(e) Information relating to criminal activity discovered in the course of an investigation by the unit shall be provided to the Alabama State Law Enforcement Agency.
(Act 2012-429, p. 1170, §2; Act 2024-371, §1; Act 2024-382, §1.)
(a) The commissioner shall assess each insurer authorized to write insurance in the State of Alabama two hundred dollars ($200) per year in order to fund the operations of the unit.
(b) Assessments shall be due not less than 30 days after prior written notice to the insurer and shall accrue interest at six percent per annum on and after the due date. Failure to remit payment of an assessment shall warrant the suspension or revocation of an insurer’s certificate of authority.
(c) As used in this section insurer authorized to write insurance in the State of Alabama refers only to those entities defined in subdivision (5) of Section 27-12A-1 which hold a certificate of authority from the commissioner.
(Act 2012-429, §2.)
(a) There is created a fund in the State Treasury designated the Insurance Fraud Unit Fund. The expenses incurred by the department in operating the unit, including expenses incurred by the department for providing administrative personnel, legal counsel, litigation support, expert witness, and costs of investigations, shall be paid from the fund. The department may not hire, contract, or otherwise engage the services of private attorneys to administer or implement this chapter.
No funds shall be withdrawn or expended from this fund except as budgeted and allotted according to Article 4 of Chapter 4 of Title 41 and Sections 41-19-1 to 41-19-12, inclusive, and only in amounts as stipulated in the general appropriations act, other appropriation acts, or Sections 3 and 4 of Act 2012-429.
(b) The department shall deposit the funds received pursuant to Section 27-12A-41 into the State Treasury to the credit of the Insurance Fraud Unit Fund.
(c) The department may file a claim for restitution for any expenses incurred by the department in investigating and prosecuting a person convicted of insurance fraud. This restitution shall be payable to the State Treasury to the credit of the Insurance Fraud Unit Fund as a refund against disbursements.
(d) Monies not used during a fiscal year shall be carried over in the Insurance Fraud Unit Fund and shall not revert to the State General Fund.
(Act 2012-429, §2.)
The purpose of this chapter is to promote the public welfare by regulating insurance rates 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) 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.
(Acts 1971, No. 407, p. 707, §250.)
The commissioner is charged with the duty of the administration of all laws now relating, or hereafter relating, to insurance rates and rating systems of all companies authorized to do business in the State of Alabama, with the exception of rates of life and health and accident business and rates of title insurance.
(Acts 1945, No. 118, p. 111, §2; Acts 1971, No. 407, p. 707, §253.)
(a) The commissioner may require any regulated insurer engaged in any of the businesses in Alabama as enumerated in this chapter to file with the department any data or information required or necessary in the performance of the duties of the commissioner, the data or information to be filed in the manner and on forms as may be prescribed by the commissioner.
(b) The records of the commissioner and insurance filings in the commissioner’s office submitted in accordance with this chapter shall be open to public inspection, except as otherwise provided by this title or where the records and insurance filings are considered to be confidential as commercially valuable trade secrets under Chapter 27 of Title 8. The commissioner may not release the confidential information except by court order. The confidential information shall be submitted under separate cover and clearly state the desires of the party filing the information as to its confidentiality. The confidential information shall be maintained by the commissioner separate and distinct from all records available for public inspection. If the commissioner receives a court order to release the confidential information, the commissioner shall give notice of not less than 10 business days to the party that filed the confidential information before releasing the information.
(Acts 1945, No. 118, p. 111, §5; Acts 1971, No. 407, p. 707, §254; Act 2021-237, §1.)
The commissioner shall, from time to time, promulgate such rules and regulations as he may deem necessary to carry out the provisions of this article and, upon request, shall furnish to any interested party a copy of such rules and regulations.
(Acts 1945, No. 118, p. 111, §6; Acts 1971, No. 407, p. 707, §255.)
Any licenses collected from any rating organization by the commissioner shall be paid into the Treasury of the State of Alabama.
(Acts 1945, No. 118, p. 111, §7; Acts 1971, No. 407, p. 707, §256.)
This chapter may be referred to as “The Rating Law.”
(Acts 1971, No. 407, p. 707, §251.)
For the purposes of this article, unless otherwise stated, the following terms shall have the meanings respectively ascribed to them by this section.
(1) RATE. The unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.
(2) PREMIUM. The consideration paid, or to be paid, to an insurer for the issuance and delivery of any binder or policy of insurance.
(3) RATE-MAKING. The examination and analysis of every factor and influence related to, and bearing upon, the hazard and risk made the subject of insurance, the collection and collation of such factors and influences into rating systems and the application of such rating systems to individual risks.
(4) RATING SYSTEM. Every schedule, class, classification, rule, guide, standard, manual, table, rating plan, policy, policy form, or compilation, by whatever name described, containing the rates used by any rating organization or by any insurer or used by any insurer or by any rating organization in determining or ascertaining a rate.
(5) RATING ORGANIZATION. Every person or persons, corporation, partnership, company, society, bureau or association, whether located within or outside this state, engaged in the business of rate-making for two or more insurers.
(6) INSURER. Any person or persons, corporation, association, partnership, reciprocal exchange, or company authorized by the laws of this state to transact the business of insurance in this state.
(7) RISK. Any property, real or personal, described in any policy, exposed to any hazard or peril named in such policy.
(8) UNREASONABLY HIGH RATES. No rate shall be held to be unreasonably high unless:
a. Such rate is unreasonably high for the insurance provided; and
b. A reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.
(9) INADEQUATE RATE. No rate shall be held to be inadequate which upon reasonable assumptions of prospective loss and expense experience will produce an underwriting profit.
(Acts 1945, No. 132, p. 133, §1; Acts 1971, No. 407, p. 707, §257.)
(a) This article shall apply to insurance against loss to property located in this state, or to any valuable interest therein, by fire, lightning, windstorm, explosion, or by theft or physical damage to motor vehicles and all other kinds of insurance which fire insurance companies are authorized to write in this state, except this article shall not apply to reinsurance, aviation insurance, flood insurance, and marine insurance, which term shall mean, and include, insurance and reinsurance against any, and all, kinds of loss or damage to all of the following subject matters of insurance and interests therein:
(1) Hulls, vessels, and craft of every kind.
(2) Aids to navigation.
(3) Dry docks and marine railways, including marine builders’ and repairers’ risks, and whether complete or in process of, or awaiting, construction.
(4) All marine protection and indemnity risks.
(5) All goods, freights, cargoes, merchandise, effects, disbursements, profits, monies, bullion, precious stones, securities, chooses in action, evidences of debt, valuable papers, bottomry and respondentia interest, 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 on or under any seas, lakes, rivers, or other waters, or in the air or on land in connection with, or incident to, export, import, or waterborne risks, or while being assembled, packed, crated, baled, compressed, or similarly prepared for shipment, or while awaiting the same, or during any delays, storage, transshipment, or reshipment incident thereto, including the insurance of war risks in respect to any or all of the aforesaid subject matters of insurance.
(b) This article shall apply to inland marine insurance in the manner provided in Section 27-13-22, and to flood insurance for motor vehicles.
(Acts 1945, No. 132, p. 133, §2; Acts 1971, No. 407, p. 707, §258; Act 2021-173, §1.)
The provisions of this section shall apply to all insurance which is now or hereafter defined by statute, by ruling of the commissioner or by lawful custom as inland marine insurance, but this article shall not apply to insurance of vessels or craft, their cargoes, marine builder’s risks, marine protection and indemnity, or other risks commonly insured under marine insurance policies:
(1) As to all classes of inland marine insurance for which class rates or rating plans are customarily fixed by rating organizations or associations of underwriters, rates or rating plans shall be filed by all authorized insurers writing such classes, with the department in such manner and form as it shall direct, and also special rates fixed by any such rating organization or association shall be similarly filed. All such rates shall be reasonable, adequate and not unfairly discriminatory. Due consideration shall be given to past experience within the state and outside the state when necessary, and due consideration may be given to prospective loss experience within the state and without when necessary, including catastrophe hazards, to a reasonable margin for profit and contingencies, to policyholders’ dividends in the case of participating insurers and to all other relevant factors within the state and without the state when necessary;
(2) Any filing made pursuant to this section shall be approved by the commissioner unless he finds that such filing does not meet the requirements of this section. As soon as reasonably possible after the filing has been made, the commissioner shall in writing approve or disapprove the same; provided, however, that any filing of class rates, special rates, or rating plans shall be deemed approved unless disapproved within 30 days. The commissioner may investigate rates not required to be filed under the provisions of this section and may require the filing of any particular rate not otherwise required to be filed; and
(3) An insurer may satisfy its obligation to make such filings by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings and by authorizing the department to accept such filings on its behalf. An insurer may belong or subscribe to an inland marine rating organization for inland marine insurance and also to other rating organizations for other types of insurance.
(Acts 1945, No. 132, p. 133, §3; Acts 1971, No. 407, p. 707, §259.)
Nothing in this article shall apply to any town or county farmers’ mutual fire insurance association restricting their operations to not more than one county or to domestic insurance companies, associations, orders, or fraternal benefit societies now doing business in this state on the assessment plan.
(Acts 1945, No. 132, p. 133, §25; Acts 1971, No. 407, p. 707, §282.)
(a) No rating organization shall do business in this state unless it shall have been licensed to do so by the commissioner. Application for such license shall be made on such forms as the commissioner shall prepare for that purpose. Upon applying for such license, every rating organization shall file with the department:
(1) A copy of its constitution, its articles of agreement or association or its certificate of incorporation and of its bylaws or rules governing the conduct of its business or such of the foregoing, if any, as such rating organization may have;
(2) A list of insurers who are, or who have agreed to become, members of, or subscribers to, such rating organization;
(3) The name and address of a person, or persons, in this state upon whom notices or orders of the commissioner affecting such rating organization may be served; and
(4) Such other information as the commissioner may require.
(b) If the commissioner finds that the applicant for a license:
(1) Has complied with the provisions of this article;
(2) Is equipped with an adequate staff of experts and clerks qualified in rate-making;
(3) Is otherwise qualified to function as a rating organization; and
(4) Maintains necessary service offices throughout Alabama beginning with at least three, viz: one in Mobile, Montgomery and Birmingham, he shall issue a license to such rating organization authorizing it to engage in rate-making for the kinds of insurance specified in such license.
(c) The service offices described in the preceding sentence shall be adequately staffed and equipped and keep on hand a complete supply of all forms, clauses, permits, rules, and such other information and data as the commissioner may prescribe for writing fire insurance in such territory. These service offices are, however, not to be required in the handling of any types of insurance serviced by special organizations. Such offices are to be kept open on all customary business days. Rating organizations having a membership of less than 25 members shall not be required to maintain such offices unless the department shall require same. If the commissioner shall determine that the applicant is not entitled to a license, he shall make an order denying its application, specifying his reasons for such denial. Licenses issued pursuant to this section shall be renewed on or before July 1, of each year in the manner provided by this article. Every rating organization doing business in the state on January 1, 1972, may continue to transact such business thereafter, subject to the provisions of this article, pending its application to the department, to be made within 180 days after January 1, 1972, for a license to do business as required by this section. A fee of $25.00 shall be paid annually to the department for such license issued under this section.
(Acts 1945, No. 132, p. 133, §4; Acts 1971, No. 407, p. 707, §260.)
Every rating organization shall make reasonable provision in its bylaws, rules, constitution, or otherwise to permit any insurer engaged in the kind of insurance for which rate-making is done by such rating organization to become a member or subscriber thereof upon application therefor by such insurer. An insurer may be a member of, or a subscriber to, more than one rating organization, but not for the purpose of rating the same risk. No insurer shall use any rate or rating systems made by a rating organization of which it is not a member or subscriber or by another insurer. No rating organization shall discriminate unfairly between insurers in the conditions imposed for admission as subscribers or in the services rendered to either members or subscribers. The refusal of any rating organization to admit an insurer as a subscriber shall, at the request of such insurer, be reviewed by the commissioner at a hearing held upon at least 10 days’ notice to such rating organization and such insurer. If the commissioner shall find that the insurer has been refused admittance to such rating organization as a subscriber without justification, he shall make an order directing such rating organization to admit such insurer as a subscriber. If he shall find that the action of the rating organization in refusing admittance to an insurer as a subscriber is justified, he shall make an order affirming its action.
(Acts 1945, No. 132, p. 133, §5; Acts 1971, No. 407, p. 707, §261.)
Every rating organization shall notify the department within 10 days upon the withdrawal or expulsion therefrom of any member or subscriber. Should a rating organization expel or otherwise exclude a subscriber for the refusal or failure of such subscriber to pay such rating organization the subscribership fee agreed upon, such rating organization shall readmit such subscriber upon payment to it of any delinquent charges. No insurer shall, after expulsion or withdrawal from a rating organization, use any rate or rating system made by such rating organization during the period that such expulsion or withdrawal continues.
(Acts 1945, No. 132, p. 133, §16; Acts 1971, No. 407, p. 707, §273.)
Every rating organization and every insurer which makes its own rates shall make rates that are not unreasonably high or inadequate for the safety and soundness of the insurer and which do not unfairly discriminate between risks in this state involving essentially the same hazards and shall, in rate-making and in making rating systems:
(1) Adopt basis classifications, which shall be used as the basis of all manual, minimum, class, schedule, or experience rates;
(2) Adopt reasonable standards for construction, for protective facilities and for other conditions that materially affect the hazard or peril, which shall be applied in the determination or fixing of rates;
(3) Give consideration to past experience within the state and without the state when necessary, and due consideration may be given to prospective loss experience within the state and without the state when necessary, over such period of years as appears to be fairly representative of the frequency of the occurrence of the particular hazard or peril, including, where pertinent, the conflagration and catastrophe hazards, if any; and
(4) Give consideration to all factors reasonably related to the kind of insurance involved, including a reasonable profit for the insurer and, in the case of participating insurers, to policyholders’ dividends. In the case of fire insurance, consideration shall be given to the latest available experience of the fire insurance business, other than fire insurance covering motor vehicles, during a period of not less than five years preceding the year in which rates are made or revised.
(Acts 1945, No. 132, p. 133, §6; Acts 1971, No. 407, p. 707, §262.)
Every insurer shall file annually, on or before July 1, with the rating organization of which it is a member or subscriber, or with such other common agency representing a group of insurers as the department may approve, and with the department a statistical report showing a classification schedule of its premiums and its losses on all kinds of insurance to which this article is applicable, together with such other information as the department may deem necessary for the proper determination of the reasonableness and adequacy of rates. Such statistical report filed with the rating organization may be consolidated and filed by such common agency. Such data shall be kept and reports made in such manner and on such forms as may be prescribed by the commissioner. All such annual filings with the department shall be kept under lock and key, and any official or employee of the department who shall divulge the contents or permit the examination thereof, except for the purpose of properly administering the provisions of this article or upon the order of court, shall be guilty of a misdemeanor and shall be subject to a fine of not more than $50.00, and shall thereafter be ineligible to be an employee or agent of said department. A mutual fire insurance company or reciprocal fire exchange which confines its business chiefly to the insurance of sprinklered risks and which pays no commission or brokerage for the acquisition of business shall be deemed to comply with the provisions of this section if it files its statistical reports of premium deposits and losses on the basis of comprehensive coverage.
(Acts 1945, No. 132, p. 133, §7; Acts 1971, No. 407, p. 707, §263.)
Beginning 180 days after January 1, 1972, every insurer shall, before using or applying any rate to any kind of insurance coming within the scope of this article, file with the department a copy of the rating system upon which such rate is based or by which such rate is fixed or determined. The filing required in this section may be made on behalf of such insurer by a rating organization of which such insurer is a member or subscriber. The provisions of this section shall be deemed to have been complied with by any insurer which had, before January 1, 1972, been a member or subscriber of a rating organization doing business in the state. From and after the date of the filing of such rating systems, every insurer shall charge and receive rates fixed or determined in strict conformity therewith, except as in this article otherwise expressly provided.
(Acts 1945, No. 132, p. 133, §8; Acts 1971, No. 407, p. 707, §264.)
If, after examination thereof, the commissioner shall find that such rating systems filed by, or on behalf of, an insurer provide for, result in or produce rates that are unreasonably high or excessive, or are not adequate for the safeness and soundness of the insurer or are unfairly discriminatory between risks in this state involving essentially the same hazards, he shall issue an order to such insurer, or to the rating organization of which such insurer is a member or subscriber, directing that such rating systems be altered in the manner, and to the extent, stated in such order to produce rates that are reasonable and adequate and not unfairly discriminatory. If the commissioner shall find that such rating systems provide for, result in or produce rates that are not unreasonably high, are not inadequate for the safeness and soundness of the insurer and are not unfairly discriminatory between risks in this state involving essentially the same hazards, he shall approve such rating systems, and such approval shall continue in effect until he shall, by order, direct that such rating systems be changed or modified as in this section provided. As soon as reasonably possible after the filing has been made the commissioner shall, in writing, approve or disapprove the same; provided, however, that unless disapproved within 30 days, such rating systems shall be deemed to be approved by him. Whenever the commissioner shall find that rating systems theretofore approved by him, or which pursuant to Section 27-13-37 are effective without approval, provide for, result in or produce rates which are unreasonable or inadequate or which discriminate unfairly between risks in this state involving essentially the same hazards, he shall issue an order to all insurers employing such rating systems, or to the rating organizations of which such insurers are members or subscribers, directing that such rating systems be altered or revised in the manner, and to the extent, stated in such order to provide for, result in or produce rates which are reasonable, adequate and do not discriminate unfairly between risks in this state involving essentially the same hazards. Rating systems filed with the department on, or before, January 1, 1972, pursuant to the provisions of this section shall be deemed to have been approved by the commissioner, such approval to continue in effect until the commissioner shall, by order, direct that such rating system be altered or modified as in this section provided. Changes in rates resulting from an order of the commissioner directing or approving alterations or revisions in rating systems shall become effective following the date of such order as fixed by the commissioner and shall be applied to policies written on, or after, such effective date. Under such rules and regulations as he shall adopt, 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 may deem advisable to ascertain whether any rates affected by such order are excessive, inadequate, or unfairly discriminatory.
(Acts 1945, No. 132, p. 133, §9; Acts 1971, No. 407, p. 707, §265.)
Every rating organization, and every insurer which does its own rate-making, shall keep in its office a written survey of every risk rated upon schedule after inspection and shall, upon request, furnish a copy of such survey to the interested insured or his duly authorized representative.
(Acts 1945, No. 132, p. 133, §10; Acts 1971, No. 407, p. 707, §266.)
Every rating organization, and every insurer which does its own rate-making, shall provide reasonable means within this state, to be approved by the department, whereby any person, or persons, affected by rate made by it may be heard on an application to reduce such rate. If such rating organization or such insurer shall refuse to reduce such rate, the person or persons affected thereby may make a like application to the commissioner within 30 days after receipt of notice in writing that the application for reduction of rate has been denied by such rating organization or by such insurer. If, upon the expiration of 20 days after application for the reduction of a rate, such rating organization or such insurer fails to grant or reject the application, the person, or persons, affected may make the application to the commissioner in the same manner as if the application had been rejected by such rating organization or by such insurer. The commissioner shall fix a time and place for hearing on such application, upon not less than 10 days’ notice by registered or certified mail, for the applicant and such rating organization or such insurer to be heard. The commissioner shall make such order as he shall deem just and lawful upon the evidence placed before him at such hearing.
(Acts 1945, No. 132, p. 133, §11; Acts 1971, No. 407, p. 707, §267.)
Any insurer may apply to the commissioner for permission to effect a uniform percentage increase or decrease in the rates applied to all risks of a particular class in the state in a particular kind, or kinds, of insurance. Upon the filing of such application, the commissioner shall give notice thereof by registered or certified mail to the rating organization, if any, of which such insurer is a member or subscriber and shall fix a time and place for a hearing upon the merits of such application. At such hearing, such insurer and such rating organization, or their representatives, shall be entitled to be heard and to present evidence in support of, or against, such application. The commissioner shall, upon the conclusion of such hearing, make such order as he shall deem consistent with the establishment and maintenance of reasonable, adequate and non-discriminatory rates. If the application is granted, such increase or decrease shall remain in force unless withdrawn by the insurer with the consent of, or by order of, the commissioner. If the commissioner shall find that such increase or decrease will result in rates that are unreasonable, inadequate, or unfairly discriminatory, he shall make an order denying the application. Notwithstanding the foregoing, but subject to the provisions of Section 27-13-30, to the extent not inconsistent therewith, when a filing of adjustments of rates for existing rating systems is made under this section and does not involve a change in the relationship between such rates and the expense portion thereof or does not involve a change of the element of expenses which are paid as a percentage of premiums and does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filing shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this title. A rate in excess of that promulgated by such rating organization may be charged on any specific risk provided such higher rate is charged with the knowledge and written consent of both the insured and the commissioner.
(Acts 1945, No. 132, p. 133, §12; Acts 1971, No. 407, p. 707, §268.)
Any insurer, individually or as a member of a pool, group, or association, engaged in the business of insuring special types or classes of risks in connection with a particular inspection or engineering service or with respect to which a set of standards has been maintained to the satisfaction of the commissioner may submit its loss experience data, forms, and proposed rates and negotiate with the commissioner for his approval of such rates and forms either directly in its own behalf or through a unified facility of the group created, licensed as a rating organization and maintained entirely or in part for such purpose. In evaluating the forms and rates of such an insurer, or pool or association of insurers, the commissioner shall act with due regard for the previous record of such insurer or group of insurers and with due appreciation of previous and prospective loss trends, both within and outside the state, and to any other factors reasonably related to the classes or types of insurance written by such insurer or group of insurers. If approved, such forms and rates shall be filed with the rating organization, licensed to make rates on such types or classes of risks, of which such insurer is a member or subscriber. Nothing contained in this section shall be construed as exempting any insurer, pool, group, or association of insurers from all other provisions of this article.
(Acts 1945, No. 132, p. 133, §13; Acts 1971, No. 407, p. 707, §270.)
In every case where, pursuant to the provisions of this article, the commissioner is authorized or required to determine whether rates are reasonable and adequate and not unfairly discriminatory, he shall consider:
(1) The factors applied by insurers and rating organizations generally in determining the bases for rates;
(2) The financial condition of the insurer;
(3) The method of operation of such insurer;
(4) The past loss experience of the insurer within the state and without the state when necessary and may give consideration to prospective loss experience within the state and without the state when necessary, over such period of years as shall appear to be fairly representative of the frequency of the occurrence of the particular hazard or peril, including, where pertinent, the conflagration and catastrophe hazards, if any;
(5) All factors reasonably related to the kind of insurance involved; and
(6) A reasonable profit for the insurer and, in the case of participating insurers, to policyholders’ dividends.
In the case of fire insurance, he shall consider the latest available experience of the fire insurance business, other than fire insurance covering motor vehicles, during a period of not less than five years preceding the year in which such rates are reviewed by him.
(Acts 1945, No. 132, p. 133, §14; Acts 1971, No. 407, p. 707, §271.)
The commissioner may, whenever he deems it expedient, but at least once in every five years, make, or cause to be made, an examination of the business, affairs, and method of operation of every rating organization doing business in this state and a like examination of an insurer making its own rates. The cost of such examination shall be fixed in the same manner as provided for in this title and shall be paid by the rating organization or insurer making its own rates being examined. The commissioner may, in his discretion, waive such examination upon proof that such rating organization has, within a reasonably recent period, been examined by a public official or department of another state pursuant to the laws of such state and upon the filing with the department of a certified copy of the report of such examination. The officers, managers, agents, and employees of such rating organization or insurer making its own rates shall exhibit all its books, records, documents, or agreements governing its method of operation, its rating systems, and its accounts for the purpose of such examination. The commissioner, or his representative, may, for the purpose of facilitating and furthering such examination, examine, under oath, the officers, managers, agents, and employees of such rating organization or insurer making its own rates.
(Acts 1945, No. 132, p. 133, §15; Acts 1971, No. 407, p. 707, §272.)
A rating organization, or any insurer making its own rates, may, with the approval of the commissioner, from time to time, alter, supplement, or amend its rating systems, or any part thereof, by filing with the department copies of such alterations, supplements, or amendments, together with a statement of the reason, or reasons, for such alteration, supplement, or amendment. If such alteration, supplement, or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate, and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate, or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement, or amendment. Notwithstanding the foregoing, but subject to the provisions of Section 27-13-30, to the extent not inconsistent with this section, when a filing of adjustments of rates for existing classifications of risks does not involve a change in the relationship between such rates and the expense portion thereof, or does not involve a change of the element of expenses which are paid as a percentage of premiums or does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filing shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this title.
(Acts 1945, No. 132, p. 133, §17; Acts 1971, No. 407, p. 707, §274.)
No insurer, or employee thereof, and no broker or agent shall knowingly charge, demand, or receive a premium for any policy of insurance except in accordance with the respective rating systems on file with, and approved by, the commissioner. No insurer, or employee thereof, and no broker or agent 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 in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage, or consideration may be provided for in rating systems filed by, or on behalf of, such insurer and approved by the commissioner. No insured named in a policy of insurance, nor any employee of such insured, shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium or any such special favor, or advantage, or valuable consideration, or inducement. Nothing contained in this section shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this state nor as prohibiting any participating insurer from distributing to its policyholders dividends, savings or the unused, or unabsorbed, portion of premiums and premium deposits.
(Acts 1945, No. 132, p. 133, §18; Acts 1971, No. 407, p. 707, §275.)
No insurer, and no officer, agent, or employee thereof, shall give false or misleading information to any rating organization of which it is a member or subscriber or to the department which will in any manner affect the proper determination of reasonable, adequate, and nondiscriminatory rates.
(Acts 1945, No. 132, p. 133, §19; Acts 1971, No. 407, p. 707, §276.)
Any rating organization which violates any provisions of this article shall be subject to suspension of its license, and any insurer making its own rates which violates any provision of this article shall be subject to suspension of its certificate of authority to do business in this state. Failure of a rating organization, or insurer making its own rates, to comply with the provisions of any order of the commissioner within 30 days after such order, or any extension thereof as the commissioner may, in his discretion, grant shall automatically suspend the license of such rating organization or insurer.
(Acts 1945, No. 132, p. 133, §20; Acts 1971, No. 407, p. 707, §277.)
If the commissioner shall find, after due notice and hearing, that any rating organization, insurer, officer, agent, or representative thereof has willfully violated any of the provisions of this article, he may issue an order revoking or suspending the license of any such insurer, agent, broker, or representative thereof.
(Acts 1945, No. 132, p. 133, §21; Acts 1971, No. 407, p. 707, §278.)
The commissioner shall not make any order under the provisions of this article without giving every rating organization and insurer who may be affected thereby reasonable notice and a hearing, if hearing is requested. All hearings provided for in this article shall be held at such time and place as shall be designated in a notice which shall be given in writing by registered or certified mail to such rating organization and insurer, or the officers, agents, and representatives thereof, which may be affected thereby, at least 30 days before the date designated therein, which notice shall state the subject of the order. At the conclusion of such hearing, or within 30 days thereafter, the commissioner shall make such order, or orders, as he may deem necessary in accordance with his findings.
(Acts 1945, No. 132, p. 133, §23; Acts 1971, No. 407, p. 707, §280.)
Any final order made by the commissioner as provided by law may, upon appropriate petition filed by the Attorney General on behalf of the state or by any interested party, at any time within 30 days from the date of said order, be reviewed by the Circuit Court of Montgomery County, Alabama, on a writ of certiorari. Upon the filing of such petition, the petitioner shall file with the register or clerk of said court a bond, with good and sufficient sureties, to be approved by the register or clerk, conditioned to pay all costs which may be assessed against the petitioner in such proceedings. The Circuit Court of Montgomery County, Alabama, or the Court of Civil Appeals of Alabama, on appeal to it, may affirm said order or modify or repeal the same, in whole or in part. From the judgment of the Circuit Court of Montgomery County, Alabama, either the state or the interested party taking the appeal may appeal directly to the Court of Civil Appeals of Alabama, within 42 days from the entry of the judgment; the interested party so appealing to the Court of Civil Appeals shall give security for costs of such appeal to be approved by the register or clerk of said court.
(Acts 1945, No. 132, p. 133, §24; Acts 1971, No. 407, p. 707, §281.)
Whenever, under the provisions of this article, the commissioner is authorized or required to do any act, he may designate an assistant, or any salaried employee of the department, to act in his place and stead, who shall report to the commissioner and advise the commissioner on the nature of the matter delegated. The commissioner shall make such order, based upon such advice and report, as he shall, in his discretion, determine, and such order shall have the same force and effect as if the commissioner had acted thereon personally.
(Acts 1945, No. 132, p. 133, §26; Acts 1971, No. 407, p. 707, §283.)
Any rating organization, any insurer, officer, agent, or representative thereof failing to comply with, or otherwise willfully violating, any of the provisions of this article shall be guilty of a misdemeanor and, upon conviction, be punished by a fine of not less than $100.00 nor more than $500.00.
(Acts 1945, No. 132, p. 133, §22; Acts 1971, No. 407, p. 707, §279.)
For the purposes of this article, unless otherwise stated, the following terms shall have the meanings respectively ascribed to them by this section:
(1) RATE. The unit charge by which the measure of exposure or the amount of insurance specified in a policy of insurance or covered thereunder is multiplied to determine the premium.
(2) PREMIUM. The consideration paid or to be paid to an insurer for the issuance and delivery of any binder or policy of insurance.
(3) RATE-MAKING. The examination and analysis of every factor and influence related to and bearing upon the hazard and risk made the subject of insurance; the collection and collation of such factors and influences into rating plans; systems; and the application of such rating systems to individual risks.
(4) RATING PLAN. Every schedule, class, classification, rule, guide, standard, manual, table, rating plan, policy, policy form, or compilation by whatever name described, containing the rates used by any rating organization or by any insurer, or used by any insurer or by any rating organization in determining and ascertaining a rate.
(5) RATING ORGANIZATION. Every person or persons, corporation, partnership, company, society, bureau, or association, whether located within or outside this state, engaged in the business of rate-making for two or more insurers.
(6) INSURER. Any person or persons, corporation, association, partnership, reciprocal exchange or company authorized by the laws of this state to transact the business of insurance in this state.
(7) CASUALTY INSURANCE. As used herein this term is to be construed in its generally accepted trade sense.
(8) UNREASONABLY HIGH RATE. No rate shall be held to be unreasonably high unless:
a. Such rate is unreasonably high for the insurance provided; and
b. A reasonable degree of competition does not exist in the area with respect to the classification to which such rate is applicable.
(9) INADEQUATE RATE. No rate shall be held to be inadequate which upon reasonable assumptions of prospective loss and expense experience will produce an underwriting profit.
(Acts 1945, No. 133, p. 145, §1; Acts 1971, No. 407, p. 707, §284.)
The provisions of this article shall apply to all lines of casualty insurance, including workmen’s compensation, employer’s liability, fidelity, surety, and guaranty bonds, and all other kinds of insurance which casualty and surety insurance companies are authorized to write in this state, except reinsurance, aviation insurance, and accident and health insurance.
(Acts 1945, No. 133, p. 145, §2; Acts 1971, No. 407, p. 707, §285.)
No rating organization shall do business in this state until it shall have been licensed to do so by the commissioner. Application for such license shall be made on such forms as the commissioner shall prepare for that purpose. Upon applying for such license, every rating organization shall file with the department:
(1) A copy of its constitution, its articles of agreement or association, or its certificate of incorporation and of its bylaws or rules governing the conduct of its business or such of the foregoing, if any, as such rating organization may have;
(2) A list of insurers who are or, who have agreed to, become members of, or subscribers to, such rating organization;
(3) The name and address of a person, or persons, in this state upon whom notices or orders of the commissioner affecting such rating organization may be served; and
(4) Such other information as the commissioner may require.
If the commissioner finds that the applicant for license:
If the commissioner shall determine that the applicant is not entitled to a license, he shall make an order denying its application, specifying his reasons for such denial. Licenses issued pursuant to this section shall be renewed on, or before, July 1, of each year in the manner provided by this article. Every rating organization doing business in this state on January 1, 1972, may continue to transact such business thereafter, subject to the provisions of this article, pending its application to the department, to be made within 180 days after January 1, 1972, for a license to do business as required by this section. A fee of $25.00 shall be paid annually to the department for such license issued under this section.
(Acts 1945, No. 133, p. 145, §3; Acts 1971, No. 407, p. 707, §286.)
Every rating organization shall make reasonable provision in its bylaws, rules, constitution, or otherwise to permit any insurer engaged in the kind of insurance for which rate-making is done by such rating organization to become a member or subscriber to its rating services for any kind of insurance, or subdivisions thereof, upon application therefor by such insurer. No rating organization shall discriminate unfairly between insurers in the condition imposed for admission as subscribers or in the services rendered to either members or subscribers. 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. The refusal of any rating organization to admit an insurer as a subscriber shall, at the request of such insurer, be reviewed by the commissioner at a hearing held upon at least 10 days’ notice to such rating organization and such insurer. If the commissioner shall find that the insurer has been refused admittance to such rating organization as a subscriber without justification, he shall make an order directing such rating organization to admit such insurer as a subscriber. If he shall find that the action of the rating organization in refusing admittance to an insurer as a subscriber is justified, he shall make an order affirming its action.
(Acts 1945, No. 133, p. 145, §4; Acts 1971, No. 407, p. 707, §287.)
Every rating organization shall notify the department within 10 days upon the admission, withdrawal, or expulsion therefrom of any member or subscriber. Should a rating organization expel or otherwise exclude a subscriber for the refusal or failure of such subscriber to pay such rating organization the subscribership charges agreed upon, such rating organization shall readmit such subscriber upon payment to it of any delinquent charges.
(Acts 1945, No. 133, p. 145, §15; Acts 1971, No. 407, p. 707, §298.)
Every rating organization and every insurer which makes its own rates shall make rates that are not unreasonably high or inadequate for the safety and soundness of the insurer and which do not unfairly discriminate between risks in this state and shall, in rate-making and in making rating plans:
(1) Adopt basis classifications, which shall be used as the basis of all manual, minimum, class, schedule, or experience rates;
(2) Give consideration to past experience within the state and without the state, when necessary, and due consideration may be given to prospective loss experience within the state and without the state, when necessary, over such period of years as appears to be fairly representative of the frequency of the occurrence of the particular risk; and
(3) Give consideration to all factors reasonably related to the kind of insurance involved, including a reasonable profit for the insurer and, in the case of participating insurers, to policyholders’ dividends.
The systems of expense provisions included in the rates for use by insurers or groups 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 any subdivision or combination thereof, for which the commissioner approves the application of separate expense provisions.
(Acts 1945, No. 133, p. 145, §5; Acts 1971, No. 407, p. 707, §288.)
Every insurer shall file annually on, or before, July 1, with the rating organization of which it is a member or subscriber, or with such other common agency representing a group of insurers as the department may approve, and with the department a statistical report showing its premiums and its losses on all kinds of insurance to which this article is applicable, together with such other information as the department may deem necessary for the proper determination of the reasonableness and adequacy of rates. Such statistical report filed with the rating organization may be consolidated and filed by such common agency. Such data shall be kept and reports made in such manner and on such forms as may be prescribed by the commissioner. All such annual filings with the department shall be kept under lock and key, and any official or employee of the department who shall divulge the contents or permit the examination thereof, except for the purpose of properly administering the provisions of this article or upon the order of court, shall be guilty of a misdemeanor and shall be subject to a fine of not more than $50.00 and shall thereafter be ineligible to be an employee or agent of said department. Reasonable rules and plans may be promulgated by the commissioner, after consultation with all insurers and rating organizations affected thereby, for the interchange of loss experience necessary for the application of rating plans. In order to further uniform administration of rating 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 and cooperate with them with respect to rate-making and the application of rating systems. The commissioner may make reasonable rules and regulations necessary to effect the purposes of this article.
(Acts 1945, No. 133, p. 145, §6; Acts 1971, No. 407, p. 707, §289.)
Beginning 180 days after January 1, 1972, every insurer shall, before using or applying any rate to any kind of insurance coming within the scope of this article, file with the department a copy of the rating plan upon which such rate is based or by which such rate is fixed or determined. The filing required in this section may be made on behalf of such insurer by a rating organization of which such insurer is a member or subscriber. From and after the date of the filing of such rating plans, every insurer shall charge and receive rates fixed or determined in strict conformity therewith, except as in this article otherwise expressly provided.
(Acts 1945, No. 133, p. 145, §7; Acts 1971, No. 407, p. 707, §290.)
If, after examination thereof, the commissioner shall find that such rating plans filed by, or on behalf of, an insurer provide for, result in or produce rates that are unreasonably high or excessive, or are not adequate for the safeness and soundness of the insurer or are unfairly discriminatory between risks in this state involving essentially the same risks, he shall issue an order to such insurer, or to the rating organization of which such insurer is a member or subscriber, directing that such rating plans be altered in the manner, and to the extent, stated in such order to produce rates that are reasonable and adequate and not unfairly discriminatory. If the commissioner shall find that such rating plans provide for, result in or produce rates that are not unreasonably high, are not inadequate for the safeness and soundness of the insurer and are not unfairly discriminatory between risks in this state, he shall approve such rating plans and rates, and such approval shall continue in effect until he shall, by order, direct that such rating plans and rates be changed or modified as in this section provided. As soon as reasonably possible after the filing has been made, the commissioner shall, in writing, approve or disapprove the same; provided, however, that unless disapproved within 30 days such rating plans and rates shall be deemed to be approved by him. Whenever the commissioner shall find that rating plans theretofore approved by him or which pursuant to Section 27-13-75 are effective without approval, provide for, result in or produce rates which are unreasonable or inadequate or which discriminate unfairly between risks in this state, he shall issue an order to all insurers employing such rating plans, or to the rating organizations of which such insurers are members or subscribers, directing that such rating plans be altered or revised in the manner, and to the extent, stated in such order to provide for, result in or produce rates which are reasonable, adequate and do not discriminate unfairly between risks in this state. Rating plans and rates filed with the department on, or before, January 1, 1972, pursuant to the provisions of this section, shall be deemed to have been approved by the department, such approval to continue in effect until the commissioner shall, by order, direct that such rating system be altered or modified as in this section provided. Changes in rates resulting from an order of the department directing or approving alterations or revisions in rating plans shall become effective following the date of such order as fixed by the commissioner and shall be applied to policies written on, or after, such effective date. Under such rules and regulations as he shall adopt, 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 examination as he may deem advisable to ascertain whether any rates affected by such order are excessive, inadequate, or unfairly discriminatory.
(Acts 1945, No. 133, p. 145, §8; Acts 1971, No. 407, p. 707, §291.)
Any member of, or subscriber to, a rating organization may appeal to the commissioner from the decision of such rating organization in approving or rejecting any proposed change in, or addition to, the filings of such rating organization; and the commissioner shall, after a hearing held on not less than 10 days’ written notice to the appellant and to such rating organization, issue an order approving the decision of such rating organization or directing it to give further consideration to such proposal. If such appeal is based upon the failure of the rating organization to make a filing on behalf of such member or subscriber which is based on a system of expense provisions which differs, in accordance with the right granted in this article, from the system of expense provisions included in a filing made by the rating organization, the commissioner shall, if he grants the appeal, order the rating organization to make the requested filing for use by the appellant.
(Acts 1945, No. 133, p. 145, §9; Acts 1971, No. 407, p. 707, §292.)
Every rating organization and every insurer which makes its own rates shall, after receiving written request therefor from the department, furnish to any person affected by a rate made by it, or to the authorized representative of such person, all pertinent information as to such rate.
(Acts 1945, No. 133, p. 145, §10; Acts 1971, No. 407, p. 707, §293.)
Every rating organization and every insurer which does its own rate-making shall provide reasonable means within this state, to be approved by the department, whereby any person, or persons, affected by a rate made by it may be heard on a written application to reduce such rate. If such rating organization or such insurer shall refuse to reduce such rate, the person, or persons, affected thereby may make a like application to the commissioner within 30 days after receipt of notice in writing that the application for reduction of rate has been denied by such rating organization or by such insurer. If, upon the expiration of 20 days after application for the reduction of a rate, such rating organization or such insurer fails to grant or reject the application, the person, or persons, affected may make the application to the commissioner in the same manner as if the application had been rejected by such rating organization or by such insurer. The commissioner shall fix a time and place for hearing on such application, upon not less than 10 days’ notice by registered or certified mail, for the applicant and such rating organization or such insurer to be heard. The commissioner shall make such order as he shall deem just and lawful upon the evidence placed before him at such hearing.
(Acts 1945, No. 133, p. 145, §11; Acts 1971, No. 407, p. 707, §294.)
(a) Any insurer may apply to the commissioner for permission to effect a uniform percentage increase or decrease in the rates applied to all kinds of a particular class in the state in a particular kind, or kinds, of insurance. Upon the filing of such application, the commissioner shall give notice thereof by registered or certified mail to the rating organization, if any, of which such insurer is a member or subscriber and shall fix a time and place for a hearing upon the merits of such application. At such hearing, such insurer and such rating organization, or their representatives, shall be entitled to be heard and to present evidence in support of, or against, such application. The commissioner shall, upon the conclusion of such hearing, make such order as he shall deem consistent with the establishment and maintenance of reasonable, adequate, and nondiscriminatory rates. If the application is granted, such increase or decrease shall remain in force unless withdrawn by the insurer with the consent of, or by order of, the commissioner. If the commissioner shall find that such increase or decrease will result in rates that are unreasonable, inadequate, or unfairly discriminatory, he shall make an order denying the application.
(b) Notwithstanding the foregoing, but subject to the provisions of Section 27-13-68, to the extent not inconsistent with this section, when a filing of adjustments of rates for existing classifications of risks is made under this section and does not involve a change in the relationship between such rates and the expense portion thereof, or does not involve a change of the element of expenses which are paid as percentage of premiums, and does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filings shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this article.
(c) A rate in excess of that promulgated by such rating organization may be charged on any specific risk, provided such higher rate is charged with the knowledge and written consent of both the insured and the commissioner.
(d) Subsection (b) of this section shall not apply to workmen’s compensation or employer’s liability insurance.
(Acts 1945, No. 133, p. 145, §12; Acts 1971, No. 407, p. 707, §295.)
In every case where, pursuant to the provisions of the article, the commissioner is authorized or required to determine whether rates are reasonable and adequate and not unfairly discriminatory, he shall consider the factors and standards set forth in Section 27-13-65.
(Acts 1945, No. 133, p. 145, §13; Acts 1971, No. 407, p. 707, §296.)
The commissioner may, whenever he deems it expedient, but at least once in every five years, make, or cause to be made, an examination of the business, affairs, and method of operation of each rating organization doing business in this state and a like examination of each insurer making its own rates. The costs of such examination shall be fixed in the same manner as provided for in Section 27-2-25 and shall be paid by the rating organization or insurer making its own rates examined. The commissioner may, in his discretion, waive such examination upon proof that such rating organization has, within a reasonably recent period, been examined by a public official or department of another state, pursuant to the laws of such state, and upon the filing with the department of a certified copy of the report of such examination. The officers, managers, agents, and employees of such rating organization or insurer making its own rates shall exhibit all its books, records, documents, or agreements governing its method of operation, its rating systems and its accounts for the purpose of such examination. The commissioner, or his representative, may, for the purpose of facilitating and furthering such examination, examine, under oath, the officers, managers, agents, and employees of such rating organization or insurer making its own rates.
(Acts 1945, No. 133, p. 145, §14; Acts 1971, No. 407, p. 707, §297.)
A rating organization or any insurer making its own rates may, with the approval of the commissioner, from time to time, alter, supplement, or amend its rating plans, or any part thereof, by filing with the department copies of such alterations, supplements, or amendments, together with a statement of the reason, or reasons, for such alteration, supplement, or amendment. If such alteration, supplement, or amendment shall have the effect of increasing or decreasing rates, the commissioner shall determine whether the rates as altered thereby are reasonable, adequate, and not unfairly discriminatory. If the commissioner shall determine that the rates as so altered are not unreasonably high, or inadequate or unfairly discriminatory, he shall make an order approving them. If he shall find that the rates as altered are unreasonable, inadequate, or unfairly discriminatory, he shall issue an order disapproving such alteration, supplement, or amendment. Notwithstanding the foregoing, but subject to the provisions of Section 27-13-68, to the extent not inconsistent with this section, when a filing of adjustments of rates for existing classifications of risks does not involve a change in the relationship between such rates and the expense portion thereof, or does not involve a change of the element of expenses which are paid as a percentage of premiums or does not involve a change in rate relativities among such classifications on any basis other than loss experience, such filing shall become effective upon the date, or dates, specified in the filing and shall be deemed to meet the requirements of this article. The foregoing provisions shall not apply to workmen’s compensation and employers’ liability insurance.
(Acts 1945, No. 133, p. 145, §16; Acts 1971, No. 407, p. 707, §299.)
No insurer, or employee thereof, and no broker or agent shall knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the respective rating systems on file with, and approved by, the commissioner. No insurer, or employee thereof, and no broker or agent 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 in the policy of insurance, except to the extent that such rebate, discount, abatement, credit, reduction, favor, advantage, or consideration may be provided for in rating systems filed by, or on behalf of, such insurer and approved by the commissioner. No insured named in a policy of insurance nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any such special favor or advantage, or valuable consideration or inducement. Nothing contained in this section shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this state nor as prohibiting any participating insurer from distributing to its policyholders dividends, savings or the unused or unabsorbed portion of premiums and premium deposits.
(Acts 1945, No. 133, p. 145, §17; Acts 1971, No. 407, p. 707, §300.)
No insurer and no officer, agent, or employee thereof shall give false or misleading information to any rating organization of which it is a member or subscriber or to the department which will in any manner affect the proper determination of reasonable, adequate, and nondiscriminatory rates.
(Acts 1945, No. 133, p. 145, §18; Acts 1971, No. 407, p. 707, §301.)
Any rating organization which violates any provision of this article shall be subject to suspension of its license, and any insurer making its own rates which violates any provisions of this article shall be subject to suspension of its certificate of authority to do business in this state. Failure of a rating organization or an insurer making its own rates to comply with the provisions of any order of the commissioner within 30 days after such order, or any extension thereof, as the commissioner may, in his discretion, grant shall automatically suspend the license of such rating organization or insurer.
(Acts 1945, No. 133, p. 145, §19; Acts 1971, No. 407, p. 707, §302.)
If the commissioner shall find, after due notice and hearing, that any rating organization, insurer, officer, agent, or representative thereof has willfully violated any of the provisions of this article, he may issue an order revoking or suspending the license of any such insurer, agent, broker, or representative thereof.
(Acts 1945, No. 133, p. 145, §20; Acts 1971, No. 407, p. 707, §303.)
The commissioner shall not make any order under the provisions of this article without giving every rating organization and insurer who may be affected thereby reasonable notice and a hearing, if hearing is requested. All hearings provided for in this article shall be held at such time and place as shall be designated in a notice which shall be given in writing by registered or certified mail to such rating organization and insurer, or the officers and agents and representatives thereof, which may be affected thereby, at least 30 days before the date designated therein, which notice shall state the subject of the order. At the conclusion of such hearing, or within 30 days thereafter, the commissioner shall make such order, or orders, as he may deem necessary in accordance with his findings.
(Acts 1945, No. 133, p. 145, §22; Acts 1971, No. 407, p. 707, §305.)
Any final order made by the commissioner as provided by law may, upon appropriate petition filed by the Attorney General on behalf of the state or by any interested party at any time within 30 days from the date of said order, be reviewed by the Circuit Court of Montgomery County, Alabama, on a writ of certiorari. Upon the filing of such petition, the petitioner shall file with the register or clerk of said court a bond, with good and sufficient sureties, to be approved by the register or clerk, conditioned to pay all costs which may be assessed against the petitioner in such proceedings. The Circuit Court of Montgomery County, Alabama, or the Court of Civil Appeals of Alabama, on appeal to it, may affirm said order or modify or repeal the same, in whole or in part. From the judgment of the Circuit Court of Montgomery County, Alabama, either the state or the interested party taking the appeal may appeal directly to the Court of Civil Appeals of Alabama within 42 days from the entry of the judgment; the interested party so appealing to the Court of Civil Appeals shall give security for the costs of such appeal to be approved by the register or clerk of said court.
(Acts 1945, No. 133, p. 145, §23; Acts 1971, No. 407, p. 707, §306.)
Whenever, under the provisions of this article, the commissioner is authorized or required to do any act, he may designate an assistant or any salaried employee of the department to act in his place and stead, who shall report to the commissioner and advise the commissioner on the nature of the matter delegated. The commissioner shall make such order, based upon such advice and report, as he shall, in his discretion, determine, and such order shall have the same force and effect as if the commissioner had acted thereon personally.
(Acts 1945, No. 133, p. 145, §24; Acts 1971, No. 407, p. 707, §307.)
Any rating organization, and any insurer, officer, agent, or representative thereof, failing to comply with, or otherwise willfully violating, any of the provisions of this article shall be guilty of a misdemeanor and, upon conviction, be punished by a fine of not less than $100.00 nor more than $500.00.
(Acts 1945, No. 133, p. 145, §21; Acts 1971, No. 407, p. 707, §304.)
“Advisory organization” means every group, association, or other organization of insurers, whether located within or without this state, which assists insurers which make their own filings or rating organizations in rate-making by collection and furnishing of loss or expense statistics or by the submission of recommendations, but which does not make filings under Articles 2 or 3 of this chapter.
(Acts 1965, 2nd Ex. Sess., No. 120, p. 167, §1; Acts 1971, No. 407, p. 707, §308.)
Every advisory organization assisting any rating organization or any insurer whose rates are subject to regulation under Article 2 of this chapter or any rating organization or any insurer whose rates are subject to regulation under Article 3 of this chapter, as a condition precedent to the rendering of such assistance, shall comply with the provisions of this article and any, and all, duly promulgated rules or regulations or orders of the commissioner relative to insurance rates, rate-making, or assistance therein.
(Acts 1965, 2nd Ex. Sess., No. 120, p. 167, §2; Acts 1971, No. 407, p. 707, §309.)
(a) 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 its bylaws, rules, and regulations governing its activities;
(2) A list of its members;
(3) The name and address of a resident of this state upon whom notices or orders of the commissioner or process issued at his direction may be served; and
(4) An agreement that the commissioner may examine such advisory organization in accordance with the provisions of this section.
(b) 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 Articles 2 or 3 of this chapter, as the case may be, 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 Articles 2 or 3 of this chapter and requiring the discontinuance of such act or practice.
(c) No insurer which makes its own filings 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 article or with an order of the commissioner involving such statistics or recommendations issued under subsection (b) 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.
(Acts 1965, 2nd Ex. Sess., No. 120, p. 167, §3; Acts 1971, No. 407, p. 707, §310.)
(a) Every advisory organization rendering assistance to a rating organization or to an insurer whose rates are subject to regulation under Article 2 of this chapter shall agree to be subject to examination in the same manner, and upon the same terms and conditions, as rating organizations and insurers making their own rates are pursuant to Section 27-13-36.
(b) Every advisory organization rendering assistance to a rating organization or to an insurer whose rates are subject to regulation under Article 3 of this chapter shall agree to be subject to examination in the same manner, and upon the same terms and conditions, as rating organizations and insurers making their own rates are pursuant to Section 21-13-74.
(Acts 1965, 2nd Ex. Sess., No. 120, p. 167, §4; Acts 1971, No. 407, p. 707, §311.)
The commissioner is authorized, and directed, to enforce this article, and he is hereby authorized to make such orders, rules, and regulations as are reasonable and proper to facilitate the administration hereof.
(Acts 1965, 2nd Ex. Sess., No. 120, p. 167, §5; Acts 1971, No. 407, p. 707, §312.)
The provisions of this article are supplemental and shall be construed in pari materia with other laws relating to insurance rates and rate-making.
(Acts 1965, 2nd Ex. Sess., No. 120, p. 167, §7; Acts 1971, No. 407, p. 707, §313.)
(a) Any rates, rating schedules, or rating manuals submitted to or filed with the Commissioner of the Department of Insurance for private passenger automobile liability insurance and private passenger automobile physical damage insurance shall include an appropriate reduction in premium charges if the principal operator is 55 years of age or older and has successfully completed a motor vehicle accident prevention course approved pursuant to this article.
(b) Upon successful completion of an approved motor vehicle accident prevention course, each participant shall be issued, by the course’s sponsoring entity, a certificate of completion which shall be the basis of the qualification for the reduction in the automobile insurance premium.
(c) The premium reduction required in this section shall be effective for an insured for a three-year period after successful completion of the approved course, except that the insurer may require, as a condition of providing and maintaining the premium reduction, that the insured not be involved in an accident for which the insured is at fault nor be found guilty of a moving violation during the three-year period after course completion.
(d) Any discount used by an insurer shall be presumed appropriate unless credible evidence data demonstrates otherwise.
(e) This section shall not apply if the approved course is taken by a person who is specified by a court or other governmental entity resulting from a moving traffic violation.
(f) Each participant shall take an approved course every three years to continue to be eligible for the reduction in premiums provided in this section.
(Act 2000-432, p. 793, §1.)
To qualify for the insurance premium reduction described in Section 27-13-120, the motor vehicle accident prevention course shall be sponsored by the National Safety Council, the American Automobile Association, or the AARP or shall be an equivalent course approved by the Department of Public Safety. The course shall consist of not less than six classroom or online hours of instruction, the instructors for the course shall be certified by the sponsoring entity, and the contents of the course shall be outlined by the sponsoring entity.
(Act 2000-432, p. 793, §2; Act 2012-389, p. 1048, §1.)
The provisions of this article shall not apply to individuals 55 years of age or older that are already receiving a rate reduction, based on attained age, from their insurance company.
(Act 2000-432, p. 793, §3.)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) POLICY. A written contract of, or written agreement for, or effecting, insurance, by whatever name called, and includes all clauses, riders, endorsements, and papers attached, or issued, and delivered for attachment thereto and made a part thereof.
(2) PREMIUM. The consideration for insurance, by whatever name called. Any “assessment” or any “membership,” “policy,” “survey,” “inspection,” “service,” or similar fee or charge in consideration for an insurance contract is deemed part of the premium.
(Acts 1971, No. 407, p. 707, §315.)
This chapter applies as to all insurance contracts and annuity contracts other than:
(1) Reinsurance;
(2) Policies or contracts not issued for delivery in this state nor delivered in this state;
(3) Wet marine and transportation insurance; and
(4) Title insurance, except as to the following provisions:
a. Section 27-14-5;
b. Section 27-14-8;
c. Section 27-14-9;
d. Section 27-14-13;
e. Section 27-14-14; and
f. Section 27-14-17.
(Acts 1971, No. 407, p. 707, §314.)
(a) Insurable interest with reference to personal insurance is an interest based on a reasonable expectation of pecuniary advantage through the continued life, health, or bodily safety of another person and consequent loss by reason of his or her death or disability or a substantial interest engendered by love and affection in the case of individuals closely related by blood or by law.
(b) An individual has an unlimited insurable interest in his or her own life, health, and bodily safety and may lawfully take out a policy of insurance on his or her own life, health, or bodily safety and have the same made payable to whomsoever he or she pleases, regardless of whether the beneficiary so designated has an insurable interest.
(c) A corporation, foreign or domestic, has an insurable interest in the life or physical or mental ability of any of its directors, officers, or employees, or the directors, officers, or employees of any of its subsidiaries or any other person whose death or physical or mental disability might cause financial loss to the corporation; or, pursuant to any contractual arrangement with any shareholder concerning the reacquisition of shares owned by the shareholder at the time of his or her death or disability, on the life or physical or mental ability of that shareholder for the purpose of carrying out the contractual arrangement; or pursuant to any contract obligating the corporation as part of compensation arrangements or pursuant to a contract obligating the corporation as guarantor or surety, on the life of the principal obligor. The trustee of a trust established by a corporation for the sole benefit of the corporation has the same insurable interest in the life or physical or mental ability of any person as does the corporation. The trustee of a trust established by a corporation providing life, health, disability, retirement, or similar benefits to employees of the corporation or its affiliates and acting in a fiduciary capacity with respect to the employees, retired employees, or their dependents or beneficiaries has an insurable interest in the lives of employees for whom the benefits are to be provided.
(d) After satisfaction of the requirements of Section 34-13-232(d)(1), the trustee of a trust established by a certificate holder which complies with the requirements of Article 5 of Chapter 13 of Title 34 has an insurable interest in the life of a preneed contract purchaser or a preneed contract beneficiary. It is the intention of the Legislature that the preceding sentence shall be retroactive and shall also apply to all policies, as defined in this chapter, issued prior to May 6, 2008. It is also the intention of the Legislature that the value of any life insurance policy purchased by a trust pursuant to Article 5 of Chapter 13 of Title 34 shall not exceed the lesser of twenty thousand dollars ($20,000) or 100 percent of the purchase price of the preneed contract regulated under Article 5 of Chapter 13 of Title 34. Further, it is the intention of the Legislature that any life insurance policy purchased by a trust pursuant to Article 5 of Chapter 13 of Title 34 be used for the sole benefit of the preneed contract purchaser, the preneed contract beneficiary, or the funeral establishment or cemetery providing funeral services, burial services, or funeral merchandise for the preneed contract purchaser, and not for the benefit of another person who otherwise lacks an insurable interest under this section.
(e) Any provision of this section and chapter to the contrary notwithstanding, a charitable organization that meets the requirements of 26 U.S.C. § 501(c)(3) may own or purchase life insurance on an individual who consents to the ownership of purchase of that insurance. The charitable organization shall be deemed to have a substantial interest in the individual insured and to have an insurable interest in the individual insured whether the charitable organization originally purchases the insurance or the insurance is later transferred to the charitable organization by the insured or another person. This subsection is intended to clarify and declare existing law.
(f) An insurable interest shall exist at the time the contract of personal insurance becomes effective, but this requirement need not exist at the time the loss occurs.
(g) Any personal insurance contract procured or caused to be procured upon another individual is void unless the benefits under the contract are payable to the individual insured, or his or her personal representative, or to a person having, at the time when the contract was made, an insurable interest in the individual insured. In the case of a void contract, the insurer shall not be liable on the contract but shall be liable to repay to the person, or persons, who have paid the premiums, all premium payments without interest.
(Acts 1971, No. 407, p. 707, §316; Acts 1994, No. 94-576, p. 1049, §1; Act 2008-271, p. 393, §1; Act 2025-275, §1.)
(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 damnified by loss, injury, or impairment thereof.
(Acts 1971, No. 407, p. 707, §317.)
(a) Any person of competent legal capacity may contract for insurance.
(b) Any minor of the age of 15 years or more, as determined by the nearest birthday, may, notwithstanding his minority, contract for annuities, or for insurance upon his own life, body, health, property, liabilities, or other interests or on the person 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 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) of this section, 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.
(Acts 1967, No. 96, p. 434, §1; Acts 1971, No. 407, p. 707, §318.)
(a) No life or disability insurance contract upon an individual, except a contract of group life insurance or of group or blanket disability insurance, shall be made or effectuated unless at the time of the making of the contract the individual insured, being of competent legal capacity to contract, applies therefor or has consented thereto, 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; and
(3) Family policies may be issued insuring any two or more members of a family on an application signed by either parent, a stepparent or by a husband or wife;
(b) An insurer shall be entitled to rely upon all statements, declarations, and representations made by an applicant for insurance relative to the insurable interest which such applicant has in the insured, and no insurer shall incur any 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.
(c) As to kinds of insurance other than life or disability 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 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.
(d) No alteration of any written application for any life or disability 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; provided, however, an insurer may prepare and attach to a contract of life or disability insurance a summary of the contents of the application therefor.
(Acts 1971, No. 407, p. 707, §319; Acts 1988, No. 88-545, p. 844, §1.)
(a) All statements and descriptions in any application for an insurance policy or annuity contract, or in negotiations therefor, 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;
(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 a policy or contract at the premium rate as applied for, 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.
(b) No plea of misrepresentation or fraud in connection with the issuance of a life insurance policy or annuity contract shall be filed unless accompanied by a payment into court of all premiums paid on the policy or contract.
(Code 1940, T. 28, §6; Acts 1971, No. 407, p. 707, §320.)
(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, and approved by, the commissioner. This subsection 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 disability insurance policies and are used at the request or with the consent 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 coverages, the filing required by this subsection may be made by rating organizations on behalf of its members and subscribers; but this subsection 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 deemed approved unless prior thereto it has been affirmatively approved or disapproved by order of the commissioner. Approval 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 approve or disapprove any such form, by giving notice of such extension before expiration of the initial 30-day period. At the expiration of any such period as so extended, and in the absence of such prior affirmative approval or disapproval, any such form shall be deemed approved. The commissioner may, at any time, after notice and for cause shown, withdraw any such approval.
(c) Any order of the commissioner disapproving any such form or withdrawing a previous approval shall state the grounds therefor and the particulars thereof in such detail as reasonably to inform the insurer thereof.
(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 approval 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 approval may be taken as provided in Section 27-2-32.
(Acts 1971, No. 407, p. 707, §321.)
The commissioner may disapprove any form filed under Section 27-14-8 or withdraw any previous approval thereof only if the form:
(1) Is in any respect in violation of, or does not comply with, this title;
(2) 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) Has any title, heading, or other indication of its provisions which is misleading;
(4) Is printed, or otherwise reproduced, in such manner as to render any provision of the form substantially illegible; or
(5) Contains provisions which are unfair, or inequitable, or contrary to the public policy of this state or which would, because such provisions are unclear or deceptively worded, encourage misrepresentation.
(Acts 1971, No. 407, p. 707, §322.)
(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; however, 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 the protection of the insured or 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.
(Acts 1971, No. 407, p. 707, §323.)
(a) Every policy shall specify:
(1) The names of the parties to the contract;
(2) The subject of the insurance;
(3) The risks insured against;
(4) The time when the insurance thereunder takes effect and the period during which the insurance is to continue;
(5) The premium; and
(6) The conditions pertaining to the insurance.
(b) If under the policy the exact amount of premium is determinable only at stated intervals or termination of the contract, a statement of the basis and rates upon which the premium is to be determined and paid shall be included.
(c) This section shall not apply as to surety contracts or to group insurance policies.
(Acts 1971, No. 407, p. 707, §324.)
(a) For purposes of this section, “private insurer” is defined as any of the following:
(1) Any commercial insurance company offering health or casualty insurance to individuals or groups, including both experience-rated contracts and indemnity contracts.
(2) Any profit or nonprofit prepaid plan offering either medical services or full or partial payment for the diagnosis or treatment of an injury, disease, or disability.
(3) Any organization administering health or casualty insurance plans for professional associations, unions, fraternal groups, employer-employee benefit plans, and any similar organization offering these payments or services, including self-insured and self-funded plans.
(4) Any health insurer, including group health plans, as defined in Section 607(1) of the Employee Retirement Income Security Act of 1974, self-insured plans, service benefit plans, managed care organizations, pharmacy benefit managers, or other parties that are, by statute, contract, or agreement, legally responsible for payment of a claim for a health care item or service.
(b) Any provision in an insurance contract issued or renewed after March 25, 1980, by a private insurer which denies or reduces benefits due to the eligibility of the insured to receive assistance under the Medicaid program is null and void.
(c) A private insurer may not deny enrollment to an individual because of Medicaid eligibility.
(d) As a condition of doing business in Alabama, a private insurer shall do all of the following:
(1) Provide, with respect to individuals who are eligible for, or are provided, medical assistance under the Alabama Title XIX plan, upon the request of the state, information to determine during what period the individuals or their spouses or their dependents may be, or may have been, covered by a health insurer and the nature of the coverage that is or was provided by the health insurer, including the name, address, and identifying number of the plan, in a manner prescribed by the state Medicaid Agency.
(2) Accept the state’s right of recovery and the assignment to the state of any right of an individual or other entity to payment from the party for an item or service for which payment has been made under the Alabama Medicaid program.
(3) Respond to an inquiry by the state regarding a claim for payment for any health care item or service that is submitted not later than three years after the date of the provision of such health care item or service.
(4) Agree not to deny a claim submitted by the state solely on the basis of the date of submission of the claim, the type or format of the claim form, or a failure to present proper documentation at the point-of-sale that is the basis of the claim, if both of the following apply:
a. The claim is submitted by the state within the three-year period beginning on the date on which the item or service was furnished.
b. Any action by the state to enforce its rights with respect to the claim is commenced within six years of the state’s submission of the claim.
(e) The provisions of this section shall not be effective if they are found by a court of competent jurisdiction to contravene federal laws or federal regulations applicable to the Medicaid program.
(Acts 1980, No. 80-124, p. 188; Acts 1994, No. 94-709, p. 1359, §1; Act 2008-388, p. 731, §1.)
A policy may contain additional provisions not inconsistent with this title and which are:
(1) Required to be inserted by the laws of the insurer’s domicile;
(2) Necessary, on account of the manner in which the insurer is constituted or operated, in order to state the rights and obligations of the parties to the contract; or
(3) Desired by the insurer and neither prohibited by law nor in conflict with any provisions required to be included therein.
(Acts 1971, No. 407, p. 707, §325.)
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.
(Acts 1971, No. 407, p. 707, §326.)
(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 of an individual not authorized so to execute as of the date of the policy.
(Acts 1971, No. 407, p. 707, §327.)
(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 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 cosurety obligations.
(Acts 1971, No. 407, p. 707, §328.)
Any insurance policy, rider, or endorsement hereafter issued and otherwise valid which contains any condition or provision not in compliance with the requirements of this title shall not be thereby rendered invalid but shall be construed and applied in accordance with such conditions and provisions as would have applied had such policy, rider, or endorsement been in full compliance with this title.
(Acts 1971, No. 407, p. 707, §329.)
(a) Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by any rider, endorsement, or application which is a part of the policy.
(b) A clause in any policy of life insurance, including burial insurance, providing that such policy shall be incontestible 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.
(Acts 1971, No. 407, p. 707, §330.)
(a) Binders or other contracts for temporary insurance may be made orally or in writing and shall be deemed to include all the usual terms of the policy as to which the binder was given, together with such applicable endorsements as are designated in the binder, except as superseded by the clear and express terms of the binder.
(b) No binder shall be valid beyond the issuance of the policy with respect to which it was given or beyond 90 days from its effective date, whichever period is the shorter.
(c) If the policy has not been issued, a binder may be extended or renewed beyond such 90 days with the written approval of the commissioner or in accordance with such rules and regulations relative thereto as the commissioner may promulgate.
(d) This section shall not apply to life or disability insurances.
(Acts 1971, No. 407, p. 707, §331.)
(a) Subject to the insurer’s requirements as to payment of premium, every policy shall be mailed or delivered to the insured or to the person entitled thereto within a reasonable period of time after its issuance, except where a condition required by the insurer has not been met by the insured.
(b) 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 pledgor 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 coverages, 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 pledgor 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.
(Acts 1971, No. 407, p. 707, §332.)
(a) As used in this section, each of the following words shall have the following meanings:
(1) DELIVERED BY ELECTRONIC MEANS or ELECTRONIC DELIVERY. Any of the following:
a. Delivery to an electronic mail address at which a party has consented to receive notices or documents.
b. Posting on an electronic network or site accessible via the Internet, mobile application, computer, mobile device, tablet, or any other electronic device, together with separate notice of the posting which shall be provided 1. by electronic mail to the address at which the party has consented to receive notice or 2. by any other delivery method that has been consented to by the party.
(2) PARTY. A recipient of any notice or document required as part of an insurance transaction, including, but not limited to, an applicant, an insured, a policyholder, or an annuity contract holder.
(b) Subject to the requirements of this section, any notice to a party or any other document required under applicable law in an insurance transaction involving property and casualty insurance or that is to serve as evidence of insurance coverage may be delivered, stored, and presented by electronic means so long as it meets the requirements of the Uniform Electronic Transactions Act.
(c) Delivery of a notice or document in accordance with this section shall be considered equivalent to any delivery method required under applicable law, including delivery by first class mail, postage prepaid, certified mail, certificate of mail, or certificate of mailing.
(d) A notice or document may be delivered by electronic means by an insurer to a party under this section if:
(1) The party has affirmatively consented to that method of delivery and has not withdrawn the consent.
(2) The party, before giving consent, is provided with a clear and conspicuous statement informing the party of all of the following:
a. The right of the party to withdraw consent to have a notice or document delivered by electronic means, at any time, and any conditions or consequences imposed in the event consent is withdrawn.
b. The types of notices and documents to which the consent of the party would apply.
c. The right of a party to have a notice or document delivered in paper form.
d. The procedures a party must follow to withdraw consent to have a notice or document delivered by electronic means and to update the electronic mail address of the party.
(e)(1) The party, before giving consent, shall be provided with a statement of the hardware and software requirements for access to and retention of a notice or document delivered by electronic means and consents electronically, or confirms consent electronically, in a manner that reasonably demonstrates that the party can access information in the electronic form that will be used for notices or documents delivered by electronic means as to which the party has given consent.
(2) After consent of the party is given, the insurer, if a change in the hardware or software requirements is needed to access or retain a notice or document delivered by electronic means creates a material risk that the party may not be able to access or retain a subsequent notice or document to which the consent applies, shall provide the party with a statement that:
a. Describes the revised hardware and software requirements for access to and retention of a notice or document delivered by electronic means.
b. The right of the party to withdraw consent without the imposition of any condition or consequence that was not disclosed at the time of initial consent.
c. Complies with subdivision (2) of subsection (d).
(f) This section shall not affect the requirements related to content or timing of any notice or document required under applicable law.
(g) If a provision of this section or applicable law requiring a notice or document to be provided to a party expressly requires verification or acknowledgment of receipt of the notice or document, the notice or document may be delivered by electronic means only if the method used provides for verification or acknowledgment of receipt.
(h) The legal effectiveness, validity, or enforceability of any contract or policy of insurance executed by a party may not be denied solely because of the failure to obtain electronic consent or confirmation of consent of the party in accordance with subsection (c) of this section.
(i)(1) A withdrawal of consent by a party does not affect the legal effectiveness, validity, or enforceability of a notice or document delivered by electronic means to the party before the withdrawal of consent is effective.
(2) A withdrawal of consent by a party is effective within a reasonable period of time after receipt of the withdrawal by the insurer.
(3) Failure by an insurer to comply with the notice requirement of this section may be treated, at the election of the party, as a withdrawal of consent for purposes of this section.
(j) This section does not apply to a notice or document delivered by an insurer in an electronic form before September 1, 2015, to a party who, before that date, has consented to receive notices or documents in an electronic form otherwise allowed by law.
(k) If the consent of a party to receive certain notices or documents in an electronic form is on file with an insurer before September 1, 2015, and pursuant to this section, an insurer intends to deliver additional notices or documents to such party in an electronic form, then prior to delivering such additional notices or documents electronically, the insurer shall meet the following requirements:
(1) Provide the party with a statement that describes:
a. The notices or documents that shall be delivered by electronic means under this section that were not previously delivered electronically.
b. The right of a party to withdraw his or her consent to have notices or documents delivered by electronic means, without the imposition of any condition or consequence that was not disclosed at the time of initial consent.
(2) Comply with subdivision (2) of subsection (c).
(l) An insurer shall deliver a notice or document by any other delivery method permitted by law other than electronic means if:
(1) The insurer attempts to deliver the notice or document by electronic means and has a reasonable basis for believing that the notice or document has not been received by the party.
(2) The insurer becomes aware that the electronic mail address provided by the party is no longer valid.
(m) It is the responsibility of the insurer to deliver to a party any notice or document authorized to be sent electronically pursuant to this section.
(n) This section may not be construed to modify, limit, or supersede the provisions of the federal Electronic Signatures in Global and National Commerce Act, Public Law 106-229, as amended.
(Act 2015-482, §§1, 2.)
(a) As used in this section, the following terms have the following meanings:
(1) HEALTH BENEFIT PLAN. Any policy or contract for health care services, including a vision or dental benefit plan issued, delivered, issued for delivery, renewed in this state by a health care insurer, health maintenance organization, accident and sickness insurer, fraternal benefit society, nonprofit hospital service corporation, nonprofit medical service corporation, health care service plan, or any other individual, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state, including any entity created pursuant to Article 6 of Chapter 4 of Title 10.
(2) PLAN SPONSOR. Any person who establishes, adopts, or maintains a health benefit plan, including an employer.
(b) A health benefit plan may provide all communications relating to a health benefit plan, including any health insurance identification card, to covered individuals of the health benefit plan by electronic means, provided the plan sponsor has done all of the following:
(1) Provided the consent to the mailing of all communications related to the plan by electronic means on behalf of covered individuals enrolled in the plan to the health benefit plan.
(2) Confirmed that the enrollee routinely uses electronic communications on a regular basis. This may be confirmed by the employer of an enrollee if the employer is the plan sponsor.
(3) Notified the enrollee of the electronic communication option and provided the enrollee with the opportunity to opt out of delivery by electronic communication. This notice may also be provided by the health benefit plan.
(Act 2023-196, §1.)
Any insurance policy terminating by its term at a specified expiration date and not otherwise renewable may be renewed or extended at the option of the insurer, and upon a currently authorized policy form and at the premium rate then required therefor for a specific additional period, or periods, by certificate or by endorsement of the policy and without requiring the issuance of a new policy.
(Acts 1971, No. 407, p. 707, §333.)
(a) A policy may be assignable or not assignable, as provided by its terms. Subject to its terms relating to assignability, any life or disability policy, whether heretofore or hereafter issued, under the terms of which the beneficiary may be changed upon the sole request of the owner, may be assigned either by pledge or transfer of title by an assignment executed by the 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. No such written assignment is required in the case of a policy loan made by the insurer under the terms of the policy.
(b) A policy of life insurance, taken out by the insured himself or by a person having an insurable interest in the life of the insured, in good faith may, unless the policy provides otherwise, be assigned to anyone as any other chose in action without regard to whether the assignee has an insurable interest in the life insured or not.
(Acts 1967, No. 98, p. 437; Acts 1971, No. 407, p. 707, §334.)
All contracts of insurance, the application for which is taken within this state, shall be deemed to have been made within this state and subject to the laws thereof.
(Code 1940, T. 28, §10; Acts 1971, No. 407, p. 707, §335.)
No insurance contract issued to a citizen of this state by an insurer organized under the laws of a foreign country shall be invalidated by the occurrence of hostilities between such foreign country and the United States of America.
(Code 1940, T. 28, §8; Acts 1971, No. 407, p. 707, §336.)
Whenever the proceeds of, or payments under, a life or disability 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 with the terms of the policy or contract or in accordance with any written assignment thereof, the person then designated in the policy or contract, or by such assignment, 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.
(Acts 1971, No. 407, p. 707, §337.)
(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 $3,000.00 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, provided such policy, contract, or agreement shall provide for the payment, or payments, to such minor and if, prior to such payment, the insurer has not received written notice of the appointment of a duly qualified guardian of the property of such minor. No such minor shall be deemed competent to alienate the right to, or to anticipate, such payments. This section shall not be deemed to restrict the rights of minors set forth in Section 27-14-5.
(b) This section shall not be deemed to require any insurer to determine whether any other insurer may be effecting a similar payment to the same minor.
(Acts 1967, No. 96, p. 434; Acts 1971, No. 407, p. 707, §338.)
An insurer shall furnish, upon written request of any person claiming to have a loss under an insurance contract issued or assumed by such insurer, forms for 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.
(Acts 1971, No. 407, p. 707, §339.)
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; or
(3) Investigating any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim.
(Acts 1971, No. 407, p. 707, §340.)
No misrepresentation in any proof of loss under any insurance policy shall defeat or void the policy unless such misrepresentation is made with actual intent to deceive as to a matter material to the insured’s rights under the policy.
(Code 1940, T. 28, §6; Acts 1971, No. 407, p. 707, §341.)
(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 his executors or administrators, shall be entitled to its proceeds and avails against the creditors, personal representatives, trustees in bankruptcy, and receivers in state and federal courts of the person insured and of the person effecting the insurance, 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 predecease such person; provided, however, that, subject to the statute of limitations, the amount of any premiums for the 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 written notice, 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.
(b) If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on the life of another in favor of the person effecting the same or, except in cases of transfer with intent to defraud creditors, is made payable by assignment, change of beneficiary or otherwise to any such person, the latter shall be entitled to the proceeds and avails of the policy as against the creditors, personal representatives, trustees in bankruptcy and receivers in state and federal courts of the person insured. If the person effecting such insurance, or the assignee of such insurance, is the wife of the insured, she shall also be entitled to the proceeds and avails of the policy as against her own creditors, personal representatives, trustees in bankruptcy, and receivers in state and federal courts.
(c) “Proceeds and avails,” as used in this section, means death benefits, cash surrender and loan values, premiums waived, and dividends, whether used in reduction of premiums or otherwise, excepting only where the debtor, subsequent to issuance of the policy, has actually elected to receive the dividends in cash.
(d) For the purposes of subsection (a) of this section, 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 obligations after the death of the individual insured by paying the death benefits to a person as permitted by such clause.
(Acts 1971, No. 407, p. 707, §342.)
If under the terms of any annuity contract or life insurance policy, or under any written agreement supplemental thereto, issued by any life insurer, the proceeds, or any part thereof, are retained by the insurer at maturity or otherwise, no person entitled to any part of such proceeds or any installments of interest due, or to become due thereon, shall be permitted to commute, anticipate, encumber, alienate, or assign the same, or any part thereof, if such permission is expressly withheld by the terms of such contract, policy, or supplemental agreement; and if such contract, policy, or supplemental agreement so provides, no payment of interest or of principal shall be in any way subject to such person’s debts, contracts, or engagements nor to any judicial process to levy upon, or attach the same, for payment thereof.
(Acts 1935, No. 231, p. 627; Code 1940, T. 28, §4; Acts 1971, No. 407, p. 707, §343.)
The proceeds or avails of all contracts or disability 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. The exemption of income benefits payable as the result of disability shall not exceed an average of $250.00 of such benefits per month of the period of disability.
(Acts 1971, No. 407, p. 707, §344.)
(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 payments 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 insurance or annuity contract, the person insured or annuitant and the payments 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 $250.00 per month for the length of time represented by such installments, and such periodic payments in excess of $250.00 per month shall be subject to garnishment;
(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 $250.00 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 in this section for the annuitant shall apply with respect to such beneficiary or assignee.
(Acts 1971, No. 407, p. 707, §345.)
This article applies to contracts of life insurance and annuities other than reinsurance, group life insurance, group annuities, industrial life, and burial insurance; except, that Sections 27-15-15, 27-15-24, 27-15-25, 27-15-28, and 27-15-29 shall apply to industrial life insurance also.
(Acts 1971, No. 407, p. 707, §346.)
(a) No policy of life insurance other than industrial, group, and 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 provisions required by Sections 27-15-3 through 27-15-14. This section shall not apply to burial insurance, annuity contracts, 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 or dismemberment by accident or accidental means or to any provision relating to waiver of premiums in the event of death or disability of the beneficiary or premium payer.
(b) Any of such provisions, or portions thereof not applicable to single premium or term policies, shall, to that extent, not be incorporated therein.
(Acts 1971, No. 407, p. 707, §347.)
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 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; but if a claim arises under the policy during such period of grace, the amount of any premium due or overdue may be deducted from the policy proceeds.
(Acts 1971, No. 407, p. 707, §348.)
There shall be a provision that the policy, exclusive, at the option of the insurer, of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means, shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue.
(Acts 1967, No. 181, p. 543; Acts 1971, No. 407, p. 707, §349.)
There shall be a provision that the policy, or the policy and the application or a summary of such application, if a copy of the application or a summary thereof 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. In the event of discrepancies between the original application and the summary, the contents of the original application shall govern. When a summary of the application is attached to the policy, the insurer shall keep and maintain the original application for insurance or a copy thereof for a period of not less than three years from the date on which the policy was issued.
(Acts 1935, No. 152, p. 194; Acts 1971, No. 407, p. 707, §350; Acts 1988, No. 88-545, p. 844, §2.)
There shall be a provision that if the age or sex of the insured or of any other person whose age or sex is considered in determining the premium 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 sex.
(Acts 1971, No. 407, p. 707, §351.)
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 provided in this section, 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 days 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 subdivision (1) of this section, even though the policy provides that payment of such dividend is to be deferred for a specified period, provided such period does not exceed six years from the date of apportionment and that interest will be added to such dividend at a specified rate and provided, further, that upon the maturity, surrender, or other expiry of the policy, any such dividend, and interest thereon, shall not be forfeited to the insurer. If a participating policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under such nonforfeiture provision shall be applied in the manner set forth in the policy.
(Acts 1971, No. 407, p. 707, §352.)
(a) In case of policies issued on and after January 1, 1972, there shall be a provision that after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment the insurer shall advance, on proper assignment or pledge of the policy and on the sole security thereof, at a specified rate of interest not exceeding eight percent per annum, payable in advance, 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, provided that the insurer may deduct, either from the loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining the 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 shall have been mailed by the insurer to the last known address of the insured or policyowner and of any assignee of record at the home office of the insurer. 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 six months after application therefor. The policy, at the insurer’s option, may provide for automatic premium loan, subject to an election of the party entitled to elect.
(b) This section shall not apply to term policies nor to term insurance benefits provided by rider or supplemental policy provision.
(Acts 1971, No. 407, p. 707, §353; Act 2025-275, §1.)
(a) For purposes of this section the “published monthly average” means:
(1) The Monthly Average of the Composite Yield on Seasoned Corporate Bonds as published by Moody’s Investors Service, Inc., or any successor thereto; or
(2) In the event that the Monthly Average of the Composite Yield on Seasoned Corporate Bonds is no longer published, a substantially similar average, established by regulation issued by the commissioner.
(b)(1) Policies issued on or after May 15, 1981, shall provide for policy loan interest rates as follows:
a. A provision permitting a maximum interest rate of not more than eight percent per annum; or
b. A provision permitting an adjustable maximum interest rate established from time to time by the life insurer as permitted by law.
(2) The rate of interest charged on a policy loan made under subdivision (1) of this subsection shall not exceed the higher of the following:
a. The published monthly average for the calendar month ending two months before the date on which the rate is determined; or
b. The rate used to compute the cash surrender values under the policy during the applicable period plus one percent per annum.
(3) If the maximum rate of interest is determined pursuant to subdivision (2) of this subsection, the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy.
(4) The maximum rate for each policy must be determined at regular intervals at least once every 12 months, but not more frequently than once in any three month period. At the intervals specified in the policy:
a. The rate being charged may be increased whenever such increase as determined under subdivision (2) of this subsection would increase that rate by one-half percent or more per annum;
b. The rate being charged must be reduced whenever such reduction as determined under subdivision (2) of this subsection would decrease that rate by one-half percent or more per annum.
(5) The life insurer shall:
a. Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan;
b. Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan. Notice need not be given to the policyholder when a further premium loan is added, except as provided in paragraph c. of this subdivision;
c. Send to policyholders with loans reasonable advance notice of any increase in the rate; and
d. Include in the notices required above the substance of the pertinent provisions of subdivisions (1) and (3) of this subsection.
(6) The loan value of the policy shall be determined in accordance with Section 27-15-8, but no policy shall terminate in a policy year as the sole result of change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year.
(7) The substance of the pertinent provisions of paragraphs (1) and (3) of this subsection shall be set forth in the policies to which they apply.
(8) For purposes of this subsection:
a. The rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy.
b. The term “policy loan” includes any premium loan made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due.
c. The term “policyholder” includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer.
d. The term “policy” includes certificates issued by a fraternal benefit society and annuity contract which provide for policy loans.
(9) No other provisions of law shall apply to policy loan interest rates unless made specifically applicable to such rates.
(c) The provisions of this section shall not apply to any insurance contract issued before May 15, 1981, unless the policyholder agrees in writing to the applicability of such provisions.
(d) In the event of any conflicts between the provisions of this section and Section 27-15-5, the provisions of this section shall control.
(Acts 1981, No. 81-542, p. 909, §§1-4.)
In policies issued on and after the operative date of Section 27-15-28, there shall be a table showing in figures the loan value and the cash surrender values and nonforfeiture benefits in accordance with subdivision (b) (5) of Section 27-15-28, either during the first 20 policy years or during the term of the policy, whichever is shorter.
(Acts 1971, No. 407, p. 707, §354.)
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.
(Acts 1971, No. 407, p. 707, §355.)
There shall be a provision that unless the policy has been surrendered for its cash value, or its cash surrender value has been exhausted or the period of any extended insurance provided by the policy has expired, the policy will be reinstated at any time within three years after the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all overdue premiums and payment, or, within the limits permitted by the then cash value of the policy, reinstatement, of any other indebtedness to the insurer upon the policy, with interest as to both premiums and indebtedness at a rate not exceeding the rate of interest on policy loans specified in the policy in accordance with the provisions of Section 27-15-8, as may be amended from time to time.
(Acts 1971, No. 407, p. 707, §356; Acts 1981, No. 81-381, p. 564, §1.)
(a) There shall be a provision relative to the payment of premiums.
(b) A premium may not be increased unless the policy or a document delivered with the policy contains a provision in writing placing the consumer on notice that the premium may be increased; provided that nothing contained in this subsection shall be interpreted to require the continuation of coverage that is not otherwise guaranteed under the terms of the policy.
(Acts 1971, No. 407, p. 707, §357; Act 2006-614, p. 1683, §1.)
(a) There shall be a provision that when a life insurance policy shall become a claim by 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 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 two months from the receipt of such proofs.
(b) Notwithstanding any other provision of law regarding payment of interest on contracts, if an insurer fails to pay the proceeds of or make payment under a policy pursuant to a death claim within 30 days after receipt of satisfactory proof of death and of the interest of the claimant, and if the beneficiary of the policy elects to receive a lump-sum payment through a retained asset account or otherwise, the insurer shall pay interest on any money due and unpaid after the expiration of the 30-day period. The insurer shall compute the interest from the date of receipt of due proof of the death of the insured and interest of the claimant until the date of payment. The rate of interest shall be the current rate of interest on death proceeds left on deposit with the insurer.
(c) Nothing in this section shall be construed to apply to annuity contracts.
(Acts 1971, No. 407, p. 707, §358; Act 2015-468, §1.)
There shall be a title on the policy briefly describing the same.
(Acts 1971, No. 407, p. 707, §359.)
A clause in any policy of life insurance or annuity contract providing that such policy or contract shall be incontestable after a specified period shall preclude only a contest of the validity of the policy or contract and shall not preclude the assertion at any time of defenses based upon provisions in the policy or contract which exclude or restrict coverage, whether or not such restrictions or exclusions are excepted in such clause.
(Acts 1967, No. 181, p. 543; Acts 1971, No. 407, p. 707, §360.)
(a) No annuity or pure endowment contract, other than reversionary annuities, survivorship annuities, or group annuities and except as stated in this section, shall be delivered or issued for delivery in this state unless it contains in substance each of the provisions specified in Sections 27-15-17 through 27-15-22. 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.
(Acts 1971, No. 407, p. 707, §361.)
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 six percent 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.
(Acts 1971, No. 407, p. 707, §362.)
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 27-15-20, 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 two 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.
(Acts 1971, No. 407, p. 707, §363.)
In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the written contract shall constitute the entire contract between the parties or, if a copy of the application or a summary thereof is endorsed upon or attached to the contract when issued, a provision that the written contract and the application or summary thereof shall constitute the entire contract between the parties. In the event of discrepancies between the original application and the summary, the contents of the original application shall govern. When a summary of the application is attached to the policy, the insurer shall keep and maintain the original application for insurance or a copy thereof for a period of not less than three years from the date on which the policy was issued.
(Acts 1935, No. 152, p. 194; Acts 1971, No. 407, p. 707, §364; Acts 1988, No. 88-545, p. 844, §3.)
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 six percent per annum, may be charged against the current or next succeeding payment, or payments, to be made by the insurer under the contract.
(Acts 1971, No. 407, p. 707, §365.)
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.
(Acts 1971, No. 407, p. 707, §366.)
In an annuity or pure endowment contract, other than a reversionary, survivorship, 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 six percent per annum payable annually, and, in cases where applicable, the insurer may also include a requirement of evidence of insurability satisfactory to the insurer.
(Acts 1971, No. 407, p. 707, §367.)
(a) Except as stated in this section, 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 27-15-17 through 27-15-21 except that under Section 27-15-20 the insurer may at its option provide for an equitable reduction of the amount of the annuity payments in settlement of an overdue or deferred payment in lieu of providing for deduction of such payments from an amount payable upon settlement under the contract; and
(2) In such reversionary annuity contracts, there shall be a provision that the contract may be reinstated at any time within three 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 six percent 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.
(Acts 1971, No. 407, p. 707, §368.)
(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 for a period shorter than that provided by statute within which an action may be commenced on such a policy; and
(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:
a. 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;
b. Death as a result of aviation or any air travel or flight;
c. Death as a result of a specified hazardous occupation or occupations, avocation or avocations;
d. Death while the insured is a resident outside continental United States and Canada; or
e. Death within two 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 subsection (a) of this section 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 commissioner’s 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; except, that if the policy has been in force for not more than two years, the insurer shall pay the amount of the gross premiums charged on the policy less dividends paid in cash or used in the payment of premiums thereon and less any indebtedness to the insurer on the policy, including interest due or accrued.
(c) This section shall not apply to group life insurance, disability 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 or dismemberment by accident or accidental means or to any provision relating to waiver of premium in event of death or disability of the beneficiary or premium payer.
(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.
(Acts 1971, No. 407, p. 707, §369.)
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.
(Acts 1967, No. 181, p. 543; Acts 1971, No. 407, p. 707, §370.)
Any life insurer shall have the power to hold under agreement the proceeds of any policy issued by it upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as set forth in the policy or as agreed to in writing by the insurer and the policyholder. Upon maturity of a policy, in the event the policyholder has made no such agreement, the insurer shall have the power to hold the proceeds of the policy under an agreement with the beneficiaries. The insurer shall not be required to segregate the funds so held but may hold them as part of its general assets.
(Acts 1971, No. 407, p. 707, §371.)
In determining the amount due under any life insurance policy heretofore or hereafter issued, deduction may be made of:
(1) Any unpaid premiums or installments thereof for the current policy year due under the terms of the policy; and
(2) The amount of principal and accrued interest of any policy loan or other indebtedness against the policy then remaining unpaid.
(Acts 1971, No. 407, p. 707, §372.)
[Repealed]
Repealed by Act 2016-411, §3, effective January 1, 2017.
(Acts 1981, No. 407, p. 707, §373; Acts 1979, No. 79-661, p. 1142, §1; Acts 1981, No. 81-783, p. 1347, §1.)
(a) This section shall be known as the standard nonforfeiture law for individual deferred annuities.
(b) This section shall not apply to any reinsurance group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced or reversionary annuity, nor to any contract which shall be delivered outside this state through an agent or other representative of the company issuing the contract.
(c) In the case of contracts issued on or after the operative date of this section as defined in subsection (l) no contract of annuity, except as stated in subsection (b), shall be delivered or issued for delivery 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 contract holder, upon cessation of payment of considerations under the contract:
(1) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (e), (f), (g), (h), and (j);
(2) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (e), (f), (h), and (j). The company shall reserve the right to defer the payment of such cash surrender benefit for a period of six months after demand therefor with surrender of the contract;
(3) A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of such benefits; and
(4) A statement that any paid-up annuity, cash surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this section, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than $20.00 monthly, the company may at its option terminate such contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract.
(d) The minimum values as specified in subsections (e), (f), (g), (h), and (j) of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection:
(1) With respect to contracts providing for flexible considerations, the minimum nonforfeiture amount at any time at, or prior to, the commencement of any annuity payments shall be equal to an accumulation up to such time at a rate of interest of one and one-half percent per annum of percentages of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of:
a. any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest of three percent per annum; and
b. the amount of any indebtedness to the company on the contract, including interest due and accrued; and increased by any existing additional amounts credited by the company to the contract.
The net consideration for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero and shall be equal to the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of $30.00 and less a collection charge of $1.25 per consideration credited to the contract during that contract year. The percentages of net considerations shall be 65 percent of the net consideration for the first contract year and 87 1/2 percent of the net considerations for the second and later contract years. Notwithstanding the provisions of the preceding sentence, the percentage shall be 65 percent of the portion of the total net consideration for any renewal contract year which exceeds by not more than two times the sum of those portions of the net considerations in all prior contract years for which the percentage was 65 percent.
(2) With respect to contracts providing for fixed scheduled considerations, minimum nonforfeiture amounts shall be calculated on the assumption that considerations are paid annually in advance and shall be defined as for contracts with flexible considerations which are paid annually with two exceptions:
a. The portion of the net consideration for the first contract year to be accumulated shall be the sum of 65 percent of the net consideration for the first contract year plus 22 1/2 percent of the excess of the net consideration for the first contract year over the lesser of the net considerations for the second and third contract years.
b. The annual contract charge shall be the lesser of (i) $30.00 or (ii) 10 percent of the gross annual consideration.
(3) With respect to contracts providing for a single consideration, minimum nonforfeiture amounts shall be defined as for contracts with flexible considerations except that the percentage of net consideration used to determine the minimum nonforfeiture amount shall be equal to 90 percent and the net considerations shall be the gross consideration less a contract charge of $75.00.
(e) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrender of the contract, such present value being calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
(g) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of the paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
(h) For the purpose of determining the benefits calculated under subsections (f) and (g) in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant’s seventieth birthday or the tenth anniversary of the contract, whichever is later.
(i) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
(j) Any paid-up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
(k) For any contract which provides, within the same contract by rider or supplemental contract provisions, both annuity benefits and life insurance benefits that are in excess of the greater cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (e), (f), (g), (h), and (j) additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits or (3) as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this section. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.
(l) After June 30, 2004, and until June 30, 2006, any company may elect to either comply with the provisions of this section or to comply with the provisions of Section 27-15-28.2. This section shall cease to be operative with respect to annuity contracts issued by a company after June 30, 2006.
(Acts 1979, No. 79-661, p. 1142, §3; Act 2004-244, p. 324, §1.)
(a) This section shall be known as the standard nonforfeiture law for individual deferred annuities.
(b)(1) This section shall not apply to any reinsurance group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced or reversionary annuity, nor to any contract which shall be delivered outside this state through an agent or other representative of the company issuing the contract.
(2) Subsections (c) through (h) shall not apply to contingent deferred annuities.
(3) Notwithstanding subdivision (2), the commissioner may adopt by rule nonforfeiture benefits for contingent deferred annuities that, in the opinion of the commissioner, are equitable to the policy holder, appropriate given the risks insured, and to the extent possible, consistent with the general intent of this section.
(c)(1) In the case of contracts issued on or after the operative date of this section as defined in subsection (l), no contract of annuity, except as stated in subsection (b), shall be delivered or issued for delivery 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 contract holder, upon cessation of payment of considerations under the contract:
a. That upon cessation of payment of considerations under a contract, or upon the written request of the contract owner, the company shall grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (e), (f), (g), (h), and (j).
b. If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company shall pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (e), (f), (h), and (j). The company may reserve the right to defer the payment of such cash surrender benefit for a period not to exceed six months after demand therefor with surrender of the contract after making written request and receiving written approval of the commissioner. The request shall address the necessity and equitability to all policyholders of the deferral.
c. A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of such benefits.
d. A statement that any paid-up annuity, cash surrender, or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract.
(2) Notwithstanding the requirements of this section, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than twenty dollars ($20) monthly, the company may at its option terminate such contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract.
(d) The minimum values as specified in subsections (e), (f), (g), (h), and (j) of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection.
(1)a. The minimum nonforfeiture amount at any time at, or prior to, the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest as indicated in subdivision (2) of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of subparagraphs 1., 2., 3., and 4.:
Any prior withdrawals from or partial surrenders of the contract accumulated at rates of interest as indicated in subdivision (2).
An annual contract charge of fifty dollars ($50), accumulated at rates of interest as indicated in subdivision (2).
Any premium tax paid by the company for the contract, accumulated at rates of interest as indicated in subdivision (2).
The amount of any indebtedness to the company on the contract, including interest due and accrued.
b. The net consideration for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to eighty-seven and one-half percent (87.5%) of the gross considerations credited to the contract during that contract year.
(2) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as the lesser of three percent per annum and the following, which shall be specified in the contract if the interest rate will be reset:
a. The five-year constant maturity treasury rate reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under paragraph d.
b. Reduced by 125 basis points (1.25%).
c. Where the resulting interest rate is not less than 15 basis points (0.15%).
d. The interest rate shall apply for an initial period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the five-year constant maturity treasury rate to be used at each redetermination date.
(3) During the period or term that a contract provides substantive participation in an equity indexed benefit, it may increase the reduction described in paragraph b. of subdivision (2) by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. Lacking such a demonstration that is acceptable to the commissioner, the commissioner may disallow or limit the additional reduction.
(4) The commissioner may adopt rules to implement subdivision (3) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the commissioner determines adjustments are justified.
(e) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrender of the contract, such present value being calculated on the basis of an interest rate not more than one percent (1%) higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
(g) For contracts that do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of the paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
(h) For the purpose of determining the benefits calculated under subsections (f) and (g) in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant’s seventieth birthday or the tenth anniversary of the contract, whichever is later.
(i) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
(j) Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
(k) For any contract that provides, within the same contract by rider or supplemental contract provisions, both annuity benefits and life insurance benefits that are in excess of the greater cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (e), (f), (g), (h), and (j), additional benefits payable: (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits, or (3) as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits that may be required by this section. The inclusion of such additional benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits.
(1) After June 30, 2004, any company may elect to apply the provisions of this section to annuity contracts on a contract form-by-contract form basis before July 1, 2006. In all other instances, this section shall become operative with respect to annuity contracts issued by the company after June 30, 2006.
(m) The commissioner may adopt rules to implement the provisions of this section.
(Act 2004-244, p. 324, §2; Act 2022-151, §1.)
(a) No insurer shall hereafter deliver or issue for delivery in this state any policy or contract providing for the establishment of its policyholders or members into divisions and classes and for payment of benefits from special funds created for such purpose to the oldest member of the division and class or to the member of the division and class whose policy has been in force the longest period of time upon the death of a member in such division and class, or under any other similar plan; except, that any insurer heretofore operating on such a plan in this state, whether by conversion from a fraternal benefit society or otherwise, may continue to do so upon the condition that the insurer shall not hereafter establish its policyholders or members into any new divisions, classes or groupings of any kind, other than those heretofore established and containing subsisting policies heretofore issued, and that the insurer, if a stock insurer, shall have and maintain paid-in capital stock of at least $100,000.00 or, if a mutual insurer, a surplus of at least $25,000.00 and increase such surplus to, and thereafter maintain surplus in the amount of, at least $100,000.00 within six years from January 1, 1972.
(b) No insurer shall deliver, or issue for delivery, in this state as a part of, or in combination with, any insurance, endowment or annuity contract any agreement or plan 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 policyholders or members of a designated group or class who continue as members or policyholders until the end of a specified period of time or under any other similar plan.
(c) This section shall not be deemed to prohibit the payment or allowance of regular annual dividends or “savings” under regular participating forms of policies or contracts.
(Acts 1931, No. 687, p. 819; Acts 1936-37, Ex. Sess., No. 186, p. 221; Acts 1971, No. 407, p. 707, §374.)
This article shall be known and may be cited as the Unclaimed Life Insurance Benefits Act.
(Act 2012-424, p. 1142, §1.)
(a) This article shall require recognition of the escheat or unclaimed property statutes of Alabama as they relate to the method of payment for life insurance death benefits regulated by the Department of Insurance.
(b) This article shall apply only to life insurance policies, annuity contracts, and retained asset accounts issued and delivered in this state and which are issued or entered into on or after January 1, 2016.
(Act 2012-424, p. 1142, §2; Act 2013-195, p. 372, §1.)
The following terms shall have the following meanings:
(1) COMMERCIALLY REASONABLE EFFORT. The plans, processes, or procedures necessary to confirm the death of the insured, contract owner or annuitant, or retained asset account holder against other available records and information and, as applicable, to locate the beneficiary or beneficiaries or other person entitled to payment pursuant to the terms of the policy or contract which have been developed by each insurer and submitted to and approved by the department.
(2) CONTRACT. An annuity contract. The term contract shall not include an annuity used to fund an employment-based retirement plan or program where the insurer is not committed by terms of the annuity contract to pay death benefits to the beneficiaries of specific plan participants.
(3) DEATH MASTER FILE. The United States Social Security Administration’s Death Master File or any other database or service that is at least as comprehensive as the United States Social Security Administration’s Death Master File for determining that a person has reportedly died.
(4) DEATH MASTER FILE MATCH. A search of the death master file that results in a match of the Social Security number or the name and date of birth of an insured, annuity contract owner, an annuitant, or retained asset account holder.
(5) INDUSTRIAL LIFE INSURANCE POLICY. A policy of life insurance with a face amount of two thousand five hundred dollars ($2,500), or less, and which provides for payment of premiums monthly or more often.
(6) INSURER. An insurer, as defined in Section 27-1-2(2), which issues life insurance policies or annuity contracts.
(7) POLICY. Any policy, as defined in Section 27-14-1, or certificate of life insurance that provides a death benefit. The term policy shall not include any policy or certificate of life insurance that provides a death benefit under: (i) an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002, as periodically amended; (ii) any federal employee benefit program; (iii) government plans or church plans as defined in the Employment Retirement Income Security Act of 1974 (29 U.S.C. § 1002 (32) and (33)), as periodically amended; (iv) any policy or certificate of life insurance that is used to fund a preneed funeral contract or prearrangement; (v) any policy or certificate of credit life or accident and health insurance; (vi) any policy of burial insurance, the primary death benefit of which is to be provided in the form of tangible merchandise, such as a casket or funeral services; or (vii) any industrial life insurance policy.
(Act 2012-424, p. 1142, §3; Act 2013-195, p. 372, §1.)
(a) An insurer shall perform a comparison of its insureds’ in-force life insurance policies, annuity contracts, and retained asset accounts against a death master file, to identify potential death master file matches of its insureds. Such comparison shall be completed by January 1, 2019. Thereafter, an insurer shall maintain a program designed to compare each such policy, contract, or account with a death master file no less frequently than every three years, it being the intent that insurers fashion a program that best fits their business systems while at the same time protecting consumers by assuring reasonable checks are being performed to identify unreported deaths. For those potential death master file matches identified as a result of a death master file comparison, the insurer shall do all of the following:
(1) Within 90 days of a death master file match:
a. Complete a commercially reasonable effort, which shall be documented by the insurer, to confirm the death of the insured, contract owner or annuitant, or retained asset account holder against other available records and information.
b. Determine whether a policy or contract insuring the insured or annuitant is in force or a retained asset account exists and whether benefits may be due in accordance with the applicable policy or contract and if a policy is in force or a retained asset account exists and benefits may be due in accordance with the applicable policy or contract:
Use commercially reasonable efforts, which shall be documented by the insurer, to locate the beneficiary or beneficiaries or other person entitled to payment pursuant to the terms of the policy or contract.
Provide the appropriate claim forms or instructions to the beneficiary or beneficiaries or other person entitled to payment pursuant to the terms of the policy or contract to make a claim, including the need to provide written evidence of the loss, including, but not limited to, an official death certificate, medical authorizations, medical records, or other reasonable evidence of the loss or its circumstances such as is ordinarily required by the insurer of similar claimants.
(2) With respect to group life insurance, an insurer is required only to confirm the possible death of an insured when the insurer provides full recordkeeping services to the group policyholder and maintains in the ordinary course of business at least the following information of those covered under a policy or certificate:
a. Complete insured information, including Social Security number and complete name and date of birth.
b. Beneficiary designation information.
c. Coverage eligibility.
d. Benefit amount.
e. Premium payment status.
(b) To the extent permitted by law, the insurer may disclose minimum necessary personal information about the insured or beneficiary to a person who the insurer reasonably believes may be able to assist the insurer to locate the beneficiary or a person otherwise entitled to payment of the claims proceeds.
(c) An insurer shall not charge insureds, account holders, or beneficiaries for any fees or costs associated with a search or verification conducted pursuant to this section.
(d) After the insurer has completed the efforts required in subdivision (1) of subsection (a), any benefits payable under a life insurance policy, annuity contract, or a retained asset account, plus any applicable accrued interest, shall first be payable to the designated beneficiaries, owners, or other person entitled to payment pursuant to the terms of the policy or contract, and in the event the beneficiaries, owners, or other person entitled to payment pursuant to the terms of the policy or contract cannot be found after the insurer has completed the efforts required in subparagraph 1. of paragraph b. of subdivision (1) of subsection (a), shall escheat to the state as unclaimed property in accordance with the provisions of Article 2A, Chapter 12 of Title 35. Nothing in this section shall be deemed to change the terms of any contract or policy concerning contestability or requiring the submission of due proof of loss.
(e) Subject to the provisions of subsection (d), an insurer shall notify the State Treasurer, in accordance with the provisions of Section 35-12-76, upon the expiration of the statutory time period for escheat after all of the following have occurred:
(1) A positive death master file match has occurred.
(2) A life insurance policy or annuity contract beneficiary or retained asset account holder has not submitted a claim with the insurer.
(3) The insurer has complied with subsection (a) and has been unable, after commercially reasonable efforts documented by the insurer, to contact the retained asset account holder, beneficiary, beneficiaries, or other person entitled to payment pursuant to the terms of the policy or contract.
(f) Upon such notice, an insurer shall submit the unclaimed life insurance or annuity death benefits, or unclaimed retained asset accounts, plus any applicable accrued interest, to the State Treasurer, pursuant to Section 35-12-77.
(Act 2012-424, p. 1142, §4; Act 2013-195, p. 372, §1.)
This article shall be known as the Standard Nonforfeiture Law for Life Insurance.
(Act 2016-411, §1.)
For the purposes of this article, the following terms shall have the following meanings:
(1) NAIC. The National Association of Insurance Commissioners.
(2) OPERATIVE DATE OF THE VALUATION MANUAL. The January 1 of the first calendar year that the valuation manual as defined in Chapter 36A is effective.
(Act 2016-411, §1.)
(a) In the case of policies issued on or after January 1, 1972, no policy of life insurance, except as set forth in Section 27-15-82, shall be delivered or issued for delivery in this state unless it shall contain 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 as are the minimum requirements specified in this section and are essentially in compliance with Section 27-15-81:
(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 amount as may be specified in this article. In lieu of such stipulated paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits.
(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 three full years in the case of ordinary insurance or five 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 specified in this article.
(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 specified in this article.
(5) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums or which provide an option for changes in benefits or premiums other than a change to a new policy, a statement of the mortality table, interest rate, and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy. In the case of all other policies, 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 that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance laws of this state; 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; and a statement of the method to be used in calculating the cash surrender value, and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy.
(b) Any of the provisions, or portions thereof, set forth in subdivisions (1) through (6) of subsection (a) which are not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy.
(c) The insurer shall reserve the right to defer the payment of any cash surrender value for a period of six months after demand therefor with surrender of the policy.
(Act 2016-411, §1.)
(a) Any cash surrender value available under the policy in the event of default in the premium payment due on any policy anniversary, whether or not required by Section 27-15-72, 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 premium as defined in Sections 27-15-75, 27-15-76, 27-15-77, and 27-15-78, corresponding to premiums which would have fallen due on and after such anniversary.
(2) The amount of any indebtedness to the insurer on account of or secured by the policy.
(b) Provided, however, that for any policy issued on or after the operative date of Section 27-15-78, as defined therein, which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value referred to in subsection (a) shall be an amount not less than the sum of the cash surrender value as defined in subsection (a) for an otherwise similar policy issued at the same age without such rider or supplemental policy provision and the cash surrender value as defined in subsection (a) for a policy which provides only the benefits otherwise provided by the rider or supplemental policy provision.
(c) Provided, further, that for any family policy issued on or after the operative date of Section 27-15-78, as defined therein, which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse’s age 71, the cash surrender value referred to in subsection (a) shall be an amount not less than the sum of the cash surrender value as defined in subsection (a) for an otherwise similar policy issued at the same age without term insurance on the life of the spouse and the cash surrender value as defined in subsection (a) for a policy which provides only the benefits otherwise provided by term insurance on the life of the spouse.
(d) 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 benefits, whether or not required by Section 27-15-72, shall be an amount not less than the present value, on the 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 account of or secured by the policy.
(Act 2016-411, §1.)
Any paid-up nonforfeiture benefit available under the policy in the event of default in the premium payment due 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 article in the absence of the condition that premiums shall have been paid for at least a specified period.
(Act 2016-411, §1.)
(a)(1) This section shall not apply to policies issued on or after the operative date of Section 27-15-78, as defined therein. Except as provided in subsection (c), 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 on a substandard policy, that the present value at the date of issue of the policy, of all such adjusted premiums shall be equal to the sum of:
a. The then present value of the future guaranteed benefits provided for by the policy.
b. Two percent of the amount of the insurance if the insurance be uniform in amount, or of the equivalent uniform amount, as defined in this article, if the amount of insurance varies with the duration of the policy.
c. Forty percent of the adjusted premium for the first policy year.
d. Twenty-five percent 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.
(2) Provided, however, that in applying the percentages specified in paragraphs c. and d. of subdivision (1), no adjusted premiums shall be deemed to exceed four percent of the amount of insurance or level amount equivalent. The date of issue of a policy for the purpose of this section shall be the date as of which the rated age of the insured is determined.
(b) In the case of a policy providing an amount of insurance varying with the duration of the policy, the equivalent level amount for the purpose of this section shall be deemed to be the level 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 inception of the insurance as the benefits under the policy.
(c) The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provision shall be equal to: (i) 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 (ii) the adjusted premiums for such term insurance. The foregoing items (i) and (ii) are to be calculated separately and as specified in subsections (a) and (b) except that, for the purposes of paragraphs b., c., and d. of subdivision (1) of subsection (a), the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in subdivision (2) of subsection (a) 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 item (i).
(d) Except as otherwise provided in Sections 27-15-76 and 27-15-77, all adjusted premiums and present values referred to in this article for all policies of ordinary insurance, shall 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 any age not more than three 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 three and one-half percent per annum, specified in the policy for calculating cash surrender values and paid-up nonforfeiture 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 130 percent of the rates of mortality according to the applicable table. Provided, further, that for insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on such other table of mortality as may be specified by the company and approved by the commissioner.
(Act 2016-411, §1.)
(a) This section shall not apply to ordinary policies issued on or after the operative date of Section 27-15-78, as defined therein.
(b) In the case of ordinary policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in this article shall be calculated on the basis of the Commissioners 1958 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 three years younger than the actual age of the insured and provided that, for any category of ordinary insurance issued on female risks on or after July 30, 1979, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured.
(c) 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 in the case of ordinary policies may not be more than those shown in the Commissioners 1958 Extended Term Insurance Table.
(d) For insurance issued on a substandard basis, the calculation of any 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.
(Act 2016-411, §1.)
(a) This section shall not apply to industrial policies to be issued on or after the operative date of Section 27-15-78, as defined therein.
(b) The adjusted premiums and present values referred to in this article for all policies of industrial insurance shall be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table. All calculations shall be made on the basis of the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits; provided, that such rate of interest shall not exceed three and one-half percent per annum; provided further, that a rate of interest not exceeding four percent per annum may be used for policies issued on or after August 23, 1976, and prior to July 30, 1979, and a rate of interest not exceeding five and one-half percent per annum may be used for policies issued on or after July 30, 1979; 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 in the case of industrial policies, may not be 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.
(Act 2016-411, §1.)
(a) This section shall apply to all policies issued on or after the operative date of this section as defined herein. Except as provided in subsection (g), 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 on a substandard policy and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all 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) One percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years.
(3) One hundred twenty-five percent of the nonforfeiture net level premium, as hereinafter defined; provided, however, that in applying the percentage specified in this subdivision, no nonforfeiture net level premium shall be deemed to exceed four percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years. The date of issue of a policy for the purpose of this section shall be the date as of which the rated age of the insured is determined.
(b) The nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one percent per annum, payable on the date of issue of the policy and on each anniversary of such policy on which a premium falls due.
(c) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums or which provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values shall initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any such change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change.
(d) Except as otherwise provided in subsection (g), the recalculated future adjusted premiums for any such policy shall be the uniform percentage of the respective future premiums specified in the policy for each policy year, excluding extra premiums on a substandard policy and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all such future adjusted premiums shall be equal to the excess of the sum of (1) the then present value of the then future guaranteed benefits provided for by the policy and (2) the additional expense allowance, if any, over the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of:
(1) One percent of the excess, if positive, of the average amount of insurance at the beginning of each of the first 10 policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first 10 policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy.
(2) One hundred twenty-five percent of the increase, if positive, in the nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing (1) by (2) where (1) equals the sum of (i) the nonforfeiture net level premium applicable prior to the change times the present value of an annuity of one percent per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred and (ii) the present value of the increase in future guaranteed benefits provided for by the policy, and (2) equals the present value of an annuity of one percent per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due.
(g) Notwithstanding any other provision of this section to the contrary, in the case of a policy issued on a substandard basis, which provides reduced graded amounts of insurance, so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis, which provides higher uniform amounts of insurance, adjusted premiums, and present values for the substandard policy may be calculated as if it were issued to provide the higher uniform amounts of insurance on the standard basis.
(h) All adjusted premiums and present values referred to in this article shall, for all policies of ordinary insurance, be calculated on the basis of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election of the insurer for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with 10-year select mortality factors; shall, for all policies of industrial insurance, be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table; and shall, for all policies issued in a particular calendar year, be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this section, for policies issued in that calendar year; provided, however, that:
(1) At the option of the insurer, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this section, for policies issued in the immediately preceding calendar year.
(2) Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by Section 27-15-72, shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of such paid-up nonforfeiture benefit and paid-up dividend additions, if any.
(3) An insurer may calculate the amount of any guaranteed paid-up nonforfeiture benefit, including any paid-up additions, under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values.
(4) 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 1980 Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance.
(5) For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables.
(6)a. For policies issued prior to the operative date of the valuation manual as defined by §27-36A-15, any Commissioners Standard ordinary mortality tables, adopted after 1980 by the NAIC, that are approved by regulation promulgated by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without 10-year select mortality factors or for the Commissioners 1980 Extended Term Insurance Table.
b. For policies issued on or after the operative date of the valuation manual as defined by §27-36A-15, the valuation manual shall provide the Commissioners Standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. If the commissioner approves by regulation any Commissioners Standard ordinary mortality table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual as defined by §27-36A-15 then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.
(7)a. For policies issued prior to the operative date of the valuation manual as defined by §27-36A-15, any Commissioners Standard industrial mortality tables, adopted after 1980 by the NAIC, that are approved by regulation promulgated by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table.
b. For policies issued on or after the operative date of the valuation manual as defined by §27-36A-15, the valuation manual shall provide the Commissioners Standard mortality table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. If the commissioner approves by regulation any Commissioners Standard industrial mortality table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual as defined by §27-36A-15 then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.
(i) The nonforfeiture interest rate is defined as follows:
(1) For policies issued prior to the operative date of the valuation manual as defined by §27-36A-15, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to 125 percent of the calendar year statutory valuation interest rate for such policy as defined in the standard valuation law, rounded to the nearest one-quarter of one percent, provided, however, that the nonforfeiture interest rate shall not be less than four percent.
(2) For policies issued on and after the operative date of the valuation manual as defined by §27-36A-15, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be provided by the valuation manual.
(j) Notwithstanding any other provision of this title to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provisions of that policy form.
(k) After January 1, 2017, 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, 1989, which shall be the operative date of this section for the insurer. If an insurer makes no such election, the operative date of this section for the insurer shall be January 1, 1989.
(Act 2016-411, p. 1108, §1.)
In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on the estimates of future experience, or, in the case of any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in Section 27-15-72, 27-15-73, 27-15-74, 27-15-75, 27-15-76, 27-15-77, or 27-15-78, then:
(1) The commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by Section 27-15-72, 27-15-73, 27-15-74, 27-15-75, 27-15-76, 27-15-77, or 27-15-78.
(2) The commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds.
(3) The cash surrender values and paid-up nonforfeiture benefits provided by such plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this standard nonforfeiture law for life insurance, as determined by regulations promulgated by the commissioner.
(Act 2016-411, §1.)
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 allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in Sections 27-15-73, 27-15-74, 27-15-75, 27-15-76, 27-15-77, and 27-15-78 may be calculated on 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 not be less than the amounts used to provide such additions. Notwithstanding the provisions of Section 27-15-73, additional benefits payable as follows shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this article, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits:
(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 article 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 the parent of the child.
(6) As other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits.
(Act 2016-411, §1.)
(a) This section, in addition to all other applicable sections of this article, shall apply to all policies issued on or after January 1, 1985. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be in an amount which does not differ by more than two-tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of:
(1) The greater of zero and the basic cash value hereinafter specified.
(2) The present value of any existing paid-up additions, less the amount of any indebtedness to the insurer on account of or secured by the policy.
(b) The basic cash value shall be equal to the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the insurer, if there had been no default, less the then present value of the nonforfeiture factors, as defined in this article, corresponding to premiums which would have fallen due on and after such anniversary; provided, however, that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in Section 27-15-73 or 27-15-75, whichever is applicable, shall be the same as are the effects specified in Section 27-15-73 or 27-15-75, whichever is applicable, on the cash surrender values defined in that section.
(c) The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in Section 27-15-75 or 27-15-78, whichever is applicable. Except as is required by subsection (d), the percentage:
(1) Must be the same percentage for each policy year between the second policy anniversary and the later of:
a. The fifth policy anniversary.
b. The first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years.
(2) Must be such that no percentage after the later of the two policy anniversaries specified in subdivision (1) may apply to fewer than five consecutive policy years.
(d) Provided, that no basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in Section 27-15-78, were substituted for the nonforfeiture factors in the calculation of the basic cash value.
(e) All adjusted premiums and present values referred to in this section shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy’s compliance with the other sections of this article. The cash surrender values referred to in this section shall include any endowment benefits provided for by the policy.
(f) Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment, shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in Sections 27-15-72, 27-15-73, 27-15-74, 27-15-78, and 27-15-80. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in subdivisions (1) through (6) of Section 27-15-80 shall conform with the principles of this section.
(Act 2016-411, §1.)
This article shall not apply to any of the following:
(1) Reinsurance.
(2) Group insurance.
(3) Pure endowment.
(4) Annuity or reversionary annuity contract.
(5) Variable life insurance contract.
(6) A term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of 20 years or less, expiring before age 71, for which uniform premiums are payable during the entire term of the policy.
(7) A term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in Sections 27-15-75, 27-15-76, 27-15-77, and 27-15-78, is less than the adjusted premium so calculated on a term policy of uniform amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of 20 years or less, expiring before age 71, for which uniform premiums are payable during the entire term of the policy.
(8) A policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in Sections 27-15-73, 27-15-74, 27-15-75, 27-15-76, 27-15-77, and 27-15-78, exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year.
(9) Benefits provided in the form of funeral or monument merchandise and services under burial policies, except to the extent provided in Section 27-17-13.
(Act 2016-411, §1.)
For purposes of determining the applicability of this article, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life.
(Act 2016-411, §1.)
For the purposes of this title, “industrial life insurance” is that form of life insurance written under policies of face amount to $2,500.00 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.
(Acts 1971, No. 407, p. 707, §376.)
The provisions of this chapter apply only to industrial life insurance policies. Sections 27-15-15, 27-15-24, 27-15-25, 27-15-28, and 27-15-29 shall also apply to industrial life insurance.
(Acts 1971, No. 407, p. 707, §375.)
(a) No policy of industrial life insurance shall be delivered or be issued for delivery in this state unless it contains in substance the applicable provisions set forth in Sections 27-16-4 through 27-16-14.
(b) This section does not apply to burial insurance policies as defined in Section 27-17-1.
(Acts 1971, No. 407, p. 707, §377.)
There shall be a provision that the insured is entitled to a grace period of four weeks within which the payment of any premiums after the first may be made; except, that in policies the premiums for which are payable monthly, the period of grace shall be one month, but not less than 30 days, and that during the period of grace the policy shall continue in full force, but if during the grace period the policy becomes a claim, then any overdue and unpaid premiums may be deducted from any settlement under the policy.
(Acts 1971, No. 407, p. 707, §378.)
There shall be a provision that the policy shall constitute the entire contract between the parties or, if a copy of the application is endorsed upon or attached to the policy when issued, a provision that the policy and the application therefor shall constitute the entire contract. If the application is so made a part of the contract, the policy shall also provide that all statements made by the applicant in such application shall, in the absence of fraud, be deemed to be representations and not warranties.
(1935, No. 152, p. 194; Code 1940, T. 28, §6; Acts 1971, No. 407, p. 707, §379.)
There shall be a provision that the policy, exclusive of provisions relating to disability or dismemberment benefits or to additional benefits in the event of death by accident or accidental means, shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue.
(Code 1940, T. 28, §7; Acts 1967, No. 181, p. 543; Acts 1971, No. 407, p. 707, §380.)
There shall be a provision that if it is found that the age or sex of the individual insured or the age or sex of any other individual considered in determining the premium 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, sex or sexes.
(Acts 1971, No. 407, p. 707, §381.)
If a participating policy, there shall be a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the policy; except, that, at the option of the insurer, such participation may be deferred to the end of the fifth policy year. This provision shall not prohibit the payment of additional dividends on default of payment of premiums or termination of the policy.
(Acts 1971, No. 407, p. 707, §382.)
(a) There shall be a provision that unless the policy has been surrendered for its cash value, or its cash surrender value has been exhausted or the period of any extended insurance provided by the policy has expired, the policy will be reinstated at any time within two years after the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all overdue premiums and payment or, within the limits permitted by the then cash value of the policy, reinstatement of any other indebtedness to the insurer upon the policy with interest as to both premiums and indebtedness at a rate not exceeding six percent per annum compounded annually.
(b) If for the purpose of or toward reinstatement of a policy after its lapse the insurer receives a payment or tender of premium or other funds in amount less than as required to effectuate the reinstatement so as to place the policy currently in full force, then, within 60 days after the receipt of such payment or tender, the insurer shall either:
(1) Collect whatever amount is necessary to effectuate the reinstatement and place the policy in full force and effect currently;
(2) Refund to the person entitled thereto all such payments and amounts tendered and refuse the reinstatement; or
(3) In the absence of action referred to in subdivisions (1) or (2) of this subsection the insurer shall be deemed as a matter of law to have effectuated reinstatement of the policy so that it is in full force and effect currently as of the end of such 60-day period and to have forever waived the payment or collection of all premiums and amounts theretofore due and unpaid under the policy.
(c) The provisions made in subsection (b) of this section need not be contained in the policy.
(Acts 1971, No. 407, p. 707, §383.)
There shall be a provision that, when the policy becomes a claim by 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 premium receipt book and proof of interest of the claimant. If the insurer specifies a particular period prior to the expiration of which settlement shall be made, such period shall not exceed two months from the receipt of such proofs.
(Acts 1971, No. 407, p. 707, §384.)
There shall be a provision that no agent shall have the power or authority to waive, change or alter any of the terms or conditions of any policy; except, that at the option of the insurer, the terms or conditions may be changed by an endorsement or rider signed by a duly authorized officer of the insurer.
(Acts 1971, No. 407, p. 707, §385.)
(a) Each such policy shall have a space for the name of the beneficiary designated with a reservation of the right to designate or change the beneficiary after the issuance of the policy.
(b) 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.
(c) Such a 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 be not 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 payment thereunder to the executor or administrator of the insured, or to any of the insured’s relatives 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 incurred expense for the maintenance, medical attention or burial of the insured. Such policy may also include a similar provision applicable to any other payment due under the policy.
(Acts 1971, No. 407, p. 707, §386.)
There shall be provisions for nonforfeiture benefits and cash surrender values as required by Section 27-15-28.
(Acts 1971, No. 407, p. 707, §387.)
There shall be a title on the face of each such policy briefly describing the same.
(Acts 1971, No. 407, p. 707, §388.)
Any of the provisions required by Sections 27-16-4 through 27-16-14, or any portion thereof, which are not applicable to single premium or term policies or to policies issued or granted pursuant to nonforfeiture provisions shall, to that extent, not be incorporated therein.
(Acts 1971, No. 407, p. 707, §389.)
There may be a provision in the case of industrial policies granting to the insured, upon proper written request and upon presentation of evidence of insurability satisfactory to the insurer, the privilege of converting any industrial insurance policy to any form of life insurance with less frequent premium payments regularly issued by the insurer, in accordance with terms and conditions agreed upon with the insurer. The privilege of making such conversion need be granted only if the insurer’s industrial policies on the life insured, in force as premium-paying insurance and on which conversion is requested, grant benefits in event of death, exclusive of additional accidental death benefits and exclusive of any dividend additions, in an amount not less than the minimum amount of such insurance, with less frequent premium payments issued by the insurer at the age of the insured on the plan of industrial or ordinary insurance desired.
(Acts 1971, No. 407, p. 707, §390.)
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;
(2) 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 two 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; or
(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 to make such contract.
(Acts 1971, No. 407, p. 707, §391.)
(a) This chapter applies only to burial insurance policies.
(b) For the purposes of this title, “burial insurance” is that form of life insurance under which:
(1) Benefits are provided in the form of merchandise and services incident to the burial of the insured or the furnishing of a monument to the insured;
(2) The specified retail value of such merchandise and services does not exceed $1,500.00; and
(3) The words “burial policy,” “vault policy,” “monument policy,” or words of similar import are printed on the policy as a part of its description.
(Acts 1971, No. 407, p. 707, §392.)
No policy of burial insurance shall be delivered or issued for delivery in this state unless it contains in substance the provisions set forth in Sections 27-17-3 through 27-17-14, or corresponding provisions, which in the opinion of the commissioner are not less favorable in any respect to the policyholder. Any of such provisions, or portions thereof, not applicable to single premium policies shall to that extent be omitted therefrom.
(Acts 1971, No. 407, p. 707, §393.)
There shall be a provision that the insured is entitled to a grace period of four weeks within which the payment of any premium after the first may be made, except, that, in policies the premiums which are payable monthly or less often, the period of grace shall be one month but not less than 30 days, and that during the period of grace the policy shall continue in full force, but if during the grace period the policy becomes a claim, then any overdue premiums may be deducted from any cash payment which may be due under the policy.
(Acts 1971, No. 407, p. 707, §394.)
There shall be a provision that the policy shall constitute the entire contract between the parties or, if a copy of the application is endorsed upon or attached to the policy when issued, a provision that the policy and the application therefor shall constitute the entire contract. If the application is so made a part of the contract, the policy shall also provide that all statements made by the applicant in such application shall, in the absence of fraud, be deemed to be representations and not warranties.
(Acts 1935, No. 152, p. 194; Code 1940, T. 28, §6; Acts 1971, No. 407, p. 707, §395.)
There shall be a provision, with respect to benefits provided in the form of merchandise and services incident to the burial of the insured, that the policy shall be incontestable from its date of issue except for nonpayment of premiums and, with respect to benefits payable in cash, monuments, waiver of premium benefits and disability benefits, a provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years from its date of issue, except for nonpayment of premiums and except, at the option of the insurer, as to provisions relating to benefits in event of dismemberment or disability or to additional benefits for death by accident or accidental means.
(Acts 1971, No. 407, p. 707, §396.)
(a) There shall be a provision that the policy may be reinstated at any time within two years after the date of default in the payment of any premium unless the policy has been surrendered for its cash value or the period of any extended insurance provided by the policy has expired, upon evidence of insurability satisfactory to the insurer and the payment of all overdue premiums with interest at a rate not exceeding six percent per annum compounded annually.
(b) Subsections (b) and (c) of Section 27-16-9 shall also apply as to burial insurance policies.
(Acts 1971, No. 407, p. 707, §397.)
There shall be a provision that the insurer has contracted with and appointed an authorized funeral director or monument dealer in this state to furnish the merchandise and services provided by the policy. The policy may also provide that the term “authorized funeral director” or “authorized monument dealer” shall mean a funeral director or monument dealer authorized by the insurer at the time of the insured’s death.
(Acts 1971, No. 407, p. 707, §398.)
There shall be a provision that if the death of the insured or, if a vault or monument policy, the burial of the insured occurs within the State of Alabama and within a specified distance from an authorized funeral director or monument dealer of the insurer, the merchandise and services provided by the policy shall be furnished by such authorized funeral director or monument dealer upon the request of the beneficiary or other person having authority to make funeral arrangements.
(Acts 1971, No. 407, p. 707, §399.)
There shall be a provision that if the death of the insured or, if a vault or monument policy, the burial of the insured occurs outside the State of Alabama or at a greater distance from an authorized funeral director or monument dealer of the insurer than that specified in Section 27-17-8, the insurer will, in lieu of furnishing such merchandise and services, pay a cash benefit of not less than one half of the specified retail value of the merchandise and services provided in the policy; provided, however, that the insurer may provide for a reduced benefit as to an insured less than one year of age at death. The policy may contain a provision for the payment of such cash benefit at the option of the insurer under any other circumstances where it is impractical for any reason to furnish the merchandise and services provided by the policy.
(Acts 1971, No. 407, p. 707, §400.)
Each such policy shall have a space for the name of the beneficiary designated with a reservation of the right to designate or change the beneficiary after the issuance of the policy. 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.
(Acts 1971, No. 407, p. 707, §401.)
(a) There shall be a provision that any cash benefit provided by the policy upon the death of the insured will be payable upon receipt of due proof of death of the insured and, at the insurer’s option, the surrender of the policy and premium receipt book.
(b) The policy may also provide for the payment of such benefit or any other cash benefit due under the policy to the beneficiary designated in the policy, or 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 incurred expense for the maintenance, medical attention or burial of the insured.
(Acts 1971, No. 407, p. 707, §402.)
There shall be a provision that no agent shall have the power or authority to waive, change or alter any of the terms or conditions of any policy; except, that, at the option of the insurer, the terms or conditions may be changed by an endorsement signed by a duly authorized officer of the insurer.
(Acts 1971, No. 407, p. 707, §403.)
There shall be provisions for nonforfeiture benefits and cash surrender values as required by Section 27-15-28; except, that, with respect to benefits provided in the form of funeral or monument merchandise and services, the required minimum cash surrender values shall be two thirds of the cash surrender values which would be required for a cash life insurance policy having a face amount equal to the cash benefit provided in accordance with Section 27-17-9.
(Acts 1971, No. 407, p. 707, §404.)
There shall be a title on the face of the policy briefly describing the same.
(Acts 1971, No. 407, p. 707, §405.)
The following provisions of this title shall also apply as to burial insurance policies:
(1) Section 27-15-15;
(2) Section 27-15-24;
(3) Section 27-15-25;
(4) Section 27-15-29; and
(5) Section 27-16-16.
(Acts 1971, No. 407, p. 707, §406.)
(a) Except as hereinafter provided, any authorized insurer who issues or has heretofore issued “burial insurance” in this state shall value the life insurance reserve liabilities for such policies (hereinafter “burial reserves”) in accordance with the provisions of Section 27-36-7.
(b) An insurer shall increase the amount of insurance on which its burial reserves are based, not to exceed the retail value of such benefits as stated in the policies, when appropriate to reflect an increase in the costs to the insurer of providing the policy benefits. When an insurer shall increase the amount of insurance for this purpose, it shall be permitted to change the assumed interest rate and the valuation mortality table for computing such reserves, provided that the resulting reserves after such increase in amount of insurance and change in assumed interest rate or valuation mortality table, or both, shall not be less than the reserves before such changes, and provided further that the reserves shall not be less than those calculated using the minimum standards set forth below.
(c) The minimum standards for valuation of burial reserves under this chapter shall be:
(1) An assumed interest rate not exceeding six percent per annum;
(2) The commissioners 1961 standard industrial mortality table or any industrial mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by the commissioner for use in determining the minimum standard of valuation for such policies; and
(3) The commissioners reserve valuation method as defined by Section 27-36-7(e), as may be amended from time to time.
(d) Prior to the filing date of the annual statement for the year in which the insurer intends to change the assumed interest rate or the valuation mortality tables, or both, used in the valuation of burial reserves as permitted under this chapter, the insurer shall communicate in writing to the commissioner the valuation standards to be used in such calculation. The insurer shall as to each block of business specify the interest rate, mortality table, valuation method, and amount of insurance to be used in the reserve calculation. “Block of business” shall mean a logical and identifiable grouping of policies as specified by the insurer in its written notice to the commissioner.
(e) Nothing in this chapter shall be construed as authorizing or requiring an increase in the retail value of the policies or in the nonforfeiture values, including the cash surrender values of subject burial insurance policies.
(f) To the extent that other laws or parts of laws may be construed as being applicable to the calculation of burial reserves, the provisions of this chapter shall take precedence over and supersede said provisions to the extent necessary to effectuate the intent of this chapter.
(Acts 1984, No. 84-326, p. 746, §§1-6.)
DELETED BY ACT 2024-290, EFFECTIVE MAY 8, 2024
REPEALED BY IMPLICATION IN ACT 2023-94.
(Act 2002-74, p. 221, §1; Act 2014-216, p. 653, §1.)
This chapter applies only as to group life insurance contracts hereafter issued and does not apply as to group life insurance contracts heretofore issued or to any amendment or renewal of such heretofore issued contracts.
(Acts 1971, No. 407, p. 707, §407.)
No policy of group life insurance shall be delivered in this state unless it contains in substance the applicable provisions set forth in Sections 27-18-3 through 27-18-13, 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 27-18-9 and 27-18-13 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 in this section shall be construed to require that group life insurance policies contain the same nonforfeiture provisions as are required for individual life insurance policies.
(Acts 1971, No. 407, p. 707, §408.)
The group life insurance policy shall contain a provision that the policyholder is entitled to a grace period of not less than 30 days for the payment of any premium due 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.
(Acts 1971, No. 407, p. 707, §409.)
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 two 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 two years during such person’s lifetime nor unless it is contained in a written instrument signed by him.
(Code 1940, T. 28, §7; Acts 1967, No. 181, p. 543; Acts 1971, No. 407, p. 707, §410.)
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, 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.
(Code 1940, T. 28, §6; Acts 1971, No. 407, p. 707, §411.)
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.
(Acts 1971, No. 407, p. 707, §412.)
The group life insurance policy shall contain a provision specifying an equitable adjustment of premiums or of benefits, or of 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.
(Acts 1971, No. 407, p. 707, §413.)
In the case of a policy issued to a creditor to insure debtors of such creditor, there shall be 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.
(Acts 1971, No. 407, p. 707, §414.)
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 provisions 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 $500.00 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.
(Acts 1971, No. 407, p. 707, §415.)
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 27-18-11, 27-18-12, and 27-18-13.
(Acts 1971, No. 407, p. 707, §416.)
The group life insurance policy shall contain 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 days after such termination and provided, further, that:
(1) 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;
(2) 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 any other group policy within 31 days 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
(3) 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.
(Acts 1971, No. 407, p. 707, §417.)
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 five 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 27-18-11; except, that the group policy may provide that the amount of such individual policy shall not exceed the smaller of:
(1) 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 days after such termination; and
(2) $2,000.00.
(Acts 1971, No. 407, p. 707, §418.)
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 27-18-11 and 27-18-12 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.
(Acts 1971, No. 407, p. 707, §419.)
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 contained in this section 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.
(Acts 1971, No. 407, p. 707, §420.)
“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 three employees at date of issue. Premiums for such policies shall be paid by the employer or the trustee of a fund established by the employer 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 or from funds contributed wholly by the insured employees.
(Acts 1971, No. 407, p. 707, §421.)
Any person insured under a group insurance policy may, in accordance with Section 27-14-21 and pursuant to the terms of such policy or an arrangement among the insured, the group policyholder and the insurer, make an assignment of the rights and benefits conferred by any provision of such policy or by law, including specifically, but not by way of limitation, the right to have issued to the insured an individual policy arising from conversion or otherwise and the right to name a beneficiary. Any assignment permitted in this section, whether made before or after January 1, 1972, shall be valid for the purpose of vesting in the assignee all such rights and benefits so assigned and shall entitle the insurer to deal with the assignee as the owner of all rights and benefits conferred on the insured under the policy in accordance with the terms of the assignment without prejudice to the insurer on account of any payment it may make or any individual policy it may issue arising from conversion prior to receipt at its home office of written notice of such assignment. This section acknowledges, declares, and codifies the right of assignment of interest under like insurance policies existing prior to the enactment of this title.
(Acts 1971, No. 407, p. 707, §421.1.)
Nothing in this article 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 disability insurance as:
a. Provide additional benefits in case of death or dismemberment or loss of sight by accident; or
b. 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 contract;
(4) Reinsurance; or
(5) Industrial insurance, which is disability insurance issued under policies sold on a debit basis, bearing the words “industrial policy” imprinted on the face of the policy as part of the descriptive matter, and with premiums payable monthly or more often.
(Acts 1953, No. 193, p. 247, §8; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §422.)
No policy of disability 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 the family, who shall be deemed the policyholder, any two or more eligible members of that family, including husband, wife, dependent children, or any children under a specified age, and any other person dependent upon the policyholder;
(4) 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 lightfaced type of a style in general use, the size of which shall be uniform and not less than 10 point with a lower case unspaced alphabet length not less than 120 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;
(5) The exceptions and reductions of indemnity shall be set forth in the policy and, other than those contained in Sections 27-19-4 through 27-19-26, 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.
(Acts 1953, No. 193, p. 247, §2; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §423.)
(a) Except as provided in subsection (b) of this section, each such policy delivered, or issued for delivery, to any person in this state shall contain the provisions specified in Sections 27-19-4 through 27-19-15, 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 subcaptions 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.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §424.)
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 insurer 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §425.)
There shall be a provision as follows:
“Time Limit on Certain Defenses: (1) After two 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 two-year period.”
(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 two-year period nor to limit the application of Sections 27-19-17 through 27-19-21 in the event of misstatement with respect to age or occupation or other insurance.)
(A policy which the insured has the right to continue in force subject to its terms by the timely payment of premium:
(1) Until at least age 50; or
(2) In the case of a policy issued after age 44, for at least five 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 two years during the lifetime of the insured, excluding any period during which the insured is disabled, it shall become incontestable as to the statements contained in the application.)”
”(2) No claim for loss incurred or disability (as defined in the policy) commencing after two 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §426.)
There shall be a provision as follows:
“Grace Period: 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 30 days prior to the premium due date the insurer has delivered to the insured or has mailed to his last address as shown by the records of the insurer written notice of its intention not to renew this policy beyond the period for which the premium has been accepted.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §427.)
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 insurer to accept such premium, without requiring in connection therewith an application for reinstatement, shall reinstate the policy; provided, however, that if the insurer 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 insurer or, lacking such approval, upon the forty-fifth day following the date of such conditional receipt unless the insurer 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 10 days after such date. In all other respects, the insured and the insurer 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 hereon 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 60 days prior to the date of reinstatement.”
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 five years from its date of issue.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §428.)
There shall be a provision as follows:
“Notice of Claim: Written notice of claim must be given to the insurer within 20 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 insurer at _____ (insert the location of such office as the insurer may designate for the purpose), or to any authorized agent of the insurer, with information sufficient to identify the insured, shall be deemed notice to the insurer.”
In a policy providing a loss-of-time benefit which may be payable for at least two years, an insurer may, at its option, insert the following between the first and second sentences 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 insurer 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 insurer on account of such claim or any denial of liability, in whole or in part, by the insurer 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §429.)
There shall be a provision as follows:
“Claim Forms: The insurer, 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 15 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §430.)
There shall be a provision as follows:
“Proofs of Loss: Written proof of loss must be furnished to the insurer at its said office in case of claim for loss for which this policy provides any periodic payment contingent upon continuing loss within 90 days after the termination of the period for which the insurer is liable and, in case of claim for any other loss, within 90 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §431.)
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 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §432.)
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 insurer, be paid either to such beneficiary or to such estate. All other indemnities will be payable to the insured.”
The following provisions, or either of them, may be included with the foregoing provision at the option of the insurer:
“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 insurer may pay such indemnity, up to an amount not exceeding $ _____ (insert an amount which shall not exceed $1,000.00), to any relative by blood or connection by marriage of the insured or beneficiary who is deemed by the insurer to be equitably entitled thereto. Any payment made by the insurer in good faith pursuant to this provision shall fully discharge the insurer to the extent of such payment.”
“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 insurer’s option and unless the insured requests otherwise in writing not later than the time of filing proof 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §433.)
There shall be a provision as follows:
“Physical Examinations and Autopsy: The insurer 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §434.)
There shall be a provision as follows:
“Legal Actions: No action shall be brought to recover on this policy prior to the expiration of 60 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §435.)
There shall be a provision as follows:
“Change of Beneficiary: Unless the insured makes an irrevocable designation of beneficiary, the right to change a 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.”
(The first clause of this provision, relating to the irrevocable designation of beneficiary, may be omitted at the insurer’s option.)
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §436.)
Except as provided in subsection (b) of Section 27-19-3, no such policy delivered, or issued for delivery, to any person in this state shall contain provisions respecting the matters set forth in Sections 27-19-17 through 27-19-26 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.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §437.)
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 insurer as more hazardous than that stated in this policy or while doing for compensation anything pertaining to an occupation so classified, the insurer 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 insurer for such more hazardous occupation. If the insured changes his occupation to one classified by the insurer as less hazardous than that stated in this policy, the insurer, 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 insurer prior to the occurrence of the loss for which the insurer 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 insurer in such state prior to the occurrence of the loss or prior to the date of proof of change in occupation.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §438.)
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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §439.)
There may be a provision as follows:
“Other Insurance in This Insurer: If an accident or sickness or accident and sickness policy, or policies, previously issued by the insurer to the insured be in force concurrently herewith, making the aggregate indemnity for _____ (insert type of coverage or coverages) in excess of $ _____ (insert maximum limit of indemnity or indemnities), the excess insurance shall be void and all premiums paid for such excess shall be returned to the insured or to his estate.”
Or, in lieu thereof:
“Insurance effective at any one time on the insured under a like policy, or policies, in this insurer is limited to the one such policy elected by the insured, his beneficiary or his estate, as the case may be, and the insurer will return all premiums paid for all other such policies.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §440.)
(a) There may be a provision as follows:
“Insurance with Other Insurers: If there be other valid coverage, not with this insurer, providing benefits for the same loss on a provision of service basis or on an expense-incurred basis and of which this insurer has not been given written notice prior to the occurrence or commencement of loss, the only liability under any expense-incurred coverage of this policy shall be for such proportion of the loss as the amount which would otherwise have been payable hereunder plus the total of the like amounts under all such other valid coverages for the same loss of which this insurer had notice bears to the total like amounts under all valid coverages for such loss, and for the return of such portion of the premiums paid as shall exceed the pro rata portion for the amount so determined. For the purpose of applying this provision when other coverage is on a provision of service basis, the ‘like amount’ of such other coverage shall be taken as the amount which the services rendered would have cost in the absence of such coverage.”
(b) If the foregoing policy provision is included in a policy which also contains the policy provision set out in Section 27-19-21 there shall be added to the caption of the foregoing provision the phrase ”-Expense-Incurred Benefits.” The insurer may, at its option, include in this provision a definition of “other valid coverage,” approved as to form by the commissioner, which definition shall be limited in subject matter to coverage provided by organizations subject to regulation by insurance law or by insurance authorities of this, or any other, state of the United States or any province of Canada, and by hospital or medical service organizations and to any other coverage the inclusion of which may be approved by the commissioner. In the absence of such definition, such term shall not include group insurance, automobile medical payments insurance or coverage provided by hospital, or medical service organizations, or by union welfare plans or employer or employee benefit organizations. For the purpose of applying the foregoing policy provision with respect to any insured, any amount of benefit provided for such insured pursuant to any compulsory benefit statute, including any workmen’s compensation or employer’s liability statute, whether provided by a governmental agency or otherwise, shall, in all cases, be deemed to be “other valid coverage” of which the insurer has had notice. In applying the foregoing policy provision, no third party liability coverage shall be included as “other valid coverage.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §441.)
(a) There may be a provision as follows:
“Insurance with Other Insurers: If there be other valid coverage, not with this insurer, providing benefits for the same loss on other than an expense-incurred basis and of which this insurer has not been given written notice prior to the occurrence or commencement of loss, the only liability for such benefits under this policy shall be for such proportion of the indemnities otherwise provided hereunder for such loss as the like indemnities of which the insurer had notice (including the indemnities under this policy) bear to the total amount of all like indemnities for such loss and for the return of such portion of the premium paid as shall exceed the pro rata portion for the indemnities thus determined.”
(b) If the foregoing policy provision is included in a policy which also contains the policy provision set out in Section 27-19-20, there shall be added to the caption of the foregoing provision the phrase ”- Other Benefits.” The insurer may, at its option, include in this provision a definition of “other valid coverage,” approved as to form by the commissioner, which definition shall be limited in subject matter to coverage provided by organizations subject to regulation by insurance law or by insurance authorities of this, or any other, state of the United States or any province of Canada and to any other coverage the inclusion of which may be approved by the commissioner. In the absence of such definition, such term shall not include group insurance or benefits provided by union welfare plans, or by employer or employee benefit organizations. For the purpose of applying the foregoing policy provision with respect to any insured, any amount of benefit provided for such insured pursuant to any compulsory benefit statute, including any workmen’s compensation or employer’s liability statute, whether provided by a governmental agency or otherwise, shall, in all cases, be deemed to be “other valid coverage” of which the insurer has had notice. In applying the foregoing policy provision, no third party liability coverage shall be included as “other valid coverage.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §442.)
(a) There may be a provision as follows:
“Relation of Earnings to Insurance: If the total monthly amount of loss of time benefits promised for the same loss under all valid loss of time coverage upon the insured, whether payable on a weekly or monthly basis, shall exceed the monthly earnings of the insured at the time disability commenced or his average monthly earnings for the period of two years immediately preceding a disability for which claim is made, whichever is the greater, the insurer will be liable only for such proportionate amount of such benefits under this policy as the amount of such monthly earnings or such average monthly earnings of the insured bears to the total amount of monthly benefits for the same loss under all such coverage upon the insured at the time such disability commences and for the return of such part of the premiums paid during such two years as shall exceed the pro rata amount of the premiums for the benefits actually paid hereunder; but this shall not operate to reduce the total monthly amount of benefits payable under all such coverage upon the insured below the sum of $200.00 or the sum of the monthly benefits specified in such coverages, whichever is the lesser, nor shall it operate to reduce benefits other than those payable for loss of time.”
(b) The foregoing policy provision may be inserted only in a 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 five years from its date of issue.
The insurer may, at its option, include in this provision a definition of “valid loss of time coverage,” approved as to form by the commissioner, which definition shall be limited in subject matter to coverage provided by governmental agencies or by organizations subject to regulation by insurance law or by insurance authorities of this, or any other, state of the United States or any province of Canada, or to any other coverage the inclusion of which may be approved by the commissioner or any combination of such coverages. In the absence of such definition, such term shall not include any coverage provided for such insured pursuant to any compulsory benefit statute including any workmen’s compensation or employer’s liability statute, or benefits provided by union welfare plans or by employer or employee benefit organizations.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §443.)
There may be a provision as follows:
“Unpaid Premiums: 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §444.)
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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §445.)
There may be a provision as follows:
“Illegal Occupation: The insurer 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §446.)
There may be a provision as follows:
“Intoxicants and Narcotics: The insurer 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.”
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §447.)
The provisions which are the subject of Sections 27-19-4 through 27-19-26, 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.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §448.)
(a) No policy of health, sickness, or accident insurance delivered, or issued for delivery, in this state, including both individual and group policies, which provide coverage for psychiatric treatment or mental illness shall exclude hospitalization benefits for mental patients in tax-supported institutions of the State of Alabama, or any county or municipality thereof.
(b) The provisions of this section shall not apply to any policy of insurance in effect prior to September 20, 1971, nor shall the provisions of this section apply to any employee benefit plan providing hospital benefits for mental patients where such employee benefit plan is established by the employer and contributions to the plan are provided by the employer and the employee, or either of them, and such plan is not evidenced by individual, or group or blanket policies of health, sickness, or accident insurance issued by an insurance company.
(Acts 1971, No. 1871, p. 3052.)
The word “insured,” as used in this article, 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.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §449.)
(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 article 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.
(Acts 1953, No. 193, p. 247, §3; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §450.)
(a) Every individual policy of insurance providing hospital, medical, or surgical benefits in which an 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 in a rider attached thereto that, subject to the right to terminate the policy upon nonpayment of premium when due, such right to refuse renewal shall not be exercised before the renewal date occurring on, or after and nearest, each policy anniversary or, in the case of lapse and reinstatement, before 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. Subject to the right to terminate for nonpayment of premium, the right to refuse renewal by an insurer shall only be exercised after having given the insured no less than 30 days’ notice in writing of the intent not to renew.
(b) Every individual disability insurance policy which is subject to renewal at the option of the insurer shall so indicate in a prominently captioned statement on the first page of such policy.
(Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §451.)
Every individual disability insurance policy, except single premium nonrenewable policies or contracts, issued for delivery in the State of Alabama shall have printed thereon, or attached thereto, a notice stating in substance that the person to whom the policy is issued shall be permitted to return the policy within 10 days of its delivery to such purchaser and to have the premium paid refunded if, after examination of the policy, the purchaser is not satisfied with it for any reason. If a policyholder or purchaser, pursuant to such notice, returns the policy or contract to the insurer at its home or branch office or to the agent through whom it was purchased, it shall be void from the beginning and the parties shall be in the same position as if no policy or contract has been issued.
(Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §452.)
Any insurer writing disability insurance policies may, with approval of the commissioner, add endorsements or riders to existing policies of such insurance, with or without increase in premium, provided there is shown separately on the endorsement or rider a stated premium charge for additional coverage.
(Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §453.)
The requirements of this article may be complied with by the insurer by attaching to the policy such rider or endorsement as may be necessary for the purpose.
(Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §454.)
(a) No policy provision which is not subject to this article 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 article.
(b) A policy delivered, or issued for delivery, to any person in this state in violation of this article shall be held valid but shall be construed as provided in this article. When any provision in a policy subject to this article is in conflict with any provision of this article, the rights, duties, and obligations of the insurer, the insured, and the beneficiary shall be governed by the provisions of this article.
(Acts 1953, No. 193, p. 247, §4; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §455.)
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 subject to any right of cancellation 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.
(Acts 1953, No. 193, p. 247, §7; Acts 1957, No. 597, p. 834; Acts 1971, No. 407, p. 707, §456.)
Disability insurance on a franchise plan is hereby declared to be that form of disability insurance issued to:
(1) Three or more employees of any corporation, copartnership, 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 two 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 for its members or by some designated person acting on behalf of such employer or association or union. The term “employees” as used in this section may be deemed to include the officers, managers, employees, and retired employees of the employer and the individual proprietor or partners if the employer is an individual proprietor or partnership.
(Acts 1971, No. 407, p. 707, §457.)
(a) All individual and group health insurance policies providing coverage on an expense-incurred basis and individual and group service or indemnity type contracts issued by a nonprofit service corporation which provide coverage for a family member of the insured or subscriber shall, as to such family members’ coverage, also provide that the health insurance benefits applicable for children shall be payable with respect to a newly born child of the insured or subscriber from the moment of birth.
(b) The coverage for newly born children shall consist of coverage of injury or sickness including the necessary care and treatment of medically diagnosed congenital defects and birth abnormalities, but need not include benefits for routine well-baby care.
(c) The requirements of this section shall apply to all insurance policies and subscriber contracts renewed, delivered, or issued for delivery in this state, 60 days after April 24, 1975.
(Acts 1975, 3rd Ex. Sess., No. 82, p. 311, §§1-3.)
Whenever any policy of insurance or any medical service plan or hospital service contract or hospital and medical service contract provides for reimbursement for any visual service in Alabama which is within the lawful scope of practice of a duly licensed optometrist, as defined in Section 34-22-1, the insured or other person entitled to benefits under such policy shall be entitled to reimbursement for such services, whether such services are performed by a duly licensed physician or by a duly licensed optometrist, whichever the insured selects, notwithstanding any provision to the contrary in any statute or in such policy, plan, or contract. Duly licensed optometrists shall be entitled to participate in such policies, plans, or contracts providing for visual services to the same extent as fully licensed physicians.
(Acts 1967, No. 508, p. 1224.)
This article shall be known and may be cited as the “Alabama Medicare Supplement Minimum Standards Act.”
(Acts 1981, No. 81-560, p. 940, §1.)
The purpose of this article is to establish certain definitions, policy provisions, anticipated loss ratio standards, and disclosure requirements applicable to group and individual Medicare supplement disability policies and to authorize the implementation of these requirements through regulations promulgated by the Commissioner of Insurance consistent with the uniform standards developed by the National Association of Insurance Commissioners to meet the standards enacted in Public Law 96-265 (Laws 1980).
(Acts 1981, No. 81-560, p. 940, §2.)
For purposes of this article, the following terms shall have the meaning indicated herein:
(1) APPLICANT. Includes either of the following:
a. In the case of an individual Medicare supplement policy or subscriber contract, the person who seeks to contract for insurance benefits.
b. In the case of a group Medicare supplement policy or subscriber contract, the proposed certificate holder.
(2) CERTIFICATE. Any certificate issued under a group Medicare supplement policy, which policy has been delivered or issued for delivery in this state.
(3) CERTIFICATE FORM. The form on which the certificate is delivered or issued for delivery by the issuer.
(4) ISSUER. Insurance companies, fraternal benefit societies, health care service plans, health maintenance organizations, and any other entity delivering or issuing for delivery in this state Medicare supplement policies or certificates.
(5) MEDICARE. The “Health Insurance for the Aged Act,” Title XVIII of the Social Security Amendments of 1965, as then constituted or later amended.
(6) MEDICARE SUPPLEMENT POLICY. A group or individual policy of disability insurance or a nonprofit hospital and medical plan contract or a subscriber contract of a health maintenance organization, other than a policy issued pursuant to a contract under Section 1876 of the federal Social Security Act (42 U.S.C. Section 1395, et seq.), or an issued policy under a demonstration project specified in 42 U.S.C. Section 1395ss (g)(1), which is advertised, marketed, or designed primarily as a supplement to reimbursements under Medicare for the hospital, medical, or surgical expenses of persons eligible for Medicare.
(7) POLICY FORM. The form on which the policy is delivered or issued for delivery by the issuer
(Acts 1981, No. 81-560, p. 940, §3; Act 2000-795, p. 1876, §1.)
(a) Except as otherwise specifically provided, this article shall apply to both of the following:
(1) All Medicare supplement policies delivered or issued for delivery in this state on or after August 1, 2000.
(2) All certificates issued under group Medicare supplement policies, which certificates have been delivered or issued for delivery in this state.
(b) This article shall not apply to a policy of one or more employers or labor organizations, or of the trustees of a fund established by one or more employees or labor organizations, or combination thereof, for employees or former employees or a combination thereof, or for members or former members, or a combination thereof, of the labor organizations.
(c) Except as otherwise specifically provided in subsection (d) of Section 27-19-56, this article is not intended to prohibit or apply to insurance policies or health care benefit plans, including group conversion policies, provided to Medicare eligible persons which policies are not marketed or held to be Medicare supplement policies or benefit plans.
(Act 2000-795, p. 1876, §2.)
(a) The commissioner shall issue reasonable regulations to establish specific standards for policy provisions of Medicare supplement policies and certificates. The standards shall be in addition to and in accordance with applicable laws of this state, including Article 1 and Chapter 20. No requirement of this title relating to minimum required policy benefits, other than the minimum standards contained in this article, shall apply to Medicare supplement policies and certificates. The standards may cover but shall not be limited to the following:
(1) Terms of renewability.
(2) Initial and subsequent conditions of eligibility.
(3) Nonduplication of coverage.
(4) Probationary periods.
(5) Benefit limitations, exceptions, and reductions.
(6) Elimination periods.
(7) Requirements for replacement.
(8) Recurrent conditions.
(9) Definition of terms.
(b) The commissioner may issue reasonable regulations that specify prohibited policy provisions not otherwise specifically authorized by statute which, in the opinion of the commissioner, are unjust, unfair, or unfairly discriminatory to any person insured or proposed to be insured under a Medicare supplement policy or certificate.
(c) Notwithstanding any other provisions of law of this state, a Medicare supplement policy shall not exclude or limit benefits for loss incurred more than six months from the effective date of coverage because it involved a preexisting condition. The policy may not define a preexisting condition more restrictively than a condition for which medical advice was given or treatment was recommended by or received from a physician within six months before the effective date of coverage.
(d) No Medicare supplement policy or certificate in force in the state shall contain benefits that duplicate benefits provided by Medicare.
(Acts 1981, No. 81-560, p. 940, §4; Act 2000-795, p. 1876, §3.)
(a) The commissioner shall issue reasonable regulations to establish minimum standards for benefits, claims payment, marketing practices, compensation arrangements, and reporting practices, for Medicare supplement policies and certificates.
For the purposes of this section, the term compensation arrangements shall not include payment methods, fee schedules, or other compensation arrangements between licensed health care providers and purchasers of health care services.
(b) The commissioner may, from time to time, adopt reasonable regulations as are necessary to conform Medicare supplement policies and certificates to the requirements of federal law and regulations promulgated thereunder, including, but not limited to, the following:
(1) Requiring refunds or credits if the policies or certificates do not meet loss ratio requirements.
(2) Establishing a uniform methodology for calculating and reporting loss ratios.
(3) Assuring public access to policies, premiums, and loss ratio information of issuers of Medicare supplement insurance.
(4) Establishing a process for approving or disapproving policy forms and certificate forms and proposed premium increases.
(5) Establishing a policy for holding public hearings prior to approval of premium increases.
(6) Establishing standards for Medicare Select policies and certificates.
(Acts 1981, No. 81-560, p. 940, §5; Act 2000-795, p. 1876, §3.)
Medicare supplement policies shall return to policyholders benefits which are reasonable in relation to the premium charged. The commissioner shall issue reasonable regulations to establish minimum standards for loss ratios of Medicare supplement policies on the basis of incurred claims experience, or incurred health care expenses where coverage is provided by a health maintenance organization on a service rather than reimbursement basis, and earned premiums in accordance with accepted actuarial principles and practices.
(Acts 1981, No. 81-560, p. 940, §6; Act 2000-795, p. 1876, §3.)
(a) In order to provide for full and fair disclosure in the sale of Medicare supplement policies, no Medicare supplement policy shall be delivered or issued for delivery in this state and no certificate shall be delivered pursuant to a group Medicare supplement policy delivered or issued for delivery in this state unless an outline of coverage is delivered to the applicant at the time application is made.
(b) The commissioner shall prescribe the format and content of the outline of coverage required by subsection (a) of this section. For purposes of this section, “format” means style, arrangements, and overall appearance, including, but not limited to, the size, color, and prominence of type and the arrangement of text and captions. This outline of coverage shall include all of the following:
(1) A description of the principal benefits and coverage provided in the policy.
(2) A statement of the renewal provisions including any reservation by the insurer of a right to change the premiums and disclosure of the existence of any automatic renewal premium increases based on the policyholder’s age.
(3) A statement that the outline of coverage is a summary of the policy issued or applied for and that the policy should be consulted to determine governing contractual provisions.
(c) The commissioner may prescribe by regulation a standard form and the contents of an informational brochure for persons eligible for Medicare, which is intended to improve the buyer’s ability to select the most appropriate coverage and improve the buyer’s understanding of Medicare. Except in the case of direct response insurance policies, the commissioner may require by regulation that the informational brochure be provided to any prospective insurers eligible for Medicare concurrently with delivery of the outline of coverage. With respect to direct response insurance policies, the commissioner may require by regulation that the prescribed brochure be provided upon request to any prospective insurers eligible for Medicare, but in no event later than the time of policy delivery.
(d) The commissioner may adopt regulations for captions or notice requirements, determined to be in the public interest and designed to inform prospective insurers that particular insurance coverages are not Medicare supplement coverages, for all disability insurance policies sold to persons eligible for Medicare, other than any of the following:
(1) Medicare supplement policies;
(2) Disability income policies;
(3) Basic, catastrophic, or major medical expense policies;
(4) Single premium, nonrenewable policies; or
(5) Other policies defined in subdivision (6) of Section 27-19-52.
(e) The commissioner may adopt reasonable regulations to govern the full and fair disclosure of the information in connection with the replacement of accident and sickness policies, subscriber contracts or certificates by persons eligible for Medicare.
(f) The commissioner may promulgate reasonable regulations to govern the full and fair disclosure of the information in connection with the replacement of accident and sickness policies, subscriber contracts, or certificates by persons eligible for Medicare.
(Acts 1981, No. 81-560, p. 940, §7; Act 2000-795, p. 1876, §3.)
Medicare supplement policies or certificates shall have a notice prominently printed on the first page of the policy or certificate or attached thereto stating in substance that the applicant shall have the right to return the policy or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason. Any refund made pursuant to this section shall be paid directly to the applicant by the issuer in a timely manner.
(Acts 1981, No. 81-560, p. 940, §8; Acts 1994, 1st Ex. Sess., No. 94-803, p. 108, §1; Act 2000-795, p. 1876, §3.)
Every issuer of Medicare supplement insurance policies or certificates in this state shall provide a copy of any Medicare supplement advertisement intended for use in this state whether through written, radio, or television medium to the Commissioner of Insurance of this state for review or approval by the commissioner to the extent it may be required under state law.
(Act 2000-795, p. 1876, §4.)
In addition to any other applicable penalties for violations of the insurance code, the commissioner may require issuers violating this article or regulations promulgated pursuant to this article to cease marketing any Medicare supplement policy or certificate in this state which is related directly or indirectly to a violation or may require the issuer to take actions necessary to comply with the provisions of this article, or both.
(Act 2000-795, p. 1876, §4.)
Regulations promulgated pursuant to this article shall be subject to the provisions of Chapter 2 of this title.
(Acts 1981, No. 81-560, p. 940, §9.)
In addition to any other penalties provided by the laws of this state, any insurer and any agent found to have violated any requirement of this state relating to the regulation of Medicare supplement insurance or the marketing of this insurance shall be subject to a fine of up to three times the amount of any commissions paid for each policy involved in the violation or up to ten thousand dollars ($10,000), whichever is greater.
(Act 2000-795, p. 1876, §4.)
The purpose of this article is to promote the public interest, to promote the availability of long-term care insurance policies, to protect applicants for long-term care insurance, as defined, from unfair or deceptive sales or enrollment practices, to establish standards for long-term care insurance, to facilitate public understanding and comparison of long-term care insurance policies, and to facilitate flexibility and innovation in the development of long-term care insurance coverage. The Legislature recognizes the viability of a long-term care product funded through a life insurance vehicle, and this article is not intended to prohibit approval of this product.
(Act 2000-795, p. 1876, §5.)
The requirements of this article shall apply to policies delivered or issued for delivery in this state on or after August 1, 2000. This article is not intended to supersede the obligations of entities subject to this article to comply with the substance of other applicable insurance laws insofar as they do not conflict with this article, except that laws and regulations designed and intended to apply to Medicare supplement insurance policies shall not be applied to long-term care insurance. Entities subject to this article shall continue to comply with other applicable insurance legislation not in conflict with this article.
(Act 2000-795, p. 1876, §5.)
This article may be known and cited as the “Alabama Long-Term Care Insurance Policy Minimum Standards Act.”
(Act 2000-795, p. 1876, §5.)
Unless the context requires otherwise, the definitions in this section apply throughout this article.
(1) APPLICANT. In the case of:
a. An individual long-term care insurance policy, the person who seeks to contract for benefits.
b. A group long-term care insurance policy, the proposed certificate holder.
(2) CERTIFICATE. Any certificate issued under a group long-term care insurance policy, which policy has been delivered or issued for delivery in this state.
(3) COMMISSIONER. The Alabama Commissioner of Insurance.
(4) GROUP LONG-TERM CARE INSURANCE. A long-term care insurance policy which is delivered or issued for delivery in this state and issued to any of the following:
a. One or more employers or labor organizations, or to a trust or to the trustees of a fund established by one or more employers or labor organizations, or a combination thereof, for employees or former employees or a combination thereof, or for members or former members or a combination thereof, of the labor organizations.
b. Any professional, trade, or occupational association for its members or former or retired members, or combination thereof, if the association meets both of the following requirements:
Is composed of individuals all of whom are or were actively engaged in the same profession, trade, or occupation.
Has been maintained in good faith for purposes other than obtaining insurance.
c. An association or a trust or the trustee or trustees of a fund established, created, or maintained for the benefit of members of one or more associations. Prior to advertising, marketing, or offering the policy within this state, the association or associations, or the insurer of the association or associations, shall file evidence with the commissioner that the association or associations have at the outset a minimum of 100 persons and have been organized and maintained in good faith for purposes other than that of obtaining insurance; have been in active existence for at least one year; and have a constitution and bylaws which provide all of the following:
The association or associations hold regular meetings, not less than annually, to further purposes of the members.
Except for credit unions, the association or associations collect dues or solicit contributions from members.
The members have voting privileges and representation on the governing board and committees. Thirty days after this filing, the association or associations shall be deemed to satisfy these organizational requirements, unless the commissioner makes a finding that the association or associations do not satisfy those organizational requirements.
d. A group, other than as described in paragraphs a., b., and c., subject to a finding by the commissioner that:
The issuance of the group policy is not contrary to the best interest of the public.
The issuance of the group policy would result in economies of acquisition or administration.
The benefits are reasonable in relation to the premiums charged.
(5) LONG-TERM CARE INSURANCE. Any insurance policy or rider advertised, marketed, offered, or designed to provide coverage for not less than 12 consecutive months for each covered person on an expense incurred, indemnity, prepaid, or other basis for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, provided in a setting other than an acute care unit of a hospital. This term includes group and individual annuities and life insurance policies or riders that provide directly or that supplement long-term care insurance. This term also includes a policy or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. The term shall also include qualified long-term care insurance contracts. Long-term care insurance may be issued by insurers as follows: Fraternal benefit societies; nonprofit health, hospital, and medical service corporations; prepaid health plans; health maintenance organizations; or any similar organization to the extent they are otherwise authorized to issue life or health insurance. Long-term care insurance shall not include any insurance policy which is offered primarily to provide basic Medicare supplement coverage, basic hospital expense coverage, basic medical-surgical expense coverage, hospital confinement indemnity coverage, major medical expense coverage, disability income or related asset-protection coverage, accident only coverage, specified disease or specified accident coverage, or limited benefit health coverage. With regard to life insurance, this term does not include life insurance policies which accelerate the death benefit specifically for one or more of the qualifying events of terminal illness, medical conditions requiring extraordinary medical intervention, or permanent institutional confinement, and which provide the option of a lump-sum payment for those benefits and in which neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long-term care. Notwithstanding any other provision contained herein, any product advertised, marketed, or offered as long-term care insurance shall be subject to the provisions of this article. The definition of long-term care insurance under this article is designed to allow maximum flexibility in benefit scope, intensity, and level, while assuring that the purchasers’ reasonable expectations for a long-term care insurance policy are met. The article is intended to permit long-term care insurance policies to cover either diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services, or any combination thereof, and not to mandate coverage for each of these types of services. Pursuant to the definition, long-term care insurance may be either a group or individual insurance policy or a rider to a policy, for example, life or disability. The language in the definition concerning “other than an acute care unit of a hospital” is intended to allow payment of benefits when a portion of a hospital has been designated for, and duly licensed or certified as, a long-term care provider or swing bed.
(6) POLICY. Any policy, contract, subscriber agreement, rider, or endorsement delivered or issued for delivery in this state by an insurer, fraternal benefit society, nonprofit health, hospital, or medical service corporation, prepaid health plan, health maintenance organization, or any similar organization.
(7)a. QUALIFIED LONG-TERM CARE INSURANCE CONTRACT or FEDERALLY TAX-QUALIFIED LONG-TERM CARE INSURANCE CONTRACT. An individual or group insurance contract that meets the requirements of Section 7702B (b) of the Internal Revenue Code of 1986, as amended, as follows:
The only insurance protection provided under the contract is coverage of qualified long-term care services. A contract shall not fail to satisfy the requirements of this subparagraph by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate.
The contract does not pay or reimburse expenses incurred for services or items to the extent that the expenses are reimbursable under Title XVIII of the Social Security Act, as amended, or would be so reimbursable but for the application of a deduction or coinsurance amount. The requirements of this subparagraph do not apply to expenses that are reimbursable under Title XVIII of the Social Security Act only as a secondary payor. A contract shall not fail to satisfy the requirements of this subparagraph by reason of payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate.
The contract is guaranteed renewable, within the meaning of Section 7702B (b)(1)(C) of the Internal Revenue Code of 1986, as amended.
The contract does not provide for a cash surrender value or other money that can be paid, assigned, pledged as collateral for a loan, or borrowed, except as provided in subparagraph 5.
All refunds of premiums, and all policyholder dividends or similar amounts, under the contract are to be applied as a reduction in future premiums or to increase future benefits, except that a refund on the event of death of the insured or a complete surrender or cancellation of the contract cannot exceed the aggregate premiums paid under the contract.
The contract meets the consumer protection provisions set forth in Section 7702B (g) of the Internal Revenue Code of 1986, as amended.
b. QUALIFIED LONG-TERM CARE INSURANCE CONTRACT or FEDERALLY TAX-QUALIFIED LONG-TERM CARE INSURANCE CONTRACT. This term also means the portion of a life insurance contract that provides long-term care insurance coverage by rider or as part of the contract and that satisfies the requirements of Sections 7702B (b) and (e) of the Internal Revenue Code of 1986, as amended.
(Act 2000-795, p. 1876, §5.)
No group long-term care insurance coverage may be offered to a resident of this state under a group policy issued in another state to a group described in Section 27-19-103(4)d, unless this state or another state having statutory and regulatory long-term care insurance requirements substantially similar to those adopted in this state has made a determination that these requirements have been met.
(Act 2000-795, p. 1876, §5.)
(a) The commissioner may adopt regulations that include standards for full and fair disclosure setting forth the manner, content, and required disclosures for the sale of long-term care insurance policies, terms of renewability, initial and subsequent conditions of eligibility, nonduplication of coverage provisions, coverage of dependents, preexisting conditions, termination of insurance, continuation or conversion, probationary periods, limitations, exceptions, reductions, elimination periods, requirements for replacement, recurrent conditions, and definitions of terms. Regulations under this subsection should recognize the developing and unique nature of long-term care insurance and the distinction between group and individual long-term insurance policies.
(b) No long-term care insurance policy may do any of the following:
(1) Be cancelled, nonrenewed, or otherwise terminated on the grounds of the age or the deterioration of the mental or physical health of the insured individual or certificate holder.
(2) Contain a provision establishing a new waiting period in the event existing coverage is converted to or replaced by a new or other form within the same company, except with respect to an increase in benefits voluntarily selected by the insured individual or group policyholder.
(3) Provide coverage for skilled nursing care only or provide significantly more coverage for skilled care in a facility than coverage for lower levels of care.
(c)(1) No long-term care insurance policy or certificate other than a policy or certificate thereunder issued to a group as defined in Section 27-19-103(4)a, shall use a definition of preexisting condition which is more restrictive than the following: Preexisting condition means a condition for which medical advice or treatment was recommended by, or received from, a provider of health care services, within six months preceding the effective date of coverage of an insured person.
(2) No long-term care insurance policy or certificate other than a policy or certificate thereunder issued to a group as defined in Section 27-19-103(4)a, may exclude coverage for a loss or confinement which is the result of a preexisting condition unless the loss or confinement begins within six months following the effective date of coverage of an insured person.
(3) The commissioner may extend the limitation periods set forth in subdivisions (1) and (2) as to specific age group categories in specific policy forms upon findings that the extension is in the best interest of the public.
(4) The definition of preexisting condition does not prohibit an insurer from using an application form designed to elicit the complete health history of an applicant, and, on the basis of the answers on that application, from underwriting in accordance with the underwriting standards established by the insurer. Unless otherwise provided in the policy or certificate, a preexisting condition, regardless of whether it is disclosed on the application, need not be covered until the waiting period described in subdivision (2) expires. No long-term care insurance policy or certificates may exclude or use waivers or riders of any kind to exclude, limit, or reduce coverage or benefits for specifically named or described preexisting diseases or physical conditions beyond the waiting period described in subdivision (2).
(d) Prior hospitalization or institutionalization standards:
(1) No long-term care insurance policy may be delivered or issued for delivery in this state if the policy does any one of the following:
a. Conditions eligibility for any benefits on a prior hospitalization requirement.
b. Conditions eligibility for benefits provided in an institutional care setting on the receipt of a higher level of institutional care.
c. Conditions eligibility for any benefits other than waiver of premium, post-confinement, post-acute care, or recuperative benefits on a prior institutionalization requirement.
(2) a. A long-term care insurance policy containing post-confinement, post-acute care, or recuperative benefits shall clearly label in a separate paragraph of the policy or certificate entitled “Limitations or Conditions on Eligibility for Benefits” the limitations or conditions, including any required number of days of confinement.
b. A long-term care insurance policy or rider which conditions eligibility of noninstitutional benefits on the prior receipt of institutional care shall not require a prior institutional stay of more than 30 days.
(3) No long-term care insurance policy or rider which provides benefits only following institutionalization shall condition the benefits upon admission to a facility for the same or related conditions within a period of less than 30 days after discharge from the institution.
(e) The commissioner may adopt regulations establishing loss ratio standards for long-term care insurance policies provided that a specific reference to long-term care insurance policies is contained in the regulation.
(f) Long-term care insurance applicants shall have the right to return the policy or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, the applicant is not satisfied for any reason. Long-term care insurance policies and certificates shall have a notice prominently printed on the first page or attached thereto stating in substance that the applicant shall have the right to return the policy or certificate within 30 days of its delivery and to have the premium refunded if, after examination of the policy or certificate, other than a certificate issued pursuant to a policy issued to a group, as defined in Section 27-19-103(4)a., the applicant is not satisfied for any reason.
This subsection shall also apply to denials of applications and any refund must be made within 30 days of the return or denial.
(g)(1) An outline of coverage shall be delivered to a prospective applicant for long-term care insurance at the time of initial solicitation through means which prominently direct the attention of the recipient to the document and its purpose.
a. The commissioner shall prescribe a standard format, including style, arrangement, and overall appearance, and the content of an outline of coverage.
b. In the case of agent solicitations, an agent shall deliver the outline of coverage prior to the presentation of an application or enrollment form.
c. In the case of direct response solicitations, the outline of coverage shall be presented in conjunction with any application or enrollment form.
(2) The outline of coverage shall include all of the following:
a. A description of the principal benefits and coverage provided in the policy.
b. A statement of the principal exclusions, reductions, and limitations contained in the policy.
c. A statement of the terms under which the policy or certificate, or both, may be continued in force or discontinued, including any reservation in the policy of a right to change premium. Continuation or conversion provisions of group coverage shall be specifically described.
d. A statement that the outline of coverage is a summary only, not a contract of insurance, and that the policy or group master policy contains governing contractual provisions.
e. A description of the terms under which the policy or certificate may be returned and premium refunded.
f. A brief description of the relationship of cost of care and benefits.
g. A statement that discloses to the policyholder or certificateholder whether the policy is intended to be a federally tax-qualified long-term care insurance contract under 7702B (b) of the Internal Revenue Code of 1986, as amended.
(h) A certificate issued, pursuant to a group long-term care insurance policy, which policy is delivered or issued for delivery, in this state shall include all of the following:
(1) A description of the principal benefits and coverage provided in the policy.
(2) A statement of the principal exclusions, reductions, and limitations contained in the policy.
(3) A statement that the group master policy determines governing contractual provisions.
(i) If an application for a long-term care insurance contract or certificate is approved, the issuer shall deliver the contract or certificate of insurance to the applicant no later than 30 days after the date of approval.
(j) At the time of policy delivery, a policy summary shall be delivered for an individual life insurance policy which provides long-term care benefits within the policy or by rider. In the case of direct response solicitations, the insurer shall deliver the policy summary upon the applicant’s request, but regardless of request shall make the delivery no later than at the time of policy delivery. In addition to complying with all applicable requirements, the summary shall also include all of the following:
(1) An explanation of how the long-term care benefit interacts with other components of the policy, including deductions from death benefits.
(2) An illustration of the amount of benefits, the length of benefit, and the guaranteed lifetime benefits if any, for each covered person.
(3) Any exclusions, reductions, and limitations on benefits of long-term care.
(4) A statement that any long-term care inflation protection option required by regulations promulgated by the commissioner is not available under this policy.
(5) If applicable to the policy type, the summary shall also include all of the following:
a. A disclosure of the effects of exercising other rights under the policy.
b. A disclosure of guarantees related to long-term care costs of insurance charges.
c. Current and projected maximum lifetime benefits.
(6) The provisions of the policy summary listed above may be incorporated into a basic illustration required to be delivered in accordance with regulations promulgated by the commissioner or into the life insurance policy summary which is required to be delivered in accordance with regulations promulgated by the commissioner.
(k) Any time a long-term care benefit, funded through a life insurance vehicle by the acceleration of the death benefit, is in benefit payment status, a monthly report shall be provided to the policyholder. The report shall include all of the following:
(1) Any long-term care benefits paid out during the month.
(2) An explanation of any changes in the policy, for example, death benefits or cash values, due to long-term care benefits paid out.
(3) The amount of long-term care benefits existing or remaining.
(l) If a claim under a long-term care insurance contract is denied, the issuer, within 60 days of the date of a written request by the policyholder or certificateholder, or a representative thereof, shall do both of the following:
(1) Provide a written explanation of the reasons for the denial.
(2) Make available all information directly related to the denial.
(m) Any policy or rider advertised, marketed, or offered as long-term care or nursing home insurance shall comply with this article.
(Act 2000-795, p. 1876, §5.)
(a) For a policy or certificate that has been in force for less than six months an insurer may rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim upon a showing of misrepresentation that is material to the acceptance for coverage.
(b) For a policy or certificate that has been in force for at least six months but less than two years an insurer may rescind a long-term care insurance policy or certificate or deny an otherwise valid long-term care insurance claim upon a showing of misrepresentation that is both material to the acceptance for coverage and which pertains to the condition for which benefits are sought.
(c) After a policy or certificate has been in force for two years it is not contestable upon the grounds of misrepresentation alone but may be contested only upon a showing that the insured knowingly and intentionally misrepresented relevant facts relating to the insured’s health.
(d)(1) No long-term care insurance policy or certificate may be field issued based on medical or health status.
(2) For purposes of this section, “field issued” means a policy or certificate issued by an agent or a third-party administrator pursuant to the underwriting authority granted to the agent or third-party administrator by an insurer.
(e) If an insurer has paid benefits under the long-term care insurance policy or certificate, the benefit payments may not be recovered by the insurer in the event that the policy or certificate is rescinded.
(f) In the event of the death of the insured, this section shall not apply to the remaining death benefit of a life insurance policy that accelerates benefits for long-term care. In this situation, the remaining death benefits under these policies shall be governed by Section 27-15-18. In all other situations, this section shall apply to life insurance policies that accelerate benefits for long-term care.
(Act 2000-795, p. 1876, §5.)
(a) Except as provided in subsection (b), a long-term care insurance policy may not be delivered or issued for delivery in this state unless the policyholder or certificateholder has been offered the option of purchasing a policy or certificate including a nonforfeiture benefit. The offer of a nonforfeiture benefit may be in the form of a rider that is attached to the policy. In the event the policyholder or certificateholder declines the nonforfeiture benefit, the insurer shall provide a contingent benefit upon lapse that shall be available for a specified period of time following a substantial increase in premium rates.
(b) When a group long-term care insurance policy is issued, the offer required in subsection (a) shall be made to the group policyholder. However, if the policy is issued as group long-term care insurance, as defined in Section 27-19-103(4)d., other than to a continuing care retirement community or other similar entity, the offering shall be made to each proposed certificateholder.
(c) The commissioner shall promulgate regulations specifying the type or types of nonforfeiture benefits to be offered as part of long-term care insurance policies and certificates, the standards for nonforfeiture benefits, and the rules regarding contingent benefit upon lapse, including a determination of the specified period of time during which a contingent benefit upon lapse will be available and the substantial premium rate increase that triggers a contingent benefit upon lapse as described in subsection (a).
(Act 2000-795, p. 1876, §5.)
The commissioner shall issue reasonable regulations to promote premium adequacy and to protect the policyholder in the event of substantial rate increases, and to establish minimum standards for marketing practices, agent compensation, agent testing, penalties, and reporting practices for long-term care insurance.
(Act 2000-795, p. 1876, §5.)
In addition to any other penalties provided by the laws of this state, any insurer and any agent found to have violated any requirement of this state relating to the regulation of long-term care insurance or the marketing of this insurance shall be subject to a fine of up to three times the amount of any commissions paid for each policy involved in the violation or up to ten thousand dollars ($10,000), whichever is greater.
(Act 2000-795, p. 1876, §5.)
Regulations promulgated pursuant to this article shall be subject to Chapter 2.
(Act 2000-795, p. 1876, §5.)
The purpose of this article is to authorize disability insurers to expand their fully insured benefits to include paid family leave benefits through employer-sponsored group insurance policies or voluntarily purchased employee policies.
(Act 2023-112, §1.)
This article shall be known and may be cited as the Paid Family Leave Income Replacement Benefits Act.
(Act 2023-112, §1.)
For purposes of this article, the following terms have the following meanings:
(1) CHILD. An individual who is:
a. Under 19 years of age.
b. 19 years of age or older and incapable of self-care because of a mental or physical disability.
c. Either paragraph a. or b. and a biological, adopted, or foster son or daughter; a stepson or stepdaughter; a legal ward; or a son or daughter of an individual to whom the employee stands in loco parentis.
(2) FAMILY LEAVE. Any leave taken by an employee from work for reasons set forth in Section 27-19-153.
(3) FAMILY MEMBER. May include a child, spouse, parent, or any other individual defined as a family member in the insurance policy.
(4) HEALTH CARE PROVIDER. An individual licensed under Title 34 to provide health care services.
(5) PARENT. A biological, foster, or adoptive parent, a stepparent, a legal guardian, or other individual who stood in loco parentis to the employee when the employee was a child.
(6) SERIOUS HEALTH CONDITION. An illness, injury, impairment, or physical or mental condition, including transplantation preparation and recovery from surgery related to organ or tissue donation, that involves inpatient care in a hospital, hospice, or residential health care facility, continuing treatment or continuing supervision by a health care provider including a period of incapacity that is permanent or long term due to a condition for which treatment may not be effective and where the family member need not be receiving active treatment by a health care provider.
(Act 2023-112, §1.)
Family leave benefits may be provided for any leave taken by an employee from work to do any of the following:
(1) Participate in providing care, including physical or psychological care, for a family member of the employee made necessary by a serious health condition of the family member.
(2) Bond with the employee’s child during the first twelve months after the child’s birth, or the first 12 months after the placement of the child for adoption or foster care with the employee.
(3) Address a qualifying exigency as interpreted under the Family and Medical Leave Act, 29 U.S.C. § 2612(a)(1)(E) and 29 C.F.R. § 825.126(b)(1)-(9), arising out of the fact that the spouse, child, or parent of the employee is on active duty, or has been notified of an impending call or order to active duty, in the Armed Forces of the United States.
(4) Care for a family service member injured in the line of duty.
(5) Take other leave to provide care for a family member or other family leave as specified in the insurance policy.
(Act 2023-112, §1.)
The insurance policy shall set forth the details and requirements with regard to each of the covered family leave reasons.
(Act 2023-112, §1.)
The insurance policy shall set forth the length of family leave benefits that are available for each covered family leave reason, which will in no event be less than two weeks during a period of 52 consecutive calendar weeks. Fifty-two consecutive calendar weeks may be calculated by any of the following methods:
(1) A calendar year.
(2) Any fixed period starting on a particular date such as the effective or anniversary date.
(3) The period measured forward from the employee’s first day of family leave.
(4) A rolling period measured by looking back from the employee’s first day of family leave.
(5) Any other method that is specified in the insurance policy.
(Act 2023-112, §1.)
The insurance policy shall set forth whether there is an unpaid waiting period and, if so, the terms and conditions of the unpaid waiting period, which may include, but are not limited to, all of the following:
(1) Whether the waiting period runs over a consecutive calendar day period.
(2) Whether the waiting period is counted toward the annual allotment of family leave benefits or is in addition to the annual allotment of family leave benefits.
(3) Whether the waiting period must be met only once per benefit year or must be met for each separate claim for benefits.
(4) Whether the employee may work or receive paid time off or other compensation by the employer during the waiting period.
(Act 2023-112, §1.)
(a) The insurance policy shall set forth all of the following:
(1) The amount of benefits that will be paid for covered family leave reasons.
(2) The definition of the wages or other income upon which the amount of family leave benefits will be based.
(3) How the wages or other income will be calculated.
(b) If the family leave benefits are subject to offsets for wages or other income received or for which the insured may be eligible, the policy shall set forth both of the following:
(1) All the wages or other income that may be offset.
(2) The circumstances under which it may be offset.
(Act 2023-112, §1.)
Eligibility for family leave benefits under this article may be limited, excluded, or reduced, but any limitations, exclusions, or reductions shall be set forth in the insurance policy. Permissible limitations, exclusions, or reductions may include, but are not limited to, any of the following:
(1) Any period of family leave wherein the required notice and medical certification as prescribed in the policy have not been provided.
(2) Any period of family leave related to a serious health condition or other harm to a family member brought about by the willful intention of the employee.
(3) Any period of family leave during which the employee performed work for remuneration or profit.
(4) Any period of family leave for which the employee is eligible to receive from his or her employer or from a fund to which the employer has contributed remuneration or maintenance.
(5) Any period of family leave in which the employee is eligible to receive benefits under any other statutory program or employer-sponsored program, including, but not limited to, unemployment insurance benefits, worker’s compensation benefits, statutory disability benefits, statutory paid leave benefits, or any paid time off or employer’s paid leave policy.
(6) Any period of family leave commencing before the employee becomes eligible for family leave benefits under the policy.
(7) Any period of family leave where more than one individual seeks family leave for the same family member.
(Act 2023-112, §1.)
Family leave benefits provided under this article shall be paid periodically and promptly as provided in Section 27-19-11 except as to a contested period of family leave and subject to any of the provisions of Section 27-19-158.
(Act 2023-112, §1.)
(a) Premiums for policies or riders providing paid family leave benefits in accordance with state disability income insurance law shall be calculated in accordance with applicable state insurance law.
(b) Insurance policies issued pursuant to this article may offer coverage for paid family leave benefits or may offer paid family leave benefits as a rider to a disability insurance policy.
(Act 2023-112, §1.)
(a) This article shall be known and may be cited as the Health Savings Account State-Federal Regulatory Coordination Act.
(b) The purpose of this article is to protect the efficacy of Health Savings Account (HSA) qualified plans via a legislative exception or safe harbor from any state benefit mandate or copay accumulator adjustment law due to federal law, regulations, rules, or guidance regarding high deductible health plans.
(c) For purposes of this article, the following terms have the following meanings:
(1) ENROLLEE. An individual who is enrolled in a health insurance plan, whether on an individual or group basis, including any covered dependent.
(2) HEALTH SAVINGS ACCOUNT QUALIFIED INSURANCE PLAN or HSA. A high deductible health plan that meets the specific requirements of 26 U.S.C. § 223, as interpreted and administered by the federal Internal Revenue Service. Individuals covered by such a plan may contribute to a Health Savings Account (HSA), a trust, or a custodial account for qualified medical expenses. An individual may not contribute to an HSA unless he or she is covered by an HSA-qualified insurance plan and has no other disqualifying coverage.
(3) HIGH DEDUCTIBLE HEALTH PLAN. A health insurance plan, as defined in 26 U.S.C. § 223(c)(2).
(4) PREVENTIVE CARE. Those services defined as such by the U.S. Department of the Treasury and the Internal Revenue Service, including preventive services recognized under the Affordable Care Act, pursuant to regulation or guidance issued under the authority of Title 26 of the United States Code. In general, the term does not include services that provide treatment for known illnesses, diseases, or conditions. However, under IRS Notice 2019-45, the term also includes specified products and services provided to individuals with certain defined chronic conditions including, but not limited to, diabetes, asthma, and heart disease.
(5) ZERO COST-SHARING or COST-SHARING RESTRICTIONS. Prohibition outright of any deductible, copayment, or coinsurance on the part of the enrollee or certain limitations on the amount of the deductible, copayment, or coinsurance.
(d) If under federal law the application of any cost-sharing requirement of the Insurance Code would cause the enrollee’s health savings account plan to no longer qualify as a high-deductible health plan under 26 U.S.C. § 223, the cost-sharing requirement shall only apply to the enrollee’s plan once the minimum deductible under 26 U.S.C. § 223 has been applied.
(e) The Commissioner of Insurance may adopt rules as necessary to implement this section.
(Act 2026-298, §1.)
This chapter shall apply to health insurance and employee benefit plans providing for dental care services.
(Acts 1984, No. 84-411, p. 960, §1.)
As used in this chapter, the following terms shall have the respective meanings herein set forth, unless the context shall otherwise require:
(1) ALABAMA INSURANCE CODE. Title 27 of the Code of Alabama 1975.
(2) INSURER. Such term shall have the meaning ascribed in Section 27-1-2.
(3) PERSON. Such term shall have the meaning ascribed in Section 27-1-2.
(4) COMMISSIONER and DEPARTMENT. Such terms, respectively, shall have the meanings ascribed in Section 27-1-2.
(5) CONTRACTUAL OBLIGATION. Any obligation under covered policies or employee benefit plans.
(6) COVERED POLICY OR PLAN. Any policy, employee benefit plan, or contract within the scope of this chapter.
(7) HEALTH INSURANCE POLICY. Any individual, group, blanket, or franchise insurance policy, insurance agreement, or group hospital service contract providing benefits for dental care expenses incurred as a result of an accident or sickness.
(8) EMPLOYEE BENEFIT PLAN. Any plan, fund, or program heretofore or hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, dental care benefits in the event of accident or sickness.
(9) DENTAL CARE SERVICES. Any services furnished to any person for the purpose of preventing, alleviating, curing, or healing human dental illness or injury.
(10) DENTIST. Any person who furnishes dental care services and who is licensed as a dentist by the State of Alabama.
(Acts 1984, No. 84-411, p. 960, §2.)
No health insurance policy or employee benefit plan which is delivered, renewed, issued for delivery, or otherwise contracted for in this state shall:
(1) Prevent any person who is a party to or beneficiary of any such health insurance policy or employee benefit plan from selecting the dentist of his choice to furnish the dental care services offered by said policy or plan or interfere with said selection provided the dentist is licensed to furnish such dental care services in this state;
(2) Deny any dentist the right to participate as a contracting provider for such policy or plan provided the dentist is licensed to furnish the dental care services offered by said policy or plan;
(3) Authorize any person to regulate, interfere, or intervene in any manner in the diagnosis or treatment rendered by a dentist to his patient for the purpose of preventing, alleviating, curing, or healing dental illness or injury provided said dentist practices within the scope of his license; or
(4) Require that any dentist furnishing dental care services must make or obtain dental X rays or any other diagnostic aids for the purpose of preventing, alleviating, curing, or healing dental illness or injury; provided, however, that nothing herein shall prohibit requests for existing dental X rays or any other existing diagnostic aids for the purpose of determining benefits payable under a health insurance policy or employee benefit plan.
Nothing herein shall prohibit the predetermination of benefits for dental care expenses prior to treatment by the attending dentist.
(Acts 1984, No. 84-411, p. 960, §2.)
Any health insurance policy or employee benefit plan which is delivered, renewed, issued for delivery, or otherwise contracted for in this state shall, to the extent that it provides benefits for dental care expenses:
(1) Disclose, if applicable, that the benefit offered is limited to the least costly treatment;
(2) Define and explain the standard upon which the payment of benefits or reimbursement for the cost of dental care services is based, such as “usual and customary,” “reasonable and customary,” “usual, customary, and reasonable,” fees or words of similar import or specify in dollars and cents the amount of the payment or reimbursement for dental care services to be provided. Said payment or reimbursement for a noncontracting provider dentist shall be the same as the payment or reimbursement for a contracting provider dentist; provided, however, that the health insurance policy or the employee benefit plan shall not be required to make payment or reimbursement in an amount which is greater than the amount so specified or which is greater than the fee charged by the providing dentist for the dental care services rendered.
(Acts 1984, No. 84-411, p. 960, §3.)
Any provision in a health insurance policy or employee benefit plan which is delivered, renewed, issued for delivery, or otherwise contracted for in this state which is contrary to this chapter shall to the extent of such conflict be void.
(Acts 1984, No. 84-411, p. 960, §4.)
The provisions of this chapter do not mandate that any type of benefits for dental care expenses be provided by a health insurance policy or an employee benefit plan.
(Acts 1984, No. 84-411, p. 960, §5.)
The provisions of this chapter do not prohibit the following conduct and shall be construed to provide that:
(1) A dentist may contract directly with a patient for the furnishing of dental care services to said patient as may be otherwise authorized by law;
(2) Any person providing a health insurance policy or employee benefit plan, or an employer, or an employee organization may:
a. Make available to its insureds, beneficiaries, participants, employees, or members information relating to dental care services by the distribution of factually accurate information regarding dental care services, rates, fees, location, and hours of service, provided such distribution is made upon the request of any dentist licensed by this state; or
b. Establish an administrative mechanism which facilitates payment for dental care services by insureds, beneficiaries, participants, employees, or members to the dentist of their choice; or
c. Pay or reimburse, on a nondiscriminatory basis, its insureds, beneficiaries, participants, employees, or members for the cost of dental care services rendered by the dentist of their choice.
(Acts 1984, No. 84-411, p. 960, §6.)
It shall be unlawful for any insurer or any person to provide any health insurance policy or employee benefit plan providing for dental care services that does not conform to the provisions of this chapter.
(Acts 1984, No. 84-411, p. 960, §7.)
The Commissioner of Insurance shall not approve for sale in this state any health insurance policy or employee benefit plan providing for dental care services which does not conform to the provisions of this chapter or to the provisions of Sections 27-14-8 and 27-14-9.
(Acts 1984, No. 84-411, p. 960, §8.)
It shall be the duty and responsibility of the Commissioner of Insurance to enforce the provisions of this chapter.
(Acts 1984, No. 84-411, p. 960, §9.)
Each willful violation of the provisions of this chapter shall be punishable as provided in Section 27-1-12.
(Acts 1984, No. 84-411, p. 960, §10.)
(a) As used in this section, the following terms shall have the following meanings:
(1) COVERED PERSON. Any individual, family, or family member on whose behalf third-party payment or prepayment of health or medical expenses is provided under an insurance policy, plan, or contract providing for third-party payment or prepayment of health care or medical expenses.
(2) COVERED SERVICES. Dental care services for which a reimbursement is available under an enrollee’s plan contract, or for which a reimbursement would be available but for the application of contractual limitations such as deductibles, copayments, coinsurance, waiting periods, annual or lifetime maximums, frequency limitations, alternative benefit payments, or any other limitation.
(3) DENTAL CARE PROVIDER. A licensed dentist.
(4) DENTAL PLAN. Includes any policy of insurance which is issued by a health care service contractor which provides for coverage of dental services not in connection with a medical plan.
(5) INSURANCE POLICY, PLAN, OR CONTRACT PROVIDING FOR THIRD-PARTY PAYMENT OR PREPAYMENT OF HEALTH OR MEDICAL EXPENSES. Includes an individual or group policy for accident or health insurance, an individual or group hospital or health care service contract, an individual or group health maintenance organization contract, an organized delivery system contract, a preferred provider organization contract, and any other similar policy, plan, or contract.
(b) An insurance policy, plan, or contract providing for third-party payment or prepayment of health or medical expenses issued after January 1, 2016, shall not require a dental care provider to provide service to a covered person at a fee set by the policy or plan unless the services are covered by the policy or plan.
(c) Nothing in this section shall be construed as limiting the ability of an insurer or a third-party administrator to restrict any of the following as related to covered services:
(1) Balance billing.
(2) Waiting periods.
(3) Frequency limitations.
(4) Deductibles.
(5) Maximum annual benefits.
(d) Nothing in this section shall apply to corporations organized pursuant to Article 6, commencing at Section 10A-20-6.01, of Chapter 20 of Title 10A, or to policies, plans, or contracts entered, issued, or administered by the corporations.
(Act 2015-483, §§1-4.)
Group disability insurance is hereby declared to be that form of disability insurance covering groups of persons as defined in this section, 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 in this subdivision 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 and 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 in this subdivision 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 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 in this subdivision may include retired employees;
(3) Under a policy issued to the trustees of a fund established by two 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) of this section, 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 in this subdivision 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 in this subdivision 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 disability policy or contract; or
(6) Any group disability 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.
(Acts 1971, No. 407, p. 707, §458.)
Each such group disability 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 certificate need be issued for each family unit; and
(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.
(Acts 1971, No. 407, p. 707, §459.)
Any group disability policy may, on request by the group policyholder, 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. Payment so made shall discharge the insurer’s obligation with respect to the amount of insurance so paid.
(Acts 1971, No. 407, p. 707, §460.)
Blanket disability insurance is hereby declared to be that form of disability 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 participants 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 an 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 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, 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; or
(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 disability insurance. The discretion of the commissioner may be exercised on an individual risk basis or class of risks, or both.
(Acts 1971, No. 407, p. 707, §461.)
Any insurer authorized to write disability insurance in this state shall have the power to issue blanket disability insurance. No such blanket policy may be issued or delivered in this state unless a copy of the form thereof shall have been filed in accordance with Section 27-14-8. Every such blanket policy shall contain provisions which, in the opinion of the commissioner, are at least as favorable to the policyholder and the individual insured as the following:
(1) A provision that the policy, including endorsements and 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;
(2) 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 to the policyholder 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 the 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, character, and extent of the loss for which claim is made;
(4) 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 30 days after the commencement of the period for which the insurer is liable, 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;
(5) 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, that, subject to due proof of loss, all accrued benefits payable under the policy for loss of time will be paid not later than at the expiration of each period of 30 days 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;
(6) 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 any autopsy in case of death where it is not prohibited by law; and
(7) A provision that no action 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 three years after the time written proof of loss is required to be furnished.
(Acts 1971, No. 407, p. 707, §462.)
An individual application shall not be required from a person covered under a blanket disability policy or contract, nor shall it be necessary for the insurer to furnish each person a certificate.
(Acts 1971, No. 407, p. 707, §463.)
All benefits under any blanket disability policy shall be payable to the person insured, or to his employer, or to his designated beneficiary or beneficiaries or to his estate; except, that if the person insured be a minor or mental incompetent, such benefits may be made payable to his parent, guardian, or other person actually supporting him, or, if the entire cost of the insurance has been borne by the employer, such benefits may be made payable to the employer; provided, however, that the policy may provide that all, or any portion, of any indemnities provided by 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. Payment so made shall discharge the insurer’s obligation with respect to the amount of insurance so paid.
(Acts 1971, No. 407, p. 707, §464.)
The following words and phrases used in this chapter, and others evidently intended as the equivalent thereof, shall, in the absence of clear implication otherwise, be given the following respective interpretations herein:
(1) ALCOHOLISM. A chronic disorder or illness in which the individual is unable, for psychological or physical reasons, or both, to refrain from the frequent consumption of alcohol in quantities sufficient to produce intoxication and, ultimately, injury to health and effective functioning.
(2) DETOXIFICATION. Supervised physical withdrawal from alcohol.
(3) INPATIENT TREATMENT FOR ALCOHOLISM. Care provided in a licensed hospital and is normally limited to detoxification where severe medical or psychiatric complications are present or may be anticipated.
(4) SHORT TERM RESIDENTIAL ALCOHOLISM TREATMENT FACILITY. A state certified facility which provides structured programs of intensive treatment services for people addicted to alcohol. Services may include supervised withdrawal from alcohol, backup emergency medical services for persons whose physical condition necessitates medical care, psychological and social evaluation, nutritional stabilization through proper dietary service, individual counseling, family counseling and referral to other providers who can provide additional services for continuity of care, aftercare, and followup.
(5) OUTPATIENT TREATMENT. Treatment rendered in a nonresidential setting and using an intermittent, periodic schedule of visits.
(Acts 1979, No. 79-436, p. 701, §1.)
No group, blanket, franchise, or association health insurance policy providing coverage on an expense incurred basis, nor group, blanket, franchise, or association service or indemnity type contract issued by a nonprofit corporation, nor group-type self insurance plan providing protection, insurance, or indemnity against hospital, medical, or surgical expenses, nor health maintenance organization plan shall be issued, delivered, executed, or renewed in this state, or approved for issuance or renewal in this state by the Commissioner of Insurance after 90 days beyond the effective date of this chapter, unless such policy, contract, or plan, at the option of the policyholder or sponsor, provides benefits to any insured, subscriber, or other person covered under the policy, contract, or plan for expenses incurred in connection with the treatment of alcoholism when such treatment is prescribed by a duly licensed doctor of medicine.
(Acts 1979, No. 79-436, p. 701, §2.)
The benefits to be offered under this chapter shall include inpatient or residential treatment rendered to the insured, subscriber or other person covered, at a state licensed hospital or at a short term residential alcoholism treatment facility or detoxification facility duly licensed or certified as such by the Alabama Board of Health or the Alabama Mental Health Board. Benefits shall also include outpatient treatment rendered to the insured, subscriber or other person covered, by a duly licensed doctor of medicine or by an alcoholism treatment facility duly licensed or certified as such by the Alabama Board of Health or the Alabama Mental Health Board.
(Acts 1979, No. 79-436, p. 701, §3.)
When benefits are provided under this chapter, the benefits shall provide for a minimum of 30 days of inpatient treatment or its equivalent per calendar year with the equivalency to be computed based on a formula which equates two days of treatment in a short term residential alcoholism treatment facility to one day of inpatient treatment and which equates three sessions of outpatient treatment by a licensed doctor of medicine or an alcoholism treatment facility to one day of inpatient treatment.
(Acts 1979, No. 79-436, p. 701, §4.)
The Legislature of Alabama takes cognizance of the existence of many Alabama citizens who are unable to obtain adequate health care protection by reason of economic, physical, or other related causes. It is the purpose of the Legislature to provide adequate health care protection through this plan to those persons not otherwise able to obtain such protection by insurance companies or voluntary association on a nonprofit basis.
(Acts 1971, No. 501, p. 1218.)
Any insurer authorized and licensed to engage in the business of health insurance in this state may join with one or more other such insurers to offer to any resident of this state, who meets the qualifications established by the commissioner, insurance against major financial loss from accident or disease. Such insurance may be offered by such insurers in their own names or in the name of a voluntary unincorporated association or other organization formed by such insurers solely for the purpose of this plan. The forms of applications, certifications, and policies of such insurance, the applicable premium rates, annual statement, and all other information required by the department under Alabama law for organizations in the business of health insurance shall be filed with the commissioner for his approval. Any other information which the commissioner deems necessary for the efficient operation of the plan may also be required.
(Acts 1971, No. 501, p. 1218.)
Each insurer or association electing to come under the provisions of this chapter shall charge the same premium for the same insurance coverage and be allowed the same percentage for expense of administration. Such premium rate and percentage for administration expense shall be determined and approved by the commissioner so as to maintain the nonprofit basis of the plan.
(Acts 1971, No. 501, p. 1218.)
The premiums collected under the provisions of the health care plan are hereby exempt from the payment of premium tax under Chapter 4 of this title. Any losses suffered as a direct result of operation under the plan by those organizations electing to join and operate under the health care plan may be deducted from the premium tax submitted under the above-mentioned Chapter 4 which would normally be paid on individual accident and health insurance premiums collected, but total loss deduction shall not exceed 50 percent of such premium tax normally payable on premiums from individual accident and health insurance.
(Acts 1971, No. 501, p. 1218.)
(a) The commissioner shall set up standards and promulgate regulations concerning the qualifications of those Alabama citizens entitled to utilize this plan, and no insurer or association operating under the plan shall allow anyone to be insured under the plan unless that person meets these qualifications. Any willful material misrepresentation by a person attempting to qualify under the plan shall be a misdemeanor and, upon conviction thereof, shall be punishable as prescribed in Section 13A-5-1.
(b) The commissioner may also make other necessary rules or regulations and may conduct any examination as to insurers at any reasonable time and may also, at his discretion, hold public hearings to determine qualifications of prospective insureds or rates and expenses of insurers in furtherance of this plan. The commissioner may also employ consultants, actuaries, attorneys, or special investigators or examiners to assist him in the regulation of the plan and examination of the insurers, and the expense of these special assistants and consultants, along with any regular examination costs, will be borne by the concerned insurer.
(Acts 1971, No. 501, p. 1218.)
This chapter shall be known as the Alabama Health Care Plan and may be referred to by that designation.
(Acts 1971, No. 501, p. 1218.)
As used in this chapter, the following terms shall have the following meanings, respectively:
(1) AGENT. A person who is appointed or employed by a health maintenance organization and who engages in solicitation of membership in such organization. This definition does not include a person enrolling members on behalf of an employer, union, or other organization.
(2) BASIC HEALTH CARE SERVICES. Emergency care, inpatient hospital and physician care, and outpatient medical services.
(3) COMMISSIONER. The Commissioner of Insurance.
(4) ENROLLEE. An individual who is enrolled in a health maintenance organization.
(5) EVIDENCE OF COVERAGE. Any certificate, agreement, or contract issued to an enrollee setting out the coverage to which he is entitled.
(6) HEALTH CARE SERVICES. Any services included in the furnishing to any individual of medical or dental care, or hospitalization or incident to the furnishing of such care or hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing, or healing human illness, injury, or physical disability.
(7) HEALTH MAINTENANCE ORGANIZATION. Any person that undertakes to provide or arrange for basic health care services through an organized system which combines the delivery and financing of health care to enrollees. The organization shall provide physician services directly through physician employees or under contractual arrangements with either individual physicians or a group or groups of physicians. The organization shall provide basic health care services directly or under contractual arrangements. When reasonable and appropriate, the organization may provide physician services and basic health care services through other arrangements. The organization may provide, or arrange for, health care services on a prepayment or other financial basis.
(8) INSURER. Every insurer authorized in this state to issue contracts of accident and sickness insurance. Hospital service nonprofit corporations, nonprofit medical service corporations, and nonprofit health care corporations are included within such term.
(9) PERSON. Any natural or artificial person including, but not limited to, individuals, partnerships, associations, trusts, or corporations.
(10) PROVIDER. Any physician, hospital, or other person which is licensed or otherwise authorized in this state to furnish health care services.
(11) SCHEDULE OF CHARGES. A statement of the method used by a health maintenance organization to establish rates.
(12) STATE HEALTH OFFICER. The executive officer of the State Department of Public Health.
(13) UNCOVERED EXPENDITURES. The costs of health care services that are covered by a health maintenance organization, for which an enrollee would also be liable in the event of the organization’s insolvency.
(Acts 1986, No. 86-471, p. 854, §1.)
(a) Notwithstanding any law of this state to the contrary, any person may apply to the commissioner for and obtain a certificate of authority to establish and operate a health maintenance organization in compliance with this chapter. No person shall establish or operate a health maintenance organization in this state without obtaining a certificate of authority under this chapter. A foreign corporation may qualify under this chapter, subject to its registration to do business in this state as a foreign corporation under the provisions of Sections 10-2A-220, et seq.
(b) Health maintenance organizations licensed as of May 29, 1986, shall be issued a certificate of authority in accordance with Section 27-21A-29.
(c) Each application for a certificate of authority shall be verified by an officer or authorized representative of the applicant, shall be in a form prescribed by the commissioner, and shall set forth or be accompanied by the following:
(1) A certified copy of the organizational documents of the applicant, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents, and all amendments thereto;
(2) A certified copy of the bylaws, rules and regulations, or similar document, if any, regulating the conduct of the internal affairs of the applicant;
(3) A list of the names, addresses, official positions, and such biographical information as may be required by the commissioner concerning the persons who are to be responsible for the conduct of the affairs of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation, and the partners or members in the case of a partnership or association;
(4) A copy of any contract made or to be made between any persons listed in subdivision (3) and the applicant;
(5) A copy of the form of evidence of coverage to be issued to the enrollees;
(6) A copy of the form or group contract, if any, which is to be issued to employers, unions, trustees, or other organizations;
(7) Financial statements showing the applicant’s assets, liabilities, and sources of financial support. If the applicant’s financial affairs are audited by independent certified public accountants, a copy of the applicant’s most recent certified financial statement shall be deemed to satisfy this requirement unless the commissioner directs that additional or more recent financial information is required for the proper administration of this chapter;
(8) A description of the proposed method of marketing, a financial plan which includes a projection of operating results anticipated until the organization has had net income for at least one year, and a statement as to the sources of working capital as well as any other sources of funding;
(9) A power of attorney duly executed by such applicant, if not domiciled in this state, appointing the commissioner and his successors in office, and duly authorized deputies, as the true and lawful attorney of such applicant in and for this state upon whom all lawful process in any legal action or proceeding against the health maintenance organization on a cause of action arising in this state may be served;
(10) A statement reasonably describing the geographic area or areas to be served;
(11) A description of the complaint procedures to be utilized as required under Section 27-21A-10;
(12) A description of the procedures and programs to be implemented to meet the health care requirements in subdivision (a)(2) of Section 27-21A-3;
(13) The applicant’s most recent report of examination and all annual reports and other periodic reports filed by the applicant within the past year in the applicant’s state of domicile and state within which it maintains its principal place of business, if different from state of domicile; as well as any similar reports which the applicant may be required to file under federal law, if applicable;
(14) Such other information as the commissioner or State Health Officer may require to make the determinations required in Section 27-21A-3.
(d)(1) An applicant or a health maintenance organization holding a certificate of authority granted hereunder shall, unless otherwise provided for in this act, file a notice describing any material modification of the operation set out in the information required by subsection (c). Such notice shall be filed with the commissioner and the State Health Officer prior to modification. If the commissioner does not disapprove within 30 days of filing, such modification shall be deemed approved;
(2) The commissioner or State Health Officer may promulgate rules and regulations exempting from the filing requirements of subdivision (d)(1) those items he deems unnecessary.
(e) An applicant, or a health maintenance organization holding a certificate of authority granted hereunder, shall file with the commissioner all contracts of reinsurance. Any agreement between the organization and an insurer shall be subject to the laws of this state regarding reinsurance. All reinsurance agreements and any modifications thereto must be approved by the commissioner. If the commissioner does not disapprove such agreements or modifications within 30 days of filing, such agreements or modifications shall be deemed approved. Reinsurance agreements shall remain in full force and effect for at least 90 days following written notice by registered mail or cancellation by either party to the commissioner.
(Acts 1986, No. 86-471, p. 854, §2.)
(a)(1) Upon receipt of an application for issuance of a certificate of authority, the commissioner shall forthwith transmit copies of such application and accompanying documents to the State Health Officer.
(2) The State Health Officer shall determine whether the applicant for a certificate of authority, with respect to health care services to be furnished:
a. Has demonstrated the willingness and potential ability to assure that such health care services will be provided in a manner to assure both availability and accessibility of adequate personnel and facilities and in a manner enhancing availability, accessibility, and continuity of service;
b. Has arrangements, established in accordance with the regulations promulgated by the State Health Officer, for an on-going quality assurance program concerning health care processes and outcomes; and
c. Has a procedure, established in accordance with regulations of the State Health Officer, to develop, compile, evaluate, and report statistics relating to the cost of its operations, the pattern of utilization of its services, the availability and accessibility of its services, and such other matters as may be reasonably required by the State Health Officer.
d. Has demonstrated that the health maintenance organization will effectively provide, or arrange for, the provision of health care services. Such arrangements shall be established in accordance with rules promulgated by the State Health Officer for an on-going quality assurance/utilization review program concerning health care processes and outcomes.
e. Has demonstrated that a copy of the form or group contract which is to be issued to employers, unions, trustees, or other organizations or individuals is in compliance with rules promulgated by the State Health Officer; and
f. Has demonstrated that nothing in the proposed method of operation, as shown by the information submitted pursuant to Section 27-21A-2, or by independent investigation is contrary to the public interest.
(3) Within 90 days of receipt of the application for issuance of a certificate of authority, the State Health Officer shall certify to the commissioner that the proposed health maintenance organization meets the requirements of subdivision (a)(2) or notify the commissioner that the health maintenance organization does not meet such requirements and specify in what respects it is deficient.
(b) After receipt of the certification from the State Health Officer, the commissioner shall issue or deny a certificate of authority to any person filing an application pursuant to Section 27-21A-2. Issuance of a certificate of authority shall be granted upon payment of the application fee prescribed in Section 27-21A-21 if the commissioner is satisfied that the following conditions are met:
(1) The ownership, control, or management of the entity is competent and trustworthy and possesses managerial experience that would make the proposed health maintenance organization beneficial to the subscribers. The commissioner shall not grant or continue to license the business of a health maintenance organization in this state at any time the commissioner has good reason to believe that the ownership, control, or management of the organization is under the control of any person whose business operations are, or have been marked by business practices or conduct that is to the detriment of the public, stockholders, investors, or creditors; by the improper manipulation of assets or of accounts; or by bad faith;
(2) The State Health Officer certifies, in accordance with subdivision (a)(3), that the health maintenance organization’s proposed plan of operation meets the requirements of subdivision (a)(2);
(3) Except to the extent of contractually required provisions for copayments, the health maintenance organization will effectively provide or arrange for the provision of basic health care services through insurance, written contractual agreements, or other existing arrangements; and
(4) The contracts for basic health care services contain a provision that providers shall hold the enrollee harmless for the payment of the cost of health care services in any event including, but not limited to, nonpayment of the health maintenance organization, or the health maintenance organization’s insolvency. This provision shall not prohibit collection of supplemental charges or copayments on the health maintenance organization’s behalf made in accordance with terms of any applicable agreement between the health maintenance organization and the enrollee.
(5) The health maintenance organization is financially responsible and may reasonably be expected to meet its obligations to enrollees and prospective enrollees. In making this determination, the commissioner shall consider:
a. The financial soundness of the applicant and its arrangements for health care services and the schedule of charges used in connection therewith;
b. The adequacy of working capital;
c. Any agreement with an insurer or other organization for insuring the payment of the cost of health care services or the provision for automatic applicability of an alternative coverage in the event of discontinuance of the health maintenance organization;
d. Any agreement form or contract form with providers for the provision of health care services; and
e. Any deposit of cash or securities submitted in accordance with Section 27-21A-12.
(6) Nothing in the proposed method of operation, as shown by the information submitted pursuant to Section 27-21A-2 or by independent investigation, is contrary to the public interest;
(7) Any deficiencies identified by the State Health Officer have been corrected; and
(8) The form or group contract, if any, which is to be issued to employers, unions, trustees, or other organizations is in compliance with the rules and regulations of the State Insurance Department as such rules and regulations specifically apply to health maintenance organizations. Any provisions of this chapter to the contrary notwithstanding, no provision of this chapter shall exempt any HMO from compliance with the rules and regulations required for licensing or in any way exempt any HMO participant or enrollee from quality care standards and regulations as a condition for licensure. Any HMO under contract as of April 1, 1986, with the Alabama Medicaid Agency that has a grant with a national foundation and is licensed by the Alabama Department of Public Health shall not be responsible for any of the fees, taxes, and other financial regulations so long as the grant is in existence. Any HMO which contracts with the Medicaid Agency shall be exempt from the financial responsibilities and taxes listed in this chapter for that percentage of enrollees that are Medicaid recipients. These HMOs shall also be exempt from any provision necessary for the Medicaid Agency to comply with federal regulations.
(Acts 1986, No. 86-471, p. 854, §3.)
(a) The powers of a health maintenance organization include, but are not limited to the following:
(1) The purchase, lease, construction, renovation, operation, or maintenance of hospitals, medical facilities, or both, and their ancillary equipment;
(2) The making of loans other than in the ordinary course of business, to providers under contract with it in furtherance of its program or the making of loans to a corporation or corporations in which it owns a majority interest for the purpose of acquiring or constructing medical facilities and hospitals or in furtherance of a program providing health care services to enrollees.
(3) The furnishing of health care services through providers which are under contract with or employed by the health maintenance organization.
(4) The contracting with any person for the performance on its behalf of certain functions such as marketing, enrollment, and administration.
(5) The purchase, lease, construction, or renovation of property as may reasonably be required for its principal office or for such purposes as may be necessary in the transaction of the business of the organization;
(6) The contracting with an insurance company licensed in this state to do business in this state, or a health care service plan authorized to transact business in this state, for the provision of insurance, indemnity, or reimbursement against the cost of health care services provided by the health maintenance organization.
(7) The offering of other health care services, in addition to basic health care services or other required health care services.
(b)(1) A health maintenance organization shall file notice, assuring compliance with any applicable state or federal laws, with adequate supporting information, with the commissioner prior to the exercise of any power granted in subsections (a)(1), (a)(2), or (a)(4). The commissioner shall disapprove such exercise of power only if in his opinion it would substantially and adversely affect the financial soundness of the health maintenance organization and endanger its ability to meet its obligations. If the commissioner does not disapprove within 30 days of the filing, it shall be deemed approved.
(2) The commissioner may promulgate rules and regulations exempting from the filing requirement of subdivision (b)(1) those activities having a de minimis effect.
(Acts 1986, No. 86-471, p. 854, §4.)
The governing body of any health maintenance organization may include providers, or other individuals, or both.
(Acts 1986, No. 86-471, p. 854, §5.)
(a) Any director, officer, employee, or partner of a health maintenance organization who receives, collects, disburses, or invests funds in connection with the activities of such organization shall be responsible for such funds in a fiduciary relationship to the organization.
(b) A health maintenance organization shall maintain in force a fidelity bond on employees and officers in an amount not less than $25,000 or such other sum as may be prescribed by the commissioner. All such bonds shall be written with at least a one-year discovery period and if written with less than a three-year discovery period shall contain a provision that no cancellation or termination of the bond, whether by or at the request of the insured or by the underwriter, shall take effect prior to the expiration of 90 days after written notice of such cancellation or termination has been filed with the commissioner unless an earlier date of such cancellation or termination is approved by the commissioner.
(c) Any officer, or director, or any member of any committee or any employee of a health maintenance organization who is charged with the duty of investing or handling the organization’s funds shall not deposit or invest such funds except in the organization’s corporate name; except, that such health maintenance organization may for its convenience hold any equity investment in a street name or in the name of a nominee; shall not borrow the funds of such organization; shall not be pecuniarily interested in any loan, pledge or deposit, security, investment, sale, purchase, exchange, reinsurance, or other similar transaction or property of such insurer except as a stockholder or member and shall not take or receive to his own use any fee, brokerage, commission, gift, or other consideration for, or on account of, any such transaction made by, or on behalf of, such insurer.
(d) No health maintenance organization shall guarantee any financial obligation of any of its officers or directors.
(e) This section shall not prohibit such a director, or officer, or member of a committee or employee from becoming a member of the health maintenance organization and enjoying the usual rights so provided for its members, nor shall it prohibit any such officer, director, or member of a committee or employee from participating as a beneficiary in any pension trust, deferred compensation plan, profit-sharing plan, or stock option plan authorized by the health maintenance organization and to which he may be eligible, nor shall it prohibit any director or member of a committee from receiving a reasonable fee for legal services actually rendered to such health maintenance organization.
(f) The commissioner may, by regulations from time to time, define and permit additional exceptions to the prohibition contained in subsection (c) of this section solely to enable payment of reasonable compensation to the director who is not otherwise an officer or employee of the health maintenance organization, 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 health maintenance organization’s business and in the usual private, professional, or business capacity of such director or such corporation or firm.
(Acts 1986, No. 86-471, p. 854, §6.)
(a)(1) Every enrollee residing in this state is entitled to an evidence of coverage. If the enrollee obtains such coverage through an insurance policy or a contract issued by a health care service plan, the insurer or the health care service plan shall issue the evidence of coverage. Otherwise, the health maintenance organization shall issue the evidence of coverage.
(2) No evidence of coverage, or amendment thereto, shall be issued or delivered to any person in this state until a copy of the basic form of the evidence of coverage, or amendment thereto, has been filed with the commissioner and the State Health Officer, and approved by the commissioner.
(3) An evidence of coverage shall contain:
a. No provisions or statements which encourage misrepresentation, or which are untrue, misleading, or deceptive as defined in subsection (a) of Section 27-21A-13; and
b. A clear and concise statement, if a contract, or a reasonably complete summary, if a certificate, of:
The health care service and the insurance or other benefits, if any, to which the enrollee is entitled;
Any limitations on the services, kinds of services, benefits, or kinds of benefits, to be provided, including any deductible or copayment feature;
Where and in what manner information is available as to how services may be obtained;
The total amount of payments for health care services and the indemnity or service benefits, if any, which the enrollee is obligated to pay with respect to individual contracts; and
A clear and understandable description of the health maintenance organization’s method for resolving enrollee complaints.
Any subsequent change may be evidenced in a separate document issued to the enrollee.
(b)(1) No schedule of charges for enrollee coverage for health care services, or amendment thereto, may be used until a copy of such schedule, or amendment thereto, has been filed with and approved by the commissioner.
(2) Such schedule of charges shall be established in accordance with actuarial principles for various categories of enrollees, provided that the charges applicable to any enrollee shall not be individually determined based on his health status. Charges shall not be excessive, inadequate, or unfairly discriminatory. A certification, by a qualified actuary or other qualified person acceptable to the commissioner as to the appropriateness of the use of the charges, based on reasonable assumptions, shall accompany the filing along with adequate supporting information.
(c) The commissioner shall within 30 days approve any form if the requirements of subsection (a) are met and the commissioner shall within 30 days approve any schedule of charges if the requirements of subsection (b) are met. It shall be unlawful to issue such form or to use such schedule of charges until approved. If the commissioner disapproves such filing, he shall notify the filer. In the notice, the commissioner shall specify the reasons for his disapproval. A hearing will be granted within 30 days after a request in writing by the person filing. If the commissioner does not approve any form or if the commissioner does not approve any schedule of charges within 30 days of the filing of such forms or schedule of charges, they shall be deemed approved.
(d) The commissioner may require the submission of whatever relevant information he deems necessary in determining whether to approve or disapprove a filing made pursuant to this section.
(Acts 1986, No. 86-471, p. 854, §7.)
Every health maintenance organization shall annually, on or before the first day of March, file a report verified by at least two principal officers with the commissioner, with a copy to the State Health Officer, covering the preceding calendar year. Such report shall be on forms prescribed by the commissioner, and shall include:
(1) A financial statement of the organization;
(2) Any material changes in the information submitted pursuant to subsection (c) of Section 27-21A-2;
(3) The number of persons enrolled at the beginning and end of the year;
(4) A summary of information compiled pursuant to paragraph (a)(2)c of Section 27-21A-3;
(5) The amount of uncovered and covered expenditures that are payable and more than 90 days past due; and
(6) Such additional information or reports as are deemed reasonably necessary and appropriate by the commissioner to enable him to carry out his duties under this chapter.
(Acts 1986, No. 86-471, p. 854, §8.)
Every health maintenance organization shall provide promptly to its enrollees notice of any material change in the operation of the organization that will affect them directly.
(Acts 1986, No. 86-471, p. 854, §9.)
(a)(1) Every health maintenance organization shall establish and maintain a complaint system which has been approved by the commissioner, after consultation with the State Health Officer, to provide reasonable procedures for the resolution of written complaints initiated by enrollees.
(2) Each health maintenance organization shall submit to the commissioner and the State Health Officer an annual report in a form prescribed by the commissioner, after consultation with the State Health Officer, which shall include:
a. A description of the procedures of such complaint system;
b. The total number of complaints handled through such complaint system and a compilation of causes underlying the complaints filed; and
c. The number, amount, and disposition of malpractice claims and other claims relating to the service or care rendered by the health maintenance organization made by enrollees of the organization that were settled during the year by the health maintenance organization. All such information shall be held in confidence by the commissioner.
(b) The commissioner or the State Health Officer may examine such complaint system.
(Acts 1986, No. 86-471, p. 854, §10.)
With the exception of investments made in accordance with subdivisions (a)(1), (a)(2), (a)(5), and subsection (b) of Section 27-21A-4, the funds of a health maintenance organization shall be invested only in securities or other investments permitted by the laws of this state for the investment of assets constituting the legal reserves of life insurance companies or such other securities or investments as the commissioner may permit.
(Acts 1986, No. 86-471, p. 854, §11.)
(a) Unless otherwise provided below, each health maintenance organization shall deposit with the commissioner, or with any organization or trustee acceptable to him through which a custodial or controlled account is utilized, cash, securities, or any combination of these or other measures acceptable to him in the amount set forth in this section.
(b) The amount for an organization that is beginning operation shall be the greater of: (1) five percent of its estimated expenditures for health care services for its first year of operation, (2) twice its estimated average monthly uncovered expenditures for its first year of operation, or (3) $100,000. At the beginning of each succeeding year, unless not applicable, the organization shall deposit with the commissioner, or organization, or trustee, cash, securities, or any combination of these or other measures acceptable to the commissioner, in an amount equal to four percent of its estimated annual uncovered expenditures for that year.
(c) Unless not applicable, an organization that is in operation on May 29, 1986, shall make a deposit equal to the larger of: (1) one percent of the preceding 12 months uncovered expenditures, or (2) $100,000 on the first day of the fiscal year beginning six months or more after May 29, 1986.
In the second fiscal year, if applicable, the amount of the additional deposit shall be equal to two percent of its estimated annual uncovered expenditures. In the third fiscal year, if applicable, the additional deposit shall be equal to three percent of its estimated annual uncovered expenditures for that year, and in the fourth fiscal year and subsequent years, if applicable, the additional deposit shall be equal to four percent of its estimated annual uncovered expenditures for each year. Each year’s estimate, after the first year of operation shall reasonably reflect the prior year’s operating experience and delivery arrangements.
(d) The commissioner may waive any of the deposit requirements set forth in subsections (a) and (b) above whenever satisfied that the organization has sufficient net worth and an adequate history of generating net income to assure its financial viability for the next year, or its performance and obligations are guaranteed by an organization with sufficient net worth and an adequate history of generating net income, or the assets of the organization or its contracts with insurers, health care service plans, governments, or other organizations are reasonably sufficient to assure the performance of its obligations; provided, however, that a minimum deposit of $100,000 shall be required in all cases.
(e) When an organization has achieved a net worth composed of investments authorized under Section 27-21A-11, but not including land, buildings, and equipment, of at least $1 million or has achieved a net worth including direct investments in organization-related land, buildings, and equipment of at least $5 million, the annual deposit requirement shall not apply.
The annual deposit requirement shall not apply to an organization if the total amount of the accumulated deposit is equal to 25 percent of its estimated annual uncovered expenditures for the next calendar year, or the capital and surplus requirements for the formation for admittance of an accident and health insurer in this state, whichever is less.
If the organization has a guaranteeing organization which has been in operation for at least five years and has a net worth not including land, buildings, and equipment of at least $1 million or which has been in operation for at least 10 years and has a net worth including direct investments in organization-related land, buildings, and equipment of at least $5 million, the annual deposit requirement shall not apply; provided, however, that if the guaranteeing organization is sponsoring more than one organization, the net worth requirement shall be increased by a multiple equal to the number of such organizations. This requirement to maintain a deposit in excess of the deposit required of an accident and health insurer shall not apply during any time that the guaranteeing organization maintains for each organization it sponsors a net worth of at least equal to the capital and surplus requirements for an accident and health insurer.
(f) All income from deposits shall belong to the depositing organization and shall be paid to it as it becomes available. A health maintenance organization that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities, or any combination of these or other measures of equal amount and value. Any securities shall be approved by the commissioner before being substituted.
(g) In any year in which an annual deposit is not required of an organization, at the organization’s request the commissioner shall reduce the required, previously accumulated deposit by $100,000 for each $250,000 of net worth in excess of the amount that allows the organization not to make the annual deposit. If the amount of net worth no longer supports a reduction of its required deposit, the organization shall immediately redeposit $100,000 for each $250,000 of reduction in net worth, provided that its total deposit shall not exceed the maximum required under this section.
(h) Each health maintenance organization shall have and maintain a capital account of at least $100,000 in addition to any deposit requirements under this section. The capital account shall be net of any accrued liabilities and be in the form of cash, securities, or any combination of these or other measures acceptable to the commissioner.
(i) There is created a nonprofit unincorporated legal entity to be known as the Alabama Health Maintenance Organization Guaranty Association. All health maintenance organizations authorized to transact business in this state shall participate in this guaranty association which shall protect all enrollees of such organizations in this state against failure in the performance of obligations due to the impairment or insolvency of a health maintenance organization. The association shall be separate from, but shall be modeled on the Alabama Life and Disability Guaranty Association, Sections 27-44-1, et seq. and the commissioner shall take such actions and promulgate, in accordance with the provisions of Section 27-2-17, such regulations as he may deem necessary to effectuate the provisions of this subsection.
(Acts 1986, No. 86-471, p. 854, §12.)
(a) No health maintenance organization, or representative thereof, may cause or knowingly permit the use of advertising which is untrue or misleading, solicitation which is untrue or misleading, or any form or evidence of coverage which is deceptive. For purposes of this chapter:
(1) A statement or item of information shall be deemed to be untrue if it does not conform to fact in any respect which is or may be significant to an enrollee of, or person considering enrollment with a health maintenance organization;
(2) A statement or item of information shall be deemed to be misleading, whether or not it may be literally untrue, if, in the total context in which such statement is made or such item of information is communicated, such statement or item of information may be reasonably understood by a reasonable person, not possessing special knowledge regarding health care coverage, as indicating any benefit or advantage or the absence of any exclusion, limitation, or disadvantage or possible significance to an enrollee of, or person considering enrollment in a health maintenance organization, if such benefit or advantage or absence of limitation, exclusion, or disadvantage does not in fact exist;
(3) An evidence of coverage shall be deemed to be deceptive if the evidence of coverage taken as a whole, and with consideration given to typography and format, as well as language, shall be such as to cause a reasonable person, not possessing special knowledge regarding health maintenance organizations and evidences of coverage therefor, to expect benefits, services, charges, or other advantages which the evidence of coverage does not provide or which the health maintenance organization issuing such evidence of coverage does not regularly make available for enrollees covered under such evidence of coverage.
(b) Sections 8-19-1, et seq. and 27-12-1, et seq. shall be construed to apply to health maintenance organizations and evidences of coverage except to the extent that such sections are clearly inappropriate in light of the nature of health maintenance organizations as set forth in this chapter.
(c) A health maintenance organization may not cancel or refuse to renew an individual enrollee, except for reasons stated in the organization’s rules applicable to all enrollees, or for the failure to pay the charge for such coverage, or for such other reasons as may be promulgated by the commissioner; provided, however, that a health maintenance organization may not in any event cancel or refuse to renew an enrollee solely on the basis of the health of the enrollee.
(d) No health maintenance organization unless licensed as an insurer may refer to itself as a licensed insurer or use a name deceptively similar to the name or description of any insurance or surety corporation doing business in this state.
(e) Any person not in possession of a valid certificate of authority issued pursuant to this chapter may not use the phrase “health maintenance organization” or “HMO” in the course of operation.
(Acts 1986, No. 86-471, p. 854, §13.)
(a) Unless exempted pursuant to subsection (c), health maintenance organizations in this state shall only solicit enrollees or otherwise market their services through producers duly licensed in accordance with Chapters 7 and 8A of this title.
(b) The commissioner shall, after notice and hearing, promulgate such reasonable rules and regulations as are necessary to provide for the licensing of producers.
(c) The commissioner may, by rule, exempt certain classes of persons from the requirement of obtaining a license for either of the following reasons:
(1) If the functions they perform do not require special competence, trustworthiness, or the regulatory surveillance made possible by licensing.
(2) If other existing safeguards make regulation unnecessary.
(d) Nothing in this section shall be deemed to prohibit a health maintenance organization from advertising.
(Acts 1986, No. 86-471, p. 854, §14; Act 2001-702, p. 1509, §15.)
(a) An insurance company licensed in this state, or a health care service plan authorized to do business in this state, may either directly or through a subsidiary or affiliate organize and operate a health maintenance organization under the provisions of this chapter. Notwithstanding any other law which may be inconsistent herewith, any two or more such insurance companies, health care service plans, or subsidiaries or affiliates thereof, may jointly organize and operate a health maintenance organization. The business of insurance is deemed to include the providing of health care by a health maintenance organization owned or operated by an insurer or a subsidiary thereof.
(b) Notwithstanding any provision of insurance and health care service plan laws, Title 10, Chapter 4, Article 6 and Title 27, an insurer or a health care service plan may contract with a health maintenance organization to provide insurance or similar protection against the cost of care provided through health maintenance organizations and to provide coverage in the event of the failure of the health maintenance organization to meet its obligations. For such purposes, the enrollees of a health maintenance organization constitute a permissible group under such laws. Among other things, under such contracts, the insurer or health care service plan may make benefit payments to health maintenance organizations for health care services rendered by providers.
(Acts 1986, No. 86-471, p. 854, §15.)
(a) The commissioner may make an examination of the affairs of any health maintenance organization and providers with whom such organization has contracts or agreements as often as is reasonably necessary for the protection of the interests of the people of this state, but not less frequently than once every three years.
(b) The State Health Officer may make an examination concerning health care service of any health maintenance organization and providers with whom such organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this state, but not less frequently than once every three years.
(c) Every health maintenance organization shall submit its relevant books and records for such examinations and in every way facilitate these examinations. For the purpose of examinations, the commissioner and the State Health Officer may administer oaths to, and examine the officers and agents of the health maintenance organization and the principals of such providers concerning their business.
(d) The expenses of examinations under this section shall be assessed against the organization being examined and such assessment shall be remitted to the commissioner to be deposited to the credit of the Special Examination Revolving Fund in Section 27-2-25, or the State Health Officer to be deposited to the credit of a fund to be known as the Health Maintenance Organization Revolving Fund. The expenses incurred by the commissioner and his examiners in the making of examinations pursuant to the provisions of this chapter, together with the compensation of such examiners, shall be paid from the Special Examination Revolving Fund. The expenses incurred by the State Health Officer and his examiners in the making of examinations pursuant to the provisions of this chapter, together with the compensation of such examiners, shall be paid from the Health Maintenance Organization Revolving Fund.
(e) In lieu of such examination, the commission or State Health Officer may accept the report of an examination made by the commissioner, State Health Officer, or other appropriate agency of the state of domicile of the health maintenance organization. The health maintenance organization shall file a copy of any such report with the commissioner and the State Health Officer.
(f) All records necessary for the complete examination of a health maintenance organization domiciled in this state shall be maintained in a location approved by the commissioner.
(Acts 1986, No. 86-471, p. 854, §16.)
(a) The commissioner in consultation with and with the approval of the State Health Officer, where necessary, may suspend or revoke any certificate of authority issued to a health maintenance organization under this chapter if he finds that any of the following conditions exist:
(1) The health maintenance organization is operating significantly in contravention of its basic organizational document or in a manner contrary to that described in any other information submitted under Section 27-21A-2, unless amendments to such submissions have been filed with the commissioner and the State Health Officer and approved by the commissioner;
(2) The health maintenance organization issues evidence of coverage or uses a schedule of charges for health care services which do not comply with requirements of Section 27-21A-7;
(3) The health maintenance organization does not provide or arrange for basic health care services;
(4) The State Health Officer certifies to the commissioner that:
a. The health maintenance organization does not meet the requirements of subdivision (a)(2) of Section 27-21A-3; or
b. The health maintenance organization is unable to fulfill its obligations to furnish health care services;
(5) The health maintenance organization is no longer financially responsible and may reasonably be expected to be unable to meet its obligations to enrollees or prospective enrollees;
(6) The health maintenance organization has failed to implement the complaint system required by Section 27-21A-10 in a reasonable manner to facilitate the resolution of valid complaints;
(7) The health maintenance organization, or any person on its behalf, has advertised or merchandised its services in an untrue, misrepresentative, misleading, deceptive, or unfair manner;
(8) The continued operation of the health maintenance organization would be hazardous to its enrollees;
(9) The health maintenance organization has otherwise failed substantially to comply with this chapter.
(b) A certificate of authority shall be suspended or revoked only after compliance with the requirements of Section 27-21A-20.
(c) When the certificate of authority of a health maintenance organization is suspended, the health maintenance organization shall not, during the period of such suspension, enroll any additional enrollees except newborn children or other newly acquired dependents of existing enrollees, and shall not engage in any advertising or solicitation whatsoever.
(d) When the certificate of authority of a health maintenance organization is revoked, such organization shall proceed, immediately following the effective date of the order of revocation, to wind up its affairs, and shall conduct no further business except as may be essential to the orderly conclusion of the affairs of such organization. It shall engage in no further advertising, solicitation, or enrollment whatsoever. The commissioner may, by written order, permit such further operation of the organization as he may find to be in the best interest of enrollees, to the end that enrollees will be afforded the greatest practical opportunity to obtain continuing health care coverage.
(Acts 1986, No. 86-471, p. 854, §17.)
(a) Any rehabilitation, liquidation, or conservation of a health maintenance organization shall be deemed to be the rehabilitation, liquidation, or conservation of an insurance company and shall be conducted under the supervision of the commissioner pursuant to the law governing the rehabilitation, liquidation, or conservation of insurance companies. The commissioner may apply for an order directing him to rehabilitate, liquidate, or conserve a health maintenance organization upon any one or more grounds set out in Section 27-32-6, or when in his opinion the continued operation of the health maintenance organization would be hazardous either to the enrollees or to the people of this state. Enrollees shall have the same priority in the event of liquidation or rehabilitation as the law provides to policyholders of an insurer.
(b) A claim by a health care provider for an uncovered expenditure has the same priority as a claim of an enrollee, provided such provider of services agrees not to assert such claim against any enrollee of the health maintenance organization.
(c) The State Health Officer shall provide to the commissioner or receiver of any financially troubled health maintenance organization advice and support to facilitate the expeditious rehabilitation, liquidation, conservation, or dissolution of the health maintenance organization.
(Acts 1986, No. 86-471, p. 854, §18.)
The commissioner may, after notice and hearing, promulgate reasonable rules and regulations, in accordance with Section 27-2-17, as are necessary or proper to carry out the provisions of this chapter. The State Health Officer may promulgate such rules and regulations in accordance with the provisions of Sections 41-22-1, et seq.
(Acts 1986, No. 86-471, p. 854, §19.)
(a) When the commissioner has cause to believe that grounds for the denial of an application for a certificate of authority exist, or that grounds for the suspension or revocation of a certificate of authority exist, he shall notify the health maintenance organization and the State Health Officer in writing specifically stating the grounds for denial, suspension, or revocation. If so requested in writing by the health maintenance organization, the commissioner shall set a hearing on the matter within 30 days of the receipt of such request.
(b) The State Health Officer, or his designated representative, shall be in attendance at the hearing and shall participate in the proceedings. The recommendation and findings of the State Health Officer with respect to matters relating to the quality of health care services provided in connection with any decision regarding denial, suspension, or revocation of a certificate of authority, shall be conclusive and binding upon the commissioner. Within 30 days after such hearing, or upon the failure of the health maintenance organization to appear at such hearing, the commissioner shall take action as is deemed advisable on written findings which shall be mailed to the health maintenance organization with a copy thereof to the State Health Officer. The health maintenance organization can appeal the action of the commissioner and the recommendation and findings of the State Health Officer to the Circuit Court of Montgomery County by filing an appeal to such court within 30 days of the receipt of such findings. The court may, in disposing of the issue before it, modify, affirm, or reverse the order of the commissioner in whole or in part.
(c) Those provisions of this title, relating to the suspension, denial, or revocation of a certificate of authority, shall apply to proceedings under this section.
(Acts 1986, No. 86-471, p. 854, §20.)
(a) Every health maintenance organization subject to this chapter shall pay to the commissioner the following fees:
(1) For filing an application for certificate of authority or amendment thereto, $50.00;
(2) For filing an amendment to the organization documents that requires approval, $10.00;
(3) For filing each annual report, $20.00;
(4) For renewal of annual certificates of authority, $200.00.
(b) Fees charged under this section shall be deposited to the credit of the General Fund.
(Acts 1986, No. 86-471, p. 854, §21.)
(a) The commissioner may, in lieu of suspension or revocation of a certificate of authority under Section 27-21A-17, levy an administrative penalty in an amount not less than $500.00 nor more than $5,000.00, if reasonable notice in writing is given of the intent to levy the penalty and the health maintenance organization has a reasonable time within which to remedy the defect in its operations which gave rise to the penalty citation. The commissioner may augment this penalty by an amount equal to the sum that he calculates to be the damages suffered by enrollees or other members of the public. All moneys collected under this section shall be deposited to the credit of the General Fund.
(b)(1) If the commissioner or the State Health Officer shall for any reason have cause to believe that any violation of this chapter has occurred or is threatened, the commissioner or State Health Officer may give notice to the health maintenance organization and to the representatives, or other persons who appear to be involved in such suspected violation, to arrange a conference with the alleged violators or their authorized representatives for the purpose of attempting to ascertain the facts relating to such suspected violation, and, in the event it appears that any violation has occurred or is threatened, to arrive at an adequate and effective means of correcting or preventing such violation.
(2) Proceedings under this subsection shall not be governed by any formal procedural requirements, and may be conducted in such manner as the commissioner or the State Health Officer may deem appropriate under the circumstances. However, unless consented to by the health maintenance organization, no rule or order may result from a conference until the requirements of this section or Section 27-21A-20 of this chapter are satisfied.
(c)(1) The commissioner, after notice to the State Health Officer, may issue an order directing a health maintenance organization or a representative of a health maintenance organization to cease and desist from engaging in any act or practice in violation of the provisions of this chapter.
(2) Within 30 days after service of the cease and desist order, the respondent may request a hearing on the question of whether acts or practices in violation of this chapter have occurred. Such hearings shall be conducted and judicial review had in accord with the provisions of this title.
(d) In the case of any violation of the provisions of this chapter, if the commissioner elects not to issue a cease and desist order, or in the event of noncompliance with a cease and desist order issued pursuant to subsection (c), the commissioner may institute a proceeding to obtain injunctive or other appropriate relief in the Circuit Court of Montgomery County.
(Acts 1986, No. 86-471, p. 854, §22.)
(a) Except as otherwise provided in this chapter, provisions of the insurance law and provisions of health care service plan laws shall not be applicable to any health maintenance organization granted a certificate of authority under this chapter. This subsection shall not apply to an insurer or health care service plan licensed and regulated pursuant to the insurance law or the health care service plan laws of this state except with respect to its health maintenance organization activities authorized and regulated pursuant to this chapter.
(b) Solicitation of enrollees by a health maintenance organization granted a certificate of authority shall not be construed to violate any provision of law relating to solicitation or advertising by health professionals.
(c) Any health maintenance organization authorized under this chapter shall not be deemed to be practicing medicine and shall be exempt from the provisions of Section 34-24-310, et seq., relating to the practice of medicine.
(d) No person participating in the arrangements of a health maintenance organization other than the actual provider of health care services or supplies directly to enrollees and their families shall be liable for negligence, misfeasance, nonfeasance, or malpractice in connection with the furnishing of such services and supplies.
(e) Nothing in this chapter shall be construed in any way to repeal or conflict with any provision of the certificate of need law.
(f) Notwithstanding the provisions of subsection (a), a health maintenance organization shall be subject to all of the following:
(1) Section 27-1-17.
(2) Chapter 56.
(3) Chapter 54.
(4) Chapter 57.
(5) Chapter 58.
(6) Chapter 59.
(7) Rules adopted by the Commissioner of Insurance pursuant to Sections 27-7-43 and 27-7-44.
(8) Chapter 12A.
(9) Chapter 54A.
(10) Chapter 2B.
(11) Chapter 29.
(12) Chapter 62.
(13) Chapter 63.
(14) Chapter 45A.
(15) Article 5 of Chapter 19.
(Acts 1986, No. 86-471, p. 854, §23; Act 2001-445, p. 573, §1; Act 2001-477, p. 640, §10; Act 2002-511, p. 1315, §1; Act 2004-502, p. 969, §8; Act 2007-389, p. 778, §5; Act 2008-502, p. 1106, §4; Act 2012-298, p. 647, §3; Act 2012-429, p. 1170, §6; Act 2014-324, p. 1151, §1; Act 2014-377, p. 1407, §7; Act 2017-337, §1; Act 2019-98, §13; Act 2021-341, §3; Act 2021-236, §2; Act 2026-298, §2.)
All applications, filings, and reports required under this chapter, except those which are trade secrets or privileged or confidential commercial or financial information, other than any annual financial statement that may be required under Section 27-21A-8, shall be treated as public documents. All testimony, documents, and other evidence required to be submitted to the commissioner or State Health Officer in connection with enforcement of this chapter shall be absolutely confidential and shall not be admissible in evidence in any other proceeding. The commissioner or the State Health Officer may withhold from public inspection any examination or investigation report for so long as they deem necessary to protect the person examined from unwarranted injury or to be in the public interest.
(Acts 1986, No. 86-471, p. 854, §24.)
Any data or information pertaining to the diagnosis, treatment, or health of any enrollee or applicant obtained from such person or from any provider by any health maintenance organization shall be held in confidence and shall not be disclosed to any person except to the extent that it may be necessary to carry out the purposes of this chapter; or upon the express consent of the enrollee or applicant; or pursuant to statute or court order for the production of evidence or the discovery thereof; or in the event of claim or litigation between such person and the health maintenance organization wherein such data or information is pertinent. A health maintenance organization shall be entitled to claim any statutory privileges against such disclosure which the provider who furnished such information to the health maintenance organization is entitled to claim.
(Acts 1986, No. 86-471, p. 854, §25.)
The State Health Officer and the commissioner, in carrying out their obligations under this chapter, may contract with qualified persons to make recommendations concerning the determinations required to be made by them. Such recommendations may be accepted in full or in part by the State Health Officer or commissioner.
(Acts 1986, No. 86-471, p. 854, §26.)
No person may make a tender for or a request or invitation for tenders of, or enter into an agreement to exchange securities for or acquire in the open market or otherwise, any voting security of a health maintenance organization or enter into any other agreement if, after the consummation thereof, that person would, directly or indirectly, (or by conversion or by exercise of any right to acquire) be in control of the health maintenance organization, and no person may enter into an agreement to merge or consolidate with or otherwise to acquire control of a health maintenance organization, unless at the time any offer, request, or invitation is made or any agreement is entered into, or prior to the acquisition of the securities if no offer or agreement is involved, the person has filed with the commissioner and has sent to the health maintenance organization, information required by Section 27-29-3, and the offer, request, invitation, agreement, or acquisition has been approved by the commissioner. Approval by the commissioner shall be governed by the provisions of said Section 27-29-3. Control under this section shall be defined in the same manner as it is defined for the purposes of Section 27-29-3, as amended from time to time.
(Acts 1986, No. 86-471, p. 854, §27.)
Health maintenance organizations doing business in this state shall be subject to and pay the annual premium tax to be paid by health insurers on health insurance premiums. The same taxes and filing requirements applicable to health insurers under this title, shall apply to and shall be imposed upon each health insurance organization licensed under the provisions of this chapter; and the organization shall also be entitled to the same tax deductions, reductions, abatements, and credits that health insurers are entitled to receive.
(Acts 1986, No. 86-471, p. 854, §28; Acts 1993, No. 93-679, p. 1291, §9; Acts 1997, No. 97-227, p. 372, §1.)
(a) Notwithstanding any other provision of this chapter, any health maintenance organization licensed by the State Board of Health and in operation on May 29, 1986, shall be granted a certificate of authority upon payment of the application fee prescribed in Section 27-21A-21 and compliance with Section 27-21A-12. Nothing in this section shall prohibit any such health maintenance organization from continuing to conduct business in this state until such certificate of authority is issued.
(b) Any health maintenance organization which was licensed in this state prior to January 1, 1986, may continue to operate under existing noncontractual provider arrangements (which have been approved by the State Health Officer) for three years.
(c) After issuance of a certificate of authority in accordance with subsection (a) of this section, the commissioner may require submission by the health maintenance organization of any additional information required in Section 27-21A-2 which has not previously been submitted to the State Health Officer.
(Acts 1986, No. 86-471, p. 854, §29.)
(a) A health maintenance organization is entitled to coordinate benefits on the same basis as an insurer. No such coordination shall be allowed against policies covering individuals on other than a group basis.
(b) A health maintenance organization providing medical benefits or payments to an enrollee who suffers injury, disease, or illness by virtue of the negligent act or omission of a third party is entitled to reimbursement from such third party for the reasonable value of the benefits or payments provided.
(Acts 1986, No. 86-471, p. 854, §30.)
There shall be established a three member HMO advisory council to advise and consult with the commissioner and the State Health Officer in carrying out their duties under this chapter. The members of such advisory body shall be appointed annually by the Alabama Association of Health Maintenance Organizations.
(Acts 1986, No. 86-471, p. 854, §31.)
(a) The state government, or any agency, board, commission, institution, or political subdivision thereof, and any city or county, or board of education, which offers its employees a health benefits plan may make available to and inform its employees or members of the option to enroll in at least one health maintenance organization holding a valid certificate of authority which provides health care services in the geographic areas in which such employees or members reside.
(b) The first time a health maintenance organization is offered by an employer, either public or private, each covered employee must make an affirmative written selection among the different alternatives included in the health benefits plan. Thereafter, those who wish to change from one plan to another will be allowed to do so annually, provided, that nothing in this section shall prevent any health maintenance organization or insurer from requiring evidence of insurability or imposing underwriting restrictions on the acceptance of any such employee. In addition to the annual group enrollment period, the employer shall make available the opportunity to select among different existing alternatives within a health benefits plan to eligible employees, who are new employees or have changed their place of residence resulting in eligibility for the plan.
(c) This section shall impose no responsibilities or duties upon any employer, either public or private, to offer health maintenance organization coverage as part of its health benefits plan.
(d) No employer shall in any way be required to pay more for health benefits as a result of the application of this section than would otherwise be required by a prevailing collective bargaining agreement or other legally enforceable contract or obligation for the provision of health benefits to its employees, or in any plan provided voluntarily by an employer.
(Acts 1986, No. 86-471, p. 854, §32.)
This chapter shall be known as the “Medical Support Health Care Access Act.”
(Acts 1994, No. 94-710, p. 1377, §1.)
As used in this chapter, the following terms shall have the following meanings:
(1) AGENCY. Any state agency responsible for administering programs under Title IV-D or Title XIX of the Social Security Act.
(2) INSURER. A health insurer, including a group health plan as defined in Section 607(1) of the Employee Retirement Income Security Act of 1974, a health maintenance organization, or an entity offering a service benefit plan.
(Acts 1994, No. 94-710, p. 1377, §2.)
The Alabama Medicaid Agency is authorized and empowered to conduct investigations to determine whether a medical support order exists or eligibility for enrollment of a recipient in a parent’s family health coverage exists. The parents of any child who is a recipient shall cooperate in this investigation. State agencies may share information regarding parentage and support orders.
(Acts 1994, No. 94-710, p. 1377, §3.)
An insurer shall not deny enrollment of a child under the health coverage of the child’s parent on any of the following grounds:
(1) That the child was born out of wedlock.
(2) That the child is not claimed as a dependent on the parent’s federal income tax return.
(3) That the child does not reside with the parent or in the insurer’s service area.
(Acts 1994, No. 94-710, p. 1377, §4.)
When a parent is required by a court or administrative order to provide health coverage and the parent is eligible for family health coverage through an insurer, all of the following shall apply:
(1) The parent shall be able to enroll a child in family coverage without regard to open enrollment season restrictions.
(2) If the parent fails to enroll a child as required by court or administrative order, the child’s other parent or the agency may make an enrollment.
(3) A child enrolled in health coverage pursuant to this section shall not be disenrolled unless the insurer is provided satisfactory written evidence of either of the following:
a. The court or administrative order is no longer in effect.
b. The child is or will be enrolled in comparable health coverage through another insurer which will take effect not later than the effective date of the disenrollment.
(Acts 1994, No. 94-710, p. 1377, §5.)
When a parent is required by a court or administrative order to provide health coverage and the parent is eligible for family health coverage through an employer doing business in the state, all of the following shall apply:
(1) The parent shall be able to enroll any child in family coverage without regard to open enrollment season restrictions.
(2) If the parent fails to enroll a child, the child’s other parent or the agency can make the enrollment.
(3) The child shall not be disenrolled unless the employer is provided satisfactory written evidence of any of the following:
a. The court or administrative order is no longer in effect.
b. The child is or will be enrolled in comparable health coverage through another employer which will take effect not later than the effective date of the disenrollment.
c. The employer has eliminated family coverage for all of its employees.
(4) The employer shall withhold from the employee’s compensation the employee’s share, if any, of premiums for health coverage, so long as the amount does not exceed the maximum amount allowed by law. The employer shall then pay the employee’s share of premiums to the insurer.
(Acts 1994, No. 94-710, p. 1377, §6.)
An insurer shall not impose any additional requirements on any state agency which has been assigned the rights of an individual eligible for medical assistance under this chapter and covered for health benefits from the insurer that are different from requirements applicable to an agent or assignee of a covered individual.
(Acts 1994, No. 94-710, p. 1377, §7.)
When a child has health coverage through the insurer of a noncustodial parent, the insurer shall do all of the following:
(1) Provide necessary information to the custodial parent in order for the child to obtain benefits through the coverage.
(2) Allow the custodial parent or the health provider, with the custodial parent’s approval, to submit claims for covered services without approval from the noncustodial parent.
(3) Make payment on the submitted claims directly to the custodial parent, provider, or the agency.
(Acts 1994, No. 94-710, p. 1377, §8.)
(a) The Alabama Medicaid Agency may garnish the wages, salary, or other employment income of any person who is required by a court or administrative order to provide coverage of the costs of health services to a child who is eligible for medical assistance and has received payment from a third party for the cost of services for the child but has not used the payments to reimburse the other parent or guardian of the child, the provider of services, or the Alabama Medicaid Agency for its payments made. Current or past due child support shall have priority over claims for the costs of the services.
(b) In addition to the powers granted in subsection (a), the Alabama Medicaid Agency may notify the State Department of Revenue of any amounts due under this section. Upon proper and timely notice, the department shall withhold any amount from any state tax refund due to the above-described person.
(Acts 1994, No. 94-710, p. 1377, §9.)
(a) In any case in which a noncustodial parent is required by a court or administrative order to provide health care coverage for such child and the employer of the noncustodial parent is known to the Department of Human Resources, the department shall use the federally required medical support notice to provide notice to the employer of the requirement for employer-based health care coverage for the child through the parent of the child who has been ordered to provide health care coverage for the child unless a court or administrative order stipulates that alternative health care coverage to employer-based coverage is to be provided for a child subject to a Title IV-D child support order. In the case of an employer entered in the directory of new hires pursuant to Section 25-11-5, the department shall send the federal medical support notice to any employer of a noncustodial parent subject to the order within two business days of the entry of the employee, who is an obligor in a Title IV-D case, into the directory of new hires.
(b) Within 20 business days after the date of the medical support notice, the employer of a noncustodial parent subject to an order for health care coverage for the child shall transfer the notice to the appropriate plan providing the health care coverage for which the child is eligible. The employer shall withhold from the compensation of the noncustodial parent any employee contributions necessary for coverage of the child and shall send the amount withheld directly to the health care plan to provide the health care coverage for the child. The employee or obligor may contest the withholding order issued pursuant to this section based upon a mistake of fact and may appeal on the record to the circuit court in the county where the medical support order was issued. If the employee contests the withholding of the employee contributions, the employer shall initiate withholding of the contributions while the contest is being resolved.
(c) An employer shall promptly notify the department whenever the noncustodial parent’s employment is terminated.
(d) The department shall promptly notify the employer when there is no longer a current order for medical support in effect for which the department is responsible.
(e) The liability of the noncustodial parent for employee contributions to the health care plan necessary to enroll the child in the plan shall be subject to all available enforcement mechanisms under this title or any other provision of law.
(f) When a notice required by this section which appears regular on its face and which has been appropriately completed is received by the health plan administrator, the notice shall be deemed a qualified medical child support order under 29 U.S.C . § 1169(a)(5)(C)(i). The health insurance plan administrator of a participant under a group health plan who is the noncustodial parent of the child for whom the notice was received pursuant to this subsection, shall, within 40 business days, do all of the following:
(1) Notify the State Title IV-D agency of any state or territory that issued the notice whether coverage is available for the child under the terms of the plan and, if so, whether the child is covered under the plan and either the effective date of the coverage, or if necessary, any steps to be taken by the custodial parent or official of a state or political subdivision thereof substituted for the name of the child pursuant to 29 U.S.C. § 1169(a)(3)(A), to effectuate coverage. The department or its contractors, in consultation with the custodial parent, shall promptly select from the available plan options when the plan administrator reports that there is more than one option available under the employer’s plan. If the response is not made to the plan administrator within 20 days and the plan has a default option for coverage, the plan administrator shall enroll the child in that default option. If there is no default option, the plan administrator may call the office of the department or contractor which sent the notice and seek direction as to the enrollment of the child in the available plans.
(2) Provide the custodial parent or the substituted official a description of the coverage available and any forms or documents necessary to effectuate coverage and permit the custodial parent or substituted official to file claims.
(3) Send the explanation of benefit statements to the custodial parent, substituted official, and the employee.
(4) Send the reimbursement to the custodial parent, legal guardian, or responsible agency for expenses paid by the custodial parent, legal guardian, or substitute official for which the child may be eligible under the plan.
(5) Nothing in this subsection shall be construed as requiring a group health plan, upon receipt of a medical support notice, to provide any type or form of benefit or option not otherwise provided under the group health plan except to the extent necessary to meet the requirements of a law relating to medical child support described in 42 U.S.C. § 1396g-1.
(g) The review of enrollment of a child for health insurance coverage in employer-based health coverage pursuant to this section following issuance of an order to require the noncustodial parent to provide the coverage shall be limited to a mistake of fact.
(h) An employer who fails to comply with the requirements set forth in this section may be subject to legal action. The employer may be held personally liable to the obligee for failure to withhold contributions for medical support, up to the amount of contributions which were not withheld, and in those cases, conditional and final judgment for the amounts to be withheld may be entered by a court and against the employer.
(Act 2002-404, p. 1017, §1.)
As to every insurance contract insuring any dwelling or other building and written in the name of less than all of the joint owners or tenants in common, with or without survivorship, if such joint tenants or tenants in common are husband and wife, it shall not be a defense against liability under the policy that all the joint owners or tenants in common were not named as the insured therein, nor will the amount due in event of loss be diminished on such account unless, by special endorsement of the policy, the insurer’s liability is limited to the interest of the named insured.
(Acts 1951, No. 781, p. 1376; Acts 1971, No. 407, p. 707, §482.)
(a) Industrial fire insurance policies are policies issued by insurers writing fire and allied lines of insurance through agents operating on the debit agency system under which system a weekly or monthly collection percentage is paid based either on actual weekly or monthly premium collections or weekly or monthly increases of premium collections.
(b) No such policy, or such policies, covering any of the same subjects of insurance shall be issued which provides indemnity exceeding the limits set by the commissioner as to any one loss resulting from any, or all, of the hazards or perils insured against.
(c) No such policy shall be issued except upon a monthly or weekly premium payment basis. No discount for premiums paid in advance shall exceed five percent for premiums paid for six months in advance or 10 percent for premiums paid for 12 months in advance. In no event shall premiums be collected for more than 12 months in advance.
(Acts 1971, No. 407, p. 707, §483.)
This article shall be known and may be cited as the Property Insurance Clarity Act.
(Act 2012-373, p. 932, §1.)
(a) Each insurance company authorized to transact homeowners insurance business in the State of Alabama shall annually submit to the department for homeowners insurance policies, computations of the total amount of direct incurred losses, the number of policies in force, and the direct earned premiums for the prior calendar year. The insurance company shall report the computations to the department by zip code. The information received by the department shall be aggregated across all insurance companies collectively and the aggregated totals shall be arranged by zip code. Homeowners insurance shall also include condominium insurance, dwelling fire policies, renters/tenants insurance, and mobile home/manufactured housing property insurance. Creditor-placed property insurance, condominium association insurance, and commercial insurance are excluded from this article.
(b) Based upon the information submitted to or otherwise gathered by the department, the department shall compile and post on the department website the aggregated total of the computations provided in subsection (a) by zip code for the prior calendar year.
(c) Each insurance company authorized to transact homeowners insurance business in the state shall annually submit to the department computations of the direct incurred losses and the number of policies in force, by zip code, by calendar year for the prior calendar year, for each of the following perils:
(1) Fire.
(2) All nonhurricane wind/hail.
(3) Hurricane.
(4) All other perils.
(d) Each insurance company authorized to transact homeowners insurance business in the state shall submit to the department catastrophe wind/hail information pursuant to a data call by the department based on a specific catastrophic event.
(Act 2012-373, p. 932, §2; Act 2019-177, §1.)
The department shall also post on the department website a general description of the rate-making methodology that the department allows insurance companies to use in establishing their homeowners rates.
(Act 2012-373, p. 932, §3.)
Commencing on October 1, 2013, each insurance company authorized to transact homeowners insurance business in this state shall provide the information required pursuant to subsection (a) of Section 27-22-21, commencing with the calendar year 2007. Voluntary submissions of the information required by subsection (a) of Section 27-22-21 for calendar years prior to 2007, may be submitted and shall be compiled and posted by the department in the same manner. Based upon the submitted information, the department shall compile aggregate totals, commencing with 2007, and post those aggregate totals on the department website pursuant to subsection (b) of Section 27-22-21.
(Act 2012-373, p. 932, §4.)
(a) Upon written request of an insurance company, the commissioner may waive, modify, or extend for an additional time period, for good cause shown, the reporting requirements imposed by this article. The request shall demonstrate good cause for waiving, modifying, or extending the reporting requirements. Good cause may include, but is not limited to, the insurance company’s limited percentage of the total homeowners insurance market in this state, or the undue burden of compiling and reporting the computations, data, and other information required by this article due to the manner, format, or method in which the insurance company has stored the computations, data, or other information required.
(b) Any insurance company that fails to timely comply with the reporting requirements imposed by this article shall be given notice by the department of such failure and provided 90 days within which to comply. Any insurance company that fails to comply on or before the 90th day shall be fined two thousand five hundred dollars ($2,500) per month, by the department until the date of compliance. Any funds collected pursuant to this subsection shall be deposited into the State General Fund.
(c) The commissioner shall waive or modify the reporting requirements imposed by this article under Section 27-22-23 if an insurance company does not store the computations, data, or other information required; must materially upgrade, modify, redevise, or reprogram computer systems to provide the computations, data, or other information; or must significantly divert limited resources to provide the computations, data, or other information.
(Act 2012-373, p. 932, §5.)
Any information reported to the department by an insurer pursuant to this article is considered a commercially valuable trade secret as defined in Section 8-27-2, and shall be confidential. However, once the information from all of the insurers is aggregated, then the department may provide such information in accordance with this article. The department, absent a court order, shall not release this confidential information. Notice of at least 10 business days shall be given to the applicable entity if such information is ordered to be provided by the department.
(Act 2012-373, p. 932, §6.)
(a) The purpose of this article is to set forth the rights Alabama homeowners have with respect to their insurance policies and with insurance companies.
(b) It is the intent of this article to improve homeowners understanding of their policies and to better enable a policyholder to understand their coverages.
(c) This article shall be known and may be cited as the “Alabama Homeowners Bill of Rights Act.”
(Act 2012-510, p. 1521, §1.)
(a) This article shall apply to all insurance companies authorized under a certificate of authority for property insurance and writing homeowners and other personal lines residential property insurance policies in the State of Alabama.
(b) For purposes of this article, the term “personal lines residential property insurance” shall include condominium insurance, dwelling fire policies that provide dwelling or contents coverage, renters/tenants insurance, and mobile home or manufactured home insurance. Creditor placed property insurance and condominium association or homeowner association property insurance is excluded from this article.
(Act 2012-510, p. 1521, §2.)
The following shall serve as the minimum standards to be followed by the Alabama Department of Insurance in exercising the department’s powers and duties in regulating insurance companies pursuant to Chapter 12. The Department of Insurance and insurance companies shall post this list or an electronic link of this list on their respective websites. These standards include the following:
(1) Policyholders shall have the right to competitive pricing practices of insurers as prescribed by applicable federal or state insurance law and regulation.
(2) Policyholders shall have the right to insurance advertising and sales approaches that provide representative information on the policy in accordance with Chapter 12.
(3) Policyholders shall have the right to assurance that the insurance market in general and their insurance company in particular are financially stable as provided in Section 27-12-7.
(4) Policyholders shall have the right to receive service from licensed producers in accordance with Chapter 7, and to request the license status of an insurance company or producer.
(5) Policyholders shall have the right to a policy as prescribed in Chapter 14, to receive a complete policy, and to request a duplicate or replacement policy, if needed.
(6) Policyholders shall have the right to receive in writing from their insurance company the reason for any cancellation of coverage and a minimum number of days’ notice of cancellation of coverage, subject to applicable federal or state insurance law and regulation.
(7) Policyholders shall have the right to cancel their policy and receive a refund of any unearned premium. If a policy was funded by a premium finance company, the unearned premium will be returned to the premium finance company to pay toward the policyholder’s financing loan.
(8) Policyholders shall have the right to a written notification, at renewal, describing changes in their insurance contract language that are applicable to the renewal period.
(9) Policyholders shall have the right, in the event of a claim, to reject any settlement amount offered by the insurance company.
(10) Policyholders shall have the right to select their licensed contractor or vendor to repair, replace, or rebuild damaged property covered by the insurance policy.
(11) Policyholders shall have the right to file a written complaint against any insurance company with the Department of Insurance and to have that complaint reviewed by the Department of Insurance.
(12) Policyholders shall have the right to file a written complaint against any insurance producer with the Department of Insurance and to have that complaint reviewed by the Department of Insurance.
(Act 2012-510, p. 1521, §3.)
(a) No homeowners personal lines residential property coverage insurance policy shall be delivered or issued for delivery in this state unless an appropriate outline of coverage and comprehensive policy checklist have been delivered to the policyholder prior to issuance, within 30 days after issuance of the policy under separate cover, or included in the policy when issued or mailed. The comprehensive policy checklist shall contain a list of provisions and elements, whether or not they are included in the policy being issued, in a format that allows the insurer to indicate what is and what is not included in the policy being issued. The outline of coverage and comprehensive checklist shall provide information on the policy and may, but is not required to, include coverage by endorsement.
(b) To be in compliance with this section, an insurer may use an approved outline of coverage and comprehensive policy checklist, to be promulgated by the Alabama Department of Insurance. If a company wishes to create and use its own outline of coverage and comprehensive policy checklist, it must be approved by the Alabama Department of Insurance and include, at a minimum, the following:
(1) A brief description of the type of coverage provided in the policy, amount of coverage, and whether the coverage is replacement cost or actual cash value.
(2) A summary statement of the principal exclusions and limitations or reductions contained in the policy and any other limitations or reductions.
(3) A summary of any additional coverages provided through any rider or endorsement that accompanies the policy, amount of that coverage, and whether the coverage is replacement cost or actual cash value.
(c) In addition, an insurer must include the following language on the outline of coverage and comprehensive policy checklist:
“The following is an outline of coverage and comprehensive policy checklist of your insurance policy and is for informational purposes only. Alabama law prohibits this checklist from changing any provisions of the insurance contract which is the subject of this checklist. Any endorsement regarding changes in types of coverage, exclusions, limitations, reductions, deductibles, coinsurance, renewal provisions, cancellation provisions, surcharges, or credits is not included in this checklist, unless otherwise indicated. This checklist does not operate to expand coverage beyond the coverage provided in the policy. If there is a contradiction between this checklist and the policy, the terms of this policy govern.
“Policyholders should read their policy thoroughly. Policyholders should review their insurance policy annually with their insurance producer to ensure they are adequately covered.”
(d) Also, as part of the outline of coverage and comprehensive policy checklist, an insurance company shall include a section of the document which contains a checklist of provisions, coverage, and exclusions offered within a policy, whether or not they have been included, or accepted, as part of the policy being issued, or considered. The comprehensive policy checklist shall include, at a minimum, the following:
(1) Property coverage for the principal premises shown in the declarations.
(2) Property coverage for other structures on the residence premises.
(3) Whether the principal premises and other structures are insured against the following perils:
a. Fire.
b. Lightning.
c. Explosion.
d. Wind and hail.
e. Flood.
f. Earthquake.
g. Collapse.
h. Mold.
i. Theft.
(4) Personal property and contents coverage and the amount of or percentage of coverage.
(5) Whether personal property and contents are insured against the following perils:
a. Fire.
b. Lightning.
c. Explosion.
d. Wind and hail.
e. Flood.
f. Earthquake.
g. Collapse.
h. Mold.
i. Theft.
(6) Whether the policy provides the following additional coverage:
a. Debris removal.
b. Loss assessment.
c. Additional living expenses.
d. Personal liability coverage.
e. Medical payments coverage.
f. Named windstorm deductible.
g. Building and ordinance or law coverage.
(Act 2012-510, p. 1521, §4.)
Any violation of this article or any provision therein shall be enforceable only by the Department of Insurance as provided herein. Nothing in this article shall be used to provide a basis for a private cause of action. This article does not operate to expand coverage beyond the coverage provided by the policy.
(Act 2012-510, p. 1521, §5.)
The failure of an insurance company writing homeowners personal lines residential property coverage insurance policies in this state to comply with the material provisions of this article shall be a violation of the Unfair Trade Practices Act as set forth in Section 27-12-1 et seq. of the Alabama Insurance Code. Violation of the Unfair Trade Practices Act may subject the insurance company to the suspension or revocation of the Insurer’s Certificate of Authority or the imposition of an administrative fine, or both.
(Act 2012-510, p. 1521, §6.)
As used in this article, the following terms shall have the following meanings:
(1) LENDER. A person who holds a mortgage, lien, deed of trust, or other security interest in property. The term includes an assignee, receiver, or other transferee of the interest.
(2) RESIDENTIAL REAL PROPERTY. Any of the following:
a. A single-family house.
b. A duplex, triplex, or quadraplex.
c. A unit in a multi-unit residential structure in which title to an individual unit is transferred to the owner of the unit under a condominium or cooperative system.
(Act 2019-460, §1.)
(a) If a claim under an insurance policy for damage to residential real property is paid to the insured and a lender, and the lender holds all or part of the proceeds from the insurance claim payment pending completion of all or part of the repairs to the property, the lender shall notify the insured of each requirement with which the insured must comply for the lender to release the insurance proceeds.
(b) The notice required under this section must be provided no later than 14 days after the date the lender receives payment of the insurance proceeds.
(Act 2019-460, §2.)
Not later than 10 days after the date a lender receives from the insured a request for release of all or part of the insurance proceeds held by the lender, the lender shall do either of the following:
(1) If the lender has received sufficient evidence of the insured’s compliance with the requirements specified by the lender under Section 27-22-61 for release of the proceeds, the lender shall release to the insured, as requested, all or part of the proceeds.
(2) Provide notice to the insured that explains specifically both of the following:
a. The reason for the lender’s refusal to release the proceeds to the insured.
b. Each requirement with which the insured must comply for the lender to release the proceeds.
(Act 2019-460, §3.)
A lender who fails to provide notice as required by Section 27-22-61 or Section 27-22-62 or to release insurance proceeds as required by Section 27-22-62 shall pay to the insured interest at the rate of 10 percent per year on the proceeds held by the lender.
(Act 2019-460, §4.)
(a) If a lender fails to provide notice as required by Section 27-22-61 or Section 27-22-62, interest begins to accrue on the date the lender received the insurance proceeds.
(b) If a lender fails to release insurance proceeds as required by Section 27-22-62, interest begins to accrue on the date the lender receives sufficient evidence of the insured’s compliance with the requirements specified by the lender under Section 27-22-61 or Section 27-22-62 for release of the proceeds.
(c) Interest stops accruing on the date the lender complies with Section 27-22-61 or Section 27-22-62, as applicable.
(Act 2019-460, §5.)
Nothing in this article shall impact any rights of a lender, whether provided by law or by an agreement with a borrower or mortgagor.
(Act 2019-460, §6.)
For purposes of this chapter, the following terms have the following meanings:
(1) COMMISSIONER. The Alabama Commissioner of Insurance.
(2) CUSTOMER. A person who purchases portable electronics or services.
(3) DEPARTMENT. The Alabama Department of Insurance.
(4) ENROLLED CUSTOMER. A customer who elects coverage under a portable electronics insurance policy issued to a vendor of portable electronics.
(5) LOCATION. Any physical location in the State of Alabama or any website, call center site, or similar location directed to residents of the State of Alabama.
(6) PORTABLE ELECTRONICS. Electronic devices that are portable in nature, their accessories and services related to the use of the device.
(7) PORTABLE ELECTRONICS INSURANCE. a. Insurance providing coverage for the repair or replacement of portable electronics which may provide coverage for portable electronics against any one or more of the following causes of loss: Loss, theft, inoperability due to mechanical failure, malfunction, damage, or other similar cause of loss.
b. Portable electronics insurance does not include:
A service contract governed by Chapter 32 of Title 8.
A policy of insurance covering a seller’s or a manufacturer’s obligations under a warranty.
A homeowner’s, renters, private passenger automobile, commercial multi-peril, or similar policy.
(8) PORTABLE ELECTRONICS TRANSACTION. Either of the following:
a. The sale or lease of portable electronics by a vendor to a customer.
b. The sale of a service related to the use of portable electronics by a vendor to a customer.
(9) SUPERVISING ENTITY. A business entity that is a licensed insurer or insurance producer that is appointed by an insurer to supervise the administration of a portable electronics insurance program.
(10) VENDOR. A person in the business of engaging in portable electronics transactions directly or indirectly.
(Act 2012-312, p. 685, §3.)
(a) A vendor is required to hold a limited lines insurance producer license to sell or offer coverage under a policy of portable electronics insurance.
(b) A limited lines insurance producer license issued in accordance with this chapter shall authorize any employee or authorized representative of the vendor to sell or offer coverage under a policy of portable electronics insurance to a customer at each location at which the vendor engages in portable electronics transactions.
(c) The supervising entity shall maintain a registry of vendor locations which are authorized to sell or solicit portable electronics insurance coverage in this state. Upon request by the commissioner and with 10 days’ notice to the supervising entity, the registry shall be open to inspection and examination by the commissioner during regular business hours of the supervising entity.
(d) Notwithstanding any other provision of law, a license issued in accordance with this section shall authorize the licensee and its employees or authorized representatives to engage in those activities that are permitted in this section.
(Act 2012-312, §3.)
(a) At every location where portable electronics insurance is offered to customers, brochures or other written materials must be made available to a prospective customer which:
(1) Disclose that portable electronics insurance may provide a duplication of coverage already provided by a customer’s homeowner’s insurance policy, renter’s insurance policy, or other source of coverage.
(2) State that the enrollment by the customer in a portable electronics insurance program is not required in order to purchase or lease portable electronics or services.
(3) Summarize the material terms of the insurance coverage, including all of the following:
a. The identity of the insurer.
b. The identity of the supervising entity.
c. The amount of any applicable deductible and how it is to be paid.
d. Benefits of the coverage.
e. Key terms and conditions of coverage such as whether portable electronics may be repaired or replaced with similar make and model reconditioned or non-original manufacturer parts or equipment.
(4) Summarize the process for filing a claim, including a description of how to return portable electronics and the maximum fee applicable in the event the customer fails to comply with any equipment return requirements.
(5) State that an enrolled customer may cancel enrollment for coverage under a portable electronics insurance policy at any time and the person paying the premium shall receive a refund or credit of any applicable unearned premium.
(b) Portable electronics insurance may be offered on a month to month or other periodic basis as a group or master commercial inland marine policy issued to a vendor of portable electronics for its enrolled customers.
(c) Eligibility and underwriting standards for customers electing to enroll in coverage shall be established for each portable electronics insurance program.
(Act 2012-312, p. 685, §3.)
(a) The employees and authorized representatives of vendors may sell or offer portable electronics insurance to customers and shall not be subject to licensure as an insurance producer under this chapter provided that:
(1) The vendor obtains a limited lines license to authorize its employees or authorized representatives to sell or offer portable electronics insurance pursuant to this section.
(2) The insurer issuing the portable electronics insurance either directly supervises or appoints a supervising entity to supervise the administration of the program including development of a training program for employees and authorized representatives of the vendors. The training required by this subdivision shall comply with all of the following:
a. The training shall be delivered to employees and authorized representatives of the vendors who are directly engaged in the activity of selling or offering portable electronics insurance.
b. The training may be provided in electronic form. However, if conducted in an electronic form the supervising entity shall implement a supplemental education program regarding the portable electronics insurance product that is conducted and overseen by licensed employees of the supervising entity.
c. Each employee and authorized representative shall receive basic instruction about the portable electronics insurance offered to customers and the disclosures required under Section 27-22A-3.
(3) No employee or authorized representative of a vendor of portable electronics shall advertise, represent, or otherwise hold himself or herself out as a nonlimited lines licensed insurance producer.
(b) Notwithstanding any other provision of law, employees or authorized representatives of a vendor of portable electronics shall not be compensated based primarily on the number of customers enrolled for portable electronics insurance coverage but may receive compensation for activities under the limited lines license which is incidental to their overall compensation.
(c) The charges for portable electronics insurance coverage may be billed and collected by the vendor of portable electronics. Any charge to the enrolled customer for coverage that is not included in the cost associated with the purchase or lease of portable electronics or related services shall be separately itemized on the enrolled customer’s bill. If the portable electronics insurance coverage is included with the purchase or lease of portable electronics or related services, the vendor shall clearly and conspicuously disclose to the enrolled customer that the portable electronics insurance coverage is included with the portable electronics or related services. Vendors billing and collecting such charges shall not be required to maintain such funds in a segregated account provided that the vendor is authorized by the insurer to hold such funds in an alternative manner and remits such amounts to the supervising entity within 60 days of receipt. All funds received by a vendor from an enrolled customer for the sale of portable electronics insurance shall be considered funds held in trust by the vendor in a fiduciary capacity for the benefit of the insurer. Vendors may receive compensation for billing and collection services.
(Act 2012-312, p. 685, §3.)
If a vendor of portable electronics or its employees or authorized representative violates any provision of this section, the commissioner, after opportunity for hearing, which hearing may be waived, may do any of the following:
(1) Impose fines not to exceed five hundred dollars ($500) per violation or five thousand dollars ($5,000) in the aggregate for such conduct.
(2) Impose other penalties that the commissioner deems necessary and reasonable to carry out the purposes of this chapter, including:
a. Suspending the privilege of transacting portable electronics insurance pursuant to this section at specific business locations where violations have occurred.
b. Suspending or revoking the ability of individual employees or authorized representatives to act under the license.
c. Suspending or revoking the vendor’s limited lines insurance producer license.
(Act 2012-312, p. 685, §3.)
Notwithstanding any other provision of law:
(1) An insurer may terminate or otherwise change the terms and conditions of a policy of portable electronics insurance only upon providing the policyholder and enrolled customers with at least 30 days’ notice.
(2) If the insurer changes the terms and conditions, then the insurer shall provide the vendor policyholder with a revised policy or endorsement and each enrolled customer with a revised certificate, endorsement, updated brochure, or other evidence indicating a change in the terms and conditions has occurred and a summary of material changes.
(3) Notwithstanding subdivision (1) of this section, an insurer may terminate an enrolled customer’s enrollment under a portable electronics insurance policy upon 15 days’ notice for discovery of fraud or material misrepresentation in obtaining coverage or in the presentation of a claim thereunder.
(4) Notwithstanding subdivision (1) of this section, an insurer may immediately terminate an enrolled customer’s enrollment under a portable electronics insurance policy:
a. For nonpayment of premium.
b. If the enrolled customer ceases to have an active service with the vendor of portable electronics.
c. If an enrolled customer exhausts the aggregate limit of liability, if any, under the terms of the portable electronics insurance policy and the insurer sends notice of termination to the enrolled customer within 30 calendar days after exhaustion of the limit. However, if notice is not timely sent, enrollment shall continue notwithstanding the aggregate limit of liability until the insurer sends notice of termination to the enrolled customer.
(5) Where a portable electronics insurance policy is terminated by a policyholder, the policyholder shall mail or deliver written notice to each enrolled customer advising the enrolled customer of the termination of the policy and the effective date of termination. The written notice shall be mailed or delivered to the enrolled customer at least 30 days prior to the termination.
(6) Whenever notice or correspondence with respect to coverage under a policy of portable electronics insurance is required pursuant to this section or is otherwise required by law, it shall be in writing and may be mailed or delivered to the vendor of portable electronics at the vendor’s mailing address and to its affected enrolled customers’ last known mailing addresses on file with the insurer. If mailed, the insurer or vendor of portable electronics, as the case may be, shall maintain proof of mailing in a form authorized or accepted by the United States Postal Service or other commercial mail delivery service. Alternatively, an insurer or vendor policyholder may comply with this subdivision by providing such notice or correspondence to a vendor or its affected enrolled customers, as the case may be, by electronic means. For purposes of this subsection, an enrolled customer’s provision of an electronic mail address to the insurer or vendor of portable electronics, as the case may be, shall be deemed consent to receive notices and correspondence by electronic means. If accomplished through electronic means, the insurer or vendor of portable electronics, as the case may be, shall maintain proof that the notice or correspondence was sent.
(7) Notice or correspondence required by this section or otherwise required by law may be sent on behalf of an insurer or vendor, as the case may be, by the supervising entity appointed by the insurer.
(Act 2012-312, p. 685, §3.)
(a) A sworn application for a license under this chapter shall be made to and filed with the department on forms prescribed and furnished by the commissioner.
(b) The application shall provide all of the following:
(1) The name, residence address, and other information required by the commissioner for an employee or officer of the vendor that is designated by the applicant as the person responsible for the vendor’s compliance with the requirements of this chapter. However, if the vendor derives more than 50 percent of its revenue from the sale of portable electronics insurance the information noted above shall be provided for all officers, directors, and shareholders of record having beneficial ownership of 10 percent or more of any class of securities registered under the federal securities law.
(2) The location of the applicant’s home office.
(c) Any vendor engaging in portable electronics insurance transactions on or before January 1, 2013, must apply for licensure within 90 days of the application being made available by the department. Any applicant commencing operations after January 1, 2013, must obtain a license prior to offering portable electronics insurance.
(d) The commissioner shall by regulation provide for the expiration date of licenses and for the biennial renewal of licenses issued pursuant to this chapter.
(e) Each vendor of portable electronics licensed under this chapter shall pay to the commissioner a fee as prescribed by the commissioner but in no event shall the fee exceed one thousand dollars ($1,000) for an initial portable electronics limited lines license and five hundred dollars ($500) for each renewal thereof. However, for a vendor that is engaged in portable electronics transactions at 10 or fewer locations in the state the fee shall not exceed one hundred dollars ($100) for an initial license and for each renewal thereof.
(f) Each vendor licensed in accordance with this chapter shall be considered to have performed acts equivalent to and constituting an appointment of the commissioner as the vendor’s attorney to receive service of legal process issued against the vendor in this state upon causes of action arising within this state out of transactions under the license. The provisions of Section 27-7-29 applicable to nonresident insurance producers shall be applicable to vendors licensed in accordance with this chapter.
(Act 2012-312, p. 685, §3.)
As to every contract of insurance made between an insurer and any insured by which such insured is insured against loss or damage on account of the bodily injury or death by accident of any person for which loss or damage such insured is responsible, whenever a loss occurs on account of a casualty covered by such contract of insurance, the liability of the insurer shall become absolute and the payment of the loss shall not depend upon the satisfaction by the insured of a final judgment against him for loss, or damage, or death occasioned by the casualty. No such contract of insurance shall be cancelled or annulled by any agreement between the insurer and the insured after the insured has become responsible for such loss or damage, and any such cancellation or annulment shall be void.
(Code 1940, T. 28, §11; Acts 1971, No. 407, p. 707, §484.)
Upon the recovery of a final judgment against any person, firm, or corporation by any person, including administrators or executors, for loss or damage on account of bodily injury, or death or for loss or damage to property, if the defendant in such action was insured against the loss or damage at the time when the right of action arose, the judgment creditor shall be entitled to have the insurance money provided for in the contract of insurance between the insurer and the defendant applied to the satisfaction of the judgment, and if the judgment is not satisfied within 30 days after the date when it is entered, the judgment creditor may proceed against the defendant and the insurer to reach and apply the insurance money to the satisfaction of the judgment.
(Acts 1953, No. 283, p. 350; Acts 1971, No. 407, p. 707, §485.)
For the purposes of this article, the following terms shall have the meanings respectively ascribed to them by this section:
(1) POLICY OF AUTOMOBILE LIABILITY INSURANCE. A policy 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 of the following types only:
a. A motor vehicle of the private passenger or station type that is not used as a public or livery conveyance for passengers nor rented to others; or
b. Any other four-wheel motor vehicle with a load capacity of 1,500 pounds or less which is not used in the occupation, profession, or business of the insured; provided, however, that this article shall not apply:
To policies of automobile liability insurance issued under an automobile assigned risk plan;
To any policy insuring more than four automobiles; nor
To any policy covering garage, automobile sales agency, repair shop, service station, or public parking place operation hazards and provided, further, that this article shall apply only to that portion of an automobile liability policy insuring against bodily injury and property damage liability and to the provisions therein, if any, relating to medical payments and uninsured motorists’ coverage.
(2) NONPAYMENT OF PREMIUM. Failure of the named insured to discharge, when due, any of his obligations in connection with the payment of premiums on a policy of automobile liability insurance 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.
(Acts 1971, No. 407, p. 707, §485.1.)
(a) No notice of cancellation of a policy of automobile liability insurance shall be effective unless it is based on one or more of the following reasons:
(1) Nonpayment of premium;
(2) The policy was obtained through a material misrepresentation;
(3) Any insured violated any of the terms and conditions of the policy;
(4) The named insured failed to disclose fully his motor vehicle accidents and moving traffic violations for the preceding 36 months if called for in the application;
(5) The named insured failed to disclose in his written application or in response to inquiry by his broker, or by the insurer or its agent information necessary for the acceptance or proper rating of the risk;
(6) Any insured made a false or fraudulent claim or knowingly aided or abetted another in the presentation of such a claim;
(7) Failure to maintain membership in any group or organization when such membership is a prerequisite to the purchase of such insurance;
(8) The named insured or any other operator who either resides in the same household or customarily operates an automobile insured under such policy:
a. Has within the 36 months prior to the notice of cancellation had his driver’s license under suspension or revocation;
b. Is, or becomes, subject to epilepsy or heart attacks, and such individual does not produce a certificate from a physician testifying to his unqualified ability to operate a motor vehicle safely;
c. 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;
d. Has within the 36 months prior to the notice of cancellation been addicted to the use of narcotics or other drugs;
e. Uses alcoholic beverage to excess;
f. Has been convicted or forfeited bail during the 36 months immediately preceding the notice of cancellation for:
Any felony;
Criminal negligence resulting in death, homicide, or assault arising out of the operation of a motor vehicle;
Operating a motor vehicle while in an intoxicated condition or while under the influence of drugs;
Being intoxicated while in, or about, an automobile or while having custody of an automobile;
Leaving the scene of an accident without stopping to report;
Theft or unlawful taking of a motor vehicle;
Making false statements in an application for a driver’s license; or
g. Has been convicted of or forfeited bail for three or more violations, within the 36 months immediately preceding the notice of cancellation, of any law, ordinance, or regulation limiting the speed of 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; or
(9) The insured automobile is:
a. So mechanically defective that its operation might endanger public safety;
b. Used in carrying passengers for hire or compensation; provided, however, that the use of an automobile for a car pool shall not be considered use of an automobile for hire or compensation;
c. Used in the business of transportation of flammables or explosives;
d. An authorized emergency vehicle;
e. Changed in shape or condition during the policy period so as to increase the risk substantially; or
f. Subject to an inspection law and has not been inspected or, if inspected, has failed to qualify.
(b) This section shall not apply to any policy of automobile liability insurance 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.
(Acts 1971, No. 407, p. 707, §485.2.)
Renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of such renewal.
(Acts 1971, No. 407, p. 707, §485.4.)
No notice of cancellation of a policy to which Section 27-23-21 applies shall be effective unless mailed or delivered by the insurer to the named insured at least 20 days prior to the effective date of cancellation; provided, however, 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 of cancellation, the notice of cancellation 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 of cancellation, the insurer will specify the reason, or reasons, for such cancellation.
(Acts 1971, No. 407, p. 707, §485.3.)
When a policy is cancelled other than for nonpayment of premium, the insurer shall notify the named insured of his possible eligibility for insurance through the automobile assigned risk plan. Such notice shall accompany, or be included in, the notice of cancellation and shall state that such notice of availability of the automobile assigned risk plan is given pursuant to this article.
(Acts 1971, No. 407, p. 707, §485.6.)
Proof of mailing of notice of cancellation or of reasons for cancellation to the named insured at the address shown in the policy shall be sufficient proof of notice.
(Acts 1971, No. 407, p. 707, §485.5.)
Where the reason, or reasons, for cancellation do not accompany or are not included in the notice of cancellation, the insurer shall, upon written request of the named insured, mailed or delivered to the insurer not less than 15 days prior to the effective date of cancellation, specify in writing the reason, or reasons, for such cancellation. Such reasons shall be mailed or delivered to the named insured within five days after nonpayment of premium. This section shall apply only to a cancellation to which Section 27-23-21 applies.
(Acts 1971, No. 407, p. 707, §485.7.)
There shall be no liability on the part of and no cause of action of any nature shall arise against any insurer, its authorized representative, its agents, its employees, or any firm, person, or corporation furnishing to the insurer information as to reasons for cancellation for any statement made by any of them in any written notice of cancellation, for the providing of information pertaining thereto, or for statements made or evidence submitted at the hearings conducted in connection therewith.
(Acts 1971, No. 407, p. 707, §485.8.)
Nothing in this article shall apply to nonrenewal.
(Acts 1971, No. 407, p. 707, §485.9.)
This chapter shall not apply to any bond or undertaking which is not by law required to be approved by any state, county, municipal, precinct, township, district, or other like office, officers, commissions, boards, and similar governing bodies, or by any judge, clerk, or register of any court of this state or to insurers engaged only in the business of becoming sureties on any such bond or undertaking.
(Acts 1909, No. 147, p. 329; Acts 1971, No. 407, p. 707, §486.)
Except as provided in Section 27-24-4, whenever any person or corporation is, or may be, required or permitted to execute bond or other undertaking, of whatsoever nature, with surety, or sureties, for the faithful discharge or performance of the duties of any state, county, municipal, precinct, township, district, or corporate office or position or of any position of public or private trust or employment for the faithful discharge or performance of any duty or for the doing or not doing of anything in such bond or undertaking specified or when any person or corporation is required or permitted to execute any bond or other undertaking, of whatsoever nature, with surety or sureties, in any judicial proceeding or as guardian, executor, administrator, receiver, assignee, or trustee, the court, officer, or person having authority or charged with the duty of approving such bond or undertaking may, if such bond or undertaking is otherwise sufficient, approve the same when executed by a corporation having the power or authority under its charter to become surety on such bond or undertaking as surety and having complied with the provisions of this title. The execution by any such corporation as surety of any such bond or undertaking shall be, in all respects, upon the approval and acceptance of such bond, a full and complete compliance with the requirements of any law, ordinance, rule, or regulation requiring that such bond or undertaking shall be executed by one surety, or by one or more sureties, or that such surety, or sureties, shall be residents of the state, or any county therein, or shall be householders or freeholders, or either or both, or shall possess any other qualification.
(Code 1940, T. 41, §98; Acts 1971, No. 407, p. 707, §487.)
An authorized mutual or reciprocal surety insurer which has and maintains a surplus over and above all of its liabilities of $500,000.00, upon meeting all of the requirements of this title, except as to capital stock, may become and be accepted as sole surety on bonds or undertakings required or permitted by the laws of this state or by the charters, ordinances, rules, and regulations of any county, municipal corporation, board, body, organization, or public officer; provided, however, that any such bond or undertaking executed by such insurer shall be nonassessable and shall not provide for any contingent liability.
(Acts 1947, No. 533, p. 388; Acts 1971, No. 407, p. 707, §488.)
No such corporation or insurer shall, however, be accepted as sole surety on the bond of the State Treasurer but may become and be accepted as a cosurety with other persons or with other authorized surety insurers upon such bond, and in such event, its property or credit shall not be estimated to exceed $100,000.00.
(Code 1940, T. 41, §102; Acts 1971, No. 407, p. 707, §489.)
If the authority of a surety insurer to transact business in this state is revoked or otherwise terminated upon the ground that the insurer is insolvent or cannot be safely accepted as surety upon bonds and undertakings mentioned in Section 27-24-2, it shall be the duty of any officer in this state authorized to approve official bonds, upon receiving the circular letter from the commissioner as provided for in subsection (c) of Section 27-3-22 or upon otherwise being informed of such revocation or termination, to require the principal in any such bond upon which such insurer has become surety to give an additional bond as provided by law.
(Acts 1909, No. 147, p. 329; Acts 1971, No. 407, p. 707, §490.)
Any official bond or undertaking executed by a surety insurer may have an action maintained on it in the county of the residence of the principal or in which he resided at the time of the execution of the bond or undertaking, but actions by the state shall be brought in Montgomery County.
(Code 1940, T. 41, §104; Acts 1971, No. 407, p. 707, §491.)
No corporation or insurer having signed any such official bond or undertaking shall be permitted to deny its corporate or other power to execute such instrument or incur such liability in any proceedings to enforce liability against the insurer thereunder.
(Code 1940, T. 41, §105; Acts 1971, No. 407, p. 707, §492.)
Such an insurer as surety on any official bond, undertaking, or obligation is entitled to all the rights and remedies of other sureties on such instruments; and any insurer becoming surety on any bond or undertaking, as authorized by this chapter, shall have the same right to be relieved from further liability thereon or to require the principal to give new or additional bonds or undertakings as is conferred by law upon the other sureties on like bonds or undertakings.
(Code 1940, T. 41, §107; Acts 1971, No. 407, p. 707, §493.)
[Repealed]
Repealed by Act 2001-496, §12, effective October 1, 2001.
(Acts 1923, No. 485, p. 635; Acts 1949, No. 168, p. 195; Acts 1971, No. 407, p. 707, §494; Act 2001-496, §1.)
(a) This chapter shall be known and cited as the Alabama Title Insurance Act.
(b) The purpose of this chapter is to set forth certain definitions applicable to title insurance in this state and to provide further for the supervision of the business of title insurance transacted in this state.
(Act 2001-496, p. 866, §1.)
(a) This chapter shall apply to all title insurers and title agents engaged in the business of title insurance in this state.
(b) Except as otherwise expressly provided in this chapter, except where the context otherwise requires, and except those provisions which are inconsistent with this chapter, the provisions of this title, the Alabama Insurance Code, which apply to title insurance and title insurance companies, shall continue to be applicable to the business of title insurance and title insurance companies. No amendment to this title that is enacted after October 1, 2001, that is inconsistent with the provisions of this chapter shall be applicable to the business of title insurance unless the amendment specifically states that it is to be applicable to the business of title insurance.
(Act 2001-496, p. 866, §2.)
For the purposes of this chapter, the following terms shall have the following meanings:
(1) ABSTRACT OF TITLE. A compilation or summary of all instruments of public record of whatever kind or nature which in any manner affect title to a specified parcel of real property.
(2) BUSINESS ENTITY. A domestic entity properly formed and existing under Title 10A.
(3) COMMISSIONER. The Commissioner of the Alabama Department of Insurance.
(4) INDIVIDUAL. A natural person.
(5) NAIC. The National Association of Insurance Commissioners, its subsidiaries and affiliates, and any successor thereof.
(6) OPINION OF TITLE. A written expression of the status of title, including, but not limited to, the validity or invalidity thereof, based upon an examination by an attorney at law, who is licensed to practice law in this state, of instruments of public record or an abstract thereof affecting title to a specified parcel of real property to ascertain the history and present condition of title to such real property as to its ownership and status with respect to liens, encumbrances, clouds, and defects.
(7) PERSON. An individual or business entity.
(8) PRELIMINARY REPORT, COMMITMENT, OR BINDER. Reports furnished in connection with an application or request for title insurance and are offers to issue a title insurance policy subject to certain requirements and exceptions stated in the report, commitment, or binder and such other matters as are incorporated by reference therein.
(9) PREMIUM. Fees charged for assuming liability and risk under a title insurance policy. For the purposes of this chapter, “premium” shall include any amount retained by or paid to an agent under an agreement between the agent and the title insurance company. For the purposes of this chapter, “premium” shall not include expenses for the performance of services such as abstracting, searching, and examining titles or obtaining a title opinion; fees for document preparation; fees for handling escrows, settlements, or closings; fees incurred to cure defects in the title; and fees incident to the issuance of a commitment to insure title or a title insurance policy, including, but not limited to, the costs of reinsurance.
(10) TITLE AGENT or AGENT. a. Any person who is authorized in writing by a title insurer to perform the following:
Solicit title insurance business.
Collect premiums.
Determine insurability in accordance with underwriting rules, standards, and guidelines prescribed by the title insurer.
Issue title insurance commitments, policies, or endorsements of the title insurer.
b. The term “title agent” or “agent” does not include the officers or employees of a title insurer.
c. The term “title agent” or “agent” does not include attorneys licensed by the Alabama State Bar. Licensed attorneys shall be exempt from any licensure or regulation pursuant to this chapter.
Notwithstanding the foregoing exemption or any other provision of law to the contrary, in order to be entitled to this exemption, an attorney shall be a member in good standing of the Alabama State Bar and is prohibited from charging any premium rate for any policy or contract of title insurance except in accordance with the filed premium rates that are in effect for the title insurer, which premium rates shall not be subject to rebate and the rebate of premiums to the insured is expressly prohibited.
d. Nothing in this chapter, including the exemption of licensed Alabama attorneys contained in paragraph c., is intended to, nor shall be deemed to, affect any action or activity by non-lawyers that is permitted under subsection (c) of Section 34-3-6.
(11) TITLE INSURANCE POLICY or POLICY. A contract insuring or indemnifying against loss or damage arising from any or all of the following existing on or before the date of the policy:
a. Defects in or liens or encumbrances on the insured title.
b. Unmarketability of the insured title.
c. Invalidity or unenforceability of liens or encumbrances on the property described in the policy.
d. Lack of priority of liens or encumbrances.
(12) TITLE INSURER or INSURER. A company organized under the laws of this state or licensed in this state for the purpose of transacting as insurer the business of title insurance, as defined in Section 27-5-10, and any foreign or alien title insurer licensed to be engaged in this state in the business of title insurance, as defined in Section 27-5-10.
(13) TITLE SEARCH or TITLE EXAMINATION. A search of the records in the office of the judge of probate in the county where the real property is situated through such period of time as is acceptable to the title insurer. The search of the public records relating to matters of title performed in connection with the issuance of a preliminary report, commitment, or binder shall be solely for the benefit of the title insurance company requested to issue its policy or policies of title insurance.
(Act 2001-496, p. 886, §3; Act 2012-397, p. 1078, §1; Act 2016-296, §1.)
(a) No person shall act as a title insurance agent in this state unless licensed pursuant to this chapter. Nothing herein contained shall be construed to prevent a title insurer licensed to do business in this state, nor an employee thereof, from issuing a policy of title insurance in this state.
(b) Each title insurance agent acting on behalf of a title insurance company shall be appointed by the title insurance company in accordance with this chapter. The commissioner shall collect from the title insurer the fees set forth in Section 27-25-4.7 for each appointment. Nothing herein contained shall be construed to require the issuance of an appointment as described in this subsection to a title insurer licensed to do business in this state, nor an employee thereof, for the purpose of issuing a policy of title insurance in this state.
(c) Unless a later date is specifically authorized by the title insurer for a particular transaction or unless the title insurance commitment specifies a time for which it is effective or such commitment is renewed or extended by the title insurer, the title agent shall issue to the insured the policy or policies of title insurance for which a premium has been collected within 60 days from the effective date of the policy or in the case of a title insurance commitment having been issued, within 60 days after the satisfaction of all requirements and conditions set out in the commitment in accordance with the title insurer’s underwriting guidelines. For the purpose of this subsection, the effective date of the policy is defined as the date and time the instrument conveying the interest to be insured is recorded unless the policy to be issued is insuring the interest of the proposed insured by virtue of an instrument recorded in the real property records prior to the time the request or order for title insurance is placed.
(d) The name and license number of the title insurance agent shall be printed or legibly written by hand underneath his or her signature on each commitment, title insurance policy, and endorsement to a title insurance policy.
(Act 2001-496, p. 866, §4; Act 2012-397, p. 1078, §1.)
(a) The commissioner may contract with non-governmental entities, including NAIC, to perform any ministerial functions, including the collection of fees and data, related to licensing that the commissioner may deem appropriate. The commissioner may require that license applications, license renewal applications, notices of appointments and appointment terminations, and supporting documentation be filed and all required fees and charges be paid electronically through systems operated or maintained by the non-governmental entities.
(b) An individual applying for a title insurance agent license shall apply to the commissioner on the appropriate NAIC Uniform Individual Application and declare under penalty of suspension, revocation, or refusal of the license that the statements made in the application are true, correct, and complete to the best of the individual’s knowledge and belief. Before approving the application, the commissioner shall find that the individual meets all of the following:
(1) Is at least 19 years of age.
(2) Is a bona fide resident and citizen of this state or is a full-time employee of a duly licensed title insurance agent whose principal place of business is physically located in this state.
(3) Has not committed any act that is a ground for probation, suspension, revocation, or refusal of license as set forth in Section 27-25-4.5.
(4) Has successfully passed the examination for title insurance as required in Section 27-25-4.3.
(5) Has paid the fees set forth in Section 27-25-4.7.
(c) A business entity applying for a title insurance agent license shall apply to the commissioner on the appropriate NAIC Uniform Business Entity Application and declare under penalty of suspension, revocation, or refusal of the license that the statements made in the application are true, correct, and complete to the best of the business entity’s knowledge and belief. Before approving the application, the commissioner shall find that the business entity meets all of the following:
(1) Is a domestic entity properly formed and existing under Title 10A and whose principal place of business is physically located in this state.
(2) Has designated an individual title insurance agent licensed in this state as responsible for the business entity’s compliance with this chapter and with the insurance laws, rules, and regulations of this state.
(3) Has not committed an act that is a ground for probation, suspension, revocation, or refusal of license as set forth in Section 27-25-4.5.
(4) Has paid the fees set forth in Section 27-25-4.7.
(d) The commissioner may require any documents reasonably necessary to verify the information contained in the application.
(Act 2012-397, p. 1078, §2; Act 2023-104, §1.)
(a) Unless denied licensure pursuant to Section 27-25-4.5, a person who meets the requirements of Sections 27-25-4.1 and 27-25-4.3 shall be issued a title insurance agent license.
(b) A title insurance agent license must be initially renewed in accordance with a schedule prescribed by the commissioner and shall thereafter be subject to renewal on a biennial basis. A renewal shall be effected by submitting a renewal application, by paying the fee for renewal set forth in Section 27-25-4.7, and by meeting the requirements for renewal, including any applicable continuing education requirements, before the due date for renewal. A license expires if not renewed by the due date for renewal.
(c) Within the first 30 days following the date a title insurance agent license expires, a reinstatement retroactive to the expiration date shall be effected by submitting a renewal application, by paying the renewal fee plus the late fee set forth in Section 27-25-4.7, and by meeting the other requirements for renewal including any applicable continuing education requirements.
(d) After the first 30 days following the date a title insurance agent license expires, but within 12 months after the expiration date, the license may be reinstated effective as of the reinstatement by submitting a renewal application, by paying a fee of double the renewal fee set forth in Section 27-25-4.7, and by meeting the other requirements for renewal including any applicable continuing education requirements.
(e) After a title insurance agent license has been expired for 12 months, the person shall reapply pursuant to Section 27-25-4.1 to become licensed.
(f) A title insurance agent who is unable to comply with license renewal procedures and requirements due to military service, long-term medical disability, or some other extenuating circumstance may request a waiver, a waiver of an examination requirement, fine, or other sanction imposed for failure to comply with renewal procedures.
(g) The license shall contain the licensee’s name, address, personal identification number, the date of issuance and expiration, and any other information the commissioner deems necessary.
(h) The title insurance agent shall inform the commissioner of a change in legal name or address within 30 days of the change in a manner prescribed by the commissioner. Failure to timely inform the commissioner of a change in legal name or address shall result in a penalty of fifty dollars ($50). If the penalty is not paid within 30 days after notice of the penalty assessment, the license shall be suspended until the penalty is paid.
(Act 2012-397, p. 1078, §2.)
(a)(1) An individual intending to apply for a title insurance agent license shall first pass a written examination unless exempt pursuant to subsection (b).
(2) The examination shall test the knowledge of the individual concerning title insurance, the duties and responsibilities of a title insurance agent, and the insurance laws of this state. Examinations required by this section shall be developed and conducted under rules prescribed by the commissioner.
(3) Each individual applying for an examination shall pay a nonrefundable examination fee pursuant to Section 27-25-4.7.
(4) The commissioner may make arrangements, including contracting with an outside testing service, for administering examinations and collecting the nonrefundable fee prescribed by the commissioner, in which case the fees approved by the commissioner for the examinations may be paid directly to the outside testing service, and the fee shall be in lieu of, but not in excess of, the fees for the examination set forth in Section 27-25-4.7.
(5) An individual who fails to appear for the examination as scheduled or fails to pass the examination shall reapply for an examination and remit all required fees and forms before being rescheduled for another examination.
(6) No individual who has taken and failed to pass two examinations given pursuant to this section shall be entitled to take any further title insurance agent examinations until after the expiration of three months from the date of the last examination which the individual failed to pass. If the individual thereafter fails to pass the examination after two more attempts, the individual shall not be eligible to take any further title insurance agent examinations until after the expiration of six months from the date of the last unsuccessful examination. An examination fee shall be paid for each examination.
(b) An individual shall be exempt from the examination requirement of subsection (a) only as follows:
(1) If, within 90 days after January 1, 2013, the applicant can establish to the satisfaction of the commissioner that for a period of at least five years preceding January 1, 2013, the applicant has been an authorized signatory to commitments, title insurance policies, and endorsements to title insurance policies issued by the title insurance agent on behalf of a title insurer properly authorized to conduct the business of title insurance in this state.
(2) If the individual was previously licensed as a title insurance agent in this state after having passed the examination required by subsection (a) or being exempt from the examination under subdivision (1), this exemption is available only if the application is received within 12 months of the cancellation of the applicant’s previous license in this state and if, at the time of cancellation, the applicant was in good standing in this state.
(Act 2012-397, p. 1078, §2; Act 2023-104, §1.)
(a) An individual who holds a title insurance agent license shall satisfactorily complete a minimum of 24 hours of continuing education courses as may be approved by the commissioner, of which three hours shall be in ethics, reported to the commissioner on a biennial basis in conjunction with the license renewal cycle.
(b) This section shall not apply to licensees not licensed for one full year prior to the end of the applicable continuing education biennium.
(c) Only continuing education courses and providers approved by the commissioner shall be used to satisfy the continuing education requirements of this section. Continuing education providers and courses shall be subject to the same requirements and fees set forth in Chapter 8A.
(d) The commissioner shall prescribe the number of hours of continuing education credit for each continuing education course approved. Continuing education courses submitted in accordance with a reciprocal agreement the commissioner enters with other states shall be approved according to the provisions of the reciprocal agreement.
(e) If a continuing education course requires successful completion of a written examination, no continuing education credit shall be given to licensees who do not successfully complete the written examination.
(f) An individual teaching any approved continuing education course shall qualify for the same number of hours of continuing education credit as would be granted to a licensee taking and satisfactorily completing the course.
(Act 2012-397, p. 1078, §2.)
(a) The commissioner may place on probation, suspend, revoke, or refuse to issue or renew the license of a title insurance agent or may levy a civil penalty pursuant to subsection (d), or any combination of these actions, for any one or more of the following causes:
(1) Providing incorrect, misleading, incomplete, or materially untrue information in the license application.
(2) Violating any insurance laws, rules, subpoena, or order of the commissioner.
(3) Obtaining or attempting to obtain a license through misrepresentation or fraud.
(4) Improperly withholding, misappropriating, or converting any monies or properties received in the course of acting as a title insurance agent or in otherwise doing insurance business in this state or elsewhere.
(5) Intentionally misrepresenting the terms of an actual title insurance contract.
(6) Having been convicted of a felony.
(7) Having admitted or been found to have committed any insurance unfair trade practice or fraud.
(8) Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility, in the course of acting as a title insurance agent or otherwise in the conduct of business in this state or elsewhere.
(9) Having a title insurance agent license or its equivalent, or an insurance producer license or its equivalent, suspended, revoked, or refused in any other state, province, district, or territory.
(10) Forging another’s name to any document related to a title insurance transaction.
(11) Cheating, including improperly using notes or any other reference material, to complete an examination for a license.
(b) In the event that action by the commissioner is to refuse application for licensure or renewal of an existing license, the commissioner shall notify the applicant or licensee in writing, advising of the reason for the refusal. The applicant or licensee may make written demand upon the commissioner within 30 days for a hearing before the commissioner to determine the reasonableness of the refusal. The hearing shall be held pursuant to Chapter 2.
(c) The license of a business entity may be placed on probation, suspended, or revoked if the commissioner finds, after a hearing, that an individual licensee’s violation occurred while acting on behalf of or representing the business entity and that the violation was known or should have been known by one or more of the business entity’s partners, officers, or managers and that the violation was neither reported to the commissioner nor was corrective action taken in relation thereto.
(d) In the absence of a greater fine specifically provided elsewhere in this title, and in addition to or in lieu of an applicable probation, suspension, revocation, or refusal, a person, in the sole discretion of the commissioner after a hearing, may additionally be subject to a civil fine in an amount not to exceed ten thousand dollars ($10,000) per violation.
(e) The commissioner shall retain the authority to enforce the provisions of and impose any penalty or remedy authorized by this chapter or elsewhere in this title against any person who is under investigation for or charged with a violation of this chapter or this title even if the person’s license or registration has been surrendered or has expired by operation of law.
(Act 2012-397, p. 1078, §2.)
(a) In order to make a determination of title insurance agent license eligibility, the commissioner may require fingerprints of initial applicants for a title insurance agent license, and the fingerprints and the fee required to perform the criminal history record checks shall be submitted to the Alabama Department of Public Safety and the Federal Bureau of Investigation (FBI) for state and national criminal history record checks.
(b) The commissioner shall require a criminal history record check on each initial applicant for title insurance agent license pursuant to this section. The commissioner shall require each applicant to submit a full set of fingerprints, including a scanned file from a hard copy fingerprint, to allow the commissioner to obtain and receive national criminal history records from the FBI Criminal Justice Information Services Division.
(c) The commissioner may contract for the collection, transmission, and resubmission of fingerprints required pursuant to this section, and the fee for collecting, transmitting, and retaining fingerprints shall be payable directly to the contractor by the applicant. The commissioner may agree to a reasonable fingerprinting fee to be charged by the contractor, and both the contractor’s fee and the fee required to perform the criminal history check shall be collected from the applicant by the contractor.
(d) The criminal history record information may be submitted to the commissioner instead of the Alabama Department of Public Safety.
(e) The commissioner shall treat and maintain an applicant’s fingerprints and any criminal history record information obtained pursuant to this section as confidential and shall apply security measures consistent with the Criminal Justice Information Services Division of the Federal Bureau of Investigation standards for the electronic storage of fingerprints and necessary identifying information and limit the use of records solely to the purposes authorized in this section. The fingerprints and any criminal history record information shall not be subject to subpoena, other than one issued in a criminal action or investigation, and shall be confidential.
(f) The commissioner, by regulation, may provide for the delayed enforcement of this section for up to 24 months from April 8, 2014, to allow for delayed implementation.
(Act 2012-397, p. 1078, §2; Act 2014-296, p. 1072, §1.)
(a) The Commissioner of Insurance shall collect in advance the following fees:
(1) Title insurance agent licenses:
a. Individuals:
Application fee (for filing of initial application for license) ..............................$20
License fee (for issuance of original license and each biennial renewal) .....................$40
b. Business entities:
Application fee (for filing of initial application for license) .............................$20
License fee (for original license and each biennial renewal) ................................$100
c. Examination fee, an amount set by the commissioner not to exceed........................$100
d. Late renewal fee, to be paid by each title insurance agent failing to make a timely renewal of license.............$50
(2) Title insurance agent appointment fee:
a. Filing notice of appointment ...........................................$30
b. Annual continuation of appointment ................................$10
(3) Prelicensing course provider fee (for filing initial application for authority and annual renewal) an amount set by the commissioner not to exceed ........$100
(b) The fees specified in subsection (a) shall be deposited in the State Treasury and credited to the Insurance Department Fund.
(Act 2012-397, p. 1078, §2.)
(a) The commissioner, by rule pursuant to Chapter 2, may provide for the implementation of the requirements of this chapter.
(b) Each title insurance agent certificate of authority in force prior to January 1, 2013, shall be issued a replacement title insurance agent license and appointment upon payment of the annual fee in the amount set forth in Section 27-25-4 prior to January 1, 2013. A replacement title insurance agent shall be authorized to continue to issue title insurance policies in the same manner as permitted in Section 27-25-4 prior to January 1, 2013.
(c) A replacement title insurance agent license issued in accordance with subsection (b) shall be valid for six months, during which time the person shall satisfy the requirements for a title insurance agent license pursuant to Sections 27-25-4.1 and 27-25-4.3 or the replacement license shall thereupon expire and be canceled. The appointment issued in accordance with subsection (b) shall be transferred to the title insurance agent license when the license is issued.
(d) The commissioner may stagger the renewal periods of title insurance agents over the first two calendar years following January 1, 2013. Certain licensees may be required to renew for one year at half of the biennial fee and continuing education requirements otherwise required under this chapter.
(e) The commissioner may provide for the delayed enforcement of Section 27-25-4.3, regarding examinations, Section 27-25-4.4, regarding continuing education, and Section 27-25-4.6, regarding fingerprinting, for up to 24 months following January 1, 2013, to allow for implementation.
(f) If the enforcement of the examination requirement of Section 27-25-4.3 is delayed as authorized in subsection (e), the commissioner may issue a temporary title insurance agent license to an applicant who is otherwise qualified except as to the prelicensing course and examination requirements of Section 27-25-4.3. A temporary license may be renewed once in accordance with the renewal schedule established by the commissioner as provided in subsection (d). A temporary license shall not be valid for a period of time exceeding three months following implementation of the examination requirement.
(Act 2012-397, p. 1078, §2.)
No preliminary report, commitment, binder, policy, or contract of title insurance shall be issued until and unless the title insurer or the person or agent issuing the title insurance policy on behalf of the title insurer has performed any of the following:
(1) Caused to be conducted a search or examination of the title as defined in this chapter.
(2) Obtained an abstract of title.
(3) Obtained an opinion of title.
(Act 2001-496, p. 866, §5.)
(a) Every title insurer shall file with the commissioner its schedule of premium rates and every modification of any premium rate that it proposes to use in this state. The premium rates shall not be subject to rebate and the rebate of premiums to the insured are expressly prohibited. If a reissue premium rate is filed by an insurer, an insured may receive reissue credit only when the insured physically produces the prior title insurance policy, including schedules associated therewith, issued by a title insurer licensed to be engaged in the business of title insurance in this state. A title insurer that has not filed its premium rates pursuant to the provisions hereof shall not engage in the business of title insurance until such time as its premium rates are filed. No person, title insurer, agency, or agent shall charge any premium rate for any policy or contract of title insurance except in accordance with the filed premium rates which are in effect for the title insurer as provided in this section.
(b) Every premium rate filing by a title insurer shall state the effective date thereof and shall indicate the character and extent of the coverage contemplated. The commissioner shall determine the form, manner, and detail of premium rate filings required in this section. No premium rate filing shall provide for the negotiation or bidding of the rate to be charged for a policy insuring an interest in real property in this state.
(c) Before the expiration of 60 days after the receipt of a premium rate filing by a title insurer, the commissioner shall determine the fairness and justness of all such filings and shall also notify the title insurer of any disapproval of the premium rate filing.
(d) Any premium rate filed may be used or charged after the expiration of 60 days from the date of filing in the office of the commissioner, unless the commissioner has issued notice of the commissioner’s prior written disapproval thereto within the time period.
(e) A notice of written disapproval by the commissioner shall set forth the reasons therefor and shall state that a hearing will be granted within 30 days after request in writing by the title insurer. The commissioner or his or her designee shall have the power to administer oaths, to require the appearance of and examine any person under oath, and to require the production of books, records, or papers relevant to the inquiry upon the commissioner’s or the designee’s own initiative or upon the request of any interested insurer.
(Act 2001-496, p. 866, §6.)
(a) In connection with any transaction involving the purchase or sale of a fee simple or possessory interest in real property in this state, the title insurer shall obtain or cause its agent to obtain, at or before the closing of settlement and disbursement of any funds, a statement in writing from the purchaser acknowledging that the purchaser has received a notice that owner’s title insurance may be available to the purchaser in accordance with the underwriting guidelines of the title insurer and that the purchaser does or does not desire to purchase owner’s insurance coverage. The written notice of availability of owner’s title insurance shall contain all of the following:
(1) The address or legal description of the property.
(2) A disclosure that owner’s title insurance may be available in accordance with the underwriting guidelines of the title insurer and the premium therefor.
(3) A space to indicate the desire of the purchaser to either acquire or decline owner’s title insurance.
(4) The date the notice is executed by the purchaser.
(5) The signature of the purchaser or purchasers.
(b) In the event that the notice required in this section is not obtained from the purchaser at or before the closing of settlement and disbursement of any funds, the omission may be cured by the title agent or title insurer at any time subsequent to the closing of settlement but prior to actual or constructive notice of a claim or possible claim against the title of the real estate which was the subject of the settlement by sending a certified letter, return receipt requested, to the last known address of the purchaser, which includes the notification required in this section.
(c) The notification provided by this section shall not be required in any of the following transactions:
(1) A judicial or nonjudicial foreclosure.
(2) A sale pursuant to a decree of any court.
(3) A tax sale.
(4) A transfer evidenced by a deed upon which a recording or deed tax is not payable as provided by law.
(5) Any transaction in which the purchaser has elected to obtain owner’s title insurance or wherein the seller has elected or is required by contract to provide owner’s title insurance to the purchaser.
(6) Any transaction that conveys a security interest in property of an existing owner.
(Act 2001-496, p. 866, §7.)
The commissioner shall adopt rules and regulations for the purpose of implementing the provisions of this chapter in accordance with the Alabama Administrative Procedure Act.
(Act 2001-496, p. 866, §8.)
(a) Each individual transaction which is in violation of this chapter or which does not otherwise conform to the requirements of this chapter shall be considered a violation.
(b) This chapter shall be enforceable only by the commissioner and does not create any private cause of action or other private legal recourse.
(c) The commissioner may, in his or her discretion and upon good cause shown, revoke the certificate of authority of a title agent, revoke the license issued to a title insurer, or impose a fine in an amount not to exceed five hundred dollars ($500) for each violation of this chapter or of any rule or regulation promulgated under this chapter. No title insurer shall pay, directly or indirectly, any portion of a fine imposed on any agent of the title insurer. In addition, the commissioner may impose a fine in an amount not to exceed five thousand dollars ($5,000) per violation upon a finding that an agent or an insurer willfully or intentionally deviated from the filed rates for that insurer. Any fine collected by the commissioner shall be deposited into the State General Fund.
(d) If, from any examination of a title insurer, the commissioner finds that a title insurer is violating any of the provisions of Section 34-3-7, the commissioner shall so certify his or her findings in writing to the Attorney General, and the Attorney General shall forthwith bring an action in a court of competent jurisdiction in the State of Alabama to permanently enjoin the commission of such acts by the title insurer. If the title insurer violates any of the provisions of such an injunction, the Attorney General shall forthwith bring an action in such a court to revoke the corporate charter of the title insurer, if a domestic entity, or the license to conduct business in this state of the title insurer, if a foreign or alien entity.
(Act 2001-496, p. 866, §9.)
This chapter shall not be interpreted or construed as regulating or attempting to regulate the practice of law.
(Act 2001-496, p. 866, §11.)
For purposes of this chapter, the following words and phrases shall have the respective meanings ascribed by this section:
(1) MEDICAL PRACTITIONER. Anyone licensed to practice medicine or osteopathy in the State of Alabama, engaged in such practice, and shall include medical professional corporations, associations, and partnerships.
(2) DENTAL PRACTITIONER. Anyone licensed to practice dentistry in the State of Alabama, engaged in such practice, and such term includes professional dental corporations, associations, and partnerships.
(3) MEDICAL INSTITUTION. Any licensed hospital, or any physicians’ or dentists’ offices or clinics containing facilities for the examination, diagnosis, treatment, or care of human illnesses.
(4) PROFESSIONAL CORPORATION. Any medical or dental professional corporation or any medical or dental professional association.
(5) PHYSICIAN. Any person licensed to practice medicine in Alabama.
(6) DENTIST. Any person licensed to practice dentistry in Alabama.
(7) HOSPITAL. Such institutions as are defined in Section 22-21-20 as hospitals.
(8) OTHER HEALTH CARE PROVIDERS. Any professional corporation or any person employed by physicians, dentists, and hospitals who are directly involved in the delivery of health care services.
(9) MEDICAL LIABILITY. A finding by a judge, jury, or arbitration panel that a physician, dentist, medical institution, or other health care provider did not meet the applicable standard of care and that such failure was the proximate cause of the injury complained of, resulting in damage to the patient.
(10) BOARD. The board of directors of the joint underwriting association created by Section 27-26-22.
(Acts 1975, No. 513, p. 1148, §3.)
It is hereby declared by the Legislature of the State of Alabama that the availability of medical liability insurance at reasonable rates for the medical profession, medical institutions, and other health care providers is essential to provide adequate health services to the people of Alabama, and without such insurance, medical services by the medical profession may be curtailed, and that while the need for such insurance is increasing, availability is limited and likely to become increasingly so, unless remedial legislation is enacted. The Legislature further finds and declares that by reason of complicated and highly technical medical concepts, and the existence of sophisticated medical techniques, decisions with respect to optional procedures of diagnosis and treatment have become increasingly complex and are necessarily made on the basis of professional judgment, on which opinions may and often will reasonably vary. It is the purpose of this chapter to insure that the citizens of the State of Alabama are able to receive necessary health services by providing an environment in which the medical profession can be assured of medical liability insurance coverage and be afforded reasonable protection against personal liability for consequences proximately resulting from decisions with respect to diagnosis and treatment arrived at in the bona fide exercise of professional judgment.
(Acts 1975, No. 513, p. 1148, §2.)
Any insurance company writing casualty insurance in the State of Alabama which sells medical liability insurance in other states must make medical liability insurance available to Alabama physicians, hospitals, and other health care providers as a condition of doing business in Alabama.
(Acts 1975, No. 513, p. 1148, §12.)
All insurance carriers writing medical liability insurance policies shall be required to make annual reports of the number of claims and cost incurred to the commissioner on such forms and in such manner as the commissioner may require.
(Acts 1975, No. 513, p. 1148, §9.)
(a) Any insurance company which sells medical liability insurance to Alabama physicians or their professional corporations or professional associations, or to hospitals or other health care providers shall be required to report to the state licensing agency which issues the license of the physician, hospital, or other health care provider any final judgment or any settlement in or out of court resulting from a claim or action for damages for personal injuries caused by an error, omission, or negligence in the performance of professional services with or without consent rendered by its policyholder within 30 days after entry of a judgment in court or agreement to settle a claim in or out of court.
(b) The report rendered to the appropriate state agency shall consist of the name of the policyholder, or if the policyholder is a professional corporation or professional association, the name of the physician or physicians against whom the claim was made, the name of the claimant, a summary of the allegations made in the lawsuit, the injuries incurred by the claimant, and the terms of the judgment or settlement.
(c) The report rendered pursuant to the requirements of this section, and any and all information, interviews, reports, statements, memorandum, or other documents produced by the licensing board as a result of any investigation of the subject matter of the report are declared to be privileged and confidential. All such records, reports, proceedings, or other documents and any findings, conclusions, recommendations, or actions of the licensing board shall be confidential and shall not be public records nor available for court subpoena or for discovery proceedings. Nothing contained herein shall apply to records made in the regular course of business of a physician, hospital, or other health care provider and information, documents, or records otherwise available from original sources are not to be construed as immune from discovery or use in civil proceedings merely because they were presented to or considered by the licensing board.
(d) The failure to make the reports required by this section within the time periods which are provided shall be punishable under Section 27-1-12.
(Acts 1986, No. 86-441 p. 806; Acts 1991, No. 91-663, p. 1271, §1.)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(2).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(1).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(25).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(4).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(5).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(6)-(9).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(3); Acts 1976, No. 362, p. 446.)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(17), (18).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(19), (20).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(15).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(21).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(16).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(22).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(10).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(23).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(11).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(12)-(14).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(24).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(28).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(29).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(30).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(31).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(26).)
[Repealed]
Repealed by Act 2015-70 effective April 21, 2015.
(Acts 1975, No. 513, p. 1148, §7(27).)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) STOCK INSURER. An incorporated insurer with capital divided into shares and owned by its stockholders.
(2) DOMESTIC MUTUAL INSURER. An incorporated insurer without capital stock and the governing body of which is elected as provided in this chapter.
(Acts 1971, No. 407, p. 707, §§496, 497.)
This chapter shall apply only to domestic stock insurers and domestic mutual insurers; except, that:
(1) Sections 27-27-4 through 27-27-14, relative to sale of securities or other financing of insurers or insurance operations, and subsection (b) of Section 27-27-24 shall also apply as to foreign and alien insurers; and
(2) This chapter shall be applicable as to mutual aid associations as stated in Chapter 30 of this title and as to fraternal benefit societies as stated in Chapters 34 and 35 of this title.
(Acts 1971, No. 407, p. 707, §495.)
Without limiting the powers and authorities of domestic insurers, as provided in Section 27-27-61, a domestic insurer shall have the power and is hereby authorized to indemnify any director, officer, or employee, or former director, officer, or employee of the corporation, or any person who may have served at its request as a director or officer of another corporation in which it owns shares of capital stock or of which it is a creditor against expenses actually and reasonably incurred by him in connection with the defense of any action or proceeding, civil or criminal, in which he is made a party by reason of being, or having been, such director or officer, except in relation to matters as to which he shall be adjudged in such action or proceeding to be liable for negligence or misconduct in the performance of duty to the corporation and to make any other indemnification that shall be authorized by the articles of incorporation or by any bylaw or resolution adopted by the shareholders after notice or as may be authorized under any other statute of this state dealing with the right of a corporation to indemnify officers, directors, and employees or to purchase insurance for such indemnification.
(Acts 1971, No. 407, p. 707, §499.)
(a) No person forming, or proposing to form, in this state or secure funds in this state for the financing of an insurer, or insurance holding corporation or stock corporation to finance an insurer or corporation to be attorney-in-fact for a reciprocal insurer or a syndicate, association, firm, partnership, or organization for any such purposes, whether domestic or foreign, shall advertise or solicit or receive any funds, subscription, or membership on account thereof in this state except as authorized by a currently effective solicitation permit issued by the commissioner, in addition to complying with other applicable provisions of the law.
(b) Any person violating this section shall, upon conviction thereof, be subject to a fine of not more than $10,000.00 or imprisonment for not more than 10 years, or by both such fine and imprisonment.
(c) Any insurer violating this section, in addition to any other penalties provided by law, shall be forever barred from being authorized to transact insurance in this state.
(Acts 1971, No. 407, p. 707, §500.)
To apply for a solicitation permit, the person shall:
(1) File with the commissioner a request therefor showing:
a. Name, type and purpose of insurer, corporation, syndicate, association, firm, partnership, or organization formed or proposed to be formed;
b. Names, addresses, 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, partnership, or organization;
c. Full disclosure of the terms of all pertinent understandings and agreements existing or proposed among persons so associated; and copies of all such agreements, relative to the proposed financing of the insurer, corporation, syndicate, association, firm, partnership, or organization, or the formation thereof;
d. The plan according to which solicitations are to be made; and
e. Such additional information as the commissioner may reasonably require;
(2) Submit to the commissioner:
a. The executed and acknowledged triplicate originals of the proposed articles of incorporation of any proposed domestic insurer, a certified copy of the articles of incorporation of any proposed domestic insurer, a certified copy of the articles of incorporation of any foreign insurer or of any other corporation proposing to sell its securities as referred to in Section 27-27-4, and copy of any syndicate, association, firm, partnership, organization, or other similar agreement, by whatever name called, if funds for any of the purposes referred to in Section 27-27-4 are to be secured through the sale of any security, interest, or right in, or relative to, such syndicate, association, firm, partnership, or organization and, if the proposed insurer is a domestic reciprocal insurer, an original and duplicate copy of the proposed power of attorney and of any other agreements proposed as affecting investors, subscribers, the attorney-in-fact, and the insurer or proposed insurer;
b. Original and duplicate copy of any proposed bylaws;
c. Copy of any security, receipt, or certificate proposed to be issued and copy of the proposed application or subscription agreement therefor;
d. Copy of any insurance contract proposed to be offered by a proposed domestic mutual or reciprocal insurer and copy of application therefor;
e. Copy of any prospectus, advertising, or sales literature proposed to be used;
f. Copy of proposed form of any escrow agreement required; and
g. Irrevocable appointment of the commissioner as process agent to receive service of process issued in this state arising out of any transactions under a solicitation permit, if issued, the appointment to be on a form as prescribed and furnished by the commissioner;
(3) Deposit with the commissioner the fees required under Section 27-4-2 and otherwise by law to be paid for the application, for filing of the articles of incorporation of an insurer, for filing the subscribers’ agreement and attorney-in-fact agreement, if the proposed insurer is a reciprocal, and for the solicitation permit, if granted; and
(4) In lieu of a special filing of the information, or part thereof, called for in subdivision (1) of this section, the commissioner may, in his discretion, accept a duplicate copy of any filing made with any other state or federal agency relative to the same offering or proposed offering.
(Acts 1971, No. 407, p. 707, §501.)
(a) The commissioner shall expeditiously examine the application for a solicitation permit and make such investigation relative thereto as he deems necessary, subject to subsection (b) of this section, if he finds that:
(1) The application is complete;
(2) The documents therewith filed are proper in form; and
(3) The proposed articles of incorporation of any proposed domestic insurer comply with this title and are not in conflict with the Constitution and laws of the United States or of this state;
He shall give notice to the applicant that he will approve and file the articles of incorporation, if a proposed corporation, and issue a solicitation permit, stating the terms to be contained therein, upon the filing of any bond required by Sections 27-27-10 or 27-27-16.
(b) If the commissioner does not so find, or finds that any proposed sale of securities would be, or tend to be, fraudulent or inequitable as to present or proposed security holders or investors, or if he finds that any of the individuals associated or to be associated in the insurer, corporation, snydicate, association, partnership, firm, organization, or financing are not of good character, or that the insurer if formed or, if an applicant for a certificate of authority, would not be able to qualify for a certificate of authority by reason of the provisions of subdivision (3) of Section 27-3-4, he shall give notice to the applicant that a solicitation permit will not be granted, stating the grounds therefor, return any proposed articles of incorporation to the applicant and refund to the applicant all sums so deposited, except the fee for application for a solicitation permit.
(Acts 1971, No. 407, p. 707, §502.)
(a) Upon the filing of any bond required by Sections 27-27-10 or 27-27-16, after notice by the commissioner provided for in subsection (a) of Section 27-27-6, or upon his decision to grant a solicitation permit if such a bond is not so required, the commissioner shall issue to the applicant or to the newly formed corporation, if the application is on behalf of a newly formed incorporated domestic insurer, a solicitation permit. Every solicitation permit issued by the commissioner shall contain provisions in substance as follows:
(1) State the securities or other rights or interests for which subscriptions are to be solicited, the number, classes, par value, and selling price thereof, or identify the insurance contract, or contracts, for which applications and advance premiums or deposits of premium are to be solicited in the case of mutual or reciprocal insurers;
(2) Require that any particular class of securities, rights, and interests proposed to be sold or offered under the permit shall be so sold and offered at the same price to all parties and that, if more than one class of securities, rights, or interests are to be offered, each subscriber shall have the right to acquire some of each such class in accordance with such reasonable combination of classes into subscription units as may be approved by the commissioner;
(3) Require that all such subscriptions 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 merger, consolidation, recapitalization, or refinancing of an insurer or other corporation;
(4) Limit the portion of funds received on account of stock or syndicate, association, partnership, firm, or organization subscriptions which may be used for promotion, securities sales, and organization expenses to such amount as the commissioner deems to be reasonably adequate under the proposed plan of solicitation, but in no event to exceed 15 percent of such funds as and when the funds are actually received;
(5) If to be a mutual or reciprocal insurer, limit the portion of funds received on account of applications for insurance which may be used for promotion, sales, or organization expenses to a reasonable commission upon such funds, giving consideration to the kind of insurance and policy involved and to the costs incurred by insurers generally in the production of similar business and provide that no such commission shall be deemed to be earned or paid until the insurer has received its certificate of authority and the policies applied for, upon which the commission is to be based, have been actually issued and delivered;
(6) Prohibit the granting of any options to subscribe to, buy, or acquire, in any way, any securities, rights, or interests other than options made a part of convertible securities constituting the proposed offering, in whole or in part, and made available on a uniform basis to all subscribers to any such securities, rights, or interests;
(7) Prohibit, by any promoter or other person associated or to be associated in the proposed insurer, corporation, syndicate, firm, partnership, or organization or in solicitations under the permit, the resale or transfer of his interest in any security, right, or interest of the kind proposed to be offered under the solicitation permit or any other interest or right which he may have in, or as to, the same entity prior to the completion of sale of all securities, rights, and interests proposed to be offered or sold under the solicitation permit. In connection with this subdivision, the commissioner may, in his discretion, require that any security, right, or interest the resale or transfer of which is prohibited in this subdivision shall be deposited and held in escrow pending the completion of the sales or offering under the solicitation permit;
(8) State in boldface type that the permittee must comply with Chapter 6 of Title 8 of this code, if such chapter is applicable, and with other applicable laws of the State of Alabama;
(9) That the permit shall expire not more than two years from its date of issue, unless earlier terminated by the commissioner; if, however, in connection with a proposed offering of securities by a domestic insurer or corporation a registration thereof, or filing with respect thereto, is required by law to be made with any federal agency, the effective period of the permit may, in the commissioner’s discretion, commence upon the effective date of such registration or filing if subsequent to the date of issuance of the permit; and
(10) Contain such other reasonable conditions relative to accounting, reports, deposits, or other matters consistent with the provisions of this chapter as the commissioner deems advisable for the protection of existing or prospective investors.
(b) The holder of the solicitation permit and its directors, officers, employees, agents, and representatives shall comply with the terms of the permit.
(Acts 1971, No. 407, p. 707, §503.)
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, partnership, firm, organization, or financing, 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 boldface type at the top of each solicitation permit issued by him.
(Acts 1971, No. 407, p. 707, §504.)
(a) The commissioner may, for cause, modify a solicitation permit theretofore issued or may, after a hearing, revoke any solicitation permit for violation of any provision of this title, or of the terms of the permit, or of any proper order of the commissioner or for misrepresentation in the offering or sale of securities or policies under the permit.
(b) The commissioner shall revoke the solicitation permit if requested in writing by a majority of the syndicate members, or by a majority of the incorporators and two-thirds of the subscribers to stock or applicants for insurance in the proposed incorporated insurer or corporation or if he is so requested by a majority of the subscribers of a proposed reciprocal insurer.
(Acts 1971, No. 407, p. 707, §505.)
(a) Except as to proposed domestic insurers which are subject to the requirements of Section 27-27-16, the commissioner shall not issue a solicitation permit until the applicant therefor has filed with him a corporate surety bond in the penalty of $15,000.00 in favor of the State of Alabama and for the use and benefit of the state and of proposed Alabama investors in and creditors of the proposed organization.
(b) The bond shall be conditioned upon the payment of costs incurred by the state in event of any legal proceedings for liquidation or dissolution of the proposed organization before completion of organization or in event 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 proposed corporation, syndicate, organization, or financing has been completed as defined in the solicitation permit.
(c) In lieu of filing such bond, the applicant may deposit with the State Treasurer through the commissioner $15,000.00 in cash, or its equivalent, or in United States government bonds at par value, to be held in trust under the same conditions as required for the bond.
(d) The commissioner may, in his discretion, waive the requirement for a bond or deposit in lieu thereof if the solicitation permit provides that:
(1) The proposed securities are to be distributed solely and finally to those few persons who are the active promoters intimate to the formation of the insurer or other corporation, syndicate, or organization; or
(2) The securities are to be issued in connection with subsequent financing as provided in Section 27-27-14.
(e) Any bond filed or deposited, or remaining portion thereof, held under this section shall be released and discharged upon settlement or termination of all liabilities against it.
(Acts 1971, No. 407, p. 707, §506.)
Solicitation for sale of securities under a solicitation permit shall be made only by individuals licensed as securities salesmen pursuant to the provisions of the Alabama Securities Act.
(Acts 1971, No. 407, p. 707, §507.)
(a) All funds received in Alabama pursuant to a solicitation permit, other than advance premiums for insurance which are subject to Section 27-27-18, shall, by the permit holder, be deposited and held in escrow in a bank or trust company located in this state under an agreement approved by the commissioner.
(b) No part of such funds shall be withdrawn from such deposit, except:
(1) For the payment of promotion, sales, and organization expenses as authorized by the solicitation permit, and funds for such purposes may be withheld from the deposit;
(2) For the purpose of making any deposit with the commissioner required for the issuance of a certificate of authority to an insurer;
(3) If the proposed organization is not to be an insurer, upon completion of payments on securities subscriptions made under the solicitation permit and deposit or appropriation of such funds to the purposes specified in the solicitation permit; or
(4) For making of refunds as provided in Section 27-27-13.
(c) When the commissioner has issued a certificate of authority to an insurer, any such funds remaining in escrow for its account shall be released to the insurer.
(d) The commissioner may waive compliance with this section as to funds required to be deposited in escrow or trust in similar institutions and for similar purposes as set forth in this section pursuant to any other law of this state.
(Acts 1971, No. 407, p. 707, §508.)
The commissioner shall withdraw all funds held in escrow under Section 27-27-12, and refund to securities subscribers or purchasers all sums paid in on securities subscriptions, less that part of such sums paid in as has been allowed and used for promotion, sales, and organization expenses, and shall dissolve the proposed domestic insurer, corporation, syndicate, or organization if:
(1) It fails to complete its organization or financing and obtain full payment for subscriptions and, if to be an insurer, it fails to secure its certificate of authority, all before expiration of the solicitation permit; or
(2) The commissioner revokes the solicitation permit.
(Acts 1971, No. 407, p. 707, §509.)
(a) No insurer, or insurance holding corporation, or stock corporation for financing operations of a mutual insurer, or attorney-in-fact corporation, or a reciprocal insurer, or any other type of organization existing for the same purpose, after:
(1) It has received a certificate of authority, if an insurer, in this or any other state; or
(2) It has completed its initial organization and financing, if a corporation, syndicate, or other organization other than an insurer, shall in this state solicit or receive funds in exchange for its securities, other than when combining and selling, for the account of its stockholders entitled thereto, fractional shares to which they become entitled through a stock dividend to existing stockholders until it has applied to the commissioner for, and has been granted, a solicitation permit.
(b) The commissioner shall issue such a permit unless he finds:
(1) That the funds proposed to be secured are excessive in amount for the purposes intended;
(2) That the proposed securities or the manner of their distribution are inequitable; or
(3) That the offering or issuance of the securities would be unfair to existing or prospective holders of securities of the same insurer, corporation, syndicate, or organization.
(c) Any such solicitation 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 policyholders or investors.
(d) This section is supplemental to other laws of this state applicable to the sale of securities.
(Acts 1971, No. 407, p. 707, §510.)
(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) of this section.
(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 coverages, must have surplus funds on hand and deposited as of the date such insurance coverages are to become effective or, in lieu of such applications, premiums and surplus and may deposit surplus, all in accordance with that part of the following schedule which applies to the one kind of insurance the insurer proposes to transact:
(a) (b)(c)(d)(e)(f)(g)(h) Kind of insuranceMinimum no. of applicants acceptedMinimum no. of subjects coveredMinimum premium collectedMinimum amount of insurance each subjectMaximum amount of insurance each subject (5)Deposit of minimum surplus funds (6)Deposit of surplus in lieu (6) Life (1)500500annual$1000$2500$50,000$100,000 Disability (2)500500quarterly$10 (weekly indem.)$25 (weekly indem.)$50,000$100,000 Property (3)100250annual$1000$3000$100,000$200,000 Casualty (4)250500annual$1000$10,000$150,000$200,000 Casualty with workmen’s compensation2501500quarterly$1000$10,000$200,000$300,000
The following provisos are respectively applicable to the foregoing schedule and provisions as indicated by like arabic numerals appearing in such schedule:
(1) No group insurance or term policies for terms of less than 10 years shall be included;
(2) 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 $2,500.00;
(3) Only insurance of the owner’s interest in real property may be included;
(4) Must include insurance of legal liability for bodily injury and property damage, to which the maximum and minimum insured amounts apply;
(5) The maximums provided for in column (f) are net of applicable reinsurance; and
(6) 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 6 of this title.
(Acts 1971, No. 407, p. 707, §511.)
(a) Before soliciting any applications for insurance required under Section 27-27-15, as qualification for the original certificate of authority, the incorporators of the proposed mutual insurer shall file with the commissioner a corporate surety bond in the penalty of $15,000.00 in favor of the State of Alabama and for the use and benefit of the state and of applicant members and creditors of the corporation. The bond shall be conditioned as follows:
(1) Upon payment of any loss suffered by applicants who have cancelled or lapsed existing insurance policies due to misrepresentation by the incorporators or by persons soliciting such applications under authorization by the corporation, to the effect that the making of such application for insurance and prepayment of premiums in such proposed insurer provides insurance protection prior to issuance of a certificate of authority to such insurer by the commissioner; 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 certificate of incorporation, 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) In lieu of such a bond, the incorporators may deposit with the commissioner $15,000.00 in cash, or its equivalent, or in United States government bonds at par value, to be held in trust upon the same conditions as required for the bond.
(c) Any such bond filed or deposit, or remaining portion thereof, held under this section shall be released and discharged upon settlement and termination of all liabilities against it under this section.
(Acts 1971, No. 407, p. 707, §512.)
(a) Upon receipt of the commissioner’s approval of the bond or deposit as provided in Section 27-27-16 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:
(1) Issuance of the policy is contingent upon the insurer qualifying for and receiving a certificate of authority;
(2) No insurance is in effect unless and until the certificate of authority has been issued; and
(3) 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 certificate of incorporation.
(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 (c) (3) of this section to individuals qualified as for a resident agent’s license, except as to the taking or passing of an examination. 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 7 of this title.
(Acts 1971, No. 407, p. 707, §513.)
(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 subdivision (c) (3) of Section 27-27-17. 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.
(Acts 1971, No. 407, p. 707, §514.)
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 certificate of incorporation, 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 27-27-18.
(Acts 1971, No. 407, p. 707, §515.)
A domestic mutual insurer, after being authorized to transact one kind of insurance, may be authorized by the commissioner to transact such additional kinds of insurance as are permitted under Section 27-3-6, 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 to the additional expendable surplus requirements of Section 27-3-8 applicable to such a stock insurer.
(Acts 1971, No. 407, p. 707, §516.)
(a) Each policyholder of a domestic mutual insurer, other than of a reinsurance contract, is a member of the insurer with all rights and obligations of such membership, and the policy shall so specify.
(b) Any individual, or firm or any public or private corporation, board, or association in this state, or elsewhere, may make application, enter into agreements for, and hold policies in any such mutual insurer. Any officer, stockholder, trustee, or local representative of any such corporation, board, association, or estate may be recognized as acting for, or on its behalf for, the purpose of such membership, but shall not be personally liable upon such contract of insurance by reason of acting in such representative capacity. The right of any corporation organized under the laws of this state to participate as a member of any such insurer is declared to be incidental to the purpose for which the corporation is organized and as much granted as the rights and powers expressly conferred.
(c) The right of certain governmental bodies or agencies of this state to become, and be, policyholders of mutual insurers shall be as provided by the laws of this state governing such bodies or agencies.
(Acts 1971, No. 407, p. 707, §517.)
(a) A domestic mutual insurer shall have bylaws for the government of its affairs. The initial board of directors of a domestic mutual insurer shall adopt original bylaws, subject to the approval of the insurer’s members at the next succeeding meeting. The members shall have power to make, modify, and revoke bylaws.
(b) The bylaws shall provide:
(1) That each member is entitled to one vote upon each matter coming to a vote at meetings of members or to more votes in accordance with a reasonable classification of members as set forth in the bylaws and based upon the amount of insurance in force, number of policies held, or upon the amount of the premiums paid by such member or upon other reasonable factors. A member shall have the right to vote in person or by his written proxy made not less than 30 days prior to the meeting. No such proxy shall be made irrevocable for longer than a period of three years;
(2) For election of directors by the members and the number, qualifications, terms of office, and powers of directors;
(3) The time, notice, quorum, and conduct of annual and special meetings of members and voting thereat. The bylaws may provide that the annual meeting shall be held at a place, date, and time to be set forth in the policy and without giving other notice of such meeting;
(4) The number, designation, election, terms, powers, and duties of the respective corporate officers;
(5) For deposit, custody, disbursement, and accounting for corporate funds; and
(6) For any other reasonable provisions customary, necessary, or convenient for the management or regulation of its corporate affairs.
(c) The 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 commissioner shall disapprove any bylaw provision deemed by him to be unlawful, unreasonable, inadequate, unfair, or detrimental 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.
(Acts 1971, No. 407, p. 707, §518.)
(a) The affairs of every domestic insurer shall be managed by not less than three directors, and at least one-third of the directors shall be bona fide residents of this state.
(b) Directors must be elected by the members or stockholders of a domestic insurer at the annual meeting of stockholders or members. Directors may be elected for terms of not more than five years each and until their successors are elected and have qualified, and if to be elected for terms of more than one year, the insurer’s bylaws shall provide for a staggered-term system under which the terms of a proportionate part of the members of the board of directors will expire on the date of each annual meeting of stockholders or members.
(c) If so provided in the insurer’s bylaws, a director of a stock insurer shall be a stockholder thereof and a director of a mutual insurer shall be a policyholder thereof.
(Acts 1971, No. 407, p. 707, §519.)
(a) At a special meeting of stockholders or members called for that purpose, any director of a stock or mutual insurer may be removed from office by an affirmative vote of stockholders or members holding in the aggregate a majority of the voting power of all stockholders or members of an insurer entitled to vote at an election of directors. If the board of directors, or any member thereof, is so removed, new directors may be elected at the same meeting.
(b) Vacancies in the board of directors may be filled by the remaining members of the board, and each person so elected shall be a director until his successor is elected by the stockholders or members at the next annual meeting of stockholders or members or at any special meeting of stockholders or members called for that purpose and held prior thereto.
(Acts 1971, No. 407, p. 707, §520.)
No person shall buy, or sell or barter a vote or proxy relative to any meeting of stockholders or members of an insurer or engage in any corrupt or dishonest practice in, or relative to, the conduct of any such meeting. Violation of this section shall be punishable as provided in Section 27-1-12.
(Acts 1971, No. 407, p. 707, §521.)
(a) No officer or director of a domestic insurer, and no member of any committee or employee of a domestic insurer who is charged with the duty of investing or handling the funds of the insurer, shall do any of the following:
(1) Deposit or invest the funds except in the corporate name of the insurer; except, that the insurer may for its convenience hold any equity investment in a street name or in the name of a nominee.
(2) Borrow the funds of the insurer.
(3) Be pecuniarily interested in any loan, pledge or deposit, security, investment, sale, purchase, exchange, reinsurance, or other similar transaction or property of the insurer except as follows:
a. As a stockholder or member of the insurer.
b. As a holder or owner of common stock or equity-like preferred stock in any corporation or business entity trading on a national or international stock exchange.
c. As a holder or owner of shares of mutual funds, bond funds, or private equity funds registered with the United States Securities and Exchange Commission.
d. As a holder or owner of bonds and other evidences of indebtedness of governmental units in the United States or Canada or private business entities domiciled in the United States or Canada.
e. As a holder or owner of bonds and other evidences of indebtedness of international development organizations of which the United States is a member.
(4) Take or receive to his or her own use any fee, brokerage, commission, gift, or other consideration for, or on account of, any such transaction made by, or on behalf of, the insurer.
(b) No insurer shall guarantee any financial obligation of any of its officers or directors.
(c) This section shall not prohibit such a director, or officer, or member of a committee or employee from becoming a policyholder of the insurer and enjoying the usual rights so provided for its policyholders, nor shall it prohibit any officer, director, or member of a committee or employee from participating as beneficiary in any pension trust, deferred compensation plan, profit-sharing plan, or stock option plan authorized by the insurer and to which he or she may be eligible, nor shall it prohibit any director or member of a committee from receiving a reasonable fee for legal services actually rendered to the insurer.
(d) The commissioner may, by regulations from time to time, define and permit additional exceptions to the prohibition contained in subsection (a) of this section solely to enable payment of 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 business of the insurer and in the usual private professional or business capacity of the director or the corporation or firm.
(Acts 1971, No. 407, p. 707, §522; Act 2012-370, p. 921, §1; Act 2013-397, p. 1513, §1.)
(a) 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 substantial exclusion of its board of directors or to have the controlling or preemptive right to produce substantially all insurance business for the insurer, unless the contract is filed with, and approved by, the commissioner. The contract shall be deemed approved unless disapproved by the commissioner within 20 days 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.
(b) Any such contract shall provide that any such manager or producer of its business 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, including 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.
(c) The commissioner shall disapprove any such contract if he finds that it:
(1) Subjects the insurer to excessive charges;
(2) Is to extend for an unreasonable length of time;
(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) This section does not apply as to contracts entered into prior to January 1, 1972, nor to extensions or amendments to such contracts.
(Acts 1971, No. 407, p. 707, §523.)
An insurer shall promptly give the commissioner written notice of any change of personnel among the directors or principal officers of the insurer.
(Acts 1971, No. 407, p. 707, §524.)
(a) Every domestic insurer shall have, and maintain, its principal place of business and home office in this state and shall keep in this state complete records of its assets, transactions, and affairs in accordance with such methods and systems as are customary or suitable as to the kind, or kinds, of insurance transacted.
(b) Every domestic insurer shall have, and maintain, its assets in this state, or in a financial institution conducting business in this state except as to:
(1) Real property and personal property appurtenant to the real property lawfully owned by the insurer and located outside this state.
(2) The property of the insurer as may be customary, necessary, and convenient to enable and facilitate the operation of its branch offices and regional home offices located outside this state as referred to in subsection (d).
(3) Having, depositing, or transmitting funds and assets of the insurer in, or to, a jurisdiction outside of this state as required by the law of the jurisdiction or as reasonably required in the course of its business, including the retention of funds, assets, personal property, or securities in a depository outside the State of Alabama for purposes of safekeeping or for the convenient operation of the insurer.
(c) Removal of all, or a material part of, the records or assets of a domestic insurer from this state except pursuant to a plan of merger or consolidation approved by the commissioner under this title, or for such reasonable purposes and periods of time as may be approved by the commissioner in writing in advance of the removal, or concealment of the records or assets, or material part of the records or assets, from the commissioner is prohibited. Any person who removes, or attempts to remove, such records or assets, or such material part of the records or assets, from the home office or other place of business or of safekeeping of the insurer in this state with the intent to remove the records or assets from this state or who conceals or attempts to conceal the records or assets from the commissioner, in violation of this section, shall, upon conviction, be guilty of a felony, punishable by a fine of not more than ten thousand dollars ($10,000), or by imprisonment in the penitentiary for not more than five years, or by both the fine and imprisonment in the discretion of the court. Upon any removal or attempted removal of the records or assets or upon retention of the records or assets, or material part thereof, outside this state beyond the period therefor specified in the consent of the commissioner under which the records were so removed thereat or upon concealment of, or attempt to conceal, records or assets in violation of this section, the commissioner may institute delinquency proceedings against the insurer pursuant to the provisions of Chapter 32 of this title.
(d) This section may not be deemed to prohibit or prevent an insurer from:
(1) Establishing and maintaining branch offices or regional home offices in other states where necessary or convenient for the transaction of its business and keeping therein the detailed records and assets customary and necessary for the servicing of its insurance in force and affairs in the territory served by such an office, as long as such records and assets are made readily available at the office for examination by the commissioner or at his or her request.
(2) Using custodial arrangements for the holding of securities owned by the insurer, either in or outside of this state, and either segregated from or commingled with securities owned by others, if the arrangements conform to rules adopted by the commissioner for safeguarding the assets and facilitating the examination by the commissioner of insurers using the custodial arrangements.
(e) With the written permission of the commissioner, a domestic insurer may maintain its executive offices outside the State of Alabama and keep there complete records of its assets, transactions, and affairs in accordance with the methods and systems as are customary or suitable for the kind or kinds of insurance transacted. All records kept at the executive offices outside Alabama shall be made available to the commissioner of Alabama upon reasonable notice by the commissioner.
(f) This section shall not apply to those actions taken by insurance companies prior to January 1, 1972, but only applies to future actions of domestic insurance companies.
(g) Notwithstanding any other provision of this section, any company may evidence ownership of its assets by use of a clearing corporation or book-entry deposit system.
(Acts 1971, No. 407, p. 707, §525; Acts 1975, No. 218, p. 744, §1; Acts 1981, No. 81-541, p. 904, §3; Act 2010-685, p. 1655, §1; Act 2012-370, p. 921, §1.)
(a) No insurer shall make any disbursement of $25.00 or more unless evidenced by a voucher or other document correctly describing the consideration for the payment and support by a check or receipt endorsed or signed by, or on behalf of, the person receiving the money.
(b) If the disbursement is for services and reimbursement, the voucher or other document, or some other writing referred to therein, shall describe the services and itemize the expenditures.
(c) If the disbursement is in connection with any matter pending before any legislature or public body or before any public official, the voucher or other document shall also correctly describe the nature of the matter and of the insurer’s interest therein.
(Acts 1971, No. 407, p. 707, §526.)
(a) Each member of a domestic mutual insurer shall, except as otherwise provided in this chapter with respect to nonassessable policies, have a contingent liability, pro rata and not one for another, for the discharge of its obligations, which contingent liability shall be expressed in the policy and be in such maximum amount as is specified in the insurer’s articles of incorporation.
(b) Termination of the policy of any such member shall not relieve the member of contingent liability for his proportion, if any, of the obligations of the insurer which accrued while the policy was in force.
(c) Unrealized contingent liability of members does not constitute an asset of the insurer in any determination of its financial condition.
(Acts 1971, No. 407, p. 707, §527.)
(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 shall levy an assessment only upon its members who held policies providing for contingent liability at any time within the 12 months preceding the date notice of such assessment was mailed to them, and such members shall be liable to the insurer for the amount so assessed.
(b) The 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 five percent of the insurer’s liabilities as of the date as of which the amount of such deficiency was determined.
(c) In levying an assessment on a policy providing for contingent liability, the assessment shall be computed on a basis of premium earned on such policy.
(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 by the insurer to the credit of such member.
(Acts 1971, No. 407, p. 707, §528.)
(a) Any assessment made by an insurer under Section 27-27-32 or 27-27-42 is prima facie correct. The amount of such assessment to be paid by each member as determined by the insurer is likewise prima facie correct.
(b) 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 the assessment.
(c) 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 an action to collect the same.
(Acts 1971, No. 407, p. 707, §529.)
(a) While possessing surplus funds in amount not less than the paid-in capital stock required of a domestic stock insurer transacting like kinds of insurance, a domestic mutual insurer may, upon receipt of the commissioner’s order so authorizing, extinguish the contingent liability of its members as to all its policies in force and may omit provisions imposing contingent liability in all its policies currently issued.
(b) A foreign or alien mutual insurer may issue nonassessable policies to its members in this state pursuant to its articles of incorporation and the laws of its domicile.
(Acts 1971, No. 407, p. 707, §530.)
The commissioner shall revoke the authority of a domestic mutual insurer to issue policies without contingent liability if at any time the insurer’s assets are less than the sum of its liabilities and the surplus required for such authority or if the insurer, by resolution of its board of directors approved by a majority of its members, requests that the authority be revoked. 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 renewable at the option of the insurer without endorsing the same to provide for such contingent liability.
(Acts 1971, No. 407, p. 707, §531.)
Unless prohibited by its articles of incorporation, a domestic stock or domestic mutual insurer may issue any, or all, of its policies with, or without, participation in profits, savings, or unabsorbed portions of premiums, may classify policies issued 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 policyholders within the same such classifications. A life insurer may issue both participating and nonparticipating policies only if the right or absence of right to participate is reasonably related to the premium charged.
(Acts 1971, No. 407, p. 707, §532.)
(a) A domestic stock insurer shall not pay any cash dividend to stockholders except out of that part of its available surplus funds which is derived from realized net profits on its business.
(b) A stock dividend may be paid out of any available surplus funds in excess of the aggregate amount of surplus loaned to the insurer under Section 27-27-40.
(c) A dividend otherwise proper may be payable out of the insurer’s surplus even though its total surplus is then less than the aggregate of its past contributed surplus resulting from issuance of its capital stock at a price in excess of the par value thereof if payment is conditioned upon receipt of the commissioner’s approval and the insurer does not pay the dividend until the commissioner has done the following:
(1) Approved the payment of the dividend, or
(2) Not disapproved the payment of the dividend within 30 days after receipt of notice from the insurer of the declaration thereof.
(Acts 1971, No. 407, p. 707, §533; Acts 1994, No. 94-634, p. 1178, §2.)
(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 and net realized earnings in excess of the surplus required by law to be maintained.
(b) A dividend otherwise proper may be payable out of the savings and earnings even though the insurer’s total surplus is then less than the aggregate of its contributed surplus if payment is conditioned upon receipt of the commissioner’s approval and the insurer does not pay the dividend until the commissioner has done the following:
(1) Approved the payment of the dividend, or
(2) Not disapproved the payment of the dividend within 30 days after receipt of notice from the insurer of the declaration thereof.
(Acts 1971, No. 407, p. 707, §534; Acts 1994, No. 94-634, p. 1178, §2.)
(a) Any director of a domestic stock or mutual insurer who knowingly votes for, or concurs in, declaration or payment of a dividend to stockholders or members except as authorized in Sections 27-27-37 or 27-27-38 shall, upon conviction thereof, be guilty of a misdemeanor and shall be jointly and severally liable, together with other such directors likewise voting for or concurring, for any loss thereby sustained by the insurer.
(b) Any stockholder receiving such an illegal dividend shall be liable in the amount thereof to the insurer.
(c) The commissioner may revoke or suspend the certificate of authority of an insurer which has declared or paid such an illegal dividend.
(Acts 1971, No. 407, p. 707, §535.)
(a) A domestic stock or mutual insurer may borrow money to defray the expenses of its organization, provide it with surplus funds or for any purpose of its business, upon a written agreement that such money is required to be repaid only out of the insurer’s surplus in excess of that stipulated in such agreement. The agreement may provide for interest at a reasonable rate per annum, which interest shall, or shall not, constitute a liability of the insurer as to its funds other than such excess of surplus, as stipulated in the agreement. No commission or promotion expense shall be paid in connection with any such loan.
(b) Money so borrowed, together with the interest thereon if so stipulated in the agreement, shall not form a part of the insurer’s legal liabilities except as to its surplus in excess of the amount thereof stipulated in the agreement or be the basis of any setoff, but, until repaid, financial statements filed or published by the insurer shall show as a footnote thereto the amount thereof then unpaid together with any interest thereon accrued but unpaid.
(c) Any such loan shall be subject to the commissioner’s approval. The insurer shall, in advance of the loan, file with the commissioner a statement of the purpose of the loan and a copy of the proposed loan agreement. The loan and agreement shall be deemed approved unless, within 15 days after date of such filing, the insurer is notified of the commissioner’s disapproval and the reasons therefor. The commissioner shall disapprove any proposed loan or agreement if he finds the loan is unnecessary or excessive for the purpose intended, or that the terms of the loan agreement are not fair and equitable to the parties and to other similar lenders, if any, to the insurer or that the information so filed by the insurer is inadequate.
(d) Any such loan, or substantial portion thereof, shall be repaid by the insurer when no longer reasonably necessary for the purpose originally intended. No repayment of such a loan shall be made, unless in advance approved by the commissioner.
(e) This section shall not apply to any loan other than one obtained upon a written agreement that such loan is required to be repaid only out of the insurer’s surplus in excess of that stipulated in such agreement.
(f) The value of the surplus debenture issued under this section shall not be considered as the deciding authority for valuing the asset received for the above note, but shall only be taken into account with all other factors in determining admitted value.
(Acts 1971, No. 407, p. 707, §536; Acts 1980, No. 80-728, p. 1470.)
(a) If a stock insurer’s capital, as represented by the aggregated par value of its outstanding capital stock, becomes impaired or the assets of a mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under Sections 27-27-15 or 27-27-20 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 make good the deficiency within 60 days after service of such notice.
(b) The deficiency may be made good in cash or in assets eligible for the investment of the insurer’s funds, or, if a stock insurer, by reduction of the insurer’s capital to an amount not below the minimum required for the kinds of insurance thereafter to be transacted or, if a mutual insurer, by amendment of its certificate of authority to cover only such kind or kinds of insurance thereafter for which the insurer has sufficient surplus under this title.
(c) If the deficiency is not made good and proof thereof filed with the commissioner within such 60-day period, the insurer shall be deemed insolvent and the commissioner shall institute delinquency proceedings against it under Chapter 32 of this title; except, that if such deficiency exists because of increased loss reserves required by the commissioner or because of disallowance by the commissioner of certain assets or reduction of the value at which carried in the insurer’s accounts, the commissioner may, in his discretion and upon application and good cause shown, extend, for not more than an additional 60 days, the period within which such deficiency may be so made good and such proof thereof so filed.
(Acts 1971, No. 407, p. 707, §537.)
Any insurer receiving the commissioner’s notice mentioned in Section 27-27-41:
(1) If a stock insurer and if its articles of incorporation and laws of this state so permit, by resolution of its board of directors and subject to any limitations upon assessment contained in its articles of incorporation, may assess its stockholders for amounts necessary to cure the deficiency and provide the insurer with a reasonable amount of surplus in addition. If any stockholder fails to pay a lawful assessment after notice given to him in person or by advertisement in such time and manner as approved by the commissioner, the insurer may require the return of the original certificate of stock held by the stockholder and, in cancellation and in lieu thereof, issue a new certificate for such number of shares as the stockholder may then be entitled to, upon the basis of the stockholder’s proportionate interest in the amount of the insurer’s capital stock, as determined by the commissioner to be remaining at the time of determination of amount of impairment under Section 27-27-41, after deducting from such proportionate interest the amount of such unpaid assessment. The insurer may pay for or issue fractional shares under this subdivision;
(2) If a mutual insurer, shall levy such an assessment upon members as is provided under Section 27-27-32; and
(3) Neither this section nor Section 27-27-41 shall be deemed to prohibit the insurer from curing any such deficiency through any lawful means other than those referred to in such sections.
(Acts 1971, No. 407, p. 707, §538.)
(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 three-fourths of the insurer’s outstanding capital stock having voting rights and by not less than three-fourths 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 reasonable price as specified in the plan;
(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 laws 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) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer under Chapter 32 of this title.
(Acts 1971, No. 407, p. 707, §539.)
(a) A mutual insurer may become a stock 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 or procedure unless:
(1) It is equitable to the insurer’s members;
(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 may be limited to members who hold policies other than term or group policies and whose policies have been in force for not less than one year;
(3) The equity of each policyholder in the insurer is determinable under a fair formula approved by the commissioner, which such equity shall be based upon not less than the insurer’s entire surplus, after deducting contributed or borrowed surplus funds, plus a reasonable present equity in its reserves and in all nonadmitted assets;
(4) The policyholders entitled to participate in the purchase of stock or distribution of assets shall include all current policyholders and all existing persons who had been policyholders of the insurer within three years prior to the date such plan was submitted to the commissioner;
(5) The plan gives to each policyholder of the insurer, as specified in subdivision (b)(4) of this section, a preemptive right to acquire his proportionate part of all of the proposed capital stock of the insurer, within a designated reasonable period, and to apply upon the purchase thereof the amount of his equity in the insurer as determined under subdivision (b)(3) of this section;
(6) Shares are so offered to policyholders at a price not greater than to be thereafter offered to others;
(7) The plan provides for payment to each policyholder not electing to apply his equity in the insurer for, or upon, the purchase price of stock to which preemptively entitled of cash in 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 policyholder’s equity as an owner of such mutual insurer; and
(8) 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 required of a domestic stock insurer transacting like kinds of insurance, together with surplus funds in amount not less than one-half of such required capital.
(Acts 1971, No. 407, p. 707, §540.)
(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 subsections (b) and (c) of this section.
(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. 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;
(2) Inequitable to the stockholders of any domestic 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.
(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.
(e) If any domestic insurer involved in the proposed merger or consolidation is authorized to transact insurance also in other states, the commissioner may request the insurance commissioner, director of insurance, superintendent of insurance, or other similar public insurance supervisory official of the two other such states in which such insurer has in force the larger amounts of insurance to participate in the hearing provided for under subsection (b) of this section, with full right to examine all witnesses and evidence and to offer to the commissioner such pertinent information and suggestions as they may deem proper.
(f) Any plan or proposal through which a stock insurer proposes to acquire a controlling stock interest in another stock insurer through an exchange of stock of the first insurer, issued by the insurer for the purpose, for such controlling stock of the second insurer is deemed to be a plan or proposal of merger of the second insurer into the first insurer for the purposes of this section and is subject to the applicable provisions of this section.
(Acts 1911, No. 440, p. 623; Acts 1971, No. 407, p. 707, §541.)
(a) A domestic mutual insurer may merge or consolidate with another insurer under the applicable procedures prescribed by the statutes of this state applying to corporations formed for profit, except as provided in this section.
(b) The plan and agreement for merger or consolidation shall be submitted to, and approved by, at least two-thirds of the members of each mutual insurer voting thereon at meetings called for the purpose pursuant to such reasonable notice and procedure as has been approved by the commissioner. If a life insurer, right to vote may be limited to members whose policies are other than term and group policies and have been in effect for more than one year.
(c) 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 by him in writing after a hearing thereon. The commissioner shall give such approval within a reasonable time after such filing unless he finds such plan or agreement:
(1) Inequitable to the policyholders of any domestic insurer involved; or
(2) Would substantially reduce the security of, and service to be rendered to, policyholders of the domestic insurer in this state and elsewhere.
(d) If the commissioner does not approve such plan or agreement, he shall so notify the insurers in writing specifying his reasons therefor.
(e) Subsection (e) of Section 27-27-45 shall also apply as to mergers and consolidations of such mutual insurers.
(Acts 1971, No. 407, p. 707, §542.)
(a) A domestic stock insurer may reinsure all, or substantially all, of its insurance in force or a major class thereof with another insurer by an agreement of bulk reinsurance, but no such agreement shall become effective unless filed with the commissioner and approved by him in writing after a hearing thereon.
(b) The commissioner shall approve such agreement within a reasonable time after such filing unless he finds that it is inequitable to the stockholders of the domestic insurer or would substantially reduce the protection or service to its policyholders. If the commissioner does not approve the agreement, he shall so notify the insurer in writing, specifying his reasons therefor. If the commissioner does not approve or disapprove such agreement and notify the insurer thereof in writing within 30 days after such filing, it shall conclusively be presumed that the agreement is approved by the commissioner.
(Acts 1971, No. 407, p. 707, §543.)
(a) A domestic mutual insurer may reinsure all, or substantially all, 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 and approved by him in writing after a hearing thereon.
(b) The commissioner shall approve such agreement within a reasonable time after filing if he finds it to be fair and equitable to each domestic insurer involved, and that such reinsurance if effectuated would not substantially reduce the protection or service to its policyholders. If the commissioner does not so approve, he shall so notify each insurer involved in writing, specifying his reasons therefor.
(c) The plan and agreement for such reinsurance must be approved by vote of not less than two-thirds of each domestic mutual insurer’s members voting thereon at meetings of members called for the purpose, pursuant to such reasonable notice and procedure as the commissioner may approve. If a life insurer, right to vote may be limited to members whose policies are other than term or group policies and have been in effect for more than one year.
(d) If for reinsurance of a mutual insurer in a stock insurer, the agreement must provide for payment in cash to each member of the insurer entitled thereto, as upon conversion of such insurer pursuant to Section 27-27-44, of his equity in the business reinsured as determined under a fair formula approved by the commissioner, which equity shall be based upon such member’s equity in the reserves, assets, whether or not “admitted” assets, and surplus, if any, of the mutual insurer to be taken over by the stock insurer.
(Acts 1919, No. 443, p. 678; Acts 1971, No. 407, p. 707, §544.)
(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 existing persons 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 provided for in this subsection by such additional period as he may deem to be reasonable.
(b) The distributive share of each such member shall be in the proportion that the aggregate premiums earned by the insurer on the policies of the member during the combined periods of his membership bear to the aggregate of all premiums so earned on the policies of all such members. The insurer may, and if a life 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.
(Acts 1971, No. 407, p. 707, §545.)
(a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer, (i) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock, or (ii) any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiary to a director, officer, or employee, where the distribution or payment pursuant to (i) or (ii) is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c), and (d) of this section.
(b) No such distribution shall be recoverable if the parent or affiliate shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(c) A person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) which the person received. A person who otherwise controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.
(d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds.
(e) To the extent that any person liable under subsection (c) of this section is insolvent or otherwise fails to pay claims due from it pursuant to the subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation or holding company or person who otherwise controlled it.
(Acts 1994, No. 94-634, p. 1178, §3.)
(a) The corporate charter of any corporation formed under the laws of this state more than three years prior to January 1, 1972, for the purpose of becoming an insurer and which corporation within such three-year period has not actively engaged in business as a domestic insurer under a certificate of authority issued to it by the commissioner under laws then in force is hereby extinguished and nullified.
(b) The corporate charter of any other corporation formed under the laws of this state for the purpose of becoming an insurer and which corporation during any period of 36 consecutive months after January 1, 1972, is not actively engaged in business as a domestic insurer under a certificate of authority issued to it by the commissioner under laws currently in force is automatically hereby extinguished and nullified at the expiration of such 36-month period.
(c) The period during which any such corporation referred to in subsection (b) of this section is the subject of delinquency proceedings under Chapter 32 of this title shall not be counted as part of any such 36-month period.
(d) Upon merger or consolidation of a domestic insurer with another insurer under this chapter, the corporate charter of such merged or consolidated domestic insurer shall thereby automatically be extinguished and nullified.
(Acts 1971, No. 407, p. 707, §546.)
The commissioner shall have the power, and it shall be his duty, to prescribe, publish, and disseminate to all domestic stock insurance companies uniform written rules and regulations of proxies, consents, and authorizations, including the solicitation thereof, and information necessary, or appropriate to, such solicitation or to the authorization sought thereby, in respect of securities issued by such domestic stock insurance companies; and it shall be unlawful for any person to solicit or to permit the use of his name to solicit any proxy, consent or authorization in respect of any such securities in contravention of such rules and regulations as may be prescribed, published, and disseminated pursuant to this section.
(Acts 1971, No. 407, p. 707, §547.)
Sections 27-27-52 through 27-27-60 shall be known as the “Insider Trading of Domestic Stock Insurer Equity Securities Law.”
(Acts 1971, No. 407, p. 707, §548.)
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 insurance company or who is a director or an officer of such company shall file in the Office of the Commissioner of Insurance of Alabama on or before January 31, 1972, or 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 company 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 in the office of 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.
(Acts 1971, No. 407, p. 707, §549.)
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 company, any profit realized by him from any purchase and sale or any sale and purchase, of any equity security of such company within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to, and be recoverable by, the company, 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 six months. An action to recover such profit may be instituted in any court of competent jurisdiction by the company or by the owner of any security of the company in the name, and in behalf, of the company if the company shall fail or refuse to bring such action within 60 days after request or shall fail diligently to prosecute the same thereafter; but no such action shall be brought more than two years after the date such profit was realized. 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.
(Acts 1971, No. 407, p. 707, §550.)
It shall be unlawful for any such beneficial owner, director, or officer, directly or indirectly, to sell any equity security of such company 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 five 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.
(Acts 1971, No. 407, p. 707, §551.)
The provisions of Section 27-27-54 shall not apply to any purchase and sale or sale and purchase and the provisions of Section 27-27-55 shall not apply to any sale of an equity security of a domestic stock insurance company 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. 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.
(Acts 1971, No. 407, p. 707, §552.)
The provisions of Sections 27-27-53 through 27-27-55 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.
(Acts 1971, No. 407, p. 707, §553.)
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 shall deem to be of similar nature and consider 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.
(Acts 1971, No. 407, p. 707, §554.)
The provisions of Sections 27-27-53 through 27-27-55 shall not apply to equity securities of a domestic stock insurance company 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
(2) Such domestic stock insurance company shall not have any class of its equity securities held of record by 100 or more persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to the provisions of Sections 27-27-53 through 27-27-55 except for the provisions of this subdivision.
(Acts 1971, No. 407, p. 707, §555.)
The commissioner shall have the power to make such rules and regulations as may be necessary for the execution of the functions vested in him by Sections 27-27-53 through 27-27-59 and may for such purpose classify domestic stock insurance companies, securities, and other persons or matters within his jurisdiction. No provision of Sections 27-27-53 through 27-27-55 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.
(Acts 1971, No. 407, p. 707, §556.)
The applicable statutes of this state relating to the powers and procedures of domestic private corporations formed for profit shall apply to domestic stock insurers and to domestic mutual insurers, except where in conflict with the express provisions of this title and the reasonable implications of such provisions.
(Acts 1971, No. 407, p. 707, §498.)
A domestic stock insurance company, hereinafter referred to in this chapter as “domestic company,” may cause a corporation to be organized under the laws of this state or any other state of the United States of America to act as a holding company, hereinafter referred to in this chapter as “holding company,” which may, or may not, be an insurance corporation, and the domestic company and holding company may adopt a plan for an exchange of stock or other securities in which stockholders of the domestic company exchange their stock for shares of stock or other securities issued by the holding company pursuant to the provisions of Section 27-28-2. Such plan of exchange may provide for a direct exchange of stock or other securities between the stockholders of the domestic company and the holding company or may include provision for the merger of a wholly owned subsidiary of the holding company into the domestic company, in which stockholders of the domestic company receive shares of voting stock of the holding company in exchange for shares of stock of the domestic company and the holding company owns thereafter all of the outstanding stock of the domestic company.
(Acts 1971, No. 1449, p. 2472.)
A plan of exchange shall be adopted and become effective in the following manner:
(1) APPROVAL OF THE BOARDS OF DIRECTORS. - The boards of directors of each corporate party to the plan of exchange by resolution shall adopt the plan of exchange which shall set forth the terms and conditions of the exchange and the mode of carrying the same into effect and such other provisions with respect to the exchange as may be deemed necessary or desirable.
(2) APPROVAL OF COMMISSIONER. - Every plan of exchange, before being submitted to vote of the stockholders pursuant to subdivision (3) of this section, shall be submitted for approval to the commissioner in accordance with the following procedure:
a. After the approval required by subdivision (1) of this section is obtained, the domestic company shall submit to the commissioner three copies of the plan of exchange and any other information which the commissioner may require with respect to such plan;
b. Upon the submission of the plan, the commissioner shall schedule a public hearing to determine if the terms and conditions of the plan of exchange are fair, to be held within 30 days after such submission. Each corporation which is a party to the plan shall give notice of the time and place of such hearing to each stockholder of record of the corporation, as of a date 15 days prior to the date of the hearing, by letter mailed not later than 10 days prior to the hearing. Each corporation which is a party to the plan shall further cause notice of the hearing to be published in a newspaper of general circulation in the city wherein is located the principal place of business of the corporation, once a week for two consecutive weeks, the last publication of such notice to be not more than two weeks prior to the hearing date. Each stockholder of any corporation which is a party to the plan and each policyholder of the domestic company or any other domestic insurance company which is a party to the plan shall be entitled to appear and be heard in said hearing and said notices shall so state; and
c. After conclusion of the hearing and not later than 60 days after submission of the plan, the commissioner shall issue a written order approving the terms and conditions of the plan of exchange as delivered to him and such modifications therein as the board of directors of each corporation which is a party to the plan shall approve, only if he finds:
If the commissioner fails to approve the plan, he shall state his reasons therefor in writing. Any party in interest may appeal from the ruling of the commissioner to the circuit court in the circuit where the insurance company maintains its home office by giving notice of such appeal to the commissioner within two weeks after such ruling. All expenses of the commissioner relating to the hearing shall be paid by the domestic company.
(3) APPROVAL OF STOCKHOLDERS. - The plan of exchange as approved by the commissioner pursuant to the provisions of subdivision (2) of this section shall then be submitted to a vote of the stockholders of the domestic company at an annual or special meeting of the stockholders. Written or printed notice shall be given to each stockholder of record entitled to vote at such meeting, not less than 20 days before such meeting, in the manner provided in the Alabama Business Corporation Act for the giving of notice of meetings of stockholders, and shall state the purpose of the meeting, whether the meeting be an annual or a special meeting. A copy or a summary of the plan of exchange shall be included in or enclosed with such notice. At such meeting, a vote of the stockholders shall be taken on the proposed plan of exchange. Each outstanding share of the domestic company shall be entitled to vote on the proposed plan of exchange, whether or not such share has voting rights under the provisions of the certificate of incorporation of the domestic company. The plan shall be approved upon receiving the affirmative vote of the holders of at least two thirds of the outstanding shares of the domestic company, unless any class of shares of the domestic company is entitled to vote as a class therein, in which event, the plan of exchange shall be approved upon receiving the affirmative vote of the holders of at least two thirds of the outstanding shares for each class of shares entitled to vote as a class thereon and of the total outstanding shares. Any class of shares of the domestic company shall be entitled to vote as a class if the plan of exchange contains any provision which, if contained in a proposed amendment to the certificate of incorporation, would entitle such class of shares to vote as a class. After such approval of the plan of exchange, and at any time prior to the filing of the certificate setting forth the plan of exchange pursuant to this subdivision, the plan of exchange may be abandoned pursuant to a provision for such abandonment, if any, contained in the plan of exchange. Stockholder approval by the stockholders of any other corporate party to the plan of exchange shall be governed by the laws otherwise applicable to the transactions involved in the plan.
(4) RIGHTS OF DISSENTING STOCKHOLDERS. - If any stockholder of the domestic company shall file with such corporation prior to, or at the meeting of, stockholders at which the plan of exchange is submitted to a vote a written objection to such plan and shall not vote in favor thereof and such stockholder, within 10 days after the date on which the vote was taken, shall make written demand on the domestic company for payment of the fair value of his shares as of the day prior to the date on which the vote was taken approving the plan, then, if the plan is effected, the domestic company or surviving corporation, if a merger is included in the plan, shall pay to such stockholder, upon surrender of his certificate, or certificates, representing such shares, the fair value thereof. Such demand shall state the number and class of the shares owned by such dissenting stockholder. Any stockholder failing to make demand within the 10-day period shall be bound by the terms of the plan of exchange.
Within 10 days after the plan is effected, the domestic company or surviving corporation, as the case may be, shall give notice thereof to each dissenting stockholder who has made demand as provided for in this subdivision the payment of the fair value of his shares.
If within 30 days after the date on which such plan was effected the value of such shares is agreed upon between the dissenting stockholder and the domestic company or surviving corporation, payment therefor shall be made within 90 days after the date on which such plan was effected from the fund established pursuant to the provisions of subdivision (5) of this section or, if the fund is not sufficient for such payment, from other cash assets, upon the surrender of the dissenting stockholder’s certificate, or certificates, representing such shares. Upon payment of the agreed value, the dissenting stockholder shall cease to have any interest in such shares or in the corporation.
If within such period of 30 days the stockholder and the domestic company or the surviving corporation do not so agree, then the dissenting stockholder may, within 60 days after the expiration of the 30-day period, file a petition in any circuit court, asking for a finding and determination of the fair value of such shares, and shall be entitled to judgment against the domestic company or surviving corporation for the amount of such fair value as of the day prior to the date on which such vote was taken approving such plans, together with interest thereon to the date of such judgment. The judgment shall be payable only upon, and simultaneously with, the surrender to the domestic company or surviving corporation of the certificate or certificates representing such shares and shall be payable from the fund established pursuant to the provisions of subdivision (5) of this section or, if the fund is not sufficient for such payment, from other cash assets. Upon payment of the judgment, the dissenting stockholder shall cease to have any interest in such shares, or in the domestic company or surviving corporation. Unless the dissenting stockholder shall file such petition within the time limited in this subdivision, such stockholder and all persons claiming under him shall be bound by the terms of the plan of exchange.
Shares acquired by the domestic company or the surviving corporation pursuant to the payment of the agreed value thereof or of the judgment entered therefor, as in this subdivision provided, shall be treasury shares and may be held and disposed of by such corporation as in the case of other treasury shares.
A nominee of a corporate fiduciary holding shares of stock for more than one fiduciary account may dissent as to less than all of the shares registered in his name. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different stockholders.
The dissenting rights of stockholders of any other corporate party to the plan of exchange shall be governed by the laws otherwise applicable to the transactions involved in the plan.
(5) FILING PLAN OF EXCHANGE. - After the date of the meeting of stockholders of the domestic company at which the plan of exchange was submitted to such stockholders, a certificate setting forth:
a. The plan of exchange;
b. The vote by which such plan was adopted by the stockholders of the domestic company and any other corporate party to the plan whose stockholders approved the plan under the laws otherwise applicable;
c. The number of shares of the domestic company for which a dissenting right has been preserved and for which no payment has been made pursuant to subdivision (4) of this section; or
d. That the plan of exchange has been abandoned shall be executed on behalf of the domestic company by its president, or a vice-president, and attested by its secretary, or an assistant secretary, under the corporate seal, and shall then be presented in triplicate to the commissioner. If the certificate indicates that the plan of exchange has been approved by stockholders as required by subdivision (3) of this section and that the facts otherwise conform to the law, he shall require the domestic company, prior to the time the plan becomes effective, to create a fund in cash distinct from its other assets to provide for the payment for all shares with respect to which a dissenting right has been preserved and for which no payment has been made pursuant to subdivision (4) of this section. The amount of said fund shall not limit the amount to be paid to dissenting stockholders under the provisions of subdivision (4) of this section, nor shall the amount of the fund be used as evidence in any proceeding to establish the fair value of shares for which dissenting rights are asserted. Thereafter, upon the creation of such a fund, the commissioner shall endorse his approval on the certificate and the same shall then be filed in the Office of the Secretary of State. Upon such filing of such certificate, the plan of exchange shall become effective unless a later date and time is specified in the plan of exchange, in which event, the plan of exchange and issuance and exchange provided for therein shall become effective upon such later date and time.
(6) EFFECT OF EXCHANGE. - Upon the plan of exchange becoming effective, the exchange, or exchanges, provided for therein shall be deemed to have been consummated, each stockholder of the domestic company shall cease to be a stockholder of such company and the ownership of all shares of the issued and outstanding stock of the domestic company shall vest in the holding company automatically without any physical transfer or deposit of certificates representing such shares.
Certificates representing shares of the domestic company prior to the plan of exchange becoming effective shall after the plan of exchange becomes effective automatically represent shares of the issued and outstanding capital stock or other securities issued by the holding company, provided that the plan of exchange:
a. Shall specify that all certificates representing shares of stock of the domestic company may, after the plan of exchange becomes effective, be exchanged by any stockholder for shares of stock or other securities issued by the holding company; and
b. May require that all certificates representing shares of stock of the domestic company shall, after the plan of exchange becomes effective, represent only the right to receive shares of stock or other securities issued by the holding company as shall be specified in the plan of exchange.
(Acts 1971, No. 1449, p. 2472.)
No director, officer, agent, or employee of any corporation which is a party to the plan of exchange, except as is expressly provided by the plan filed with the commissioner, shall receive any fee, commission, other compensation, or valuable consideration whatever for in any manner aiding, promoting, or assisting in the promotion of the plan of exchange.
(Acts 1971, No. 1449, p. 2472.)
Nothing contained in this chapter shall affect the power of the commissioner to regulate, supervise, and control insurance companies pursuant to the laws of the State of Alabama governing such companies, nor shall anything in this chapter be construed to authorize any insurance company to engage in any kind, or kinds, of insurance business not authorized by its charter or to authorize any holding company which is not an insurance corporation to engage directly in the business of insurance. Subsequent to the effective date of any plan of exchange, the commissioner, having due regard to the findings stated in subdivision (2) of Section 27-28-2, shall have authority to require that the affairs of the domestic company be conducted in such manner as to assure the continued safe conduct and transaction of the business of insurance of the domestic company.
(Acts 1971, No. 1449, p. 2472.)
This chapter shall be supplemental to, and construed with, the provisions of the Alabama Business Corporation Act, as amended, but in the event there exists any conflict between the provisions of this chapter and the provisions of that act, the provisions of this chapter shall control.
(Acts 1971, No. 1449, p. 2472.)
For purposes of this chapter, unless otherwise stated, the following terms have the meanings respectively ascribed to them by this section:
(1) AFFILIATE. The term shall include an affiliate of, or person affiliated with, a specific person, and shall mean a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified.
(2) COMMISSIONER. The Commissioner of Insurance, his or her deputies, or the Insurance Department as appropriate.
(3) CONTROL. The term shall include controlling, controlled by, or under common control with and shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with, or corporate office held by, the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing five percent or more of the voting securities of any other person. This presumption may be rebutted by a showing made in the manner provided by subsection (k) of Section 27-29-4 that control does not exist in fact. The commissioner may determine, after furnishing all persons in interest notice and opportunity to be heard and making a specific finding of fact to support such determination, that control exists in fact, notwithstanding the absence of a presumption to that effect.
(4) ENTERPRISE RISK. Any activity, circumstance, event, or series of events involving one or more affiliates of an insurer which, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole, including, but not limited to, anything that would cause the insurer’s risk-based capital to fall into company action level as set forth in Section 27-2B-4 or would cause the insurer to be in hazardous financial condition.
(5) GROUP-WIDE SUPERVISOR. The regulatory official authorized to engage in conducting and coordinating group-wide supervision activities who is determined or acknowledged by the commissioner under this chapter to have sufficient significant contacts with the internationally active insurance group.
(6) GROUP CAPITAL CALCULATION INSTRUCTIONS. The group capital calculation instructions as adopted and amended by the NAIC, from time to time, in accordance with the procedures adopted by the NAIC.
(7) INSURANCE HOLDING COMPANY SYSTEM. A system that consists of two or more affiliated persons, one or more of which is an insurer.
(8) INSURER. An insurance company as set forth in Section 27-1-2, including, without limitation, any fraternal benefit society, health care service plan, and health maintenance organization, except that it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
(9) INTERNATIONALLY ACTIVE INSURANCE GROUP. An insurance holding company system that incudes an insurer registered under Section 27-29-4 that meets all of the following criteria:
a. Premiums are written in at least three countries.
b. The percentage of gross premiums written outside the United States is at least 10 percent of the insurance holding company system’s total gross written premiums.
c. Based on a three-year rolling average, the total assets of the insurance holding company system are at least fifty billion dollars ($50,000,000,000) or the total gross written premiums of the insurance holding company system are at least ten billion dollars ($10,000,000,000).
(10) NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS or NAIC. The National Association of Insurance Commissioners.
(11) NAIC LIQUIDITY STRESS TEST FRAMEWORK. A separate NAIC publication which includes a history of the NAIC’s development of regulatory liquidity stress testing, the scope criteria applicable for a specific data year, and the liquidity stress test instructions and reporting templates for a specific data year, the scope criteria, instructions, and reporting template as adopted and amended by the NAIC, from time to time, in accordance with the procedures adopted by the NAIC.
(12) PERSON. An individual, a corporation, a limited liability company, a partnership, an association, a joint-stock company, a trust, an unincorporated organization, or any similar entity or any combination of the foregoing acting in concert, but shall not include any joint venture partnership exclusively engaged in owning, managing, leasing, or developing real or tangible personal property.
(13) SCOPE CRITERIA. As detailed in the NAIC Liquidity Stress Test Framework, the designated exposure bases along with minimum magnitudes thereof for the specified data year, used to establish a preliminary list of insurers considered scoped into the NAIC Liquidity Stress Test Framework for that data year.
(14) SECURITYHOLDER. One who owns any security of such person, including common stock, preferred stock, debt obligations, and other security convertible into, or evidencing, the right to acquire any of the foregoing.
(15) SUBSIDIARY. An affiliate controlled by such person, directly or indirectly, through one or more intermediaries.
(16) VOTING SECURITY. The term shall include any security convertible into, or evidencing, a right to acquire a voting security.
(Acts 1973, No. 1042, p. 1636, §2; Acts 1982, No. 82-230, p. 280, §1; Acts 1994, No. 94-634, p. 1178, §2; Act 2014-324, p. 1151, §1; Act 2017-228, §1; Act 2019-97, §2; Act 2022-151, §2.)
(a) Authorization. A domestic insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries. The subsidiaries may conduct any kind of business or businesses and their authority to do so shall not be limited by reason of the fact that they are subsidiaries or affiliates of a domestic insurer.
(b) Additional investment authority. In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this title, a domestic insurer may also:
(1) Invest, in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries, amounts which do not exceed the lesser of 10 percent of such insurer’s assets or 50 percent of the insurer’s surplus as regards policyholders, provided that after such investments, the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs. In calculating the amount of such investments, investments in domestic and foreign insurance subsidiaries and health maintenance organizations shall be excluded, and there shall be included both of the following:
a. Total net moneys or other consideration expended and obligations assumed in the acquisition or formation of a subsidiary, including all organizational expenses and contributions to capital and surplus of such subsidiary, whether or not represented by the purchase of capital stock or issuance of other securities.
b. All amounts expended in acquiring additional common stock, debt obligations, and other securities and all contributions to the capital or surplus of a subsidiary subsequent to its acquisition or formation.
(2) Invest any amount in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries engaged or organized to engage exclusively in the ownership and management of assets authorized as investments for the insurer provided that each such subsidiary agrees to limit its investments in any asset so that such investments will not cause the amount of the total investment of the insurer to exceed any of the investment limitations specified in subdivision (1) or in Sections 27-41-15 through 27-41-18 and 27-41-35. For the purpose of this subdivision, “the total investment of the insurer” shall include both of the following:
a. Any direct investment by the insurer in an asset.
b. The insurer’s proportionate share of any investment in an asset by any subsidiary of the insurer, which shall be calculated by multiplying the amount of the subsidiary’s investment by the percentage of the insurer’s ownership of such subsidiary.
(3) With the approval of the commissioner, invest any greater amount in common stock, preferred stock, debt obligations, or other securities of one or more subsidiaries, provided that after such investment the insurer’s surplus as regards policyholders will be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs.
(c) Exemption from investment restrictions. Investments in common stock, preferred stock, debt obligations, or other securities of subsidiaries made pursuant to subsection (b) shall not be subject to any of the otherwise applicable restrictions or prohibitions contained in this title applicable to such investments of insurers.
(d) Qualification of investment; when determined. Whether any investment pursuant to subsection (b) meets the applicable requirements thereof is to be determined before such investment is made, by calculating the applicable investment limitations as though the investment had already been made, taking into account the then outstanding principal balance on all previous investments in debt obligations and the value of all previous investments in equity securities as of the date they were made, net of any return of capital invested, not including dividends.
(e) Cessation of control. If an insurer ceases to control a subsidiary, it shall dispose of any investment therein made pursuant to this section within three years from the time of the cessation of control or within such further time as the commissioner may prescribe, unless at any time after such investment shall have been made such investment shall have met the requirements for investment under any other section of this title, and the insurer has notified the commissioner.
(Acts 1973, No. 1042, p. 1636, §3; Acts 1980, No. 80-199, p. 276; Acts 1981, No. 81-314, p. 446; Acts 1994, No. 94-634, p. 1178, §2; Act 2014-324, p. 1151, §1.)
(a)(1) No person other than the issuer shall make a tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire in the open market any voting security of a domestic insurer if, after the consummation thereof, such person would, directly or indirectly, or by conversion or by exercise of any right to acquire, be in control of such insurer, and no person shall enter into an agreement to merge with or otherwise to acquire control of a domestic insurer, or any person controlling a domestic insurer unless, at the time any such offer, request, or invitation is made or any such agreement is entered into, or prior to the acquisition of such securities if no offer or agreement is involved, such person has filed with the commissioner and has sent to such insurer a statement containing the information required by this section and such offer, request, invitation, agreement, or acquisition has been approved by the commissioner in the manner prescribed in this section.
(2) For purposes of this section, any controlling person of a domestic insurer seeking to divest its controlling interest in the domestic insurer, in any manner, shall file with the commissioner, with a copy to the insurer, confidential notice of its proposed divestiture at least 30 days prior to the cessation of control. The commissioner shall determine those instances in which the party or parties seeking to divest or to acquire a controlling interest in an insurer, will be required to file for and obtain approval of the transaction. The information shall remain confidential until the conclusion of the transaction unless the commissioner, in his or her discretion, determines that confidential treatment will interfere with enforcement of this section. If the statement referred to in subdivision (1) is otherwise filed, this subdivision shall not apply.
(3) With respect to a transaction subject to this section, the acquiring person must also file a pre-acquisition notification with the commissioner, which shall contain the information set forth in subdivision (c)(1) of Section 27-29-3.1. A failure to file the notification may be subject to penalty specified in subdivision of (e)(3) of Section 27-29-3.1.
(4) For purposes of this section:
a. A domestic insurer includes any person controlling a domestic insurer unless the person, as determined by the commissioner, is either directly or through its affiliates primarily engaged in business other than the business of insurance.
b. Person does not include any securities broker holding, in the usual and customary broker’s function, less than 20 percent of the voting securities of an insurance company or of any person that controls an insurance company.
(b)(1) The statement to be filed with the commissioner under this section shall be made under oath or affirmation and shall contain all of the following information:
a. The name and address of each person by whom, or on whose behalf, the merger or other acquisition of control referred to in subsection (a) is to be effected (hereinafter called “acquiring party”), and either of the following:
If the person is an individual, his or her principal occupation and all offices and positions held during the past five years, and any conviction of crimes other than minor traffic violations during the past 10 years.
If the person is not an individual, a report of the nature of its business operations during the past five years or for the lesser period as such person and any predecessors thereof shall have been in existence; an informative description of the business intended to be done by the person and the person’s subsidiaries; and a list of all individuals who are, or who have been selected to become, directors or executive officers of the person or who perform, or will perform, functions appropriate to the positions. The list shall include for each individual the information required by subparagraph 1.
b. The source, nature, and amount of the consideration used, or to be used, in effecting the merger or other acquisition of control, a description of any transaction wherein funds were, or are to be, obtained for any such purpose, including any pledge of the insurer’s stock, or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing such consideration; provided, however, that where a source of such consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential if the person filing such statement so requests.
c. Fully audited financial information as to the earnings and financial condition of each acquiring party for the preceding five fiscal years of each such acquiring party, or for such lesser period as such acquiring party and any predecessors thereof shall have been in existence, and similar unaudited information as of a date not earlier than 90 days prior to the filing of the statement.
d. Any plans or proposals which each acquiring party may have to liquidate such insurer, to sell its assets, or to merge or consolidate it with any person or to make any other material change in its business or corporate structure or management.
e. The number of shares of any security referred to in subsection (a) which each acquiring party proposes to acquire, the terms of the offer, request, invitation, agreement, or acquisition referred to in subsection (a), and a statement as to the method by which the fairness of the proposal was arrived at.
f. The amount of each class of any security referred to in subsection (a) which is beneficially owned or concerning which there is a right to acquire beneficial ownership by each acquiring party.
g. A full description of any contracts, arrangements, or understandings with respect to any security referred to in subsection (a) in which any acquiring party is involved, including, but not limited to, transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. Such description shall identify the persons with whom such contracts, arrangements, or understandings have been entered.
h. A description of the purchase of any security referred to in subsection (a) during the 12 calendar months preceding the filing of the statement by any acquiring party, including the dates of purchase, names of the purchasers, and consideration paid, or agreed to be paid, therefor.
i. A description of any recommendations to purchase any security referred to in subsection (a) made during the 12 calendar months preceding the filing of the statement by any acquiring party or by anyone based upon interviews or at the suggestion of such acquiring party.
j. Copies of all tender offers for, requests or invitations for tenders of, exchange offers for and agreements to acquire or exchange any securities referred to in subsection (a) and, if distributed, of additional soliciting material relating thereto.
k. The terms of any agreement, contract, or understanding made with or proposed to be made with any broker-dealer as to solicitation of securities referred to in subsection (a) for tender and the amount of any fees, commissions, or other compensation to be paid to broker-dealers with regard thereto.
l. An agreement by the person required to file the statement referred to in subsection (a) that it will provide the annual report, specified in subdivision (1) of subsection (l) of Section 27-29-4, for so long as control exists.
m. An acknowledgement by the person required to file the statement referred to in subsection (a) that the person and all subsidiaries within its control in the insurance holding company system will provide information to the commissioner upon request as necessary to evaluate enterprise risk to the insurer.
n. Such additional information as the commissioner may, by rule or regulation, prescribe as necessary or appropriate for the protection of policyholders of the insurer or in the public interest.
(2) If the person required to file the statement referred to in subsection (a) is a partnership, limited partnership, syndicate, or other group, the commissioner may require that the information called for by paragraphs a. through n. of subdivision (1) shall be given with respect to each partner of such partnership or limited partnership, each member of such syndicate or group, and each person who controls such partner or member. If any such partner, member, or person is a corporation or the person required to file the statement referred to in subsection (a) is a corporation, the commissioner may require that the information called for by paragraphs a. through n. of subdivision (1) shall be given with respect to such corporation, each officer and director of such corporation, and each person who is, directly or indirectly, the beneficial owner of more than 10 percent of the outstanding voting securities of such corporation. If any material change occurs in the facts set forth in the statement filed with the commissioner and sent to such insurer pursuant to this section, an amendment setting forth such change, together with copies of all documents and other materials relevant to such change, shall be filed with the commissioner and sent to such insurer within two business days after the person learns of such change.
(c) If any offer, request, invitation, agreement, or acquisition referred to in subsection (a) is proposed to be made by means of a registration statement under the Securities Act of 1933, or in circumstances requiring the disclosure of similar information under the Securities Exchange Act of 1934, or under a state law requiring similar registration or disclosure, the person required to file the statement referred to in subsection (a) may utilize such documents in furnishing the information called for by that statement.
(d)(1) The commissioner shall approve any merger or other acquisition of control referred to in subsection (a) unless, after a public hearing thereon, he or she finds any of the following:
a. After the change of control, the domestic insurer referred to in subsection (a) would not be able to satisfy the requirements for the issuance of a license to write the line, or lines, of insurance for which it is presently licensed.
b. The effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or to create a monopoly therein. In applying the competitive standard in this paragraph:
The informational requirements of subdivision (c)(1) of Section 27-29-3.1 and the standards of subdivision (d)(2) of Section 27-29-3.1 shall apply.
The merger or other acquisition shall not be disapproved if the commissioner finds that any of the situations meeting the criteria provided by subdivision (d)(3) of Section 27-29-3.1 exist.
The commissioner may condition the approval of the merger or other acquisition on the removal of the basis of disapproval within a specified period of time.
c. The financial condition of any acquiring party is such as might jeopardize the financial stability of the insurer or prejudice the interest of its policyholders.
d. The plans or proposals which the acquiring party has to liquidate the insurer, to sell its assets, or to consolidate or merge it with any person or to make any other material change in its business or corporate structure or management are unfair and unreasonable to policyholders of the insurer and not in the public interest.
e. The competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would not be in the interest of policyholders of the insurer and of the public to permit the merger or other acquisition of control.
f. The acquisition is likely to be hazardous or prejudicial to the insurance-buying public.
(2) The public hearing referred to in subdivision (1) shall be held within 30 days after the statement required by subsection (a) is filed, and at least 20 days’ notice thereof shall be given by the commissioner to the person filing the statement. Not less than seven days’ notice of such public hearing shall be given by the person filing the statement to the insurer and to such other persons as may be designated by the commissioner. The commissioner shall make a determination within the 60-day period preceding the effective date of the proposed transaction. At such hearing, the person filing the statement, the insurer, any person to whom notice of hearing was sent, and any other person whose interest may be affected thereby shall have the right to present evidence, examine and cross-examine witnesses, and offer oral and written arguments and, in connection therewith, shall be entitled to conduct discovery proceedings in the same manner as is presently allowed in the circuit courts of this state. All discovery proceedings shall be concluded not later than three days prior to the commencement of the public hearing.
(3) If the proposed acquisition of control will require the approval of more than one commissioner, the public hearing referred to in subdivision (2) may be held on a consolidated basis upon request of the person filing the statement referred to in subsection (a). The person shall file the statement referred to in subsection (a) with the NAIC within five days of making the request for a public hearing. A commissioner may opt out of a consolidated hearing, and shall provide notice to the applicant of the opt-out within 10 days of the receipt of the statement referred to in subsection (a). A hearing conducted on a consolidated basis shall be public and shall be held within the United States before the commissioners of the states in which the insurers are domiciled. The commissioners shall hear and receive evidence. A commissioner may attend the hearing in person or by telecommunication.
(4) In connection with a change of control of a domestic insurer, any determination by the commissioner that the person acquiring control of the insurer shall be required to maintain or restore the capital of the insurer to the level required by the laws and regulations of this state shall be made not later than 60 days after the date of notification of the change in control submitted pursuant to subdivision (a)(1).
(5) The commissioner may retain any attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner’s staff as may be reasonably necessary to assist the commissioner in reviewing the proposed acquisition of control, the reasonable expenses of which shall be borne by the acquiring person.
(e) The provisions of this section shall not apply to:
(1) Any transaction which is subject to the provisions of Sections 27-27-45 and 27-27-46, dealing with the merger or consolidation of two or more insurers.
(2) Any offer, request, invitation, agreement, or acquisition which the commissioner by order shall exempt therefrom as either of the following:
a. Not having been made or entered into for the purpose and not having the effect of changing or influencing the control of a domestic insurer.
b. As otherwise not comprehended within the purposes of this section.
(f) The following shall be violations of this section:
(1) The failure to file any statement, amendment, or other material required to be filed pursuant to subsections (a) or (b).
(2) The effectuation, or any attempt to effectuate, an acquisition of control of, or merger with, a domestic insurer unless the commissioner has given his or her approval thereto.
(g) The courts of this state are hereby vested with jurisdiction over every person not resident, domiciled, or authorized to do business in this state who files a statement with the commissioner under this section and over all actions involving such person arising out of violations of this section, and each such person shall be deemed to have performed acts equivalent to and constituting an appointment by such a person of the commissioner to be his or her true and lawful attorney upon whom may be served all lawful process in any action or proceeding arising out of violations of this section. Copies of all such lawful process shall be served on the commissioner and transmitted by registered or certified mail by the commissioner to such person at his or her last known address.
(Acts 1973, No. 1042, p. 1636, §4; Acts 1986, No. 86-464, p. 844, §1; Acts 1994, No. 94-634, p. 1178, §2; Act 2014-324, p. 1151, §1; Act 2022-151, §2.)
(a) The following definitions shall apply for the purposes of this section only:
(1) ACQUISITION. Any agreement or arrangement the consummation of which results in a person acquiring directly or indirectly the control of another person, and includes, but is not limited to, the acquisition of voting securities, the acquisition of assets, bulk reinsurance, and mergers.
(2) INVOLVED INSURER. Includes an insurer which either acquires or is acquired, is affiliated with an acquirer or acquired, or is the result of a merger.
(b)(1) Except as exempted in subdivision (2), this section applies to any acquisition in which there is a change in control of an insurer authorized to do business in this state.
(2) This section shall not apply to the following:
a. A purchase of securities solely for investment purposes so long as the securities, by voting or otherwise, are not used to cause or attempt to cause the substantial lessening of competition in any insurance market in this state. If a purchase of securities results in a presumption of control under subsection (c) of Section 27-29-1, it is not solely for investment purposes unless the commissioner of the insurer’s state of domicile accepts a disclaimer of control or affirmatively finds that control does not exist and the disclaimer action or affirmative finding is communicated by the domiciliary commissioner to the commissioner of this state.
b. The acquisition of a person by another person when both persons are neither directly nor through affiliates primarily engaged in the business of insurance, if pre-acquisition notification is filed with the commissioner in accordance with subdivision (1) of subsection (c) 30 days prior to the proposed effective date of the acquisition. However, such pre-acquisition notification is not required for exclusion from this section if the acquisition would otherwise be excluded from this section by any other paragraph of subdivision (2) of subsection (b).
c. The acquisition of already affiliated persons.
d.1. An acquisition if, as an immediate result of the acquisition, any of the follow occurs:
(i) The combined market share of the involved insurers does not exceed five percent of the total market in any market.
(ii) There is no increase in any market share.
(iii) Both of the following do not occur in any market:
A. The combined market share of the involved insurers exceeds 12 percent of the total market.
B. The market share increases by more than two percent of the total market.
e. An acquisition for which a pre-acquisition notification would be required pursuant to this section due solely to the resulting effect on the ocean marine insurance line of business.
f. An acquisition of an insurer whose domiciliary commissioner affirmatively finds that the insurer is in failing condition, there is a lack of feasible alternative to improving such condition, the public benefits of improving the insurer’s condition through the acquisition exceed the public benefits that would arise from not lessening competition, and the findings are communicated by the domiciliary commissioner to the commissioner of this state.
(c) An acquisition covered by subsection (d) may be subject to an order pursuant to subsection (e) unless the acquiring person files a pre-acquisition notification and the waiting period has expired. The acquired person may file a pre-acquisition notification. The commissioner shall give confidential treatment to information submitted under this subsection in the same manner as provided in Section 27-29-7.
(1) The pre-acquisition notification shall be in such form and contain such information as prescribed by the commissioner relating to those markets which, under paragraph d. of subdivision (2) of subsection (b), cause the acquisition not to be exempted from this section. The commissioner may require such additional material and information as deemed necessary to determine whether the proposed acquisition, if consummated, would violate the competitive standard of subsection (d). The required information may include an opinion of an economist as to the competitive impact of the acquisition in this state accompanied by a summary of the education and experience of such person indicating his or her ability to render an informed opinion.
(2) The waiting period required shall begin on the date of receipt of the commissioner of a pre-acquisition notification and shall end on the earlier of the thirtieth day after the date of receipt, or termination of the waiting period by the commissioner. Prior to the end of the waiting period, the commissioner, on a one-time basis, may require the submission of additional needed information relevant to the proposed acquisition, in which event the waiting period shall end on the earlier of the thirtieth day after receipt of the additional information by the commissioner or termination of the waiting period by the commissioner.
(d)(1) The commissioner may enter an order under subdivision (1) of subsection (e) with respect to an acquisition if there is substantial evidence that the effect of the acquisition may be substantially to lessen competition in any line of insurance in this state or to create a monopoly or if the insurer fails to file adequate information in compliance with subsection (c).
(2) In determining whether a proposed acquisition would violate the competitive standard of subdivision (1), the commissioner shall consider the following:
a.1. Any acquisition covered under subsection (b) involving two or more insurers competing in the same market may be considered prima facie evidence of violation of the competitive standards.
(i) If the market is highly concentrated and the involved insurers possess the following shares of the market: Insurer AInsurer B4%4% or more10%2% or more15%1% or more
(ii) Or, if the market is not highly concentrated and the involved insurers possess the following shares of the market: Insurer AInsurer B5%5% or more10%4% or more15%3% or more19%1% or more
b. There is a significant trend toward increased concentration when the aggregate market share of any grouping of the largest insurers in the market, from the two largest to the eight largest, has increased by seven percent or more of the market over a period of time extending from any base year five to 10 years prior to the acquisition up to the time of the acquisition. Any acquisition or merger covered under subsection (b) involving two or more insurers competing in the same market may be considered prima facie evidence of violation of the competitive standard in subdivision (1) if all of the following occur:
There is a significant trend toward increased concentration in the market.
One of the insurers involved is one of the insurers in a grouping of large insurers showing the requisite increase in the market share.
Another involved insurer’s market is two percent or more.
c. For the purposes of this subdivision:
“Insurer” includes any company or group of companies under common management, ownership, or control.
“Market” means the relevant product and geographical markets. In determining the relevant product and geographical markets, the commissioner shall give due consideration to, among other things, the definitions or guidelines, if any, published by the National Association of Insurance Commissioners and to information, if any, submitted by parties to the acquisition. In the absence of sufficient information to the contrary, the relevant product market is assumed to be the direct written insurance premium for a line of business, such line being that used in the annual statement required to be filed by insurers doing business in this state, and the relevant geographical market is assumed to be this state.
The burden of showing prima facie evidence of violation of the competitive standard rests upon the commissioner.
d. Even though an acquisition is not prima facie violative of the competitive standard under paragraphs a. and b., the commissioner may establish the requisite anticompetitive effect based upon other substantial evidence. Even though an acquisition is prima facie violative of the competitive standard under paragraphs a. and b., a party may establish the absence of the requisite anticompetitive effect based upon other substantial evidence. Relevant factors in making a determination under this paragraph include, but are not limited to, the following: Market shares, volatility of ranking of market leaders, number of competitors, concentration, trend of concentration in the industry, and ease of entry and exit into the market.
(3) An order may not be entered under subdivision (1) of subsection (e) in either of the following instances:
a. The acquisition will yield substantial economies of scale or economies in resource utilization that cannot be feasibly achieved in any other way, and the public benefits which would arise from such economies exceed the public benefits which would arise from not lessening competition.
b. The acquisition will substantially increase the availability of insurance, and the public benefits of the increase exceed the public benefits which would arise from not lessening competition.
(e)(1)a. If an acquisition which takes place after January 1, 2016, violates the standards of this section, the commissioner may enter an order doing either of the following:
Requiring an involved insurer to cease and desist from doing business in this state with respect to the line or lines of insurance involved in the violation.
Denying the application of an acquired or acquiring insurer for a license to do business in this state.
b. The order shall not be entered unless all of the following occur:
There is a hearing conducted within six years of the acquisition.
Notice of the hearing is issued prior to the end of the waiting period and not less than 15 days prior to the hearing.
The hearing is concluded and the order is issued no later than 60 days after the date of the filing of the pre-acquisition notification with the commissioner.
c. Every order shall be accompanied by a written decision of the commissioner setting forth findings of fact and conclusions of law.
d. An order pursuant to this paragraph shall not apply if the acquisition is not consummated.
(2) Any person who violates a cease and desist order of the commissioner under subdivision (1) while the order is in effect, after notice and hearing and upon order of the commissioner, is subject to one or more of the following:
a. A monetary penalty of not more than ten thousand dollars ($10,000) for every day of violation.
b. Suspension or revocation of the person’s license.
(3) Any insurer or other person who fails to make any filing required by this section, and who also fails to demonstrate a good faith effort to comply with any filing requirement, is subject to a fine of not more than fifty thousand dollars ($50,000).
(f) Subsections (b) and (c) of Section 27-29-9 and Section 27-29-11 do not apply to acquisitions covered under subsection (b).
(Act 2014-324, p. 1151, §2.)
(a)(1) Every insurer which is authorized to do business in this state and which is a member of an insurance holding company system shall register with the commissioner, except a foreign insurer subject to registration requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this section and both of the following:
a. Subdivision (a)(1), and subsections (b) and (d) of Section 27-29-5.
b. Either subdivision (a)(2) of Section 27-29-5 or a provision such as the following: Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions within 15 days after the end of the month in which it learns of each change or addition.
(2) Any insurer which is subject to registration under this section shall register within 15 days after it becomes subject to registration, and annually thereafter by June 1 of each year for the previous calendar year, unless the commissioner for good cause shown extends the time for registration and, then, within such extended time. The commissioner may require any authorized insurer that is a member of an insurance holding company system which is not subject to registration under this section to furnish a copy of the registration statement, the summary specified in subsection (c), or other information filed by such insurance company with the insurance regulatory authority of domiciliary jurisdiction.
(b) Every insurer subject to registration shall file a registration statement on a form prescribed by the commissioner by rule which shall contain the following current information:
(1) The capital structure, general financial condition, ownership, and management of the insurer and any person controlling the insurer.
(2) The identity of every member of the insurance holding company system.
(3) The following agreements in force, and transactions currently outstanding or which have occurred during the last calendar year between such insurer and its affiliates:
a. Loans, other investments or purchases, sales, or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates.
b. Purchases, sales, or exchanges of assets.
c. Transactions not in the ordinary course of business.
d. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer’s assets to liability, other than insurance contracts entered into in the ordinary course of the insurer’s business.
e. All management agreements and service contracts and all cost-sharing arrangements.
f. Reinsurance agreements.
g. Dividends and other distributions to shareholders.
h. Consolidated tax allocation agreements.
(4) Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system.
(5) If requested by the commissioner, financial statements of or within an insurance holding company system, including all affiliates. Financial statements may include, but are not limited to, annual audited financial statements filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended. An insurer required to file financial statements pursuant to this subdivision may satisfy the request by providing the commissioner with the most recently filed parent corporation financial statements that have been filed with the Securities Exchange Commission. Financial statements of insurer’s affiliates required to be filed with the commissioner may be filed by the insurer in the accounting standard utilized by the affiliate in its usual course of business at the time of the filing.
(6) Other matters concerning transactions between registered insurers and any affiliates as may be included, from time to time, in any registration forms adopted or approved by the commissioner.
(7) Statements that the insurer’s board of directors or an appropriate committee of the board oversees corporate governance and internal controls and that the insurer’s officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures.
(8) Any other information required by the commissioner by rule.
(c) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement.
(d) No information need be disclosed on the registration statement filed pursuant to subsection (b) if such information is not material for the purposes of this section. Unless the commissioner by rule, regulation, or order provides otherwise, sales, purchases, exchanges, loans, or extensions of credit or investments involving one-half of one percent or less of an insurer’s admitted assets as of December 31, next preceding, shall not be deemed material for purposes of this section. The definition of materiality provided in this subsection shall not apply for purposes of the Group Capital Calculation or the Liquidity Stress Test Framework.
(e) Subject to subsection (b) of Section 27-29-5, each registered insurer shall so report all dividends and other distributions to shareholders within 15 business days following the declaration thereof.
(f) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where the information is reasonably necessary to enable the insurer to comply with the provisions of this chapter.
(g) The commissioner shall terminate the registration of any insurer which demonstrated that it no longer is a member of an insurance holding company system.
(h) The commissioner may require or allow two or more affiliated insurers subject to registration under this section to file a consolidated registration statement.
(i) The commissioner may allow an insurer that is authorized to do business in this state and which is part of an insurance holding company system to register on behalf of any affiliated insurer that is required to register under subsection (a) and to file all information and material required to be filed under this section.
(j) The provisions of this section shall not apply to any insurer, information, or transaction if, and to the extent that, the commissioner by rule, regulation, or order shall exempt the same from the provisions of this section.
(k) Any person may file with the commissioner a disclaimer of affiliation with any authorized insurer or a disclaimer may be filed by the insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between the person and the insurer, as well as the basis for disclaiming such affiliation. A disclaimer of affiliation shall be deemed to have been granted unless the commissioner, within 30 days following receipt of a complete disclaimer, notifies the filing party the disclaimer is disallowed. In the event of disallowance, the disclaiming party may request an administrative hearing, which shall be granted. The disclaiming party shall be relieved of its duty to register under this section if approval of the disclaimer has been granted by the commissioner, or if the disclaimer is deemed to have been approved.
(1) Enterprise Risk Filings.
(l) Enterprise Risk Report. The ultimate controlling person of every insurer subject to registration shall also file an annual enterprise risk report. The report shall, to the best of the ultimate controlling person’s knowledge and belief, identify the material risks within the insurance holding company system that could pose enterprise risk to the insurer. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.
(2)a. Group Capital Calculation. Except as provided in this subdivision, the ultimate controlling person of every insurer subject to registration shall concurrently file with the registration an annual group capital calculation as directed by the lead state commissioner. The report shall be completed in accordance with the NAIC Group Capital Calculation Instructions, which may permit the lead state commissioner to allow a controlling person that is not the ultimate controlling person to file the group capital calculation. The report shall be filed with the lead state commissioner of the insurance holding company system as determined by the commissioner in accordance with the procedures within the Financial Analysis Handbook adopted by the NAIC. The following insurance holding company systems described are exempt from filing the group capital calculation:
An insurance holding company system that has only one insurer within its holding company structure, that only writes business and is only licensed in its domestic state, and assumes no business from any other insurer.
An insurance holding company system that is required to perform a group capital calculation specified by the United States Federal Reserve Board. The lead state commissioner shall request the calculation from the Federal Reserve Board under the terms of information sharing agreements in effect. If the Federal Reserve Board cannot share the calculation with the lead state commissioner, the insurance holding company system is not exempt from the group capital calculation filing.
An insurance holding company system whose non-U.S. group-wide supervisor is located within a reciprocal jurisdiction as described in Section 27-5B-8.1, which recognizes the U.S. state regulatory approach to group supervision and group capital.
An insurance holding company system meeting both of the following:
(i) That provides information to the lead state which meets the requirements for accreditation under the NAIC financial standards and accreditation program, either directly or indirectly through the group-wide supervisor, who has determined such information is satisfactory to allow the lead state to comply with the NAIC group supervision approach, as detailed in the NAIC Financial Analysis Handbook.
(ii) Whose non-U.S. group-wide supervisor that is not in a reciprocal jurisdiction recognizes and accepts, as specified by the commissioner in regulation, the group capital calculation as the world-wide group capital assessment for U.S. insurance groups who operate in that jurisdiction.
b. Notwithstanding the provisions of subparagraphs a.3. and a.4., a lead state commissioner shall require the group capital calculation for U.S. operations of any non-U.S. based insurance holding company system when, after any necessary consultation with other supervisors or officials, the lead state commissioner deems it appropriate for prudential oversight and solvency monitoring purposes or for ensuring the competitiveness of the insurance marketplace.
c. Notwithstanding the exemptions from filing the group capital calculation stated in subparagraphs a.1. through a.4., the lead state commissioner may exempt the ultimate controlling person from filing the annual group capital calculation or to accept a limited group capital filing or report in accordance with criteria as specified by the commissioner in regulation.
d. If the lead state commissioner determines that an insurance holding company system no longer meets one or more of the requirements for an exemption from filing the group capital calculation under this section, the insurance holding company system shall file the group capital calculation at the next annual filing date, unless given an extension by the lead state commissioner based on reasonable grounds shown.
(3) Liquidity Stress Test.
a. The ultimate controlling person of every insurer subject to registration and also scoped into the NAIC Liquidity Stress Test Framework shall file the results of a specific year’s liquidity stress test. The filing shall be made to the lead state insurance commissioner of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.
b. The NAIC Liquidity Stress Test Framework includes scope criteria applicable to a specific data year. These scope criteria are reviewed at least annually by the Financial Stability Task Force or its successor. Any change to the NAIC Liquidity Stress Test Framework, or to the data year for which the scope criteria are to be measured, shall be effective on January 1 of the year following the calendar year when such changes are adopted. Insurers meeting at least one threshold of the scope criteria are considered scoped into the NAIC Liquidity Stress Test Framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should not be scoped into the framework for that data year. Similarly, insurers that do not trigger at least one threshold of the scope criteria are considered scoped out of the NAIC Liquidity Stress Test Framework for the specified data year, unless the lead state insurance commissioner, in consultation with the NAIC Financial Stability Task Force or its successor, determines the insurer should be scoped into the framework for that data year.
c. Regulators should avoid having insurers scoped in and out of the NAIC Liquidity Stress Test Framework on a frequent basis. The lead state insurance commissioner, in consultation with the Financial Stability Task Force or its successor, shall assess this concern as part of the determination for an insurer.
d. The performance of, and filing of the results from, a specific year’s liquidity stress test shall comply with the NAIC Liquidity Stress Test Framework’s instructions and reporting templates for that year and any lead state insurance commissioner determinations, in conjunction with the Financial Stability Task Force or its successor, provided within the Framework.
(m) The failure to file a registration statement or any summary of the registration statement or enterprise risk filing required by this section within the time specified for filing shall be a violation of this section.
(Acts 1973, No. 1042, p. 1636, §5; Acts 1994, No. 94-634, p. 1178, §2; Act 2014-324, p. 1151, §1; Act 2017-228, §1; Act 2022-151, §2.)
(a) Transactions within an insurance holding company system to which an insurer subject to registration is a party shall be subject to all of the following standards:
(1) The terms shall be fair and reasonable.
(2) Agreements for cost sharing services and management shall include such provisions as required by rule and regulation issued by the commissioner.
(3) Charges or fees for services performed shall be reasonable.
(4) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied.
(5) The books, accounts, and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties.
(6) The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs.
(b)(1) The following transactions involving a domestic insurer and any person in its insurance holding company system, including amendments or modifications of affiliate agreements previously filed pursuant to this section which are subject to any materiality standards contained in paragraphs a. through g., may not be entered into unless the insurer has notified the commissioner in writing of its intention to enter into the transaction at least 30 days prior thereto, or such shorter period as the commissioner may permit, and the commissioner has not disapproved it within that period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the domestic insurer. Informal notice shall be reported, within 30 days after a termination of a previously filed agreement, to the commissioner for determination of the type of filing required, if any.
a. Sales, purchases, exchanges, loans or extensions of credit, or investments provided the transactions are equal to or exceed the following:
With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding.
With respect to life insurers, three percent of the insurer’s admitted assets as of the 31st day of December next preceding.
b. Loans or extensions of credit to any person who is not an affiliate, where the insurer makes loans or extensions of credit with the agreement or understanding that the proceeds of the transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making the loans or extensions of credit provided the transactions are equal to or exceed the following:
With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders as of the 31st day of December next preceding.
With respect to life insurers, three percent of the insurer’s admitted assets as of the 31st day of December next preceding.
c. Reinsurance agreements or modifications thereto, including:
All reinsurance pooling agreements.
Agreements in which the reinsurance premium or a change in the insurer’s liabilities, or the projected reinsurance premium or a change in the insurer’s liabilities in any of the next three years, equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the 31st day of December next preceding, including those agreements which may require as consideration the transfer of assets from an insurer to a nonaffiliate, if an agreement or understanding exists between the insurer and nonaffiliate that any portion of the assets will be transferred to one or more affiliates of the insurer.
d. All management agreements, service contracts, tax allocation agreements, guarantees and all cost-sharing arrangements.
e. Guarantees when made by a domestic insurer; provided, however, that a guarantee which is quantifiable as to amount is not subject to the notice requirements of this paragraph unless it exceeds the lesser of one-half of one percent of the insurer’s admitted assets or 10 percent of surplus as regards policyholders as of the 31st day of December next preceding. Further, all guarantees which are not quantifiable as to amount are subject to the notice requirements of this paragraph.
f. Direct or indirect acquisitions or investments in a person that controls the insurer or in an affiliate of the insurer in an amount which, together with its present holdings in such investments, exceeds two and one-half percent of the insurer’s surplus to policyholders. Direct or indirect acquisitions or investments in subsidiaries acquired pursuant to Section 27-29-2, or authorized under any other section of this title, or in non-subsidiary insurance affiliates that are subject to this chapter, are exempt from this requirement.
g. Any material transactions, specified by regulation, which the commissioner determines may adversely affect the interests of the insurer’s policyholders.
(2) Nothing in this subsection shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to law.
(c) A domestic insurer may not enter into transactions which are part of a plan or series of like transactions with persons within the insurance holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review that would occur otherwise. If the commissioner determines that such separate transactions were entered into over any 12-month period for that purpose, the commissioner may exercise his or her authority under Section 27-29-10.
(d) The commissioner, in reviewing transactions pursuant to subsection (b), shall consider whether the transactions comply with the standards set forth in subsection (a) and whether they may adversely affect the interests of policyholders.
(e) The commissioner shall be notified within 30 days of any investment of the domestic insurer in any one corporation if the total investment in the corporation by the insurance holding company system exceeds 10 percent of the corporation’s voting securities.
(f) For purposes of this chapter in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to meet its financial needs, the following factors, among others, shall be considered:
(1) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force, and other appropriate criteria.
(2) The extent to which the insurer’s business is diversified among the several lines of insurance.
(3) The number and size of risks insured in each line of business.
(4) The extent of the geographical dispersion of the insurer’s insured risks.
(5) The nature and extent of the insurer’s reinsurance program.
(6) The quality, diversification, and liquidity of the insurer’s investment portfolio.
(7) The recent past and projected future trend in the size of the insurer’s investment portfolio.
(8) The surplus as regards policyholders maintained by other comparable insurers.
(9) The adequacy of the insurer’s reserves.
(10) The quality and liquidity of investments in affiliates. The commissioner may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever, in the judgment of the commissioner, the investment so warrants.
(g)(1)a. A domestic insurer shall not pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until 30 days after the commissioner has received notice of the declaration thereof and has not disapproved such payment within the period, or until the time the commissioner has approved the payment within the 30-day period.
b. For purposes of this section, an “extraordinary dividend or distribution” includes any dividend or distribution of cash or other property, whose fair market value together with that of other dividends or distributions made within the preceding 12 months exceeds the greater of the following:
Ten percent of the insurer’s surplus as regards policyholders as of the 31st day of December next preceding.
The net gain from operations of the insurer, if the insurer is a life insurer, or the net income, if the insurer is not a life insurer, not including realized capital gains or the pro rata distribution of any class of the insurer’s own securities, for the 12-month period ending the 31st day of December next preceding.
(2) A domestic insurer subject to registration under Section 27-29-4 shall report to the commissioner all dividends to shareholders within five business days following the declaration of the dividends and not less than 10 days prior to the payment of the dividends. This report shall also include a schedule setting forth all dividends or other distributions made within the previous 12 months.
(3) In determining whether a dividend or distribution is extraordinary, an insurer other than a life insurer may carry forward net income from the previous two calendar years that has not already been paid out as dividends. This carryforward shall be computed by taking the net income from the second and third preceding calendar years, not including realized capital gains, less dividends paid in the second and immediate preceding calendar years.
(4) Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the commissioner’s approval of the dividend or distribution. The declaration shall confer no rights upon shareholders until the commissioner has approved the payment of the dividend or distribution or the commissioner has not disapproved the payment within the 30-day period as provided in subdivision (1).
(5) The commissioner shall assess such reasonable charges as he or she deems necessary for the review conducted pursuant to this section. All funds received shall be deposited in the State Treasury to the credit of the Special Examination Revolving Fund, from which the expenses incurred shall be paid.
(Acts 1973, No. 1042, p. 1636, §6; Acts 1994, No. 94-634, p. 1178, §2; Act 2014-324, p. 1151, §1.)
(a) Subject to the limitation contained in this section and in addition to the powers which the commissioner has under Sections 27-2-7, 27-2-21, 27-2-23, and 27-2-26, relating to the examination of insurers, the commissioner shall also have the power to examine any insurer registered under Section 27-29-4 and its affiliates to ascertain the financial condition of the insurer, including the enterprise risk to the insurer by the ultimate controlling party, by any entity or combination of entities within the insurance holding company system, or by the insurance holding company system on a consolidated basis.
(b)(1) The commissioner may order any insurer registered under Section 27-29-4 to produce such records, books, or other information papers in the possession of the insurer or its affiliates as are reasonably necessary to determine compliance with this title.
(2) To determine compliance with this title, the commissioner may order any insurer registered under Section 27-29-4 to produce information not in the possession of the insurer if the insurer can obtain access to such information pursuant to contractual relationships, statutory obligations, or other methods. In the event the insurer cannot obtain the information requested by the commissioner, the insurer shall provide the commissioner a detailed explanation of the reason that the insurer cannot obtain the information and the identity of the holder of information. Whenever it appears to the commissioner that the detailed explanation is without merit, the commissioner may require, after notice and hearing, the insurer to pay a penalty of up to one thousand dollars ($1,000) for each day’s delay, or may suspend or revoke the insurer’s license.
(c) The commissioner may retain at the registered insurer’s expense such attorneys, actuaries, accountants, and other experts not otherwise a part of the commissioner’s staff as shall be reasonably necessary to assist in the conduct of the examination under subsection (a). Any persons so retained shall be under the direction and control of the commissioner and shall act in a purely advisory capacity.
(d) Each registered insurer producing for examination records, books, and papers pursuant to subsection (a) shall be liable for and shall pay the expense of such examination as provided in Section 27-2-25.
(e) In the event the insurer fails to comply with an order, the commissioner shall have the power to examine the affiliates to obtain the information. In accordance with Sections 27-2-26 and 27-2-27, the commissioner shall also have the power to issue subpoenas, to administer oaths, and to examine under oath any person for purposes of determining compliance with this section. Upon the failure or refusal of any person to obey a subpoena, the commissioner may petition a court of competent jurisdiction, and upon proper showing, the court may enter an order compelling the witness to appear and testify or produce documentary evidence. Failure to obey the court order shall be punishable as contempt of court. Every person shall be obliged to attend as a witness at the place specified in the subpoena, when subpoenaed, anywhere within the state. He or she shall be entitled to the same fees and mileage, if claimed, as a witness in circuit court, which fees, mileage, and actual expense, if any, necessarily incurred in securing the attendance of witnesses, and their testimony, shall be itemized and charged against, and be paid by, the company being examined.
(Acts 1973, No. 1042, p. 1636, §7; Act 2014-324, p. 1151, §1.)
(a) With respect to any insurer registered under Section 27-29-4, and in accordance with subsection (c), the commissioner shall also have the power to participate in a supervisory college for any domestic insurer that is part of an insurance holding company system with international operations in order to determine compliance by the insurer with this title. The powers of the commissioner with respect to supervisory colleges include, but are not limited to, the following:
(1) Initiating the establishment of a supervisory college.
(2) Clarifying the membership and participation of other supervisors in the supervisory college.
(3) Clarifying the functions of the supervisory college and the role of other regulators, including the establishment of a group-wide supervisor.
(4) Coordinating the ongoing activities of the supervisory college, including planning meetings, supervisory activities, and processes for information sharing.
(5) Establishing a crisis management plan.
(b) Each registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner’s participation in a supervisory college in accordance with subsection (c), including reasonable travel expenses. For purposes of this section, a supervisory college may be convened as either a temporary or permanent forum for communication and cooperation between the regulators charged with the supervision of the insurer or its affiliates, and the commissioner may establish a regular assessment to the insurer for the payment of these expenses.
(c) In order to assess the business strategy, financial position, legal and regulatory position, risk exposure, risk management, and governance processes, and as part of the examination of individual insurers in accordance with Section 27-29-6, the commissioner may participate in a supervisory college with other regulators charged with supervision of the insurer or its affiliates, including other state, federal, and international regulatory agencies. The commissioner may enter into agreements in accordance with subsection (c) of Section 27-29-7 providing the basis for cooperation between the commissioner and the other regulatory agencies, and the activities of the supervisory college. Nothing in this section shall delegate to the supervisory college the authority of the commissioner to regulate or supervise the insurer or its affiliates within its jurisdiction.
(Act 2014-324, p. 1151, §2.)
(a)(1) The commissioner may act as the group-wide supervisor for any internationally active insurance group in accordance with this section. The commissioner may otherwise acknowledge another regulatory official as the group-wide supervisor where the internationally active insurance group meets any of the following:
a. Does not have substantial insurance operations in the United States.
b. Has substantial insurance operations in the United States, but not in this state.
c. Has substantial insurance operations in the United States and this state, but the commissioner has determined pursuant to the factors set forth in subsections (b) and (f) that the other regulatory official is the appropriate group-wide supervisor.
(2) An insurance holding company system that does not otherwise qualify as an internationally active insurance group may request that the commissioner make a determination or acknowledgment as to a group-wide supervisor pursuant to this section.
(b)(1) In cooperation with other state, federal, and international regulatory agencies, the commissioner shall identify a single group-wide supervisor for an internationally active insurance group. The commissioner may determine that the commissioner is the appropriate group-wide supervisor for an internationally active insurance group that conducts substantial insurance operations concentrated in this state. The commissioner may acknowledge that a regulatory official from another jurisdiction is the appropriate group-wide supervisor for the internationally active insurance group. The commissioner shall consider all of the following factors when making a determination or acknowledgment under this subsection:
a. The place of domicile of the insurers within the internationally active insurance group that hold the largest share of the group’s written premiums, assets, or liabilities.
b. The place of domicile of the top-tiered insurer or insurers in the insurance holding company system of the internationally active insurance group.
c. The location of the executive office or largest operational offices of the internationally active insurance group.
d. Whether another regulatory official is acting or is seeking to act as the group-wide supervisor under a regulatory system that the commissioner determines to be both of the following:
Substantially similar to the system of regulation provided under the laws of this state.
Otherwise sufficient in terms of providing for group-wide supervision, enterprise risk analysis, and cooperation with other regulatory officials.
e. Whether another regulatory official acting or seeking to act as the group-wide supervisor provides the commissioner with reasonably reciprocal recognition and cooperation.
(2) A commissioner identified under this section as the group-wide supervisor may determine that it is appropriate to acknowledge another supervisor to serve as the group-wide supervisor. The acknowledgment of the group-wide supervisor shall be made after consideration of the factors listed in paragraphs a. to e. of subdivision (1) and shall be made in cooperation with and subject to the acknowledgment of other regulatory officials involved with supervision of members of the internationally active insurance group and in consultation with the internationally active insurance group.
(c) Notwithstanding any other provision of law, when another regulatory official is acting as the group-wide supervisor of an internationally active insurance group, the commissioner shall acknowledge that regulatory official as the group-wide supervisor. The commissioner shall make a determination or acknowledgment as to the appropriate group-wide supervisor for such an internationally active insurance group pursuant to subsection (b) in the event of a material change in the internationally active insurance group that results in either of the following:
(1) The internationally active insurance group’s insurers domiciled in this state holding the largest share of the group’s premiums, assets, or liabilities.
(2) This state being the place of domicile of the top-tiered insurer or insurers in the insurance holding company system of the internationally active insurance group.
(d) Pursuant to Section 27-29-6, the commissioner is authorized to collect from any insurer registered pursuant to Section 27-29-4 all information necessary to determine whether the commissioner may act as the group-wide supervisor of an internationally active insurance group or if the commissioner may acknowledge another regulatory official to act as the group-wide supervisor. Prior to issuing a determination that an internationally active insurance group is subject to group-wide supervision by the commissioner, the commissioner shall notify the insurer registered pursuant to Section 27-29-4 and the ultimate controlling person within the internationally active insurance group. The internationally active insurance group shall have not less than 30 days to provide the commissioner with additional information pertinent to the pending determination. The commissioner shall publish by bulletin and on its Internet website the identity of internationally active insurance groups that the commissioner has determined are subject to group-wide supervision by the commissioner.
(e) If the commissioner is the group-wide supervisor for an internationally active insurance group, the commissioner is authorized to engage in any of the following group-wide supervision activities:
(1) Assess the enterprise risks within the internationally active insurance group to ensure both of the following:
a. The material financial condition and liquidity risks to the members of the internationally active insurance group that are engaged in the business of insurance are identified by management.
b. Reasonable and effective mitigation measures are in place.
(2) Request, from any member of an internationally active insurance group subject to the commissioner’s supervision, information necessary and appropriate to assess enterprise risk, including, but not limited to, information about the members of the internationally active insurance group regarding the following:
a. Governance, risk assessment, and management.
b. Capital adequacy.
c. Material intercompany transactions.
(3) Coordinate and, through the authority of the regulatory officials of the jurisdictions where members of the internationally active insurance group are domiciled, compel development and implementation of reasonable measures designed to ensure that the internationally active insurance group is able to timely recognize and mitigate enterprise risks to members of the internationally active insurance group that are engaged in the business of insurance.
(4) Communicate with other state, federal, and international regulatory agencies for members within the internationally active insurance group and share relevant information subject to the confidentiality provisions of Section 27-29-7 through supervisory colleges as set forth in Section 27-29-6.1 or otherwise.
(5) Enter into agreements with or obtain documentation from any insurer registered under Section 27-29-4, any member of the internationally active insurance group, and any other state, federal, and international regulatory agencies for members of the internationally active insurance group, providing the basis for or otherwise clarifying the commissioner’s role as group-wide supervisor, including provisions for resolving disputes with other regulatory officials. The agreements or documentation shall not serve as evidence in any proceeding that any insurer or person within an insurance holding company system not domiciled or incorporated in this state is doing business in this state or is otherwise subject to jurisdiction in this state.
(6) Other group-wide supervision activities, consistent with the authorities and purposes enumerated above, as considered necessary by the commissioner.
(f) If the commissioner acknowledges that another regulatory official from a jurisdiction that is not accredited by the National Association of Insurance Commissioners is the group-wide supervisor, the commissioner is authorized to reasonably cooperate, through supervisory colleges or otherwise, with group-wide supervision undertaken by the group-wide supervisor, provided that:
(1) The commissioner’s cooperation is in compliance with the laws of this state.
(2) The regulatory official acknowledged as the group-wide supervisor also recognizes and cooperates with the commissioner’s activities as a group-wide supervisor for other internationally active insurance groups where applicable. Where such recognition and cooperation is not reasonably reciprocal, the commissioner may refuse recognition and cooperation.
(g) The commissioner may enter into agreements with or obtain documentation from any insurer registered under Section 27-29-4, any affiliate of the insurer, and other state, federal, and regulatory agencies for members of the internationally active insurance group, that provide the basis for or otherwise clarify a regulatory official’s role as group-wide supervisor.
(h) The commissioner may adopt rules necessary for the administration of this section.
(i) A registered insurer subject to this section shall be liable for and shall pay the reasonable expenses of the commissioner’s participation in the administration of this section, including the engagement of attorneys, actuaries, and any other professionals and all reasonable travel expenses.
(Act 2017-228, §2.)
(a)(1) All documents, materials, or other information, and copies thereof, in the possession or control of the department that are obtained by or disclosed to the commissioner or any other person in the course of an examination or investigation made pursuant to Section 27-29-6 and all information reported pursuant to paragraphs (b)(1)l. and (b)(1)m. of Section 27-29-3, Section 27-29-4, Section 27-29-5, and Section 27-29-6.2 are recognized by this state as being proprietary and containing trade secrets, and shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, and shall not be subject to subpoena. The commissioner may use the documents, materials, and other information in the furtherance of any regulatory or legal action in the course of the commissioner’s official duties. The documents, materials, and other information shall not be made public by the commissioner or any other person without the prior written consent of the insurer to which it pertains unless the commissioner determines that the interests of policyholders, shareholders, or the public will be served by the publication thereof, in which event the commissioner may publish all, or any part thereof, in such manner as the commissioner may deem appropriate. Prior to making this determination, the commissioner shall give the insurer and its affiliates who would be affected thereby no less than 10 days’ written notice of the opportunity to request a hearing on the matter.
(2) For purposes of the information reported and provided to the commissioner pursuant to Section 27-29-4(l)(2), the commissioner shall maintain the confidentiality of the group capital calculation and group capital ratio produced within the calculation and any group capital information received from an insurance holding company supervised by the Federal Reserve Board or any U.S. group-wide supervisor.
(3) For purposes of the information reported and provided to the commissioner pursuant to Section 27-29-4(l)(3), the commissioner shall maintain the confidentiality of the liquidity stress test results and supporting disclosures and any liquidity stress test information received from an insurance holding company supervised by the Federal Reserve Board and any non-U.S. group-wide supervisors.
(b) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner or with whom such documents, materials, or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) In order to assist in the performance of the commissioner’s duties, the commissioner:
(1) May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a), including proprietary and trade secret documents and materials, with other state, federal, and international regulatory agencies, with the NAIC, with any third-party consultants designated by the commissioner to perform examination or actuarial functions, and with state, federal, and international law enforcement authorities, including members of any supervisory college described in Section 27-29-6.1, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information, and has verified in writing the legal authority to maintain confidentiality.
(2) Notwithstanding subdivision (1) above, may share confidential and privileged documents, material, or information reported pursuant to subsection (l) of Section 27-29-4 only with commissioners of states having statutes or regulations substantially similar to subsection (a) and who have agreed in writing not to disclose such information.
(3) May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade secret information from the NAIC and its affiliates and subsidiaries and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
(4) Shall enter into written agreements with the NAIC and any third-party consultant designated by the commissioner to perform examination or actuarial functions governing sharing and use of information provided pursuant to this chapter consistent with this subsection that shall do all of the following:
a. Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant designated by the commissioner pursuant to this chapter, including procedures and protocols for sharing by the NAIC with other state, federal, or international regulators. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information and has verified in writing the legal authority to maintain the confidentiality.
b. Specify that ownership of information shared with the NAIC or a third-party consultant and its affiliates and subsidiaries pursuant to this chapter remains with the commissioner and the use of the information by the NAIC or a third-party consultant as designated by the commissioner to perform examination or actuarial functions is subject to the direction of the commissioner.
c. Require at least 10 days’ notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant designated by the commissioner pursuant to this chapter is subject to a request or subpoena to the NAIC or a third-party consultant designated by the commissioner for disclosure or production.
d. Require the NAIC or a third-party consultant designated by the commissioner to perform examination or actuarial functions to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant designated by the commissioner may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant designated by the commissioner pursuant to this chapter.
e. Excluding documents, materials, or other information reported pursuant to Section 27-29-4(l)(3), prohibit the NAIC or a third-party consultant designated by the commissioner to perform examination or actuarial functions from storing the information shared pursuant to this chapter in a permanent database after the underlying analysis is completed.
f. For documents, materials, or other information reported pursuant to Section 27-29-4(l)(3), in the case of an agreement involving a third-party consultant, provide for notification of the identity of the consultant to the applicable insurers.
(d) The sharing of information by the commissioner pursuant to this chapter shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner is solely responsible for the administration, execution, and enforcement of this chapter.
(e) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (c).
(f) Documents, materials, or other information in the possession or control of the NAIC or a third-party consultant designated by the commissioner pursuant to this chapter shall be confidential by law and privileged, shall not be subject to open records, freedom of information, sunshine, or other public records disclosure laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
(g) The group capital calculation and resulting group capital ratio required under Section 27-29-4(l)(2) and the liquidity stress test along with its results and supporting disclosures required under Section 27-29-4(l)(3) are regulatory tools for assessing group risks and capital adequacy and group liquidity risks, respectively, and are not intended as a means to rank insurers or insurance holding company systems generally. Therefore, except as otherwise may be required under this chapter, the making, publishing, disseminating, circulating, or placing before the public, or causing 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 any electronic means of communication available to the public, or in any other way as an advertisement, announcement, or statement containing a representation or statement with regard to the group capital calculation, group capital ratio, the liquidity stress test result, or supporting disclosures for the liquidity stress test of any insurer or any insurer group, or of any component derived in the calculation by any insurer, broker, or other person engaged in any manner in the insurance business would be misleading and is therefore prohibited. If any materially false statement with respect to the group capital calculation, resulting group capital ratio, an inappropriate comparison of any amount to an insurer’s or insurance group’s group capital calculation or resulting group capital ratio, liquidity stress test result, supporting disclosures for the liquidity stress test, or an inappropriate comparison of any amount to an insurer’s or insurance group’s liquidity stress test result or supporting disclosures is published in any written publication and the insurer is able to demonstrate to the commissioner with substantial proof the falsity of such statement or the inappropriateness, as the case may be, then the insurer may publish announcements in a written publication if the sole purpose of the announcement is to rebut the materially false statement.
(Acts 1973, No. 1042, p. 1636, §8; Act 2014-324, p. 1151, §1; Act 2017-228, §1; Act 2019-97, §2; Act 2022-151, §2.)
The commissioner may issue such rules, regulations, and orders as shall be necessary to carry out the provisions of this chapter.
(Acts 1973, No. 1042, p. 1636, §9.)
(a) Injunctions. Whenever it appears to the commissioner that any insurer or any director, officer, employee, or agent thereof has committed, or is about to commit, a violation of this chapter or of any rule, regulation, or order issued by the commissioner under this chapter, the commissioner may apply to the circuit court for the county in which the principal office of the insurer is located or if such insurer has no such office in this state, then to the Circuit Court for Montgomery County for an order enjoining such insurer or such director, officer, employee, or agent thereof from violating, or continuing to violate, this chapter or any such rule, regulation, or order and for such other equitable relief as the nature of the case and the interests of the insurer’s policyholders, creditors, and shareholders or the public may require.
(b) Voting of securities; when prohibited. No security which is the subject of any agreement or arrangement regarding acquisition or which is acquired, or to be acquired, in contravention of the provisions of this chapter or of any rule, regulation, or order issued by the commissioner under this chapter may be voted at any shareholders’ meeting or may be counted for quorum purposes, and any action of shareholders requiring the affirmative vote of a percentage of shares may be taken as though such securities were not issued and outstanding; but no action taken at any such meeting shall be invalidated by the voting of such securities unless the action would materially affect control of the insurer or unless the courts of this state have so ordered. If an insurer or the commissioner has reason to believe that any security of the insurer has been, or is about to be, acquired in contravention of the provisions of this chapter or of any rule, regulation, or order issued by the commissioner under this chapter, the insurer or the commissioner may apply to the Circuit Court for Montgomery County or to the circuit court for the county in which the insurer has its principal place of business to enjoin any offer, request, invitation, agreement, or acquisition made in contravention of Section 27-29-3 or any rule, regulation, or order issued by the commissioner thereunder to enjoin the voting of any security so acquired, to void any vote of such security already cast at any meeting of shareholders and for such other equitable relief as the nature of the case and the interests of the insurer’s policyholders, creditors, and shareholders or the public may require.
(c) Sequestration of voting securities. In any case where a person has acquired or is proposing to acquire any voting securities in violation of this chapter or any rule, regulation, or order issued by the commissioner under this chapter, the Circuit Court for Montgomery County or the circuit court for the county in which the insured has its principal place of business may, on such notice as the court deems appropriate, upon the application of the insurer or the commissioner, seize or sequester any voting securities of the insurer owned, directly or indirectly, by such person and issue such orders with respect thereto as may be appropriate to effectuate the provisions of this chapter. Notwithstanding any other provision of law, for the purposes of this chapter the situs of the ownership of the securities of domestic insurers shall be deemed to be in this state.
(Acts 1973, No. 1042, p. 1636, §10.)
(a) Any insurer failing, without just cause, to file any registration statement as required in this chapter shall be required, after notice and hearing, to pay a penalty of up to one thousand dollars ($1,000) for each day’s delay, to be recovered by the commissioner and the penalty so recovered shall be paid into the state General Fund. The maximum penalty under this section is fifty thousand dollars ($50,000). The commissioner may reduce the penalty if the commissioner, in the commissioner’s sole discretion, determines it is equitable to do so or the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.
(b) Every director or officer of an insurance holding company system who knowingly violates, participates in, or permits any of the officers or agents of the insurer to engage in transactions or make investments that have not been properly reported or submitted pursuant to subsection (a) of Section 27-29-4, subdivision (1) of subsection (b) of Section 27-29-5, or subsection (g) of Section 27-29-5, or which violate this chapter, shall pay, in their individual capacity, a civil forfeiture of not more than ten thousand dollars ($10,000) per violation, after notice and hearing before the commissioner. In determining the amount of the civil forfeiture, the commissioner shall take into account the appropriateness of the forfeiture with respect to the gravity of the violation, the history of previous violations, and such other matters as justice may require. A director or officer of an insurance holding company system acts knowingly when he or she has actual and not constructive or apparent knowledge of the nature of conduct described in this section or that a circumstance exists as described in this section.
(c) Whenever it appears to the commissioner that any insurer subject to this chapter or any director, officer, employee, or agent thereof has engaged in any transaction or entered into a contract which is subject to Section 27-29-5 and which would not have been approved had the approval been requested, the commissioner may order the insurer to cease and desist immediately any further activity under that transaction or contract. After notice and hearing, the commissioner may also order the insurer to void any contracts and restore the status quo if the action is in the best interest of the policyholders, creditors, or the public.
(d) Whenever it appears to the commissioner that any insurer or any director, officer, employee, or agent thereof has committed a willful violation of this chapter, the commissioner may cause criminal proceedings to be instituted by the district attorney for the county in which the principal office of the insurer is located, or if such insurer has no such office in the state, then by the District Attorney for Montgomery County, against such insurer or the responsible director, officer, employee, or agent thereof. Any insurer which willfully violates this chapter may upon conviction be fined not more than ten thousand dollars ($10,000). Any individual who willfully violates this chapter may upon conviction be fined not more than one thousand dollars ($1,000) or, if such willful violation involves the deliberate perpetration of a fraud upon the commissioner, imprisoned not more than two years, or both.
(e) Any officer, director, or employee of an insurance holding company system who willfully and knowingly subscribes to or makes or causes to be made any false statements or false reports or false filings with the intent to deceive the commissioner in the performance of his or her duties under this chapter, upon conviction, shall be imprisoned for not more than five years or fined not more than fifty thousand dollars ($50,000), or both. Any fines imposed shall be paid by the officer, director, or employee in his or her individual capacity.
(f) Whenever it appears to the commissioner that any person has committed a violation of Section 27-29-3 and which prevents the full understanding of the enterprise risk to the insurer by affiliates or by the insurance holding company system, the violation may serve as an independent basis for disapproving dividends or distributions and for placing the insurer under an order of supervision in accordance with Section 27-2-33.
(Acts 1973, No. 1042, p. 1636, §11; Act 2014-324, p. 1151, §1.)
Whenever it appears to the commissioner that any person has committed a violation of this chapter which so impairs the financial condition of a domestic insurer as to threaten imminent insolvency or impairment as defined in subdivision (1) of Section 27-32-1 or make the further transaction of business by it hazardous to its policyholders, creditors, shareholders, or the public, then the commissioner may proceed as provided in Sections 27-32-3 through 27-32-7 to take possession of the property of such domestic insurer and to conduct the business thereof.
(Acts 1973, No. 1042, p. 1636, §12.)
(a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under the order shall have a right to recover on behalf of the insurer, (1) from any parent corporation, holding company, person, or affiliate who otherwise controlled the insurer, the amount of distributions, other than distributions of shares of the same class of stock, paid by the insurer on its capital stock, or (2) any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiary to a director, officer, or employee, where the distribution or payment pursuant to (1) or (2) is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c), and (d).
(b) No distribution shall be recoverable if the parent or affiliate shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(c) Any person who was a parent corporation, holding company, or a person who otherwise controlled the insurer or affiliate at the time the distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) which the person received. Any person who otherwise controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions that would have been received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.
(d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty associations.
(e) To the extent that any person liable under subsection (c) is insolvent or otherwise fails to pay claims due from it, its parent corporation, holding company, or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation, holding company, or person who otherwise controlled it.
(Act 2014-324, p. 1151, §2.)
Whenever it appears to the commissioner that any person has committed a violation of this chapter which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the commissioner may, after giving notice and an opportunity to be heard, determine to suspend, revoke, or refuse to renew such insurer’s license or authority to do business in this state for such period as he finds is required for the protection of policyholders or the public. Any such determination shall be accompanied by specific findings of fact and conclusions of law.
(Acts 1973, No. 1042, p. 1636, §13.)
(a) Any person aggrieved by any act, determination, rule, regulation, or order or any other action of the commissioner pursuant to this chapter may appeal therefrom within 30 days after such action, determination, rule, or regulation is taken or issued, in accordance with the provisions of Section 27-2-32, except that the court shall conduct its review without a jury and by trial de novo; provided, however, that all the parties, including the commissioner, may stipulate that the review shall be confined to the record. Portions of the record may be introduced by stipulation into evidence in a trial de novo as to those parties so stipulating.
(b) The filing of an appeal pursuant to this section shall stay the application of any such rule, regulation, order, or other action of the commissioner to the appealing party unless the court, after giving such party notice and an opportunity to be heard, determines that such a stay would be detrimental to the interests of policyholders, shareholders, creditors, or the public.
(c) Any person aggrieved by any failure of the commissioner to act or to make a determination required by this chapter may petition the Circuit Court for Montgomery County for a writ in the nature of a mandamus or a peremptory mandamus directing the commissioner to act or make such determination forthwith.
(Acts 1973, No. 1042, p. 1636, §14.)
This chapter may be cited as the Alabama Insurance Holding Company System Regulatory Act.
(Acts 1973, No. 1042, p. 1636, §1.)
(a) The purpose of this chapter is to provide the requirements for maintaining a risk management framework and completing an Own Risk and Solvency Assessment (ORSA) and provide guidance and instructions for filing an ORSA Summary Report with the Commissioner of Insurance.
(b) The requirements of this chapter shall apply to all insurers domiciled in this state unless exempt pursuant to Section 27-29A-6.
(c) The Legislature finds and declares that the ORSA Summary Report will contain confidential and sensitive information related to an insurer or insurance group’s identification of risks material and relevant to the insurer or insurance group filing the report. This information will include proprietary and trade secret information that has the potential for harm and competitive disadvantage to the insurer or insurance group if the information is made public. It is the intent of this Legislature that the ORSA Summary Report shall be a confidential document filed with the commissioner, that the ORSA Summary Report will be shared only as stated herein and to assist the commissioner in the performance of his or her duties, and that in no event shall the ORSA Summary Report be subject to public disclosure.
(Act 2016-386, §1.)
For purposes of this chapter, the following definitions shall apply:
(1) INSURANCE GROUP. Those insurers and affiliates included within an insurance holding company system as defined in Chapter 29.
(2) INSURER. As set forth in Section 27-1-2, except that it shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
(3) NAIC. The National Association of Insurance Commissioners and its affiliates and subsidiaries.
(4) OWN RISK AND SOLVENCY ASSESSMENT or ORSA. A confidential internal assessment, appropriate to the nature, scale, and complexity of an insurer or insurance group, conducted by that insurer or insurance group of the material and relevant risks associated with the insurer or insurance group’s current business plan, and the sufficiency of capital resources to support those risks.
(5) ORSA GUIDANCE MANUAL. The current version of the Own Risk and Solvency Assessment Guidance Manual developed and adopted by the NAIC and as amended from time to time. A change in the ORSA Guidance Manual shall be effective on the January 1 following the calendar year in which the changes have been adopted by the NAIC.
(6) ORSA SUMMARY REPORT. A confidential high level summary of an insurer or insurance group’s ORSA.
(Act 2016-386, §1.)
An insurer shall maintain a risk management framework to assist the insurer with identifying, assessing, monitoring, managing, and reporting on its material and relevant risks. This requirement may be satisfied if the insurance group of which the insurer is a member maintains a risk management framework applicable to the operations of the insurer.
(Act 2016-386, §1.)
Subject to Section 27-29A-6, an insurer, or the insurance group of which the insurer is a member, shall regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual. The ORSA shall be conducted no less than annually but also at any time when there are significant changes to the risk profile of the insurer or the insurance group of which the insurer is a member, or both.
(Act 2016-386, §1.)
(a) Upon the commissioner’s request, and no more than once each year, an insurer shall submit to the commissioner an ORSA Summary Report or any combination of reports that together contain the information described in the ORSA Guidance Manual, applicable to the insurer or the insurance group of which it is a member, or both. Notwithstanding any request from the commissioner, if the insurer is a member of an insurance group, the insurer shall submit the report or reports required by this subsection if the commissioner is the lead state commissioner of the insurance group as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.
(b) The report or reports shall include a signature of the insurer or insurance group’s chief risk officer or other executive having responsibility for the oversight of the insurer’s enterprise risk management process attesting to the best of his or her belief and knowledge that the insurer applies the enterprise risk management process described in the ORSA Summary Report and that a copy of the report has been provided to the insurer’s board of directors or the appropriate committee thereof.
(c) An insurer may comply with subsection (a) by providing the most recent and substantially similar report or reports provided by the insurer or another member of an insurance group of which the insurer is a member to the commissioner of another state or to a supervisor or regulator of a foreign jurisdiction, if that report provides information that is comparable to the information described in the ORSA Guidance Manual. A report in a language other than English must be accompanied by a translation of that report into the English language.
(Act 2016-386, §1.)
(a) An insurer shall be exempt from the requirements of this chapter, if it meets both of the following:
(1) The insurer has annual direct written and unaffiliated assumed premium, including international direct and assumed premium but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than five hundred million dollars ($500,000,000).
(2) The insurance group of which the insurer is a member has annual direct written and unaffiliated assumed premium including international direct and assumed premium, but excluding premiums reinsured with the Federal Crop Insurance Corporation and Federal Flood Program, less than one billion dollars ($1,000,000,000).
(b) If an insurer qualifies for exemption pursuant to subdivision (1) of subsection (a), but the insurance group of which the insurer is a member does not qualify for exemption pursuant to subdivision (2) of subsection (a), then the ORSA Summary Report that may be required pursuant to Section 27-29A-5 shall include every insurer within the insurance group. This requirement may be satisfied by the submission of more than one ORSA Summary Report for any combination of insurers provided any combination of reports includes every insurer within the insurance group.
(c) If an insurer does not qualify for exemption pursuant to subdivision (1) of subsection (a), but the insurance group of which it is a member qualifies for exemption pursuant to subdivision (2) of subsection (a), then the only ORSA Summary Report that may be required pursuant to Section 27-29A-5 shall be the report applicable to that insurer.
(d) An insurer that does not qualify for exemption pursuant to subsection (a) may apply to the commissioner for a waiver from the requirements of this chapter based upon unique circumstances. In deciding whether to grant the insurer’s request for waiver, the commissioner may consider the type and volume of business written, ownership, and organizational structure, and any other factor the commissioner considers relevant to the insurer or insurance group of which the insurer is a member. If the insurer is part of an insurance group with insurers domiciled in more than one state, the commissioner shall coordinate with the lead state commissioner and with the other domiciliary commissioners in considering whether to grant the insurer’s request for a waiver.
(e) Notwithstanding the exemptions stated in this section, the commissioner may require of an insurer to do both of the following:
(1) To maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report based on unique circumstances including, but not limited to, the type and volume of business written, ownership, and organizational structure, federal agency requests, and international supervisor requests.
(2) To maintain a risk management framework, conduct an ORSA, and file an ORSA Summary Report if the insurer has risk-based capital for a company action level event as set forth in Section 27-2B-4, meets one or more of the standards of an insurer deemed to be in hazardous financial condition as defined by regulation of the commissioner, or otherwise exhibits qualities of a troubled insurer as determined by the commissioner.
(f) If an insurer that qualifies for an exemption pursuant to subsection (a) subsequently no longer qualifies for that exemption due to changes in premium as reflected in the insurer’s most recent annual statement or in the most recent annual statements of the insurers within the insurance group of which the insurer is a member, the insurer shall have one year following the year the threshold is exceeded to comply with the requirements of this chapter.
(Act 2016-386, §1.)
(a) The ORSA Summary Report shall be prepared consistent with the ORSA Guidance Manual, subject to the requirements of subsection (b). Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.
(b) The review of the ORSA Summary Report, and any additional requests for information, shall be made using similar procedures currently used in the analysis and examination of multi-state or global insurers and insurance groups.
(Act 2016-386, §1.)
(a) Documents, materials, or other information, including the ORSA Summary Report, in the possession of or control of the Department of Insurance that are obtained by, created by, or disclosed to the commissioner or any other person under this chapter, are recognized by this state as being proprietary and to contain trade secrets. All such documents, materials, or other information shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties. The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer.
(b) Neither the commissioner nor any person who received documents, materials, or other ORSA-related information, through examination or otherwise, while acting under the authority of the commissioner or with whom such documents, materials, or other information are shared pursuant to this chapter shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) In order to assist in the performance of the commissioner’s regulatory duties, the commissioner:
(1) Upon request, may share documents, materials, or other ORSA-related information, including the confidential and privileged documents, materials, or information subject to subsection (a), including proprietary and trade secret documents and materials with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in Section 27-29-6.1, with the NAIC and with any third-party consultants designated by the commissioner, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.
(2) May receive documents, materials, or other ORSA-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade secret information or documents, from regulatory officials of other foreign or domestic jurisdictions, including members of any supervisory college as defined in Section 27-29-6.1, and from the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the documents, materials, or information.
(3) Shall enter into a written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to this chapter, consistent with this subsection that shall satisfy all of the following:
a. Specify procedures and protocols regarding the confidentiality and security of information shared with the NAIC or a third-party consultant pursuant to this chapter, including procedures and protocols for sharing by the NAIC with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the ORSA-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.
b. Specify that ownership of information shared with the NAIC or a third-party consultant pursuant to this chapter remains with the commissioner and the NAIC’s or a third-party consultant’s use of the information is subject to the direction of the commissioner.
c. Prohibit the NAIC or third-party consultant from storing the information shared pursuant to this chapter in a permanent database after the underlying analysis is completed.
d. Require prompt notice to be given to an insurer whose confidential information in the possession of the NAIC or a third-party consultant pursuant to this chapter is subject to a request or subpoena to the NAIC or a third-party consultant for disclosure or production.
e. Require the NAIC or a third-party consultant to consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this chapter.
f. In the case of an agreement involving a third-party consultant, provide for the insurer’s written consent.
(d) The sharing of information and documents by the commissioner pursuant to this chapter shall not constitute a delegation of regulatory authority or rulemaking and the commissioner is solely responsible for the administration, execution, and enforcement of this chapter.
(e) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary, and trade secret materials or other ORSA-related information shall occur as a result of disclosure of such ORSA-related information or documents to the commissioner under this section or as a result of sharing as authorized in this chapter.
(f) Documents, materials, or other information in the possession or control of the NAIC or third-party consultants pursuant to this chapter shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, and shall not be subject to subpoena.
(Act 2016-386, §1.)
(a) Any insurer failing, without just cause as determined by the commissioner, to timely file the ORSA Summary Report as required in this chapter shall be required, after notice and hearing as provided in Chapter 2, to pay a penalty of one hundred dollars ($100) for each day’s delay, not to exceed ten thousand dollars ($10,000).
(b) The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.
(c) Any penalty collected under this section shall be deposited in the State Treasury to the credit of the Insurance Department Fund.
(Act 2016-386, §1.)
The first filing of the ORSA Summary Report shall be in the year commencing on January 1, 2017, pursuant to Section 27-29A-5.
(Act 2016-386, §1.)
(a) The purpose of this chapter is to do all of the following:
(1) Provide the Commissioner of Insurance a summary of an insurer or insurance group’s corporate governance structure, policies, and practices to permit the commissioner to gain and maintain an understanding of the insurer’s corporate governance framework.
(2) Outline the requirements for completing a corporate governance annual disclosure with the commissioner.
(3) Provide for the confidential treatment of the corporate governance annual disclosure and related information that will contain confidential and sensitive information related to an insurer or insurance group’s internal operations and proprietary and trade secret information which, if made public, could potentially cause the insurer or insurance group competitive harm or disadvantage.
(b) Nothing in this chapter shall be construed to prescribe or impose corporate governance standards and internal procedures beyond the procedures that are required under applicable state corporate law. Notwithstanding the foregoing, nothing in this chapter shall be construed to limit the authority of the commissioner, or the rights or obligations of third parties, under Chapter 2.
(c) The requirements of this chapter shall apply to all insurers domiciled in this state.
(Act 2019-97, §1.)
For purposes of this chapter, the following definitions apply:
(1) COMMISSIONER. The Commissioner of Insurance.
(2) CORPORATE GOVERNANCE ANNUAL DISCLOSURE or CGAD. A confidential report filed by an insurer or insurance group in accordance with the requirements of this chapter.
(3) INSURANCE GROUP. Insurers and affiliates included within an insurance holding company system as defined in Chapter 29.
(4) INSURER. As defined in Section 27-1-2, except the term shall not include agencies, authorities, or instrumentalities of the United States, its possessions and territories, the Commonwealth of Puerto Rico, the District of Columbia, or a state or political subdivision of a state.
(5) NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS or NAIC. The National Association of Insurance Commissioners and its affiliates and subsidiaries.
(Act 2019-97, §1.)
(a) Not later than June 1 of each calendar year, an insurer or the insurance group of which the insurer is a member, shall submit to the commissioner a Corporate Governance Annual Disclosure that contains the information described in Section 27-29B-5. Notwithstanding any request from the commissioner made pursuant to subsection (c), if the insurer is a member of an insurance group, the insurer shall submit the report required by this section to the commissioner of the lead state for the insurance group in accordance with the laws of the lead state as determined by the procedures outlined in the most recent Financial Analysis Handbook adopted by the NAIC.
(b) The CGAD shall include a signature of the insurer or insurance group’s chief executive officer or corporate secretary attesting to the best of that individual’s belief and knowledge that the insurer has implemented the corporate governance practices and that a copy of the disclosure has been provided to the board of directors of the insurer or the appropriate committee thereof.
(c) An insurer that is not required to submit a CGAD under this section shall submit a CGAD at the request of the commissioner.
(d) For purposes of completing the CGAD, the insurer or insurance group may provide information regarding corporate governance at the ultimate controlling parent level, an intermediate holding company level, or the individual legal entity level, based on the structure of the system of corporate governance of the insurer or insurance group. The insurer or insurance group is encouraged to make the CGAD disclosures at the level at which the insurer’s or insurance group’s risk appetite is determined; or at the level at which the earnings, capital, liquidity, operations, and reputation of the insurer are overseen collectively and at which the supervision of those factors are coordinated and exercised; or at the level at which legal liability for failure of general corporate governance duties would be placed. If the insurer or insurance group determines the level of reporting based on these criteria, it shall indicate which of the three criteria was used to determine the level of reporting and explain any subsequent changes in level of reporting.
(e) The review of the CGAD and any additional requests for information shall be made through the lead state as determined by the procedures within the most recent Financial Analysis Handbook as provided for in subsection (a).
(f) Insurers providing information substantially similar to the information required by this chapter in other documents provided to the commissioner, including proxy statements filed in conjunction with Form B requirements, or other state or federal filings provided to the department shall not be required to duplicate that information in the CGAD, but shall only be required to cross reference the document in which the information is included.
(Act 2019-97, §1.)
The commissioner, upon notice and opportunity for all interested persons to be heard, may issue rules and orders as necessary to carry out this chapter.
(Act 2019-97, §1.)
(a) The insurer or insurance group shall have discretion over the responses to the CGAD inquiries, provided the CGAD shall contain the material information necessary to permit the commissioner to gain an understanding of the insurer’s or insurance group’s corporate governance structure, policies, and practices. The commissioner may request additional information that the commissioner deems material and necessary to provide the commissioner with a clear understanding of the corporate governance policies or the reporting or information system or controls implementing those policies.
(b) Notwithstanding subsection (a), the CGAD shall be prepared consistent with rules adopted by the commissioner which shall be substantially similar to the Corporate Governance Annual Disclosure Model Regulation developed by the NAIC. Documentation and supporting information shall be maintained and made available upon examination or upon request of the commissioner.
(Act 2019-97, §1.)
(a) Documents, materials, or other information, including the CGAD, in the possession or control of the department that are obtained by, created by, or disclosed to the commissioner or any other person under this chapter, are recognized by this state as being proprietary and to contain trade secrets. All of the documents, materials, or other information shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the official duties of the commissioner. The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the insurer. Nothing in this section shall be construed to require written consent of the insurer before the commissioner may share or receive confidential documents, materials, or other CGAD-related information pursuant to subsection (c) to assist in the performance of the duties of the commissioner.
(b) Neither the commissioner nor any person who received documents, materials, or other CGAD-related information, through examination or otherwise, while acting under the authority of the commissioner, or with whom the documents, materials, or other information are shared pursuant to this chapter, shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) In order to assist in the performance of the regulatory duties of the commissioner, the commissioner may do all of the following:
(1) Upon request, share documents, materials, or other CGAD-related information, including the confidential and privileged documents, materials, or information subject to subsection (a), including proprietary and trade secret documents and materials, with other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in Section 27-29-6.1, with the NAIC, and with third party consultants pursuant to Section 27-29B-7, provided the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, material, or other information and has verified in writing the legal authority to maintain confidentiality.
(2) Receive documents, materials, or other CGAD-related information, including otherwise confidential and privileged documents, materials, or information, including proprietary and trade secret information or documents, from regulatory officials of other state, federal, and international financial regulatory agencies, including members of any supervisory college as defined in Section 27-29-6.1, and from the NAIC, and shall maintain as confidential or privileged any documents, materials, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
(d) The sharing of information and documents by the commissioner pursuant to this chapter shall not constitute a delegation of regulatory authority or rulemaking, and the commissioner shall be solely responsible for the administration, execution, and enforcement of this chapter.
(e) No waiver of any applicable privilege or claim of confidentiality in the documents, proprietary and trade secret materials, or other CGAD-related information shall occur as a result of disclosure of CGAD-related information or documents to the commissioner under this section or as a result of sharing authorized in this chapter.
(Act 2019-97, §1.)
(a) The commissioner, at the insurer’s expense, may retain third-party consultants, including attorneys, actuaries, accountants, and other experts not otherwise a part of the staff of the commissioner as may be reasonably necessary to assist the commissioner in reviewing the CGAD and related information or the insurer’s compliance with this chapter.
(b) Any persons retained under subsection (a) shall be under the direction and control of the commissioner and shall act in a purely advisory capacity.
(c) The NAIC and third-party consultants shall be subject to the same confidentiality standards and requirements as the commissioner.
(d) As part of the retention process, a third-party consultant shall verify to the commissioner, with notice to the insurer, that it is free of a conflict of interest and that it has internal procedures in place to monitor compliance with a conflict and to comply with the confidentiality standards and requirements of this chapter.
(e) A written agreement with the NAIC or a third-party consultant governing sharing and use of information provided pursuant to this chapter shall contain all of the following provisions and expressly require the written consent of the insurer prior to making public information provided under this chapter:
(1) Specific procedures and protocols for maintaining the confidentiality and security of CGAD-related information shared with the NAIC or a third-party consultant pursuant to this chapter.
(2) Procedures and protocols for sharing by the NAIC only with other state regulators from states in which the insurance group has domiciled insurers. The agreement shall provide that the recipient agrees in writing to maintain the confidentiality and privileged status of the CGAD-related documents, materials, or other information and has verified in writing the legal authority to maintain confidentiality.
(3) A provision specifying that ownership of the CGAD-related information shared with the NAIC or a third-party consultant remains with the department and the use of the information by NAIC or third-party consultant is subject to the direction of the commissioner.
(4) A provision that prohibits the NAIC or a third-party consultant from storing the information shared pursuant to this chapter in a permanent database after the underlying analysis is completed.
(5) A provision requiring the NAIC or third-party consultant to provide prompt notice to the commissioner and to the insurer or insurance group regarding any subpoena, request for disclosure, or request for production of the insurer’s CGAD-related information.
(6) A requirement that the NAIC or a third-party consultant consent to intervention by an insurer in any judicial or administrative action in which the NAIC or a third-party consultant may be required to disclose confidential information about the insurer shared with the NAIC or a third-party consultant pursuant to this chapter.
(Act 2019-97, §1.)
Any insurer failing, without just cause, to timely file the CGAD as required in this chapter shall be required, after notice and hearing, to pay a penalty of one thousand dollars ($1,000) for each day’s delay, to be recovered by the commissioner. Any penalty recovered shall be deposited in the State General Fund. The maximum penalty under this section is one hundred thousand dollars ($100,000). The commissioner may reduce the penalty if the insurer demonstrates to the commissioner that the imposition of the penalty would constitute a financial hardship to the insurer.
(Act 2019-97, §1.)
If any provision of this chapter, except Section 27-29B-6, or the application thereof to any person or circumstance is held invalid, that determination shall not affect the provisions or applications of this chapter which can be given effect without the invalid provisions or application, and to that end the provisions of this chapter, with the exception of Section 27-29B-6, are severable.
(Act 2019-97, §1.)
For the purposes of this title, a “mutual aid association,” whether otherwise known as a “benefit” or “industrial” company or by whatever other name called, is a corporation whose business is limited to the provision of any of the following payments, aid, or benefits under certificates, policies, or agreements issued to or made with members or policyholders and which payments, aid, or benefits are derived from donations, fees, dues, assessments, or premiums:
(1) Upon the birth of any child, or marriage, or sickness, or physical disability of the policyholder or member, or of his dependent, to pay money or render aid;
(2) The provision of dental, medical, or surgical attention, or hospital service or attention of any kind as to the member or policyholder or to his dependents; or
(3) Upon death of the policyholder or member or of his dependent, to pay money or render aid, including burial benefits or the furnishing of a complete funeral and including the payment of money and rendering aid to a beneficiary as designated by the policyholder or member becoming deceased.
(Acts 1927, No. 548, p. 634; Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §558.)
(a) This chapter applies only to domestic mutual aid associations, as defined in Section 27-30-1.
(b) No provision of this title shall apply to mutual aid associations except as contained or referred to in this chapter.
(Acts 1971, No. 407, p. 707, §557.)
The designation “mutual aid association” and this chapter do not apply as to:
(1) Any secret or benevolent society, such as Masons, Odd Fellows, Knights and Ladies of Honor, Knights of Pythias, or like orders and societies, or any association organized and operating in good faith under the lodge system for purely benevolent purposes and with a ritualistic form of work;
(2) Agreements between hospitals and industrial corporations to provide for hospital services for the employees of such corporations, and the employment by such corporations of medical doctors, surgeons and dentists for the purpose of giving medical, surgical and dental attention to such employees; or
(3) Any insurer operating under, or subject to, the general insurance laws of this state.
(Acts 1927, No. 548, p. 634; Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §559.)
(a) No person shall in this state be, act as, or hold itself out to be a mutual aid association except in compliance with this chapter and as authorized by a subsisting certificate of authority therefor, issued by the commissioner under this chapter.
(b) No person shall act as solicitor, collector, or otherwise as an agent or representative of any entity or organization acting as, or purporting to be, a mutual aid association unless such entity or organization is then authorized as a mutual aid association as required in subsection (a) of this section.
(c) Any person who violates this section shall, upon conviction thereof, be guilty of a misdemeanor and punished by a fine of not less than $200.00 nor more than $1,000.00, or by imprisonment in the county jail for not less than 10 days nor more than one year or by both such fine and imprisonment, in the discretion of the court. For the purposes of this section, each instance of such violation shall be deemed to constitute a separate offense.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §560.)
No person shall hereafter be authorized or hold authority to transact business in this state as a mutual aid association unless it is otherwise in compliance with this chapter and meets the following requirements:
(1) Must be a corporation heretofore or hereafter lawfully formed under the laws of the State of Alabama;
(2) If a stock corporation, and except as provided in Section 27-30-6, must have and maintain unimpaired paid-in capital stock of not less than $50,000.00 and, if newly organized, must have, in addition when first so authorized, a paid-in surplus of not less than $75,000.00;
(3) If a mutual corporation, and except as provided in Section 27-30-6, must have applications for benefits and paid-in fees, dues, assessments, or contributions, if required under Section 27-30-27, and must thereafter have and maintain unimpaired surplus funds, representing the excess of its admitted assets over all its required reserves and incurred liabilities, of not less than $75,000.00;
(4) Its management and affairs must be conducted under the actual and active control, direction, and supervision of directors or trustees, officers and other management personnel, each of whom has been found, by the commissioner after due investigation, to be an individual of good character and reputation and with sufficient education, training, or experience to be reasonably competent in the fulfillment of his duties and responsibilities relative to the association;
(5) Must not be affiliated, directly or indirectly, with any person or persons whose business operations are, or have been, marked to the detriment of members, policyholders, stockholders, creditors, or the public by manipulation of assets or accounts, or of reinsurance or by bad faith; and
(6) Must have and maintain in this state a principal office for the transaction of its business and must keep therein records and accounts of its affairs as required under Section 27-30-21.
(Acts 1939, No. 374, p. 502; Code 1940, T. 28, §262; Acts 1947, No. 349, p. 229; Acts 1967, No. 99, p. 437; Acts 1971, No. 407, p. 707, §561.)
Any domestic mutual aid association which immediately prior to January 1, 1972, lawfully held a certificate of authority or license to transact such business in this state and which is otherwise in compliance with the requirements of this chapter shall be entitled to have a certificate of authority while it has and maintains unimpaired paid-in capital stock, if a stock corporation, or surplus, if a mutual corporation, as follows:
(1) If it is a stock corporation, it must have and maintain capital stock of at least $25,000.00; except, that an association having unimpaired paid-in capital stock on January 1, 1972, in less than such amount shall as of each December 31, following January 1, 1972, have increased its unimpaired paid-in capital stock by an amount equal to not less than 20 percent of such original deficiency, so that, and until not later than the fifth such December 31, the association shall have unimpaired paid-in capital stock of not less than $25,000.00. Such an association shall be entitled to have its certificate of authority continue in effect during such five-year period if it is otherwise entitled thereto under this chapter;
(2) If it is a mutual corporation, it must have and maintain unimpaired surplus funds in the amount of not less than $12,500.00; except, that an association having unimpaired surplus funds on January 1, 1972, in less than such amount shall as of each December 31, following January 1, 1972, have increased its unimpaired surplus funds by an amount equal to not less than 20 percent of such original deficiency, so that, and until not later than the fifth such December 31, the association shall have unimpaired surplus funds of not less than $12,500.00. Such an association shall be entitled to have its certificate of authority continue in effect during such five-year period if it is otherwise entitled thereto under this chapter; and
(3) The commissioner shall promptly revoke the certificate of authority of any such association that does not comply with the requirements of this section.
(Acts 1971, No. 407, p. 707, §562.)
(a) All mutual aid associations which have held valid certificates of authority under Sections 27-30-1 through 27-30-33 for a period of five years prior to June 8, 1984, are hereby authorized to increase the paid-in capital stock and paid-in surplus of the association. Any association maintaining a minimum surplus of $100,000.00 is authorized to provide contracts or policies on any one life not to exceed five percent of the capital of such association, and to provide accidental death benefits on any one life so insured not to exceed the amount of life insurance provided.
(b) The provisions of subsection (a) of this section shall additionally apply to all mutual aid associations, after said associations have completed five years of operations and are in compliance with the Insurance Code of Alabama.
(Acts 1984, 1st Ex. Sess., No. 84-729, p. 65.)
Every mutual aid association shall have and use in its transactions a corporate name suited to the character and purposes of the association. No such name shall so closely resemble the name of any other corporation or organization doing business in Alabama or elsewhere as to tend to be confusing or deceptive, nor shall any such name be one which tends to confuse or mislead as to the character or plan of operation of the association.
(Acts 1971, No. 407, p. 707, §563.)
(a) To apply for a certificate of authority, a mutual aid association shall file with the commissioner its application therefor, on forms as prescribed and furnished by him, and showing:
(1) Name of the association and the address of its principal office or place of business in this state;
(2) Name, identification, and residence address of each director, trustee, or officer of the association;
(3) The types of aid or benefits to be provided its members or policyholders;
(4) The general plan or plans according to which its business is, or will be, conducted; and
(5) Such other information as the commissioner may reasonably require.
(b) The applicant shall at the time of application for certificate of authority file with the commissioner such of the following as are not already on file with him:
(1) A copy of its articles of incorporation, its bylaws, and other charter or constituent documents, certified by the public official having custody of the original or, in the case of documents not already of public record, certified by the officer of the association having custody thereof;
(2) A copy of each policy, certificate, contract, and agreement it proposes to use in the conduct of its business and relating to aid and benefits to be provided its members or policyholders;
(3) A financial statement, upon the same form and with verification as required for its annual statement as provided for under Section 27-30-22, showing its current financial condition;
(4) A schedule of fees, dues, contributions, or other sums to be charged or received by the association in transactions under its certificate of authority, if granted;
(5) Appointment of the commissioner as its attorney to receive service of process, as required under Section 27-30-13; and
(6) Such other documents and matters as the commissioner may reasonably require.
(c) At time of filing its application, the association shall pay to the commissioner the applicable fees prescribed in subdivision (a) (1) of Section 27-4-2.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §564.)
If, upon completion of the application for a certificate of authority, the commissioner finds:
he shall issue to the association 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 a certificate of authority within a reasonable period after its completion.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §565.)
(a) The certificate of authority of a mutual aid association issued under this chapter shall expire annually at midnight on the May 31 next following the date of issuance or renewal.
(b) If the association has filed its annual statement for the preceding calendar year, has paid its taxes as provided for in this chapter, and is otherwise entitled thereto under this chapter, the commissioner shall annually as of June 1, issue to the association a renewal certificate of authority if written request of the association therefor, accompanied by the annual renewal fee specified in Section 27-4-2, is received by the commissioner not later than the preceding May 1. If such request for renewal and fee is received by the commissioner after such May 1, but prior to the next following June 15, the commissioner may, in his discretion, issue to the association a renewal certificate of authority as of such June 1 if the request is also accompanied by a reinstatement fee in the amount specified in paragraph (a) (1) d of Section 27-4-2.
(Acts 1971, No. 407, p. 707, §566.)
(a) The commissioner shall suspend or revoke the certificate of authority of a mutual aid association if he finds, upon examination or other evidence, that any one or more of the following grounds exist:
(1) For any cause for which he could have refused to issue the certificate of authority under this chapter had it then existed and been known to the commissioner;
(2) If the association is in unsound condition or is in such condition or is using such methods and practices in the conduct of its business as to render its further transactions of insurance in this state hazardous to its members, policyholders, dependents, beneficiaries, or to the public;
(3) If the association has refused to be examined or to produce its accounts, records, and files for examination or if any of its officers or agents have refused to perform any legal obligation relative thereto or have willfully refused to give information with respect to its affairs, when required by the commissioner; or
(4) If the association has failed to pay any final judgment against it in favor of a citizen of this state.
(b) The commissioner may, in his discretion, suspend or revoke the certificate of authority of a mutual aid association if he finds, upon examination or other evidence, that any one or more of the following grounds exist:
(1) If the association has failed to keep adequate and proper records of its transactions or to give proper receipts and account for moneys paid to or received by it;
(2) If the association has, with such frequency as to indicate its general business practice in this state, without just cause, refused to pay proper claims arising under its policies, certificates, contracts, or agreements or, without just cause, compels claimants to accept less than the amount due them or to employ attorneys or to bring an action against the association to secure full payment or settlement of such claims; or
(3) For violation of any provision of, or referred to in, this chapter.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §567.)
(a) If suspension or revocation of certificate of authority relates to grounds other than the financial condition of the association, the commissioner shall give the association written notice of his intention to so suspend or revoke not less than 10 days in advance of the effective date of the proposed order of suspension or revocation. The notice shall state the grounds of the commissioner’s proposed action, together with such details as reasonably to inform the association thereof. Notice mailed to the association at its principal place of business last of record with the commissioner shall be deemed to have been given when so mailed. If within such 10-day period the association files with the commissioner its written request for a hearing with respect to the proposed suspension or revocation, setting forth the reasons why, in its opinion, the commissioner’s proposed action is unlawful or should not be taken, the commissioner shall hold the hearing so requested, upon notice and under procedures as provided for in Chapter 2 of this title, and shall not effectuate the proposed suspension or revocation pending the hearing and his order made thereon.
(b) Following any such suspension or revocation, the commissioner may cause notice thereof to be published in one or more newspapers of general circulation in this state.
(c) Upon such suspension or revocation becoming effective, the commissioner shall likewise suspend or revoke the licenses of all agents of the association.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §568.)
(a) Every mutual aid association, at the time of filing application for its certificate of authority, shall, by a duly executed instrument filed with the commissioner, on a form as designated and furnished by the commissioner, designate the principal office of the association in this state and constitute and appoint the commissioner, and his successors in office, as its true and lawful attorney upon whom all lawful process in actions or legal proceedings against it may be served; and the association shall agree that any lawful process against it which may be served upon its said attorney shall be of the same force and validity as if served on the association itself and that the authority thereof shall continue in force irrevocably as long as any liability remains outstanding against it in this state.
(b) Two copies of any process issued by any court of record in this state and served upon the commissioner or the person in charge of the commissioner’s office by the proper officer of Montgomery County shall be deemed a sufficient service on the association; and the commissioner, promptly after such service of process, shall forward by registered or certified mail one of the copies of such process to the association at its principal place of business referred to in subsection (a) of this section.
(c) Within 30 days after the change of address of its principal office in this state, the association shall file written notice thereof with the commissioner.
(Code 1940, T. 28, §262; Acts 1971, No. 407, p. 707, §569.)
(a) A mutual aid association shall issue to each member or policyholder a contract, in the English language, printed or reproduced by other easily legible means, and whether called a “certificate,” “policy,” “agreement,” or by whatever name, setting forth the aid and benefits for which the association is liable as to the respective individuals covered by such contract and the terms and conditions thereof and the amounts payable to the association on account of such contract and the terms and conditions of such payments. Any contract providing for aid, service, funeral, or other benefits payable otherwise than in cash shall set forth the reasonable cash value at retail of such aid, service, funeral, and other benefits, together with the valuation of such benefits for the purpose of computation of the reserves as provided in Section 27-30-17.
(b) No provision or agreement not contained in such contract shall be deemed to affect, in any manner, the terms and conditions of the contract. No provision contained, or to be contained, in any other document shall be made a part of the contract by reference unless the pertinent portions of such other document or an adequate summary thereof are set forth in the contract.
(c) An association shall not offer or use any form of contract until such form has been on file with the commissioner for at least 20 days, nor thereafter if the form has been disapproved by the commissioner. Within such 20 days, or at any time thereafter, the commissioner may disapprove any such form found by him to be unlawful, or unreasonable in its terms and conditions, or inequitable or that contains ambiguous and misleading clauses or clauses and conditions that tend to deceive as to the coverage and benefits purported to be given under the contract. The association shall not thereafter offer or use any such form which the commissioner has disapproved. The commissioner shall set forth the grounds thereof in any order of disapproval issued by him.
(Acts 1971, No. 407, p. 707, §570.)
(a) An association shall not, at any one time, have in force any contract, or any number of contracts, covering the same individual, whether such individual is so covered as a member, policyholder, dependent, or in any other capacity, for benefits payable in cash, or having a reasonable cash value, aggregating in excess of amounts as follows:
(1) Death benefits payable upon the death of any one individual, for death by any cause, $1,000.00;
(2) Accidental death benefits payable only upon the accidental death of any one individual, and including any special or additional benefits for accidental death included in any other death benefit contract, $1,000.00; or
(3) Funeral benefits and other merchandise, aid, and service benefits, $1,000.00.
(b) This section shall not be deemed to make illegal any contract or coverage lawfully issued prior to January 1, 1972, but the association shall not issue any new contract covering in any way any individual likewise covered under any such prior contract if after issuance of such new contract any such individual would be covered, under all contracts issued by the association and then in force, for amounts which exceed in aggregate amount the limits respectively provided for in subsection (a) of this section.
(c) Notwithstanding the limitations set forth in subsection (a) of this section, an association which maintains capital and surplus in amounts not less than that required by Section 27-30-5, shall not, at any one time, have in force any contract, or any number of contracts, covering the same individual, whether such individual is so covered as a member, policyholder, dependent, or in any other capacity for benefits payable in cash, or having a reasonable cash value, aggregating in excess of amounts as follows:
(1) Death benefits payable upon the death of any one individual, for death by any cause, $2,500.00; or
(2) Accidental death benefits payable only upon the accidental death of any one individual, and including any special or additional benefits for accidental death included in any other death benefit contract, $2,500.00.
(Acts 1935, No. 114, p. 165; Acts 1947, No. 528, p. 386; Acts 1953, No. 646, p. 904; Acts 1971, No. 407, p. 707, §571.)
(a) The commissioner shall each year compute the net value as of December 31 of the preceding year of all benefits payable in cash under all outstanding contracts or policies of each mutual aid association. Such valuation shall be made upon the basis of the “combined experience” or “actuaries table” or “the American experience table” rate of mortality (Illinois standard of valuation), with interest at the rate of four percent per annum. The aggregate net value so ascertained of such contracts or policies of the association shall be deemed its liability on account of such cash benefits, other than accrued claims, for the purpose of any determination of its financial condition.
(b) Funds of the association in amount not less than the value of such benefits, as valued under this section, shall be held by the association in cash or in investments as authorized under Section 27-30-20.
(Acts 1935, No. 114, p. 165; Acts 1947, No. 528, p. 386; Acts 1953, No. 643, p. 901; Acts 1953, No. 646, p. 904; Acts 1971, No. 407, p. 707, §572.)
(a) The commissioner shall each year cause all outstanding contracts or policies of every mutual aid association to be carefully valued as of December 31 of the preceding year at 40 percent of the retail value of the benefits, aid, or services provided under the terms of its contracts or policies or at the average wholesale cost of the funeral supplies, benefits, aid, and services so provided for, whichever amount is the greater, as shown by the number of contracts or policies in force according to the books and records of the association, and shall at the time compute the net value of all such outstanding contracts or policies of every such association in the following manner:
(1) On all outstanding contracts or policies issued prior to September 16, 1953, the commissioner shall compute the net value thereof by the two following separate methods:
a. Method No. 1: On the basis of $1.50 for each $100.00 at risk; or
b. Method No. 2: On the basis of the “combined experience” or “actuaries table,” or “the American experience table” rate of mortality (Illinois standard of valuation), with interest at the rate of four percent per annum.
On each December 31, the net value of all such outstanding contracts or policies issued prior to September 16, 1953, shall be the net value as computed by said method No. 1, plus as many times one tenth of the difference, if any there be, between the net value as computed by method No. 1 and the net value as computed by said method No. 2, as the number of full years elapsed since September 16, 1953; and said net value on each December 31 shall continue to be so computed until such time as said net value so computed shall be equal to the net value on such contracts or policies as computed exclusively by method No. 2, after which time the net value of all such outstanding contracts or policies shall be the net value as computed by method No. 2, exclusively; and
(2) On all outstanding contracts or policies issued on and after September 16, 1953, the commissioner shall compute the net value thereof on the basis set out in the method No. 2 in subdivision (1) of this subsection, and the net value of all such outstanding contracts or policies shall on each December 31 thereafter be the net value as so computed.
(b) The net value of all the outstanding contracts or policies of every such association as of each December 31, ascertained and computed in accordance with the provisions of subsection (a) of this section, shall be deemed its liability on account of the benefits, aid, or services payable other than in cash of such outstanding contracts or policies, other than accrued claims, to provide for which; and for the protection of its contract or policyholders, each such association shall hold net assets of an amount equal to such net value, which reserve assets may consist of cash, and such investments as are authorized under Section 27-30-20.
(Acts 1935, No. 114, p. 165; Acts 1953, No. 643, p. 901; Acts 1971, No. 407, p. 707, §573.)
(a) Each mutual aid association shall, prior to issuance of its certificate of authority, deposit and thereafter maintain on deposit with the Treasurer of the State of Alabama securities of the kind authorized under subsection (d) of this section, in the amount of not less than $5,000.00. If in any calendar year the gross premium receipts of the association from business done within this state exceed $50,000.00, the association shall, not later than the March 30 next following such calendar year, increase the amount of its deposit so made and maintained in accordance with the following schedule:
Gross premium receipts during calendar yearAmount of deposit required More than$50,000 but less than$150,000$10,000Equal to150,000 but less than250,00015,000Equal to250,000 but less than350,00020,000Equal to350,000 but less than500,00025,000Equal to500,000 but less than750,00050,000Equal to750,000 but less than1,000,00075,000Equal to1,000,000 or more 100,000
(b) Any such deposit is so made and shall be so held by the State Treasurer in trust for the benefit and protection of the contract or policyholders in this state of the depositing mutual aid association.
(c) The term “gross premium receipts” as used in this section shall include all sums received by the association as fees, dues, premiums, contributions, or by whatever other name called from its contract or policyholders as consideration for, or in connection with, such contracts and policies.
(d) All such deposits shall consist of assets, approved by the commissioner, such as are eligible for deposit generally under subsection (a) of Section 27-6-3.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §574.)
(a) Deposits of mutual aid associations, heretofore or hereafter made with the State Treasurer under Section 27-30-18 or under laws heretofore in force, shall be administered as provided by, be subject to withdrawal and release, and otherwise be subject to the applicable provisions of Chapter 6 of this title, other than the following sections:
(1) Section 27-6-2; and
(2) Section 27-6-13.
(b) A mutual aid association shall be deemed to be an “insurer” for the purposes and within the terms of Chapter 6 of this title.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §575.)
The funds of a mutual aid association shall be in cash or invested as provided by the laws of this state with respect to such associations and life insurers.
(Code 1940, T. 28, §253; Acts 1971, No. 407, p. 707, §576.)
(a) Every mutual aid association shall keep complete and accurate accounts and records of its affairs and transactions, in accordance with the usual and accepted methods and principles of insurance accounting and record keeping as applicable to the kind of business transacted by the association.
(b) All such accounts and records of a mutual aid association shall be kept in the principal offices of the association located in this state and be available for inspection thereat by the commissioner on any general business day.
(c) The commissioner may suspend or revoke the certificate of authority of any association found by him to be in violation of this section.
(Acts 1971, No. 407, p. 707, §577.)
(a) Each mutual aid association shall, annually on or before March 1, file with the commissioner a full and true statement of its financial condition, transactions, and affairs as of the December 31 preceding. The statement shall be in such general form and content as is prescribed or approved by the commissioner and shall be reasonably adapted to the plans of operation of such associations. The statement shall be verified by an officer of the association having knowledge of the facts.
(b) In addition to information called for and furnished in connection with its annual statement, an association shall furnish promptly to the commissioner such information as to any of its transactions or affairs as the commissioner may, from time to time, request in writing.
(c) At the time of filing, the association shall pay the fee for filing its annual statement as prescribed by Section 27-4-2.
(d) The commissioner may, in his discretion, suspend or revoke the certificate of authority of an association failing to file its annual statement when due.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §578.)
Any officer or agent of a mutual aid association whose duty it is to maintain its accounts and records, or to make the annual report to the commissioner or to designate the principal place of business or agent for service of process of such association as required under this chapter and who fails so to do or who willfully makes a false account, record, or report shall be guilty of a misdemeanor and, upon conviction, shall be fined not less than $200.00 nor more than $1,000.00 and may be imprisoned in the county jail for not fewer than 10 days nor longer than one year.
(Acts 1971, No. 407, p. 707, §579.)
The commissioner shall, at least once every three years and oftener whenever he deems it prudent to do so, examine each mutual aid association doing business in this state. Except as to frequency of examination, such examinations and the association shall be subject to the provisions of Chapter 2 of this title as applicable to similar examinations of other insurers.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §581.)
The interest of resident members and policyholders of mutual aid associations therein, and of resident beneficiaries provided for thereby, is exempt from all process for the collection of debts or the enforcement of liabilities.
(Code 1940, T. 28, §276; Acts 1971, No. 407, p. 707, §583.)
New domestic mutual aid associations, whether stock corporations or mutual corporations, shall hereafter be incorporated and financed under the same provisions and procedures as apply to domestic legal reserve stock or mutual insurers under Chapter 27 of this title, other than provisions made inapplicable under Section 27-30-33 or in conflict with the express provisions of this chapter; except, that, if to be a mutual corporation, its articles of incorporation shall provide either for the contingent liability of its members for the payment of losses and expenses of the association or the general conditions under which such members may otherwise be required to pay assessments for the payment of such losses and expenses, and the liability of members to assessment shall be further detailed in the corporation’s bylaws.
(Acts 1971, No. 407, p. 707, §584.)
(a) When applying for an original certificate of authority, a domestic corporation formed to transact a mutual aid business on the mutual plan must be otherwise qualified therefor under this title, must have entered into bona fide agreements for insurance of the kind proposed to be transacted, with not less than 500 persons and must have received therefrom as initial premiums, fees, or contributions at rates theretofore filed with, and approved by, the commissioner as being both adequate and reasonable, not less than $25,000.00 in cash.
(b) No such agreements shall be solicited, however, except pursuant to a solicitation permit granted by the commissioner as provided in Sections 27-27-4 through 27-27-7.
(Acts 1939, No. 374, p. 502; Acts 1971, No. 407, p. 707, §585.)
(a) A domestic mutual aid association incorporated on the stock plan, whether heretofore or hereafter formed, may increase or decrease the amount of its authorized capital stock by amendment of its articles of incorporation in the same manner, and subject to the same conditions and procedures, as apply to domestic stock insurers in general under this title.
(b) As to a corporation formed prior to January 1, 1972, no increase of authorized capital stock shall be made which does not bring the amount thereof up to at least $50,000.00, and no decrease of authorized capital stock shall be made which reduces authorized capital stock below $50,000.00.
(Code 1940, T. 28, §254; Acts 1971, No. 407, p. 707, §586.)
(a) Every holder of a policy, certificate, or benefit agreement issued by the association and then in force shall be deemed to be a member of the association.
(b) Annual and special meetings of the members of a domestic mutual aid association formed on the mutual plan shall be held as provided by the laws of this state for stock insurers.
(c) Notwithstanding the provisions of subdivision (b) (1) of Section 27-27-22, each member of the association shall be entitled to one vote upon each matter voted upon at the meeting. Each member shall have the right to attend and vote on all matters before the meeting in person or by written proxy executed at least 30 days prior to the meeting.
(Acts 1971, No. 407, p. 707, §587.)
(a) The affairs of every domestic mutual aid association shall be governed by a board of directors or board of trustees consisting of not less than seven members, each of whom must be a member or stockholder of the corporation.
(b) Directors shall be elected by the members or stockholders of the association at the annual meeting of stockholders or members. Directors may be elected for terms of not less than one nor more than five years each and until their successors are elected and have qualified, as provided in the association’s bylaws. If to be elected for terms of more than one year, the bylaws shall provide for a staggered term system under which the terms of a proportionate part of the members of the board will expire on the date of each annual meeting of members or stockholders.
(c) A majority of the directors or trustees must at all times be residents of this state.
(Code 1940, T. 28, §§251, 256, 258; Acts 1971, No. 407, p. 707, §588.)
Persons representing or aiding a mutual aid association in the solicitation of business and the mutual aid association with respect thereto shall be subject to Chapters 7 and 8A of this title.
(Acts 1935, No. 114, p. 165; Acts 1971, No. 407, p. 707, §582; Act 2001-702, p. 1509, §15.)
In addition to those contained or referred to in this chapter, the following chapters and sections of this title shall apply to mutual aid associations to the extent applicable and not in conflict with the express provisions of this chapter and the reasonable implications of such express provisions:
(1) Chapter 1;
(2) Chapter 2;
(3) The following sections:
a. Section 27-3-4;
b. Section 27-3-5;
c. Section 27-3-22;
d. Section 27-3-23;
e. Section 27-3-27;
f. Section 27-3-29; and
g. Section 27-4-2;
(4) The following section of Chapter 5: Section 27-5-12;
(5) The following sections of Chapters 36 and 37:
a. Section 27-37-1;
b. Section 27-37-3;
c. Section 27-37-2;
d. Section 27-37-4;
e. Section 27-36-1, except subdivision (4) thereof;
f. Section 27-36-6; and
g. Sections 27-37-5 through 27-37-9;
(6) Chapter 10;
(7) Chapter 12;
(8) Chapter 14, except as to the following sections: Sections 27-14-8, 27-14-9, 27-14-29, and 27-14-32;
(9) Chapter 15;
(10) Chapter 16;
(11) Chapter 17;
(12) Chapter 18;
(13) Chapter 19;
(14) Chapter 20;
(15) Chapter 27, except the following sections:
a. Section 27-27-15;
b. Section 27-27-20;
c. Section 27-27-23; and
d. Sections 27-27-34 through 27-27-36.
(16) Chapter 32.
(Acts 1971, No. 407, p. 707, §589.)
Mutual aid associations organized and authorized under the provisions of this chapter are, in addition to those authorizations and responsibilities stated in Sections 27-17-16, 27-30-1, 27-30-31, 27-30-33, and 27-36-7, entitled to provide insurance policies and contracts as are authorized domestic life and disability insurers pursuant to Chapter 3 of Title 27, subject to the limits on the size and types of risks to be insured as stated in Section 27-30-15 and Section 27-30-6.1.
(Acts 1989, No. 89-686, p. 1351.)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section.
(1) RECIPROCAL INSURANCE. Insurance resulting from an interexchange among persons, known as “subscribers,” of reciprocal agreements of indemnity, the interexchange being effectuated through an “attorney-in-fact” common to all such persons.
(2) RECIPROCAL INSURER. An unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact to provide reciprocal insurance among themselves.
(Acts 1971, No. 407, p. 707, §§590, 591.)
(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 January 1, 1972, 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.
(Acts 1971, No. 407, p. 707, §592.)
(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 directly.
(Acts 1971, No. 407, p. 707, §593.)
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 “underwriting”; and
(2) Maintain actions and have actions maintained against it in its own name.
(Acts 1971, No. 407, p. 707, §594.)
(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) Contracts of the insurer, including its policies, shall be executed by the attorney, duly authorized and acting for the subscribers.
(c) The attorney of a foreign or alien 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 firms or corporations.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §595.)
(a) A domestic reciprocal insurer formed under this chapter, if it has otherwise complied with the applicable provisions of this title, may be authorized to transact insurance if it has, and thereafter maintains, surplus funds as follows:
(1) To transact property insurance, surplus funds of not less than $200,000.00; and
(2) To transact casualty insurance, surplus funds of not less than $300,000.00.
(b) In addition to surplus required to be maintained under subsection (a) of this section, the insurer shall have, when first so authorized, expendable surplus in amount as required of a like foreign reciprocal insurer under Section 27-3-8.
(c) A domestic reciprocal insurer may be authorized to transact additional kinds of insurance if it has otherwise complied with the provisions of this title therefor and possesses and so maintains surplus funds in amount equal to the minimum capital stock required of a stock insurer for authority to transact a like combination of kinds of insurance, but subject to subsection (b) of Section 27-3-8 as to additional kinds of insurance and surplus required therefor during the first five years.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §596.)
(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;
(3) The kinds of insurance proposed to be transacted;
(4) The names and addresses of the original subscribers;
(5) The designation and appointment of the proposed attorney and a copy of the power of attorney;
(6) The names and addresses of the officers and directors of the attorney, if a corporation, or its members, if a firm;
(7) The powers of the subscribers’ advisory committee and the names and terms of office of the members thereof;
(8) That all moneys 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;
(9) A copy of the subscribers’ agreement;
(10) A statement that each of the original subscribers has in 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 six months, at an adequate rate theretofore filed with and approved by the commissioner;
(11) A statement of the financial condition of the insurer, a schedule of its assets and a statement that the surplus as required by Section 27-31-6 is on hand; and
(12) A copy of each policy, endorsement, and application form it then proposes to issue or use.
Such declaration shall be acknowledged by the attorney in the manner required for the acknowledgment of deeds.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §597.)
(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 provision of this title.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §598.)
(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) That the attorney is empowered to accept service of process on behalf of the insurer in actions against the insurer upon contracts exchanged;
(3) The general services to be performed by the attorney;
(4) 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
(5) 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.
(Acts 1971, No. 407, p. 707, §599.)
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 committee. No such modification shall be effective retroactively nor as to any insurance contract issued prior thereto.
(Acts 1971, No. 407, p. 707, §600.)
(a) Concurrently with the filing of the declaration provided for in Section 27-31-7, the attorney of a domestic reciprocal insurer shall file with the commissioner a bond in favor of this state for the benefit of all persons damaged as a result of breach by the attorney of the conditions of his bond as set forth in subsection (b) of this section. The bond shall be executed by the attorney and by an authorized corporate surety and shall be subject to the commissioner’s approval.
(b) The bond shall be in the penal sum of $25,000.00, aggregate in form, conditioned that the attorney will faithfully account for all moneys 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 moneys or property to which he is not entitled under the power of attorney.
(c) The bond shall provide that it is not subject to cancellation unless 30 days’ advance notice in writing of cancellation is given both the attorney and the commissioner.
(Acts 1971, No. 407, p. 707, §601.)
In lieu of the bond required under Section 27-31-11, the attorney may maintain on deposit with the State Treasurer, through the office of the commissioner, a like amount in cash or in value of securities qualified for deposit under Section 27-6-3, and subject to the same conditions as the bond.
(Acts 1971, No. 407, p. 707, §602.)
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.
(Acts 1971, No. 407, p. 707, §603.)
(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 27-3-24 and 27-3-25.
(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.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §604.)
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.
(Acts 1971, No. 407, p. 707, §605.)
(a) The annual statement of a reciprocal insurer shall be made and filed by its attorney.
(b) The statement shall be supplemented by such information as may be required by the commissioner relative to the affairs and transactions of the attorney, insofar as they relate to the reciprocal insurer.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §606.)
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 deposits 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 days 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; and
(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.
(Acts 1971, No. 407, p. 707, §607.)
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 authorized in this section to exchange reciprocal interinsurance 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.
(Acts 1915, No. 280, p. 315; Acts 1971, No. 407, p. 707, §608.)
(a) The advisory committee of a domestic reciprocal insurer exercising the subscribers’ rights shall be selected under such rules as the subscribers adopt.
(b) Not less than two thirds 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 subscriber’s 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.
(Acts 1971, No. 407, p. 707, §609.)
(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 27-31-24.
(c) Each assessable policy issued by the insurer shall contain a statement of the contingent liability.
(Acts 1971, No. 407, p. 707, §610.)
(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.
(Acts 1971, No. 407, p. 707, §611.)
(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 commissioner 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 27-31-24, 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 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.
(Acts 1971, No. 407, p. 707, §612.)
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 one year after its termination, he is notified by either the attorney or the commissioner of his intentions to levy such assessment; or
(2) 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 one year after its termination.
(Acts 1971, No. 407, p. 707, §613.)
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.
(Acts 1971, No. 407, p. 707, §614.)
(a) If a reciprocal insurer has a surplus of assets over all liabilities at least equal to the minimum capital stock required of 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 qualifies 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.
(Acts 1971, No. 407, p. 707, §615.)
A reciprocal insurer may from time to time return to its subscribers any unused premiums, savings, or credits accruing to their accounts. Any such distribution shall not unfairly discriminate between classes of risks or policies or between subscribers, but such distribution may vary as to classes of subscribers, based upon the loss experience of such subscribers.
(Acts 1971, No. 407, p. 707, §616.)
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 made as provided in Section 27-31-15, and the return of any unused premium, savings, or credits then standing on subscribers’ accounts 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.
(Acts 1971, No. 407, p. 707, §617.)
(a) A domestic reciprocal insurer, upon affirmative vote of not less than two thirds of its subscribers who vote on such merger, pursuant to due notice and the approval of the commissioner of the terms therefor, may merge 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 27-31-27 and a reasonable length of time within which to exercise such right.
(Acts 1971, No. 407, p. 707, §618.)
(a) If the assets of a 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.
(Acts 1971, No. 407, p. 707, §619.)
The purpose of this chapter is to regulate the formation and the operation of risk retention groups and purchasing groups in this state formed pursuant to the federal Liability Risk Retention Act of 1986, to the extent permitted by federal law. This chapter shall be known and may be cited as the “Alabama Risk Retention Act.”
(Acts 1993, No. 93-674, p. 1226, §1.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) COMMISSIONER. The Insurance Commissioner of this state or the commissioner, director, or superintendent of insurance in any other state.
(2) COMPLETED OPERATIONS LIABILITY. Liability arising out of the installation, maintenance, or repair of any product at a site which is not owned or controlled by either of the following:
a. Any person who performs that work.
b. Any person who hires an independent contractor to perform that work, but shall include liability for activities which are completed or abandoned before the date of the occurrence giving rise to the liability.
(3) DOMICILE. For purposes of determining the state in which a purchasing group is domiciled:
a. For a corporation, the state in which the purchasing group is incorporated.
b. For an unincorporated entity, the state of its principal place of business.
(4) HAZARDOUS FINANCIAL CONDITION. Based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able to do either of the following:
a. To meet obligations to policyholders with respect to their own claims and reasonably anticipated claims.
b. To pay other obligations in the normal course of business.
(5) INSURANCE. Primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk which is determined to be insurance under the laws of this state.
(6) LIABILITY.
a. Legal liability for damages (including costs of defense, legal costs and fees, and other claims expenses) because of injuries to other persons, damage to their property, or other damage or loss to other persons resulting from or arising out of either of the following:
Any business, whether profit or nonprofit, trade, product, services, including professional services, premises, or operations.
Any activity of any state or local government, or any agency, or political subdivision thereof.
b. Liability does not include personal risk liability and an employer’s liability with respect to its employees other than legal liability under the Federal Employers’ Liability Act, 45 U.S.C. 51 et seq.
(7) PERSONAL RISK LIABILITY. Liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities, rather than from responsibilities or activities referred to in subdivisions (6)a. and b. of this section.
(8) PLAN OF OPERATION or FEASIBILITY STUDY. An analysis which presents the expected activities and results of a risk retention group including at a minimum all of the following:
a. Information sufficient to verify that its members are engaged in businesses or activities similar or related with respect to the liability to which the members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations.
b. For each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer.
c. Historical and expected loss experience of the proposed members and national experience of similar exposures to the extent that this experience is reasonably available.
d. Pro forma financial statements and projections.
e. Appropriate opinions by a qualified, independent casualty actuary, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition.
f. Identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, investment policies, and reinsurance agreements.
g. Identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each state.
h. Other matters as may be prescribed by the Commissioner of Insurance, or like official, in which the risk retention group is chartered for liability insurance companies authorized by the insurance laws of that state.
(9) PRODUCT LIABILITY. Liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage, including damages resulting from the loss of use of property, arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of the person when the incident giving rise to the claim occurred.
(10) PURCHASING GROUP. Any group which meets all of the following:
a. Has as one of its purposes the purchase of liability insurance on a group basis.
b. Purchases the insurance only for its group members and only to cover their similar or related liability exposure, as described in subdivision (10)c.
c. Is composed of members whose businesses or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations.
d. Is domiciled in any state.
(11) RISK RETENTION GROUP. Any corporation or other limited liability association which meets all of the following:
a. Its primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members.
b. It is organized for the primary purpose of conducting the activity described under subdivision (11)a.
c. It is either of the following:
Chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state.
Before January 1, 1985, it was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before that date, had certified to the insurance commissioner of at least one state that it satisfied the capitalization requirements of the state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since such date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability, as the terms were defined in the Product Liability Risk Retention Act of 1981 before the date of the enactment of the Liability Risk Retention Act of 1986.
d. It does not exclude any person from membership in the group solely to provide for their members a competitive advantage over the person denied.
e. It either:
Has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by the group.
Has as its sole owner an organization which has as:
(i) Its members only persons who comprise the membership of the risk retention group; and
(ii) Its owners only persons who comprise the membership of the risk retention group and who are provided insurance by that group.
f. Its members are engaged in businesses or activities similar, or related, with respect to the liability of which the members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations.
g. Its activities do not include providing insurance other than both of the following:
Liability insurance for assuming and spreading all or any portion of the liability of its group members.
Reinsurance with respect to the liability of any other risk retention group, or any members of that other group, which is engaged in businesses or activities so that the group or member meets the requirement described in subdivision (6), a. and b. from membership in the risk retention group which provides the reinsurance.
h. The name of which includes the phrase “Risk Retention Group.”
(12) STATE. Any state of the United States or the District of Columbia.
(Acts 1993, No. 93-674, p. 1226, §2.)
(a)(1) A risk retention group shall, pursuant to this title, be chartered and licensed to write only liability insurance pursuant to this chapter and, except as provided elsewhere in this chapter, shall comply with all of the laws, rules, regulations, and requirements applicable to the insurers chartered and licensed in this state and with Section 27-31A-4, to the extent the requirements are not a limitation on laws, rules, regulations, or requirements of this state.
(2) Notwithstanding any other provision to the contrary, all risk retention groups chartered in this state shall file with the department and the National Association of Insurance Commissioners (NAIC) an annual statement in a form prescribed by the NAIC and, if required by the commissioner, in electronic format. The statement shall be completed in accordance with its instructions and the NAIC Accounting Practices and Procedures Manual.
(b) Before it may offer insurance in any state, each risk retention group shall also submit for approval to the Commissioner of Insurance a plan of operation or feasibility study. The risk retention group shall submit an appropriate revision in the event of any subsequent material change in any item of the plan of operation or feasibility study within 10 days of the change. The group shall not offer any additional kinds of liability insurance, in this state or in any other state, until a revision of the plan or study is approved by the commissioner.
(c) At the time of filing its application for charter, the risk retention group shall provide to the commissioner in summary form the following information: The identity of the initial members of the group, the identity of those individuals who organized the group or who will provide administrative services, or otherwise influence or control the activities of the group, the amount and nature of initial capitalization, the coverages to be afforded, and the states in which the group intends to operate. Upon receipt of this information, the commissioner shall forward the information to the National Association of Insurance Commissioners. Notification to the National Association of Insurance Commissioners is in addition to and shall not be sufficient to satisfy the requirements of Section 27-31A-4 or any other sections of this chapter.
(Acts 1993, No. 93-674, p. 1226, §3; Act 2014-377, p. 1407, §5.)
(a) By January 1, 2016, existing risk retention groups shall be in compliance with the governance standards set forth in this section. New risk retention groups shall be in compliance with these standards at the time of licensure.
(b) The board of directors or board, as used in this section, means the governing body of the risk retention group elected by the shareholders or members to establish policy, elect or appoint officers and committees, and make other governing decisions. Director, as used in this section, means a natural person designated in the articles of the risk retention group, or designated, elected, or appointed by any other manner, name, or title to act as a member of the board of directors.
(c)(1) The board of directors of the risk retention group shall have a majority of independent directors. If the risk retention group is a reciprocal, then the attorney-in-fact would be required to adhere to the same standards regarding independence of operation and governance as imposed on the risk retention group’s board of directors/subscribers advisory committee under these standards; and, to the extent permissible under state law, service providers of a reciprocal risk retention group should contract with the risk retention group and not the attorney-in-fact.
(2) No director qualifies as independent unless the board of directors affirmatively determines that the director has no material relationship with the risk retention group. Each risk retention group shall disclose these determinations to its domestic regulator, at least annually. For this purpose, any person that is a direct or indirect owner of or subscriber in the risk retention group (or is an officer, director, and/or employee of such an owner and insured, unless some other position of such officer, director, and/or employee constitutes a material relationship), as contemplated by Section 3901(a)(4)(E)(ii) of the Liability Risk Retention Act, is considered to be independent.
(d) Material relationship of a person with the risk retention group includes, but is not limited to, the following:
(1) The receipt in any one 12-month period of compensation or payment of any other item of value by such person, a member of such person’s immediate family, or any business with which such person is affiliated from the risk retention group or a consultant or service provider to the risk retention group is greater than or equal to five percent of the risk retention group’s gross written premium for such 12-month period or two percent of its surplus, whichever is greater, as measured at the end of any fiscal quarter falling in such a 12-month period. Such person or immediate family member of such person is not independent until one year after his or her compensation from the risk retention group falls below the threshold.
(2) A relationship with an auditor as follows: A director or an immediate family member of a director who is affiliated with or employed in a professional capacity by a present or former internal or external auditor of the risk retention group is not independent until one year after the end of the affiliation, employment, or auditing relationship.
(3) A relationship with a related entity as follows: A director or immediate family member of a director who is employed as an executive officer of another company where any of the risk retention group’s present executives serve on that other company’s board of directors is not independent until one year after the end of such service or the employment relationship.
(e)(1) The term of any material service provider contract with the risk retention group shall not exceed five years. Any such contract, or its renewal, shall require the approval of the majority of the risk retention group’s independent directors. The risk retention group’s board of directors shall have the right to terminate any service provider, audit, or actuarial contracts at any time for cause after providing adequate notice as defined in the contract. The service provider contract is deemed material if the amount to be paid for such contract is greater than or equal to five percent of the risk retention group’s annual gross written premium or two percent of its surplus, whichever is greater.
(2) For purposes of this standard, service providers shall include captive managers, auditors, accountants, actuaries, investment advisors, lawyers, managing general underwriters, or other party responsible for underwriting, determination of rates, collection of premium, adjusting and settling claims, and/or the preparation of financial statements. Any reference to lawyers in the prior sentences does not include defense counsel retained by the risk retention group to defend claims, unless the amount of fees paid to such lawyers are material as referenced in subsection (d).
(3) No service provider contract meeting the definition of material relationship contained in subsection (d) shall be entered into unless the risk retention group has notified the commissioner in writing of its intention to enter into such transaction at least 30 days prior thereto and the commissioner has not disapproved it within such period.
(f) The risk retention group’s board of directors shall adopt a written policy in the plan of operation as approved by the board that requires the board to do all of the following:
(1) Assure that all owner/insureds of the risk retention group receive evidence of ownership interest.
(2) Develop a set of governance standards applicable to the risk retention group.
(3) Oversee the evaluation of the risk retention group’s management including, but not limited to, the performance of the captive manager, managing general underwriter, or other party or parties responsible for underwriting, determination of rates, collection of premium, adjusting or settling claims, or the preparation of financial statements.
(4) Review and approve the amount to be paid for all material service providers.
(5) Review and approve, at least annually, all of the following:
a. Risk retention group’s goals and objectives relevant to the compensation of officers and service providers.
b. The officers’ and service providers’ performance in light of those goals and objectives.
c. The continued engagement of the officers and material service providers.
(g) The risk retention group shall have an audit committee composed of at least three independent board members as defined in Section 27-31A-2. A non-independent board member may participate in the activities of the audit committee, if invited by the members, but cannot be a member of the committee.
(h) The audit committee shall have a written charter that defines the committee’s purpose, which, at a minimum, must be to do all of the following:
(1) Assist in board oversight of the integrity of the financial statements, the compliance with legal and regulatory requirements, and the qualifications, independence, and performance of the independent auditor and actuary.
(2) Discuss the annual audited financial statements and quarterly financial statements with management.
(3) Discuss the annual audited financial statements with its independent auditor and, if advisable, discuss the quarterly financial statements with its independent auditor.
(4) Discuss policies with respect to risk assessment and risk management.
(5) Meet separately and periodically, either directly or through a designated representative of the committee, with management and independent auditors.
(6) Review with the independent auditor any audit problems or difficulties and management’s response.
(7) Set clear hiring policies of the risk retention group as to the hiring of employees or former employees of the independent auditor.
(8) Require the external auditor to rotate the lead or coordinating audit partner having primary responsibility for the risk retention group’s audit as well as the audit partner responsible for reviewing that audit so that neither individual performs audit services for more than five consecutive fiscal years.
(9) Report regularly to the board of directors.
(i) The domestic regulator may waive the requirement to establish an audit committee composed of independent board members if the risk retention group is able to demonstrate to the domestic regulator that it is impracticable to do so and the risk retention group’s board of directors itself is otherwise able to accomplish the purposes of an audit committee, as described in subsection (h).
(j) The board of directors shall adopt and disclose governance standards, where disclose means making such information available through electronic (e.g., posting such information on the risk retention group’s website) or other means, and providing such information to members/insureds upon request, which shall include all of the following:
(1) A process by which the directors are elected by the owner/insureds.
(2) Director qualification standards.
(3) Director responsibilities.
(4) Director access to management and, as necessary and appropriate, independent advisors.
(5) Director compensation.
(6) Director orientation and continuing education.
(7) The policies and procedures that are followed for management succession.
(8) The policies and procedures that are followed for annual performance evaluation of the board.
(k) The board of directors shall adopt and disclose a code of business conduct and ethics for directors, officers, and employees and promptly disclose to the board of directors any waivers of the code for directors or executive officers, which should include all of the following topics:
(1) Conflicts of interest.
(2) Matters covered under the corporate opportunities doctrine under the state of domicile.
(3) Confidentiality.
(4) Fair dealing.
(5) Protection and proper use of risk retention group assets.
(6) Compliance with all applicable laws, rules, and regulations.
(7) Requiring the reporting of any illegal or unethical behavior which affects the operation of the risk retention group.
(l) The captive manager, president, or chief executive officer of the risk retention group shall promptly notify the domestic regulator in writing if either of them becomes aware of any material non-compliance with any of these governance standards.
(Act 2014-377, p. 1407, §6.)
Risk retention groups chartered and licensed in states other than this state and seeking to do business as a risk retention group in this state shall comply with the laws of this state as follows:
(1) NOTICE OF OPERATIONS AND DESIGNATION OF COMMISSIONER AS AGENT.
a. Before offering insurance in this state, a risk retention group shall submit to the commissioner both of the following:
A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, charter date, its principal place of business, and other information, including information on its membership, as the commissioner of this state may require to verify that the risk retention group is qualified pursuant to subdivision (11) of Section 27-31A-2.
A copy of its plan of operations or feasibility study and revisions of the plan or study submitted to the state in which the risk retention group is chartered and licensed, provided that the provision relating to the submission of a plan of operation or feasibility study shall not apply with respect to any line or classification of liability insurance which was both:
(i) Defined in the Product Liability Risk Retention Act of 1981 before October 27, 1986.
(ii) Offered before that date by any risk retention group which had been chartered and operating for not less than three years before that date.
b. The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required by subsection (b) of Section 27-31A-3 at the same time that the revision is submitted to the commissioner of its chartering state.
c. The risk retention group shall designate the commissioner as its agent for the purpose of receiving service of legal documents or process with a statement of registration, for which a filing fee shall be determined by the commissioner.
(2) FINANCIAL CONDITION. Any risk retention group doing business in this state shall submit to the commissioner all of the following:
a. A copy of the group’s financial statement submitted to the state in which the risk retention group is chartered and licensed which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American Academy of Actuaries, or a qualified loss reserve specialist, under criteria established by the National Association of Insurance Commissioners.
b. A copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination.
c. Upon request by the commissioner, a copy of any information or document pertaining to any outside audit performed with respect to the risk retention group.
d. Information as may be required to verify its continuing qualification as a risk retention group pursuant to subdivision (11) of Section 27-31A-2.
(3) TAXATION.
a. Each risk retention group shall be liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this state, and shall report to the commissioner the net premiums written for risks resident or located within this state. The risk retention group shall be subject to taxation, and any applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer.
b. To the extent licensed agents or brokers are utilized pursuant to Section 27-31A-12, they shall report to the commissioner the premiums for direct business for risks resident or located within this state which the licensees have placed with or on behalf of a risk retention group not chartered in this state.
c. To the extent that insurance agents or brokers are utilized pursuant to Section 27-31A-12, any agent or broker shall keep a complete and separate record of all policies procured from each risk retention group, which record shall be open to examination by the commissioner, as provided in Section 27-2-20. These records shall, for each policy and each kind of insurance provided thereunder, include the following:
The limit of liability.
The time period covered.
The effective date.
The name of the risk retention group which issued the policy.
The gross premium charged.
The amount of return premiums, if any.
(4) COMPLIANCE WITH TRADE PRACTICES LAW. Any risk retention group, its agents, and representatives shall comply with the Trade Practices Law, Chapter 12 (commencing with Section 27-12-1), Title 27, regarding deceptive, false, or fraudulent acts or practices. If the commissioner seeks an injunction regarding that conduct, the injunction shall be obtained from a court of competent jurisdiction.
(5) EXAMINATION REGARDING FINANCIAL CONDITION. Any risk retention group shall submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered and licensed has not initiated an examination or does not initiate an examination within 60 days after a request by the commissioner of this state. The examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the Examiner Handbook of the National Association of Insurance Commissioners.
(6) NOTICE TO PURCHASERS. Every application form for insurance from a risk retention group, and every policy, on its front and declaration pages, issued by a risk retention group, shall contain in ten point type the following notice:
“NOTICE
“This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group.”
(7) PROHIBITED ACTS REGARDING SOLICITATION OR SALE. The following acts by a risk retention group are prohibited:
a. The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in the group.
b. The solicitation or sale of insurance by, or operation of, a risk retention group that is in hazardous financial condition or financially impaired.
(8) PROHIBITION ON OWNERSHIP BY AN INSURANCE COMPANY. No risk retention group shall be allowed to do business in this state if an insurance company, other than an alien insurance company which is an affiliated risk retention group, captive insurer, as defined in Chapter 31B, or policyholder-owned company that does no insurance business other than to reinsure the risks of its wholly-owned risk retention group, is directly or indirectly a member or owner of the risk retention group, other than in the case of a risk retention group all of whose members are insurance companies.
(9) PROHIBITED COVERAGE. The terms of any insurance policy issued by any risk retention group shall not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of this state whose law applies to that policy.
(10) DELINQUENCY PROCEEDINGS. A risk retention group not chartered in this state and doing business in this state shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment after an examination under subdivision (5).
(11) PENALTIES. A risk retention group that violates this chapter will be subject to fines and penalties including revocation of its right to do business in this state, applicable to licensed insurers generally.
(12) OPERATION PRIOR TO ENACTMENT OF THIS CHAPTER. In addition to complying with this section, any risk retention group operating in this state prior to enactment of this chapter shall, within 30 days after May 17, 1993, comply with paragraph a. of subdivision (1) of this section.
(Acts 1993, No. 93-674, p. 1226, §4; Act 2006-509, p. 1153, §2.)
(a) No risk retention group shall be required or permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this state, nor shall any risk retention group, or its insureds, or claimants against its insureds, receive any benefit from any fund for claims arising under the insurance policies issued by that risk retention group.
(b) When a purchasing group obtains insurance covering its members’ risks from an insurer, not authorized in this state or a risk retention group, no risk, wherever resident or located, shall be covered by any insurance guaranty fund or similar mechanism in this state.
(c) When a purchasing group obtains insurance covering its members’ risks from an authorized insurer, only risks resident or located in this state shall be covered by the Alabama Insurance Guaranty Association, subject to Chapter 42 (commencing with Section 27-42-1), Title 27.
(d) Notwithstanding Article 2 (commencing with Section 27-26-20), Chapter 26, Title 27, the commissioner may require or exempt a risk retention group from participating in any mechanism established or authorized under the law of this state for the equitable apportionment among insurers of casualty insurance losses and expenses incurred on policies written through that mechanism. The risk retention group shall submit sufficient information to the commissioner to enable the commissioner to apportion on a nondiscriminatory basis the risk retention group’s proportionate share of any losses and expenses.
(Acts 1993, No. 93-674, p. 1226, §5.)
A policy of insurance issued to a risk retention group, or any member of that group, shall not be required to be countersigned as otherwise provided in Section 27-3-28 or 27-7-28.
(Acts 1993, No. 93-674, p. 1226, §6.)
A purchasing group and its insurer or insurers shall be subject to all applicable laws of this state, except that a purchasing group and its insurer or insurers shall be exempt, in regard to casualty insurance for the purchasing group, from any law that would do any of the following:
(1) Prohibit the establishment of a purchasing group.
(2) Make it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters.
(3) Prohibit a purchasing group or its members from purchasing insurance on a group basis described in subdivision (2) of this section.
(4) Prohibit a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time.
(5) Require that a purchasing group must have a minimum number of members, common ownership or affiliation, or certain legal form.
(6) Require that a certain percentage of a purchasing group must obtain insurance on a group basis.
(7) Otherwise discriminate against a purchasing group or any of its members.
(8) Require that any insurance policy issued to a purchasing group or any of its members be countersigned by an insurance agent or broker residing in this state.
(Acts 1993, No. 93-674, p. 1226, §7.)
(a) A purchasing group which intends to do business in this state shall, prior to doing business, furnish notice to the commissioner which shall include all of the following:
(1) Identify the state in which the group is domiciled.
(2) Identify all other states in which the group intends to do business.
(3) Specify the lines and classifications of liability insurance which the purchasing group intends to purchase.
(4) Identify the insurance company or companies from which the group intends to purchase its insurance and the domicile of any company.
(5) Specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this state.
(6) Identify the principal place of business of the group.
(7) Provide other information as may be required by the commissioner to verify that the purchasing group is qualified under subdivision (10) of Section 27-31A-2.
(b) A purchasing group shall, within 10 days, notify the commissioner of any changes in any of the items set forth in subsection (a) of this section.
(c) The purchasing group shall register with and designate the commissioner, or other appropriate authority, as its agent solely for the purpose of receiving service of legal documents or process, for which a filing fee shall be determined by the commissioner, except that the requirements shall not apply in the case of a purchasing group which only purchases insurance that was authorized under the federal Products Liability Risk Retention Act of 1981, and:
(1) Which in any state of the United States:
a. Was domiciled before April 1, 1986, and
b. Is domiciled on and after October 27, 1986;
(2) Which:
a. Before October 27, 1986, purchased insurance from an insurance carrier licensed in any state, and
b. Since October 27, 1986, purchased its insurance from an insurance carrier licensed in any state; and
(3) Which was a purchasing group under the requirements of the Product Liability Risk Retention Act of 1981 before October 27, 1986.
(d) Each purchasing group that is required to give notice pursuant to subsection (a) of this section shall also furnish the information as may be required by the commissioner to do all of the following:
(1) Verify that the entity qualifies as a purchasing group.
(2) Determine where the purchasing group is located.
(3) Determine appropriate tax treatment.
(e) Any purchasing group which was doing business in this state prior to the enactment of this chapter shall, within 30 days after May 17, 1993, furnish notice to the commissioner pursuant to subsection (a) of this section and furnish information, as may be required, pursuant to subsections (b) and (c) of this section.
(Acts 1993, No. 93-674, p. 1226, §8.)
(a) A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed agent or broker acting pursuant to the surplus lines laws and regulations of the state.
(b) A purchasing group which obtains casualty insurance from an insurer not admitted in this state, or a risk retention group, shall inform each of the members of the group which have a risk resident or located in this state that the risk is not protected by an insurance insolvency guaranty fund in this state, and that the risk retention group or that insurer may not be subject to all insurance laws and regulations of this state.
(c) No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole. Coverage may provide for a deductible or self-insured retention applicable to individual members.
(d) Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits which are applicable to all purchases of group insurance.
(Acts 1993, No. 93-674, p. 1226, §9.)
Premium taxes and taxes on premiums paid for coverage of risks resident, or located in this state by a purchasing group, or any members of the purchasing groups shall be both:
(1) Imposed at the same rate and subject to the same interest, fines, and penalties as that applicable to premium taxes and taxes on premiums paid for similar coverage from a similar insurance source by other insureds.
(2) Paid first by the insurance source, and if not by that source, by the agent or broker for the purchasing group, and if not by the agent or broker then by the purchasing group, and if not by the purchasing group then by each of its members.
(Acts 1993, No. 93-674, p. 1226, §10.)
The commissioner is authorized to make use of any of the powers established under the Insurance Code of this state to enforce the laws of this state not specifically preempted by the Risk Retention Act of 1986, including the commissioner’s administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose penalties, and seek injunctive relief. With regard to any investigation, administrative proceedings, or litigation, the commissioner can rely on the procedural laws of this state. The injunctive authority of the commissioner, in regard to risk retention groups, is restricted by the requirement that any injunction be issued by a court of competent jurisdiction.
(Acts 1993, No. 93-674, p. 1226, §11.)
(a) Risk retention groups. Persons representing or aiding a risk retention group in the solicitation or negotiation of liability insurance in this state and the risk retention group with respect thereto shall be subject to Chapters 7 and 8A of this title.
(b) Purchasing groups.
(1) No person, firm, association, or corporation shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless the person, firm, association, or corporation is licensed as an insurance producer in accordance with Chapter 7, commencing with Section 27-7-1, of this title.
(2) No person, firm, association, or corporation shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance coverage in this state for any member of a purchasing group under a purchasing group’s policy unless that person, firm, association, or corporation is licensed as an insurance producer in accordance with Chapter 7, commencing with Section 27-7-1, of this title.
(3) No person, firm, association, or corporation shall act or aid in any manner in soliciting, negotiating, or procuring liability insurance from an insurer not authorized to do business in this state on behalf of a purchasing group located in this state unless the person, firm, association, or corporation is licensed as a surplus line broker in accordance with Chapter 10, commencing with Section 27-10-1, of this title.
(c) Residence requirement. For purposes of acting as a producer for a risk retention group or purchasing group, pursuant to subsections (a) and (b), any requirement of residence in this state shall not apply.
(d) Notice. Every person, firm, association, or corporation licensed, pursuant to the provisions of Chapter 7, commencing with Section 27-7-1, of this title, on business placed with risk retention groups or written through a purchasing group, shall inform each prospective insured of the provisions of the notice required by subdivision (6) of Section 27-31A-4 in the case of a risk retention group and subsection (b) of Section 27-31A-9 in the case of a purchasing group.
(Acts 1993, No. 93-674, p. 1226, § 12; Act 2001-702, p. 1509, § 15.)
An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating in any state, or in all states, or in any territory or possession of the United States, upon a finding that the group is in hazardous financial or financially impaired condition shall be enforceable in the courts of the state.
(Acts 1993, No. 93-674, p. 1226, §13.)
This chapter shall not apply to any liability self-insurance fund established by counties pursuant to Title 11, Chapter 30.
(Acts 1993, No. 93-674, p. 1226, §14.)
The commissioner may promulgate and enforce, and from time to time amend, the rules and regulations relating to risk retention groups as may be necessary to carry out this chapter.
(Acts 1993, No. 93-674, p. 1226, §15.)
This chapter shall be known and may be cited as the “Alabama Captive Insurers Act.”
(Act 2006-509, p. 1153, §1.)
As used in this chapter, the following terms shall have the following meanings, unless the context clearly indicates otherwise:
(1) AFFILIATED COMPANY. Any company in the same corporate system as a parent, an industrial insured, or a member organization by virtue of common ownership, control, operation, or management.
(2) AGENCY CAPTIVE INSURANCE COMPANY. A captive insurance company that satisfies both of the following:
a. Is owned or directly or indirectly controlled by one or more licensed insurance producers.
b. Only insures against risks covered by insurance policies sold, solicited, or negotiated through the insurance producers that own or control the captive insurance company.
(3) ALIEN CAPTIVE INSURANCE COMPANY. Any insurance company formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of an alien jurisdiction which imposes statutory or regulatory standards in a form acceptable to the commissioner on companies transacting the business of insurance in that jurisdiction.
(4) ASSOCIATION. Any legal association of individuals, corporations, limited liability companies, partnerships, associations, or other entities whereby either of the following exists:
a. The member organizations of which, or the association itself, whether or not in conjunction with some or all of the member organizations, meet one of the following:
Own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer.
Have complete voting control over an association captive insurance company incorporated as a mutual insurer.
Have complete voting control over an association captive insurance company formed as a limited liability company.
b. The member organizations of which collectively constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer.
(5) ASSOCIATION CAPTIVE INSURANCE COMPANY. Any company that insures risks of the member organizations of the association, and that also may insure the risks of affiliated companies of the member organizations and the risks of the association itself and their affiliated companies.
(6) BRANCH BUSINESS. Any insurance business transacted by a branch captive insurance company in this state.
(7) BRANCH CAPTIVE INSURANCE COMPANY. Any alien captive insurance company licensed by the commissioner to transact the business of insurance in this state through a business unit with a principal place of business in this state. A branch captive insurance company is a pure captive insurance company with respect to operations in this state, unless otherwise permitted by the commissioner. A branch captive insurance company may pool insurance business done in this state with business done in alien jurisdictions subject to commissioner approval.
(8) BRANCH OPERATIONS. Any business operations of a branch captive insurance company in this state.
(9) CAPTIVE INSURANCE COMPANY. Any pure captive insurance company, agency captive insurance company, association captive insurance company, risk retention group, protected cell captive insurance company, incorporated cell captive insurance company, industrial insured captive insurance company, reinsurance captive insurance company, or special purpose captive insurance company formed or licensed under this chapter.
(10) CAPTIVE RISK RETENTION GROUP. A captive insurance company organized and licensed as a captive insurer under the laws of this state and operating pursuant to the Liability Risk Retention Act of 1986, as amended, 15 U.S.C. § 3901 et seq., as a stock or mutual corporation, a reciprocal, or other limited liability entity. Risk retention groups formed under this chapter are subject to Section 27-31B-28.
(11) COMMISSIONER. The Alabama Commissioner of Insurance or the commissioner’s designee.
(12) CONTROLLED UNAFFILIATED BUSINESS. Any company that meets all of the following criteria:
a. Is not in the corporate system of a parent and affiliated companies in the case of a pure captive insurance company, or is not in the corporate system of an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company.
b. Has an existing contractual relationship with a parent or one of its affiliated companies in the case of a pure captive insurance company or with an industrial insured or one of its affiliated companies in the case of an industrial insured captive insurance company.
c. Whose risks are managed by a captive insurance company or an industrial insured captive insurance company, as applicable, in accordance with Section 27-31B-20.
(13) EXCESS WORKERS’ COMPENSATION INSURANCE. In the case of an employer or group of employers that has insured or self-insured its workers’ compensation risks in accordance with applicable state or federal law, insurance in excess of a specified per-incident or aggregate limit established by the commissioner.
(14) GENERAL ACCOUNT. All assets and liabilities of a protected cell captive insurance company not attributable to a protected cell.
(15) INCORPORATED CELL. A protected cell of an incorporated cell captive insurance company that is organized as a corporation or other legal entity separate from the incorporated cell captive insurance company.
(16) INCORPORATED CELL CAPTIVE INSURANCE COMPANY. A protected cell captive insurance company that is established as a corporation or other legal entity separate from its incorporated cells that are also organized as separate legal entities.
(17) INDUSTRIAL INSURED. As defined in subdivision (2) of Section 27-10-20.
(18) INDUSTRIAL INSURED CAPTIVE INSURANCE COMPANY. Any company that insures risks of the industrial insureds that comprise the industrial insured group, and that may insure the risks of the affiliated companies of the industrial insureds and the risks of the controlled unaffiliated business of an industrial insured or its affiliated companies.
(19) INDUSTRIAL INSURED GROUP. Any group that meets either of the following criteria:
a. Any group of industrial insureds that collectively meet any of the following criteria:
Own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer.
Have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer.
Constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer.
Have complete voting control over an industrial insured captive insurance company formed as a limited liability company.
b. Any group which is created under the Product Liability Risk Retention Act of 1981, 15 U.S. Code § 3901 et seq., as amended, as a corporation or other limited liability association taxable as a stock insurance company or a mutual insurer under the law of the State of Alabama.
(20) MEMBER ORGANIZATION. Any individual, corporation, limited liability company, partnership, association, or other entity that belongs to an association.
(21) MUTUAL CORPORATION. A corporation or other legal entity organized without stockholders. The term includes a nonprofit corporation with members.
(22) MUTUAL INSURER. An incorporated captive insurer without capital stock and the governing body of which is elected from policyholders at the mutual members’ annual meeting.
(23) ORGANIZATIONAL DOCUMENTS. The documents that must be submitted pursuant to state law in order to legally form a business in this state, or to obtain a certificate of authority to transact business in the state.
(24) PARENT. An individual, corporation, limited liability company, partnership, association, or other entity that directly or indirectly owns, controls, or holds with power to vote more than 50 percent of the outstanding of any of the following:
(1) Voting securities of a pure captive insurance company organized as a stock corporation.
(2) Membership interests of a pure captive insurance company organized as a nonprofit corporation.
(3) Membership interests of a pure captive insurance company organized as a limited liability company.
(25) PARTICIPANT. An entity as defined in Section 27-31B-24, and any affiliates thereof, that are insured by a protected cell captive insurance company, where the losses of the participant are limited through a participant contract.
(26) PARTICIPANT CONTRACT. A contract by which a protected cell captive insurance company insures the risks of a participant and limits the losses of each participant to its pro rata share of the assets of one or more protected cells identified in the participant contract.
(27) PROTECTED CELL. A separate account established by a protected cell captive insurance company formed or licensed under this chapter, in which an identified pool of assets and liabilities is segregated and insulated by means of this chapter from the remainder of the protected cell captive insurance company’s assets and liabilities in accordance with the terms of one or more participant contracts to fund the liability of the protected cell captive insurance company, with respect to the participants as set forth in the participant contracts.
(28) PROTECTED CELL ASSETS. All assets, contract rights, and general intangibles identified with and attributable to a specific protected cell of a protected cell captive insurance company.
(29) PROTECTED CELL CAPTIVE INSURANCE COMPANY. Any captive insurance company meeting all of the following:
a. The minimum capital and surplus required by this chapter are provided by one or more sponsors.
b. The company is formed and licensed under this chapter.
c. The company insures the risks of separate participants through participant contracts.
d. The company funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the protected cell captive insurance company’s general account.
(30) PROTECTED CELL LIABILITIES. All liabilities and other obligations identified with and attributed to a specific protected cell of a protected cell captive insurance company.
(31) PURE CAPTIVE INSURANCE COMPANY. Any company that insures risks of its parent and affiliated companies or controlled unaffiliated business or businesses.
(32) REINSURANCE CAPTIVE INSURANCE COMPANY. For the purpose of this section a “reinsurance captive insurance company” is a company which only assumes risks from:
a. An insurer or reinsurer approved or licensed under the laws of this state or any foreign or alien jurisdiction upon approval of the commissioner.
b. Which assumes those risks on a funds withheld basis or other basis deemed acceptable by the commissioner.
(33) SPECIAL PURPOSE FINANCIAL CAPTIVE COMPANIES or SPFC. A captive insurance company that has received a certificate of authority from the commissioner for the limited purposes provided for within this chapter.
(34) SPONSOR. Any person or entity that is approved by the commissioner to organize and operate a protected cell captive insurance company.
(35) SURPLUS NOTE. An unsecured subordinated debt obligation deemed to be a surplus certificate under terms acceptable to the commissioner.
(Act 2006-509, p. 1153, §1; Act 2016-191, p. 446, §1; Act 2021-162, §1.)
(a) Any captive insurance company, when permitted by its articles of association, charter, or other organizational document, may apply to the commissioner for a license to do any and all insurance defined in Sections 27-5-2, 27-5-4, and 27-5-5, in subdivisions (1), (2), (4), (5), (6), (7), (8), (9), (10), (11), (12), (13), and (14) of subsection (a) of Section 27-5-6, in Sections 27-5-7, 27-5-8, 27-5-9, and 27-5-10, and to grant annuity contracts as defined in Section 27-5-3, subject, however, to all of the following:
(1) No pure captive insurance company may insure any risks other than those of its parent and affiliated companies or controlled unaffiliated business.
(2) No agency captive insurance company may insure risks other than those affiliated with the controlling insurance producer.
(3) No association captive insurance company may insure any risks other than those of the member organizations of its association and their affiliated companies.
(4) No industrial insured captive insurance company may insure any risks other than those of the industrial insureds that comprise the industrial insured group and their affiliated companies.
(5) No risk retention group may insure any risks other than those of its members and owners.
(6) No captive insurance company may provide personal motor vehicle coverage or any component thereof. Homeowner’s insurance coverage may be written by an Alabama Coastal Captive Insurance Company as defined in Chapter 31C, but only in the gulf front, beach, and seacoast areas as designated by the Insurance Services Office, Inc.
(7) No captive insurance company may accept or cede reinsurance except as provided in Section 27-31B-13.
(8) Any captive insurance company may provide excess workers’ compensation insurance to its parent and affiliated companies and member organizations unless prohibited by the laws of the state having jurisdiction over the transaction. Any captive insurance company may reinsure workers’ compensation.
(9) Any captive insurance company that insures risks described in Sections 27-5-2 and 27-5-4 shall comply with all applicable state and federal laws.
(10) Insurance may be placed on risks in alien and foreign jurisdictions if the underlying business in the jurisdiction is legal in the jurisdiction, subject to commissioner approval.
(11) No protected cell captive insurance company may insure any risks other than those of its participants.
(b) To conduct insurance business in this state, a captive insurance company shall comply with all of the following:
(1) It must obtain from the commissioner a license authorizing it to do insurance business in this state.
(2) Its board of directors or managers, or in the case of a reciprocal insurer, its subscribers’ advisory committee, must hold at least one meeting each year in this state.
(3) It must maintain its principal place of business in this state, or in the case of a branch captive insurance company, maintain a place of business for its branch operations in this state.
(4) It must appoint a registered agent to accept service of process and to otherwise act on its behalf in this state; subject further to the following:
a. If formed as a corporation or other legal entity, whenever the registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Secretary of State shall be an agent of the captive insurance company upon whom any process, notice, or demand may be served.
b. If formed as a reciprocal insurer, whenever the registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the commissioner shall be an agent of the captive insurance company upon whom any process, notice, or demand may be served.
(5) It must own a financial account with a bank or credit union with a brick and mortar location in Alabama approved by the commissioner or a veteran-related financial institution approved by the commissioner.
(6)a. It must employ or enter into a contract with a natural person or business organization to manage the affairs of the captive insurer which meets the standards of competence and experience satisfactory to the commissioner.
b. The captive insurer shall promptly notify the commissioner of any failure of the captive insurer to comply with this chapter.
c. The commissioner may require a captive insurer to discharge a captive manager for failure to substantively fulfill the captive manager’s duties under this chapter.
d. The captive manager, if a natural person, or the officers and directors of the captive manager, if a business organization, shall not serve as the president of a captive insurer, except in the case where a captive insurer has contracted with its parent or its affiliated companies or a controlled unaffiliated business for captive management services.
(7) It must employ or enter into a contract with a qualified and experienced independent certified public accountant that is approved by the commissioner.
(8) It must employ or enter into a contract with a qualified and experienced actuary who is approved by the commissioner.
(9) It must submit biographical background information, on a form prescribed by the commissioner, for each director and officer of the captive insurer and for each person who controls, directly or indirectly, 10 percent or more of the captive insurer.
(10) It must submit a plan of operation which clearly indicates the method of operation of the captive insurer including all of the following items:
a. The types and limits of insurance that will be provided.
b. Pro forma financial statements for a period covering three years, which shall include a balance sheet, income statement, and cash flow statement.
c. A description of the captive insurer’s reinsurance program.
d. A description of the captive insurer’s underwriting policy, including who will perform those functions.
e. A description of the captive insurer’s claims handling procedures, including who will perform those functions.
f. A description of the captive insurer’s investment policy.
g. A description of the captive insurer’s ratemaking policies and procedures.
(11) It must submit a feasibility study, or other analysis, prepared by a qualified actuary.
(12) It must submit a statement disclosing the identity and percentage of ownership of the captive insurer for all persons who control, directly or indirectly, 10 percent or more of the captive insurer.
(13) It must submit evidence of its beneficial ownership, sponsorship, or membership.
(14) It must submit any other factors or information deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.
(c) If there is a subsequent material change in any item or information submitted pursuant to subsection (b) including, but not limited to, the plan of operation, the captive insurer shall submit an appropriate revision for approval by the commissioner. The captive insurer may not offer any additional kinds of insurance until a revision of the description is approved by the commissioner.
(d)(1) Before receiving a license, a captive insurance company shall comply with one of the following:
a. If formed as a corporation or other legal entity, it shall file with the commissioner a certified copy of its organizational documents and bylaws, a statement under oath of its president and secretary or other authorized official showing its financial condition, and any other statements or documents required by the commissioner.
b. If formed as a reciprocal insurer, it shall comply with both of the following:
File with the commissioner a certified copy of the power of attorney of its attorney-in-fact, a certified copy of its subscribers’ agreement, a statement under oath of its attorney-in-fact showing its financial condition, and any other statements or documents required by the commissioner.
Submit to the commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with any additional information as the commissioner may reasonably require. In the event of any subsequent material change in any item in the description, the reciprocal captive insurance company shall submit to the commissioner for approval an appropriate revision and shall not offer any additional kinds of insurance until a revision of the description is approved by the commissioner. The reciprocal captive insurance company shall inform the commissioner of any material change in rates within 30 days of the adoption of the change.
(2) In addition to the information required by subdivision (1), each applicant captive insurance company shall file with the commissioner evidence of all of the following:
a. The amount and liquidity of its assets relative to the risks to be assumed.
b. The adequacy of the expertise, experience, and character of the person or persons who will manage it.
c. The overall soundness of its plan of operation.
d. The adequacy of the loss prevention programs of its parent, member organizations, industrial insureds, or other insureds as applicable.
e. Any other factors deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations.
(3) In addition to the information required by subdivisions (1) and (2), each applicant protected cell captive insurance company shall file with the commissioner all of the following:
a. A business plan demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the commissioner and how it will report the experience to the commissioner.
b. A statement acknowledging that all financial records of the protected cell captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the commissioner or the commissioner’s designated agent.
c. All contracts or sample contracts between the protected cell captive insurance company and any participants.
d. Evidence that expenses shall be allocated to each protected cell in a fair and equitable manner.
(4) Information submitted pursuant to this subsection shall be and remain confidential, and may not be made public by the commissioner or by an employee or agent of the commissioner without the written consent of the company, except as provided in the following:
a. The information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted the information is a party, upon a showing by the party seeking to discover the information that: (i) the information sought is relevant to and necessary for the furtherance of the action or case; (ii) the information sought is unavailable from other nonconfidential sources; and (iii) a subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner. Notwithstanding the foregoing, this subdivision shall not apply to any industrial insured captive insurance company insuring the risks of an industrial insured group as defined in Section 27-31B-2(19)b. or to a captive risk retention group.
b. The commissioner may disclose the information to a public officer having jurisdiction over the regulation of insurance in another state, provided that: (i) the public official agrees in writing to maintain the confidentiality of the information; and (ii) the laws of the state in which the public official serves require the information to be and to remain confidential.
(e) Each captive insurance company shall pay to the commissioner a nonrefundable fee as set forth in Section 27-31B-4 for examining, investigating, and processing its application for license, and the commissioner may retain legal, financial, and examination services from outside the department, the reasonable cost of which may be charged against the applicant in accordance with Section 27-2-25. In addition, each captive insurance company shall pay a license fee for the year of registration and a renewal fee for each year thereafter as set forth in Section 27-31B-4.
(f) If the commissioner is satisfied that the documents and statements filed by a captive insurance company comply with this chapter, the commissioner may grant a license authorizing the company to conduct insurance business in this state until April 1 thereafter, which license may be renewed.
(g)(1) Notwithstanding any other provision of this chapter, the commissioner may issue a provisional license to any applicant captive insurance company for a period not to exceed 60 days if the commissioner deems that the public interest will be served by the issuance of the provisional license.
(2) As a condition precedent to the issuance of a provisional license under this subsection, the applicant shall have filed a complete application containing all information required by this section, paid all fees required for licensure, and the commissioner shall have made a preliminary finding that the expertise, experience, and character of the person or persons who will control and manage the captive insurer are acceptable.
(3) The commissioner, by order, may limit the authority of any provisional licensee in any way deemed necessary to protect insureds and the public. The commissioner, by order, may revoke a provisional license if the interests of insureds or the public are endangered. If the applicant fails to complete the regular licensure application process within the 60-day provisional period, the provisional license shall terminate automatically at the end of the 60-day period, and any policy issued during the provisional period shall be cancelled as of the termination date and any premium unearned shall be refunded to the policyholder within 10 days.
(Act 2006-509, p. 1153, §1; Act 2008-391, p. 742, §1; Act 2016-191, p. 446, §1; Act 2021-162, §1; Act 2026-486, §1.)
(a) The commissioner shall collect the following fees in connection with Section 27-31B-3:
(1) Filing application for license, two hundred dollars ($200).
(2) License fee, for initial license and each annual renewal thereof, three hundred dollars ($300).
(b) All fees collected pursuant to this section shall be deposited in the State Treasury to the credit of the Insurance Department Fund.
(Act 2006-509, p. 1153, §1.)
No captive insurance company shall adopt a name that is the same, deceptively similar, or likely to be confused with or mistaken for any other existing business name registered in the State of Alabama.
(Act 2006-509, p. 1153, §1.)
(a) No captive insurance company shall be issued a license unless the captive insurance company possesses and thereafter maintains unimpaired paid-in capital and surplus as follows:
(1) In the case of a pure captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(2) In the case of an agency captive insurance company, not less than five hundred thousand dollars ($500,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(3) In the case of an association captive insurance company, not less than five hundred thousand dollars ($500,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(4) In the case of an industrial insured captive insurance company, not less than five hundred thousand dollars ($500,000).
(5) In the case of a reinsurance captive insurance company, not less than one million dollars ($1,000,000).
(6) In the case of a protected cell captive insurance company, not less than two hundred fifty thousand dollars ($250,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(7) In the case of a branch captive insurance company, not less than two hundred fifty thousand dollars ($250,000).
(8) In the case of a risk retention group, not less than one million dollars ($1,000,000) or another amount determined by the commissioner and actuarially supported by a feasibility study.
(b) Notwithstanding the requirements of subsection (a), no captive insurance company organized as a reciprocal insurer under this chapter shall be issued a license unless the captive insurance company organized as a reciprocal insurer possesses and thereafter maintains free surplus of one million dollars ($1,000,000).
(c) The commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business transacted.
(d) Capital and surplus may be in the form of cash, cash equivalents, surplus note, securities meeting the eligibility requirements of Section 27-6-3, or, if approved by the commissioner, a clean, irrevocable, and unconditional letter of credit issued by a bank chartered by the State of Alabama or a member bank of the Federal Reserve System and approved by the commissioner. No assets of the captive insurer shall be pledged or encumbered for the payment of the letter of credit.
(e) In the case of a branch captive insurance company, as security for the payment of liabilities attributable to the branch operations, the commissioner may require collateral equal to the amount of net loss reserves on branch business plus other insurance liabilities as determined by the commissioner to be maintained by the branch captive insurance company in a manner acceptable to the commissioner.
(f) Any captive insurance company formed under this chapter may be capitalized with a surplus note. Any captive insurance company issuing a surplus note pursuant to this section must execute a written agreement with the creditor providing the following:
a. The creditor may only be paid out of the portion of the captive insurance company’s surplus which exceeds the minimum stated in the agreement.
b. The minimum surplus or floor shall exceed the sum of: (i) 10 percent of the face amount of the surplus note; and (ii) the greater of the statutory minimum capital or surplus required by statute or the approved feasibility study or such other amount approved by the commissioner.
c. Payments may only be made if the payment does not affect the financial condition of the company.
d. Any payment of principal or interest requires the prior approval of the commissioner.
(Act 2006-509, p. 1153, §1; Act 2016-191, p. 446, §1; Act 2021-162, §1; Act 2026-486, §1.)
No captive insurance company may pay a dividend out of, or other distribution with respect to, capital or surplus, in excess of the limitations set forth in subsection (g) of Section 27-29-5, without the prior approval of the commissioner. Approval of an ongoing plan for the payment of dividends or other distributions shall be conditioned upon the retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by, the commissioner.
(Act 2006-509, p. 1153, §1.)
(a) A pure captive insurance company, an agency captive insurance company, a reinsurance captive insurance company, a special purpose financial captive insurance company, or a protected cell captive insurance company shall be formed as a stock or mutual insurer, or as a nonprofit or limited liability company with its capital divided into units and held by the stockholders, members, or other equivalent as allowed by law.
(b) An association captive insurance company, an industrial insured captive insurance company, or a risk retention group may be formed in any of the following ways:
(1) Organized as a stock insurer with its capital divided into share units and held by the stockholders, members, or other equivalent as allowed by law.
(2) Organized as a mutual insurer without capital stock, the governing body of which is elected by the member organizations of its association.
(3) Organized as a reciprocal insurer in accordance with Chapter 31.
(4) Organized as a manager-managed limited liability company.
(c) A captive insurance company incorporated or organized in this state shall have one or more incorporators or one or more organizers, at least one of which shall be a resident of this state.
(d)(1) In the case of a captive insurance company formed as a corporation, before the articles of incorporation are transmitted to the Secretary of State, the incorporators shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that the establishment and maintenance of the proposed corporation will promote the general good of the state. In arriving at this finding, the commissioner shall consider all of the following:
a. The character, reputation, financial standing, and purposes of the incorporators.
b. The character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors.
c. Any other aspects as the commissioner shall deem advisable.
(2) The articles of incorporation, the certificate, and the organization fee shall be transmitted to the Secretary of State, who shall record both the articles of incorporation and the certificate.
(e) In the case of a captive insurance company formed as a reciprocal insurer, the organizers shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that the establishment and maintenance of the proposed association will promote the general good of the state. In arriving at this finding, the commissioner shall consider all of the following:
(1) The character, reputation, financial standing, and purposes of the organizers.
(2) The character, reputation, financial responsibility, insurance experience, and business qualifications of the attorney-in-fact.
(3) The competence of any person who, pursuant to a contract with the captive insurance company, will manage the affairs of the company.
(4) The competence, reputation, and experience of the company’s legal counsel relating to the regulation of insurance.
(5) The company’s business plan.
(6) Any other aspects as the commissioner shall deem advisable.
(f) In the case of a captive insurance company licensed as a branch captive insurance company, the alien captive insurance company shall petition the commissioner to issue a certificate setting forth the commissioner’s finding that, after considering the character, reputation, financial responsibility, insurance experience, and business qualifications of the officers and directors of the alien captive insurance company, the competence of any person who, pursuant to a contract with the captive insurance company, will manage the affairs of the company, the competence, reputation, and experience of the company’s legal counsel relating to the regulation of insurance, and the company’s business plan, the licensing and maintenance of the branch operations will promote the general good of the state. The alien captive insurance company may register to do business in this state after the commissioner’s certificate is issued.
(g) The capital stock of a captive insurance company incorporated as a stock insurer may be authorized with no par value.
(h) In the case of a captive insurance company, at least one of the members of the board of directors, managing members, or equivalents as allowed by law, shall be a resident of this state.
(i) In the case of a captive insurance company formed as a reciprocal insurer, at least one of the members of the subscribers’ advisory committee shall be a resident of this state.
(j) Captive insurance companies formed as corporations under this chapter shall have the privileges of and be subject to the general corporation law as well as the applicable provisions of this chapter. In the event of conflict between the general corporation law and this chapter, the latter shall control. The provisions of this title pertaining to mergers, consolidations, and conversions shall apply in determining the procedures to be followed by captive insurance companies in carrying out any of the transactions described therein, except that the commissioner may waive or modify the requirements for public notice and hearing in accordance with rules that the commissioner may adopt addressing categories of transactions. If a notice of public hearing is required, but no one requests a hearing, then the commissioner may cancel the hearing.
(k)(1) Captive insurance companies formed as reciprocal insurers under this chapter shall have the privileges and be subject to Chapter 31 in addition to the applicable provisions of this chapter. In the event of a conflict between Chapter 31 and this chapter, the latter shall control. To the extent a reciprocal insurer is made subject to other provisions of this title pursuant to Chapter 31, the provisions shall not be applicable to a reciprocal insurer formed under this chapter unless the provisions are expressly made applicable to captive insurance companies under this chapter.
(2) In addition to subdivision (1), captive insurance companies organized as reciprocal insurers that are industrial insured groups as defined in Section 27-31B-2(19)b. shall have the privileges and be subject to Chapter 31A in addition to the applicable provisions of this chapter.
(l) The articles of incorporation, organization, or equivalent allowed by law, or bylaws of a captive insurance company, may authorize a quorum of a board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors determined under Title 10A.
(m) The subscribers’ agreement or other organizing document of a captive insurance company formed as a reciprocal insurer may authorize a quorum of a subscribers’ advisory committee to consist of no fewer than one-third of its members.
(Act 2006-509, p. 1153, §1; Act 2016-191, p. 446, §1; Act 2021-162, §1; Act 2026-486, §1.)
(a) Captive insurance companies shall not be required to make any annual report except as provided in this chapter.
(b) Prior to March 1 of each year, each captive insurance company shall submit to the commissioner a report of its financial condition, verified by oath of two of its executive officers. Except as provided in Section 27-31B-6, each captive insurance company shall report using statutory accounting principles, unless the commissioner approves the use of generally accepted accounting principles, with any useful or necessary modifications or adaptations thereof required or approved or accepted by the commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the commissioner. Except as otherwise provided, each association captive insurance company and each industrial insured captive insurance company insuring the risks of an industrial insured group defined in Section 27-31B-2(19)b. shall file its report in the form required by Section 27-3-26. Each risk retention group shall file its report in the form required by Section 27-3-26 and shall comply with all filing requirements set forth in this title as well as rules and bulletins of the Alabama Department of Insurance applicable to casualty insurers domiciled in the state. The commissioner shall by rule propose the forms in which pure captive insurance companies and industrial insured captive insurance companies insuring the risks of an industrial insured group defined in Section 27-31B-2(19)a. shall report. Section 27-31B-3(d)(4) shall apply to each report filed pursuant to this section, except that Section 27-31B-3(d)(4) shall not apply to reports filed by industrial insured captive insurance companies insuring the risks of industrial insured groups as defined in Section 27-31B-2(19)b.
(c) Any pure captive insurance company or any industrial insured captive insurance company insuring the risks of industrial insured groups as defined in Section 27-31B-2(19)a. may make written application for filing the required report on a fiscal year-end. If an alternative reporting date is granted, the annual report shall be due 60 days after the end of the fiscal year and, in order to provide sufficient detail to support the premium tax return, the pure captive insurance company or industrial insured captive insurance company insuring the risks of industrial insureds as defined in Section 27-31B-2(17) shall file, prior to March 1 of each year for each calendar year-end, pages 1, 2, 3, and 5 of the “Captive Annual Statement - Pure or Industrial Insured,” verified by oath of two of its executive officers.
(d) Sixty days after the fiscal year-end, a branch captive insurance company shall file with the commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the alien captive insurance company is formed, verified by oath of two of its executive officers. If the commissioner is satisfied that the annual report filed by the alien captive insurance company in its domiciliary jurisdiction provides adequate information concerning the financial condition of the alien captive insurance company, the commissioner may waive the requirement for completion of the captive annual statement for business written in the alien jurisdiction.
(e) Annually on or before June 30, an audited statement of the captive insurer’s financial condition shall be prepared in accordance with generally accepted accounting principles in the United States for the preceding calendar year ending December 31, which shall include all of the following:
(1) The report of an independent certified public accountant.
(2) A balance sheet.
(3) An income statement.
(4) A statement of cash flows.
(5) A statement of changes in capital and surplus.
(6) Notes to financial statements.
(f) An annual actuarial certification of loss reserves and loss expense reserves which includes an opinion of the adequacy of the loss reserves and loss expense reserves of the captive insurer, in a format acceptable to the commissioner, shall be filed with the report required in subsection (b). The person that certifies the reserves shall be approved by the commissioner and shall be a qualified actuary as defined in the National Association of Insurance Commissioners Quarterly and Annual Statement Instructions-Property/Casualty.
(Act 2006-509, p. 1153, §1; Act 2016-191, §1; Act 2026-486, §1.)
(a) At least once in three years, and whenever the commissioner determines it to be prudent, the commissioner shall visit each captive insurance company and thoroughly inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations, and whether it has complied with this chapter. The commissioner, upon application, may enlarge the three-year period to five years, provided the captive insurance company is subject to a comprehensive annual audit during that period of a scope satisfactory to the commissioner by independent auditors approved by the commissioner. The expenses and charges of the examination shall be in accordance with Section 27-2-25.
(b) All examination reports, preliminary examination reports or results, working papers, recorded information, documents, and copies thereof produced by, obtained by, or disclosed to the commissioner or any other person in the course of an examination made under this section are confidential and are not subject to subpoena and may not be made public by the commissioner or an employee or agent of the commissioner without the written consent of the company, except to the extent provided in this subsection. Nothing in this subsection shall prevent the commissioner from using the information in furtherance of the commissioner’s regulatory authority under this title. The commissioner may grant access to the information to public officers having jurisdiction over the regulation of insurance in any other state or country, or to law enforcement officers of this state or any other state or agency of the federal government at any time, so long as the officers receiving the information agree in writing to hold it in a manner consistent with this section.
(c)(1) This section applies to all business written by a captive insurance company, except that the examination for a branch captive insurance company shall be of branch business and branch operations only, as long as the branch captive insurance company provides annually to the commissioner a certificate of compliance, or its equivalent, issued by or filed with the licensing authority of the jurisdiction in which the branch captive insurance company is formed, and demonstrates to the commissioner’s satisfaction that it is operating in sound financial condition in accordance with all applicable laws and regulations of the jurisdiction.
(2) As a condition of licensure, an alien captive insurance company shall grant authority to the commissioner for examination of the affairs of the alien captive insurance company in the jurisdiction in which the alien captive insurance company is formed.
(d) To the extent that Sections 27-2-22 through 27-2-32, do not contradict this section, the sections shall apply to captive insurance companies licensed under this chapter.
(Act 2006-509, p. 1153, §1.)
(a) The license of a captive insurance company to do an insurance business in this state may be suspended or revoked by the commissioner for any of the following reasons:
(1) Insolvency or impairment of capital or surplus.
(2) Failure to meet the requirements of Section 27-31B-6.
(3) Refusal or failure to submit an annual report, as required by Section 27-31B-9, or any other report or statement required by law or by lawful order of the commissioner.
(4) Failure to comply with its own charter, bylaws, or other organizational document.
(5) Failure to submit to examination or any legal obligation relative thereto, as required by Section 27-31B-10.
(6) Refusal or failure to pay the cost of examination, as required by Section 27-31B-10.
(7) Use of methods that, although not otherwise specifically prohibited by law, nevertheless render its operation detrimental or its condition unsound with respect to the public or to its policyholders.
(8) Failure otherwise to comply with the laws of this state.
(b) If the commissioner finds, upon examination, hearing, or other evidence, that any captive insurance company has committed any of the acts specified in subsection (a), the commissioner may suspend or revoke the license if the commissioner deems it in the best interest of the public and the policyholders of the captive insurance company, notwithstanding any other provision of this title.
(Act 2006-509, p. 1153, §1.)
(a) An association captive insurance company, risk retention group, and an industrial insured captive insurance company insuring the risks of an industrial insured group defined in paragraph b. of subdivision (19) of Section 27-31B-2 shall comply with the investment requirements contained in this title, as applicable; provided, however, that compliance with these investment requirements shall be waived for risk retention groups to the extent that credit for risks ceded to reinsurers is allowed pursuant to Section 27-31B-13 or to the extent otherwise deemed reasonable and appropriate by the commissioner. Chapter 37 of this title shall apply to association captives, risk retention groups, and industrial insured captive insurance companies insuring the risks of industrial insured groups defined in paragraph b. of subdivision (19) of Section 27-31B-2 except to the extent it is inconsistent with approved accounting standards in use by the association captive insurance company, risk retention group, or industrial insured captive insurance company insuring the risks of an industrial insured group as defined in paragraph b. of subdivision (19) of Section 27-31B-2. Notwithstanding any other provision of this title, the commissioner may approve the use of alternative reliable methods of valuation and rating.
(b) No pure captive insurance company, agency captive insurance company, reinsurance captive company, special purpose financial captive insurance company, and industrial insured captive insurance company insuring the risks of an industrial insured group as defined in paragraph b. of subdivision (19) of Section 27-31B-2, or protected cell captive insurance company shall be subject to any restrictions on allowable investments whatever, including those limitations contained in Chapters 37 and 41. Notwithstanding the foregoing, the commissioner may prohibit or limit any investment that threatens the solvency or liquidity of the company.
(c) Only a pure captive insurance company or a protected cell captive insurance company may make loans to its parent company or affiliates. No loans to a parent company or any affiliate shall be permitted without prior written approval of the commissioner and must be evidenced by a note in a form approved by the commissioner. Loans of minimum capital and surplus funds required by Section 27-31B-6 are prohibited. Any loan made by a protected cell captive insurance company must be made from funds in the company’s general account.
(Act 2006-509, p. 1153, §1; Act 2016-191, p. 446, §1; Act 2021-162, §1.)
(a) A captive insurance company may provide reinsurance, as authorized in this title, on risks ceded by any other insurer.
(b) A captive insurance company may take credit for reserves on risks or portions of risks ceded to reinsurers complying with Sections 27-5B-4 through 27-5B-9. A captive insurer shall not take credit for the reserves on risks or portions of risks ceded to reinsurers not complying with Sections 27-5B-4 through 27-5B-9.
(c) For all purposes of this chapter, insurance by a captive insurance company of any workers’ compensation plan of its parent and affiliates shall be deemed to be reinsurance.
(Act 2006-509, p. 1153, §1; Act 2021-162, §1.)
No captive insurance company may be required to join a rating organization.
(Act 2006-509, p. 1153, §1.)
No captive insurance company, including a captive insurance company organized as a reciprocal insurer under this chapter, may join or contribute financially to any plan, pool, association, or guaranty or insolvency fund in this state. No captive insurance company, or its insured, or its parent or any affiliated company, or any member organization of its association or, in the case of a captive insurance company organized as a reciprocal insurer, any subscriber thereof, may receive any benefit from any plan, pool, association, or guaranty or insolvency fund for claims arising out of the operations of the captive insurance company.
(Act 2006-509, p. 1153, §1.)
(a) Each captive insurance company shall pay to the commissioner, by March 1 of each year, a tax at the rate of four-tenths of one percent on the first 20 million dollars, three-tenths of one percent on the next 20 million dollars, two-tenths of one percent on the next 20 million dollars, seventy-five thousandths of one percent on each dollar thereafter on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurance company during the year ending December 31 next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders. Notwithstanding the foregoing, no tax shall be due or payable as to considerations received for annuity contracts.
(b) Each captive insurance company shall pay to the commissioner by March 1 of each year a tax at the rate of two hundred and twenty-five thousandths of one percent on the first 20 million dollars of assumed reinsurance premium, one hundred fifty thousandths of one percent on the next 20 million dollars, fifty thousandths of one percent on the next 20 million dollars, twenty-five thousandths of one percent of each dollar thereafter. However, no reinsurance tax applies to premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection (a). No reinsurance premium tax shall be payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of another insurer under common ownership and control if the transaction is part of a plan to discontinue the operations of the other insurer, and if the intent of the parties to the transaction is to renew or maintain business with the captive insurance company.
(c) If the aggregate taxes to be paid by a captive insurance company calculated under subsections (a) and (b) amount to less than five thousand dollars ($5,000) in any year, the captive insurance company shall pay a tax of five thousand dollars ($5,000) for that year. The aggregate taxes paid by a captive insurance company may not exceed one hundred thousand dollars ($100,000) in any year.
(d) The minimum tax for a protected cell captive insurance company may not be less than five thousand dollars ($5,000) and shall apply to the protected cell captive insurance company as a whole and not to each protected cell. The maximum tax to be paid by a protected cell captive insurance company shall be the aggregate of the tax liabilities of each protected cell. The maximum tax liability attributed to any one protected cell captive insurance company shall be one hundred thousand dollars ($100,000).
(e) Examination expenses paid in accordance with Section 27-31B-10 and business privilege taxes paid in accordance with Section 40-14A-22 by a captive insurance company shall be allowed as credits to the tax provided for in this section for the calendar year in which they were paid. In the event application of the credit results in a negative tax due, the tax due shall be zero and any unused portion of the credit may not be carried forward for use in subsequent years.
(f) A captive insurance company failing to make returns as required by Chapter 14A of Title 40 or failing to pay within the time required all taxes assessed by this section, shall be subject to Section 27-4A-4.
(g) Two or more captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurance company.
(h) For the purposes of this section, “common ownership and control” shall have the following meaning, as applicable:
(1) In the case of stock corporations, the direct or indirect ownership of 80 percent or more of the outstanding voting stock of two or more corporations by the same shareholder or shareholders.
(2) In the case of mutual corporations, the direct or indirect ownership of 80 percent or more of the surplus and the voting power of two or more corporations by the same member or members.
(i) In the case of a branch captive insurance company, the tax provided for in this section shall apply only to the branch business of the company.
(j) If a captive insurance company has been licensed for less than a full calendar year and has written premiums the tax for which is less than the minimum set forth in this section, the tax due shall be prorated as follows:
(1) If licensed on or before March 31, 100 percent.
(2) If licensed April 1 to June 30, 75 percent.
(3) If licensed July 1 to September 30, 50 percent.
(4) If licensed October 1 to December 31, 25 percent.
(k) If a captive insurance company surrenders its license and the calculated tax on premiums written during the calendar year is less than the minimum set forth in this section, the tax due shall be prorated as follows:
(1) If surrendered on or before March 31, 25 percent.
(2) If surrendered April 1 to June 30, 50 percent.
(3) If surrendered July 1 to September 30, 75 percent.
(4) If surrendered October 1 to December 31, 100 percent.
(l) The tax provided for in this section shall constitute all taxes collectible under the laws of this state from any captive insurance company, and no other occupation tax or other taxes shall be levied or collected from any captive insurance company by the state or any county, city, or municipality within this state, except business privilege taxes and ad valorem taxes on real and personal property used in the production of income.
(m) The tax provided for in this section shall not be applicable if the captive insurance company writes no premiums during the calendar year.
(Act 2006-509, p. 1153, §1; Act 2016-191, §1.)
The commissioner may establish and from time to time amend rules relating to captive insurance companies as are necessary to enable the commissioner to carry out this chapter.
(Act 2006-509, p. 1153, §1.)
No provisions of this title, other than those contained in this chapter or referring specifically to captive insurance companies, shall apply to captive insurance companies.
(Act 2006-509, p. 1153, §1.)
(a) Except as otherwise provided in this section, the terms and conditions set forth in Chapter 32 and Article 2, commencing with Section 27-2-50, of Chapter 2, pertaining to rehabilitation, reorganization, conservation, and liquidation of insurers, shall apply in full to captive insurance companies formed or licensed under this chapter.
(b) In the event of an action described in subsection (a) against a protected cell captive insurance company, both of the following shall apply:
(1) The assets of a protected cell may not be used to pay any expenses or claims other than those attributable to the protected cell.
(2) Its capital and surplus shall at all times be available to pay any expenses of or claims against the protected cell captive insurance company.
(c) Notwithstanding the provisions of this title, in the event of an insolvency of a protected cell captive insurance company where the commissioner determines that one or more protected cells remain solvent, the commissioner may separate those cells from the protected cell captive insurance company, and may allow, on application from the sponsor, for the conversion of the protected cells into one or more new or existing captive insurance companies, pursuant to a plan of operation as the commissioner deems acceptable.
(Act 2006-509, p. 1153, §1; Act 2016-191, §1.)
The commissioner shall adopt rules establishing standards to ensure that a parent or affiliated company is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by the captive insurance company. Until the rules under this section are adopted, the commissioner may by temporary order grant authority to a captive insurance company to insure risks.
(Act 2006-509, p. 1153, §1; Act 2016-191, §1.)
(a) An association captive insurance company or industrial insured group formed as a stock or mutual corporation may be converted to or merged with and into a reciprocal insurer in accordance with a plan therefor and this section.
(b) A plan for this conversion or merger shall satisfy both of the following:
(1) Be fair and equitable to the shareholders, in the case of a stock insurer, or the policyholders, in the case of a mutual insurer.
(2) Provide for the purchase of the shares of any nonconsenting shareholder of a stock insurer or the policyholder interest of any nonconsenting policyholder of a mutual insurer in substantially the same manner and subject to the same rights and conditions as are accorded a dissenting shareholder under Article 13, commencing with Section 10-2B-13.01, of Chapter 2B of Title 10.
(c) A conversion authorized under subsection (a) shall satisfy all of the following:
(1) The conversion shall be accomplished under a reasonable plan and procedure as may be approved by the commissioner. Notwithstanding the foregoing, the commissioner may not approve any plan of conversion unless the plan satisfies subsection (b) and all of the following:
a. Provides for a hearing, of which notice has been given to the insurer, its directors, officers, and stockholders, in the case of a stock insurer, or policyholders, in the case of a mutual insurer, all of whom shall have the right to appear at the hearing, except that the commissioner may waive or modify the requirements for the hearing. If a notice of hearing is required, but no hearing is requested, the commissioner may cancel the hearing.
b. Provides for the conversion of existing stockholder or policyholder interests into subscriber interests in the resulting reciprocal insurer, proportionate to stockholder or policyholder interests in the stock or mutual insurer.
c. Is approved as follows:
In the case of a stock insurer, by a majority of the shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present.
In the case of a mutual insurer, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting thereof at which a quorum is present.
(2) The commissioner shall approve the plan of conversion if the commissioner finds that the conversion will promote the general good of the state in conformity with those standards set forth in subsection (e) of Section 27-31B-8.
(3) If the commissioner approves the plan, the commissioner shall amend the converting insurer’s certificate of authority to reflect conversion to a reciprocal insurer and issue the amended certificate of authority to the company’s attorney-in-fact.
(4) Upon the issuance of an amended certificate of authority of a reciprocal insurer by the commissioner, the conversion shall be effective.
(5) Upon the effectiveness of the conversion the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary of State of the conversion.
(d) A merger authorized under subsection (a) shall be accomplished substantially in accordance with the procedures set forth in Sections 27-27-45 and 27-27-46, except that, solely for purposes of the merger, the plan of merger shall satisfy subsection (b) and comply with all of the following:
(1) The subscribers’ advisory committee of a reciprocal insurer shall be equivalent to the board of directors of a stock or mutual insurance company.
(2) The subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual insurance company.
(3) If a subscribers’ advisory committee does not have a president or secretary, the officers of the committee having substantially equivalent duties shall be deemed the president or secretary of the committee.
(4) The commissioner shall approve the articles of merger if the commissioner finds that the merger will promote the general good of the state in conformity with those standards set forth in subsection (e) of Section 27-31B-8. If the commissioner approves the articles of merger, the commissioner shall indorse his or her approval thereon and the surviving insurer shall present the same to the Secretary of State at the Secretary of State’s office.
(5) Notwithstanding Section 27-31B-6, the commissioner may permit the formation, without surplus, of a captive insurance company organized as a reciprocal insurer, into which an existing captive insurance company may be merged for the purpose of facilitating a transaction under this section as long as there is no more than one authorized insurance company surviving the merger.
(6) An alien insurer may be a party to a merger authorized under subsection (a) if the requirements for a merger between a domestic and a foreign insurer under Sections 27-27-45 and 27-27-46 apply to a merger between a domestic and an alien insurer under this subsection. The alien insurer shall be treated as a foreign insurer under Sections 27-27-45 and 27-27-46 and other jurisdictions shall be the equivalent of a state for purposes of Sections 27-27-45 and 27-27-46.
(e) A conversion or merger under this section shall have all of the effects set forth in Section 10-2B-11.06 to the extent these effects are not inconsistent with the provisions of this chapter.
(Act 2006-509, p. 1153, §1.)
(a) One or more sponsors may form a protected cell captive insurance company under this chapter.
(b) A protected cell captive insurance company formed or licensed under this chapter may establish and maintain one or more protected cells to insure risks of one or more participants, subject to all of the following conditions:
(1) Each protected cell shall be accounted for separately on the books and records of the protected cell captive insurance company to reflect the financial condition and results of operations of the protected cell, net income or loss, dividends or other distributions to participants, and other factors as may be provided in the participant contract or required by the commissioner.
(2) The assets of a protected cell shall not be chargeable with liabilities arising out of any other insurance business the protected cell captive insurance company may conduct.
(3) No sale, exchange, or other transfer of assets may be made by the protected cell captive insurance company between or among any of its protected cells without the consent of the protected cells.
(4) No sale, exchange, transfer of assets, dividend, or distribution may be made from a protected cell to a sponsor or participant without the commissioner’s approval and in no event shall the approval be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell.
(5) Each protected cell captive insurance company shall annually file with the commissioner all financial reports as the commissioner shall require, which shall include, without limitation, accounting statements detailing the financial experience of each protected cell.
(6) Each protected cell captive insurance company shall notify the commissioner in writing within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations.
(7) No participant contract shall take effect without the commissioner’s prior written approval, and the addition of each new protected cell and withdrawal of any participant of any existing protected cell shall constitute a change in the business plan requiring the commissioner’s prior written approval.
(8) The commissioner, based on the type, nature, and volume of insurance business transacted, may require that the business written by a protected cell captive insurance company, with respect to each cell, be one of the following:
a. Fronted by an insurance company licensed under the laws of any state.
b. Reinsured by a reinsurer authorized or approved by the state.
c. Secured by a trust fund in the United States for the benefit of policyholders and claimants funded by an irrevocable letter of credit or other asset that is acceptable to the commissioner. The amount of security provided by a trust fund shall be no less than the reserves associated with those liabilities, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned premiums for business written through the participant’s protected cell. The commissioner may require the protected cell captive insurance company to increase the funding of any trust as established under this subdivision. If the form of security in the trust is a letter of credit, the letter of credit must be clean, irrevocable, and unconditional and must be issued or confirmed by a bank chartered in this state, a member of the federal reserve system, or a bank chartered by another state if the state chartered bank is acceptable to the commissioner. A trust and trust instrument maintained pursuant to this subdivision shall be established in a form and upon terms approved by the commissioner.
(Act 2006-509, p. 1153, §1; Act 2016-191, §1.)
[Repealed]
Repealed by Act 2016-191, §3, effective July 1, 2016.
(Act 2006-509, p. 1153, §1.)
(a) An association, corporation, limited liability company, partnership, trust, or other business entity may be a participant in a protected cell captive insurance company formed or licensed under this chapter.
(b) A sponsor may be a participant in a protected cell captive insurance company.
(c) A participant need not be a shareholder of the protected cell captive insurance company or an affiliate of the company.
(d) A participant shall insure only approved risks through a protected cell captive insurance company.
(Act 2006-509, p. 1153, §1; Act 2016-191, §1.)
(a) A protected cell of a protected cell captive insurance company may be formed as an incorporated protected cell.
(b) Subject to the prior written approval of the protected cell captive insurance company and of the commissioner, an incorporated protected cell shall be entitled to enter into contracts and undertake obligations in its own name and for its own account. In the case of a contract or obligation to which the protected cell captive insurance company is not a party, either in its own name and for its own account or on behalf of a protected cell, the counterparty to the contract or obligation shall have no right or recourse against the protected cell captive insurance company and its assets other than against assets properly attributable to the incorporated protected cell that is a party to the contract or obligation.
(c) The certificate of formation of an incorporated protected cell shall refer to the protected cell captive insurance company for which it is a protected cell and shall state that the protected cell is incorporated or organized for the limited purposes authorized by the protected cell captive insurance company’s license. A copy of the prior written approval of the commissioner to add the incorporated protected cell, required by subdivision (7) of subsection (b) of Section 27-31B-22, shall be attached to and filed with the certificate of formation.
(d) It is the intent of the Legislature under this section to provide protected cell captive insurance companies with the option to establish one or more protected cells as a separate corporation, mutual corporation, nonprofit, limited liability company, or other entity as allowed by law. This section shall not be construed to limit any rights or protections applicable to protected cells not established as corporations, mutual corporations, nonprofit corporations, limited liability companies, or other entities as allowed by law.
(Act 2016-191, §2.)
A stock captive insurer may become a mutual captive insurer under the plan or procedure as may be approved by the commissioner. 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 a majority of the insurer’s outstanding capital stock having voting rights and by a majority of the insurer’s policyholders who vote on such plan in person, by proxy, by mail, or e-mail pursuant to such notice and procedure as included in the plan or procedures approved by the commissioner. For purposes of this section a majority vote is one where, based on the number of votes returned, there are more votes for approval of the mutualization than there are for denial;
(3) Mutualization will result in retirement of shares of the insurer’s capital stock at a reasonable price as specified in the plan;
(4) 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 laws of the state as to rights of nonconsenting stockholders with respect to consolidation or merger of private corporations;
(5) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective; and
(6) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully under an approved plan of operation.
(Act 2021-162, §2.)
(a) Notwithstanding any other method authorized by law, a foreign or alien captive insurance company may become a domestic captive insurance company by complying with all of the requirements of this chapter relative to the organization and licensing of a domestic captive insurance company of the same type with the approval of the commissioner. A company redomesticating to this state pursuant to this section may be organized under any lawful corporate form permitted by this chapter.
(b) A redomestication pursuant to this section shall be authorized for captive insurance companies domiciled in foreign or alien jurisdictions that authorize the redomestication of captive insurance companies where, as a result of the actions taken by the company pursuant to this section to redomesticate to this state, shall no longer be a domestic legal entity of foreign or alien jurisdiction. A company seeking to redomesticate under this section must also provide evidence in a form satisfactory to the commissioner that the applicable regulatory authority of its domicile consents to the redomestication.
(c) Upon the completion of a redomestication under this section, the captive insurance company shall be subject to the laws of this state and shall be considered domiciled in this state. The captive insurance company shall be deemed to have a formation date corresponding to its original formation date in the foreign or alien domicile.
(d) For the purposes of examination, any examination conducted by the foreign or alien domicile that is substantially similar in scope to an examination that would have been done in this state had the company been domiciled in this state shall be recognized for the purposes of determining an examination period pursuant to Section 27-31B-10(a).
(e) This section shall not be the exclusive means of redomesticating an insurance company to this state and shall not restrict the ability of an insurance company to undergo a merger, consolidation, transfer of assets and liabilities, or utilize any other means permitted by law to effect the transfer of operations of a foreign or alien insurance company to this state.
(Act 2021-162, §2.)
A risk retention group formed pursuant to this chapter shall comply with any provision determined to be applicable to the National Association of Insurance Commissioners’ (NAIC) accreditation standards for Risk Retention Groups and any provision of this title determined to be applicable by the commissioner. Applicable provisions shall be adopted by the commissioner pursuant to, and in accordance with, Section 27-2-17.
(Act 2021-162, §2.)
This chapter may be cited as the Alabama Coastal Captive Insurance Company Act.
(Act 2008-391, p. 742, §2.)
For the purpose of this chapter :
(1) ALABAMA COASTAL CAPTIVE INSURANCE COMPANY. A captive insurance company, as is defined by Section 27-31B-2(8), that is specifically formed to provide homeowners insurance coverage as limited in Section 27-31B-3(a)(4) and as defined and limited in the standard real property and contents insurance forms as approved by the commissioner.
(2) COMMISSIONER. The Commissioner of Insurance of the State of Alabama.
(3) DEPARTMENT. The Alabama Department of Insurance.
(4) PERIL. The cause of an insured loss.
(5) STATE. The State of Alabama.
(Act 2008-391, p. 742, §2.)
(a) An Alabama Coastal Captive Insurance Company, if permitted by its articles of incorporation or organization, operating agreements, or charter, may apply to the commissioner for a license to write homeowners insurance coverage as limited in Section 27-31B-3(a)(4) and as defined and limited in the standard real property and contents insurance forms as approved by the commissioner.
(b) An Alabama Coastal Captive Insurance Company that qualified as an association captive under the provisions of Section 27-31B-8 is exempt from the requirement that the association be in existence for one year so long as the association is in good standing as an entity before becoming an owner of an Alabama Coastal Captive Insurance Company.
(c) An Alabama Coastal Captive Insurance Company may write homeowners insurance coverage as limited in Section 27-31B-3(a)(4) and as limited to perils described in subsection (a) above.
(d)(1) An Alabama Coastal Captive Insurance Company formed as a sponsored captive insurance company:
a. Is exempt from the provisions of Section 27-31B-22(b)(9)a. that require that the business written by a sponsor captive insurance company, with respect to each protected cell, must be fronted by an insurance company licensed pursuant to the laws of a state.
b. May create a protected cell as a legal person separate from the protected cell company and may organize a protected cell under any incorporation or organization option available under Section 27-31B-8, unless the commissioner finds such option is not feasible under Section 27-31C-5.
c. May have as its sponsor an association formed to address coastal property and insurance issues.
(2) An Alabama Coastal Captive Insurance Company may issue directly its own policies to the insureds.
(e) Any Alabama Coastal Captive Insurance Company that otherwise qualifies for the limited exemption from the provisions of Section 27-31B-22(b)(9)a. pursuant to subsection (d)(1) and any Alabama Coastal Captive Insurance Company, regardless of form, that issues policies directly to the public shall comply with the following:
(1) It shall not expose itself to loss on one risk in an amount exceeding 10 percent of its surplus to policyholders and any risk or portion of it which has been reinsured must be deducted in determining this limitation of risk;
(2) It shall not have loss reserves in excess of five times its surplus to policyholders;
(3) It shall not have net premiums written in excess of three times its surplus to policyholders and any risk or portion of it which has been reinsured must be deducted in determining this limitation of risk; and
(4) It shall file quarterly and annual statements with the department in accordance with statutory accounting principles on forms and in the manner prescribed by Section 27-31B-9.
(f) To conduct business in this state, an Alabama Coastal Captive Insurance Company shall:
(1) Obtain from the commissioner a license authorizing it to conduct business as an Alabama Coastal Captive Insurance Company in this state;
(2) Hold at least one meeting of its governing body each year in this state;
(3) Maintain its principal place of business in this state;
(4) Appoint a registered agent to accept service of process and act otherwise on its behalf in this state; and
(5) Name the commissioner as the agent for the Alabama Coastal Captive Insurance Company upon whom process, notice, or demands may be served if a registered agent, with reasonable diligence, is not located and served.
(g) Before receiving a license, an Alabama Coastal Captive Insurance Company shall file with the commissioner:
(1) A certified copy of its organizational documents;
(2) A statement under oath of its president and secretary or other persons considered appropriate by the commissioner showing its financial condition; and
(3) Other documents required by the commissioner.
(h) In addition to the information required by subsection (g), the applicant Alabama Coastal Captive Insurance Company shall file with the commissioner evidence of:
(1) The amount and liquidity of its assets relative to the risk to be assumed;
(2) The adequacy of the expertise, experience, and character of the person who manages it;
(3) The overall soundness of its plan of operation;
(4) The adequacy of loss prevention programs;
(5) Other overall factors considered relevant by the commissioner in ascertaining if the proposed Alabama Coastal Captive Insurance Company is able to meet its policy obligations;
(6) Any information required by Section 27-31B-8 specifically applicable to the form of the Alabama Coastal Captive Insurance Company, and fees prescribed by Section 27-31B-4 along with any other required fees.
(i) Information submitted pursuant to this section is confidential as provided in Section 27-31B-3, except that information is discoverable by a party in a civil action or contested case to which the Alabama Coastal Captive Insurance Company that submitted the information is a party, upon finding by the court that:
(1) The information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted the information is a party;
(2) The information sought is relevant and necessary for the furtherance of the action or case;
(3) The information sought is unavailable from other non-confidential sources; and
(4) A subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner.
(Act 2008-391, p. 742, §2.)
(a)(1) The commissioner may not issue a license to an Alabama Coastal Captive Insurance Company unless the company possesses and maintains unimpaired paid-in capital of not less than one million dollars ($1,000,000); however, in the case of an Alabama Coastal Captive Insurance Company formed as a sponsored captive insurance company that does not assume any risk, where the risks insured by the protected cells are homogenous, the commissioner may reduce this amount to an amount not less than five hundred thousand dollars ($500,000).
(2) a. Except for an Alabama Coastal Captive Insurance Company formed as a sponsored captive insurance company that does not assume any risk, the capital must be in the form of cash, cash equivalent, or an irrevocable letter of credit issued by a bank chartered by this state or a member bank of the Federal Reserve System with a branch office in this state or as approved by the commissioner.
b. For an Alabama Coastal Captive Insurance Company formed as a sponsored captive insurance company that does not assume any risk, the capital also may be in the form of other high quality securities as approved by the commissioner.
(b) For the purposes of subsection (a), the commissioner may issue a license expressly conditioned upon the Alabama Coastal Captive Insurance Company providing to the commissioner satisfactory evidence of possession of the minimum required unimpaired paid-in capital. Until this evidence is provided, the captive insurance company may not issue a policy, assume any liability, or otherwise provide coverage. The commissioner summarily may revoke the conditional license without legal recourse by the company if satisfactory evidence of the required capital is not provided within a maximum period of time, not to exceed one year, to be established by the commissioner at the time the conditioned license is issued.
(c) The commissioner may prescribe additional capital or net assets based upon the type, volume, and nature of insurance business transacted. Contributions in connection with these prescribed additional net assets or capital must be in the form of:
(1) Cash;
(2) Cash equivalent;
(3) An irrevocable letter of credit issued by a bank chartered in this state or a member bank of the Federal Reserve System with a branch office in this state or as approved by the commissioner.
(d) Section 27-31B-12(c) does not apply and loans to its parent company and affiliates are prohibited.
(e)(1) An Alabama Coastal Captive Insurance Company may not pay a dividend out of, or other distribution with respect to, capital or surplus, in excess of the limitations set forth in Section 27-31B-7, without the prior approval of the commissioner. Approval of an ongoing plan for the payment of dividends or other distributions must be conditioned upon retention, at the time of each payment, of capital or surplus in excess of amounts specified by, or determined in accordance with formulas approved by the commissioner.
(2) A captive insurance company incorporated as a nonprofit corporation may not make any distributions without the prior approval of the commissioner.
(f) An irrevocable letter of credit, which is issued by a financial institution other than a bank chartered by this state or a member bank of the Federal Reserve System, shall meet the same standards as an irrevocable letter of credit which has been issued by either entity.
(Act 2008-391, p. 742, §2.)
(a) The requirements of Section 27-31B-8 apply to an Alabama Coastal Captive Insurance Company.
(b) The commissioner has discretion to restrict the form of an Alabama Coastal Captive Insurance Company to one or more of the types of defined captives listed in Section 27-31B-8, and has the discretion to accept or deny an application based on a finding that one or more of the incorporation or organization options available are not feasible for an Alabama Coastal Captive Insurance Company.
(Act 2008-391, p. 742, §2.)
The commissioner, by rule, regulation, or order, may exempt an Alabama Coastal Captive Insurance Company, on a case-by-case basis, from provisions of this chapter that are determined to be inappropriate given the nature of the risks to be insured and the intent of this chapter.
(Act 2008-391, p. 742, §2.)
The confidentiality provisions of Sections 27-31B-9(b) and 27-31B-10 do not extend to final reports of its financial condition produced by the commissioner in inspecting or examining an Alabama Coastal Captive Insurance Company and do not extend to reports submitted by an Alabama Coastal Captive Insurance Company. All work papers, recorded information, documents, and their copies produced by, obtained by, or disclosed to the commissioner, his or her designee, or other persons made under this chapter must be given confidential treatment as provided in Sections 27-31-3(4), 27-31B-9(b), and 27-31B-10.
(Act 2008-391, p. 742, §2.)
(a) An Alabama Coastal Captive Insurance Company shall include the following notice on each application form for insurance, as well as the declaration page of each policy, in no less than fourteen-point bold type:
“NOTICE
This policy is issued by a captive insurance company which is not subject to all of the insurance laws and regulations of the State of Alabama. Insurance solvency guaranty funds are not available for a captive insurance company.”
(b) An Alabama Coastal Captive Insurance Company shall include the following acknowledgement on each application form for insurance, as well as in each policy, in no less than fourteen-point bold type and directly above the applicant’s or insured’s signature:
“I have read the notice contained in this application (or policy) and understand that State of Alabama insurance insolvency guaranty funds are not available for an Alabama Coastal Captive Insurance Company.”
(Act 2008-391, p. 742, §2.)
The commissioner may not issue a license to an Alabama Coastal Captive Insurance Company unless the commissioner finds that the:
(1) Coastal captive insurance company is capitalized adequately or properly reinsured or both, after giving due consideration to the business plan, feasibility study, and pro formas, including the level of risk to be retained by the coastal captive insurance company;
(2) Proposed business plan of the coastal captive insurance company provides for a reasonable and expected successful operation and is not hazardous to any policyholder;
(3) Proposed business plan, including any contracts or agreements to which the coastal captive insurance company is a party, and the intended operation of the coastal captive insurance company comply with this chapter and with any other applicable provisions of this title; and
(4) Proposed business plan and intended operation of the coastal captive insurance company satisfy the purpose of this chapter.
(Act 2008-391, p. 742, §2.)
(a) Commencing on May 14, 2009, insurance companies shall provide a premium discount or insurance rate reduction in an amount and manner as established in subsection (j) and pursuant to Section 27-31D-3. In addition, insurance companies may also offer additional adjustments in deductible, other credit rate differentials, or a combination thereof, collectively referred to as adjustments. These adjustments shall be available under the terms specified in this section to any owner who builds or locates a new insurable property, in the State of Alabama, to resist loss due to hurricane or other catastrophic windstorm events.
(b) To obtain the adjustment provided in this section, an insurable property located in this state shall be certified as constructed in accordance with either of the following:
(1) The 2006 International Residential Code, as amended, including all hurricane mitigation construction requirements.
(2) The Fortified For Safe Living Standards (FFSLS), as may from time to time be adopted by the Institute for Business and Home Safety (IBHS), or a successor entity, or the Fortified Commercial Standard (FCS), as, from time to time, may be adopted by IBHS.
(c) An insurable property shall be certified as conforming to the applicable building code only after an inspection of the insurable property has been satisfactorily completed by a certified or licensed building inspector and certified to be conforming to the applicable building code including all hurricane or high wind and hail mitigation construction requirements.
(d) An insurable property shall be certified as conforming to FFSLS or FCS criteria only after inspection and certification by an IBHS certified inspector.
(e) An owner of insurable property claiming an adjustment pursuant to subsection (c) and subdivision (1) of subsection (b) shall maintain certification records and construction records including a certification of compliance with the applicable building code provided in subdivision (1) of subsection (b), receipts from contractors, receipts for materials, and records from local building officials.
(f) An owner of insurable property claiming an adjustment pursuant to subsection (d) and subdivision (2) of subsection (b) shall maintain the IBHS certification documentation, which shall be considered proof of compliance with the FFSLS or FCS requirements described in subsection (d) and subdivision (2) of subsection (b).
(g) The records required by this section shall be subject to audit by the Commissioner of Insurance, or his or her representatives.
(h) Evidence of IBHS certification as provided for in subsection (d) and subdivision (2) of subsection (b) shall be presented to the insurer or potential insurer of a property owner before the adjustment becomes effective for the insurable property.
(i) The records required to be maintained by subsection (e) shall be presented to the insurer or potential insurer of a property owner before the adjustment becomes effective for the insurable property.
(j) Insurers required to submit rates and rating plans to the commissioner shall submit an actuarially justified rating plan for any person who builds an insurable property to comply with the sets of requirements of this section. An insurer is not required to provide the same amount of adjustment for a building code insurable property as the insurer would to an FFSLS or FCS insurable property. An adjustment shall only apply to policies that provide wind coverage and may apply to that portion of the premium for wind coverage or to the total premium if the insurer does not separate out its premium for wind coverage in its rate filing. The adjustment shall apply exclusively to the premium designated for the improved insurable property. In addition to the requirements of this section, an insurer may voluntarily offer any other mitigation adjustment that the insurer deems appropriate.
(Act 2009-500, p. 924, §1; Act 2015-313, p. 947, §1; Act 2018-249, §1.)
(a) Commencing on May 14, 2009, insurance companies shall provide a premium discount or insurance rate reduction in an amount and manner as established in subsection (g) and pursuant to Section 27-31D-3. In addition, insurance companies may also offer additional adjustments in deductible, other credit rate differentials, or a combination thereof, collectively referred to as adjustments. These adjustments shall be available under the terms specified in this section to any owner who retrofits his or her insurable property located in the State of Alabama to resist loss due to hurricane or other catastrophic windstorm events.
(b) To obtain the adjustment provided in this section, an insurable property shall be retrofitted to any of the following:
(1) The Fortified Home: Hurricane Standards (FHH), or the Fortified Home: Highwind and Hail Standards (FHWH) requirements as may from time to time be adopted by the Institute for Business and Home Safety (IBHS), or a successor entity.
(2) Another mitigation program, or other construction technique, or other standardized code which may be submitted by each insurer and approved by the commissioner.
(3) Zone three HUD code manufactured homes shall also be retrofitted as defined in the Fortified Home-Hurricane: Manufactured/Modular Home Guidelines (FHHM) requirements as may from time to time be adopted by the IBHS.
(c) An insurable property shall be certified as conforming to Fortified Commercial Standard or Fortified Home requirements only after inspection and certification by an IBHS certified inspector.
(d) Certification of conformity of an insurable property with the other mitigation program, other construction technique, or other standardized code shall be made only by a certified or licensed building inspector.
(e) An owner of insurable property claiming an adjustment pursuant to subsection (d) and subdivision (2) of subsection (b) shall maintain certification records and construction records including a certification of compliance with the mitigation program, construction technique, or standardized building code, as applicable, as provided in subdivision (2) of subsection (b), receipts from contractors, receipts for materials, and records from local building officials. The records shall be subject to audit by the commissioner, or his or her representatives, and copies of the records shall be presented to the insurer or potential insurer of a property owner before the adjustment becomes effective for the insurable property.
(f) An owner of insurable property claiming an adjustment pursuant to subsection (c) and subdivision (1) or (3) of subsection (b) shall maintain the IBHS certification documentation, which shall be considered proof of compliance with the FCS or Fortified Home requirements described in subsection (c) and subdivision (1) or (3) of subsection (b). The certification shall be presented to the insurer or potential insurer of a property owner before the adjustment becomes effective for the insurable property.
(g) Insurers required to submit rates and rating plans to the commissioner shall submit actuarially justified rating plans for any person who retrofits an insurable property to comply with the sets of alternatives provided in subsection (b). The adjustment shall only apply to policies that provide wind coverage and may apply to that portion of the premium for wind coverage or to the total premium if the insurer does not separate out its premium for wind coverage in its rate filing. The adjustment shall apply exclusively to the premium designated for the improved insurable property. In addition to the requirements of this section, an insurer may voluntarily offer any other mitigation adjustment that the insurer deems appropriate.
(Act 2009-500, p. 924, §2; Act 2015-313, p. 947, §1; Act 2018-249, §1.)
(a) Insurance companies writing homeowners insurance shall offer a fortified bronze roof endorsement to upgrade a nonfortified home, which is otherwise eligible for a fortified standard, to a fortified standard identified in Section 27-31D-2, when the insured incurs damage covered by the policy requiring the roof to be replaced. The endorsement shall upgrade the nonfortified home consistent with the fortified requirements for the geographic area in which the nonfortified home is located.
(b) The endorsement offer shall be made at the time of writing a new policy on a nonfortified home and at the time of first renewal of an existing policy on a nonfortified home following January 1, 2020.
(c) Insurance companies shall file their endorsement form and accompanying rates for approval by the Department of Insurance by October 2, 2019.
(d) The commissioner may adopt rules as necessary for the implementation of this section.
(Act 2019-240, §1.)
For the purposes of this chapter, the term insurable property includes single family residential property or commercial property. Insurable property also includes modular homes satisfying the codes, standards, or techniques as provided in Section 27-31D-1 or Section 27-31D-2. Manufactured homes or mobile homes are excluded, except as expressly provided in subsection (b) of Section 27-31D-2.
(Act 2009-500, p. 924, §3; Act 2015-313, §1.)
This chapter shall only apply to new insurance policies written or existing policies renewed on or after the first day of the twelfth month following May 14, 2009.
(Act 2009-500, p. 924, §4.)
The Department of Insurance shall promulgate such rules as are necessary to implement and administer this chapter.
(Act 2009-500, p. 924, §5.)
This chapter shall be known and may be cited as the Strengthen Alabama Homes Act.
(Act 2011-643, p. 1638, §1.)
(a) There is established within the Department of Insurance, the Strengthen Alabama Homes Program.
(b) There is established the Strengthen Alabama Homes Fund within the State Treasury for the use of the department to administer the program.
(c) This chapter does not create an entitlement for property owners or obligate the state in any way to fund the inspection or retrofitting of residential property in this state. Implementation of this program is subject to annual legislative appropriations, receipt of federal grants or funds, or receipt of other sources of grants or funds. The department shall use its best efforts to obtain grants or funds from the federal government or other funding sources to supplement the financial resources of the program that may be provided by the state.
(d) Monies in the program shall be deposited in the Strengthen Alabama Homes Fund. Monies shall not lapse, unless otherwise specified under federal funding or a federal grant, or a grant or funds from another source, or be transferred to the General Fund or other state funds and shall not be redistributed. Monies shall be used for the purpose of assisting the program in performing all acts that relate to the function and purpose of the program.
(e) The program shall apply for financial grants to retrofit insurable property as defined in Section 27-31D-3, to resist loss due to hurricane, tornado, or other catastrophic windstorm events as prescribed in subsection (b) of Section 27-31D-2.
(f) The program may also make grants or funding available to nonprofit entities for projects to retrofit an insurable property to resist loss due to hurricane, tornado, or other catastrophic windstorm events if such grants or funding to nonprofit entities are allowable under grant or funding rules, requirements, guidelines, or criteria. However, a nonprofit entity shall agree to administer the grants or funds as the program would be required to administer grants or funds and the entity shall provide documentation to the department in a timely manner as requested by the department.
(g) All mitigation shall be based upon the securing of all required local permits and applicable inspections in keeping with local building codes and the Fortified for Existing Homes Program. Mitigation projects are subject to random reinspection of all projects.
(h) The department may promulgate rules and eligibility requirements necessary for the proper administration of this chapter and pursuant to any instructions or requirements on grants or funds received by the program.
(Act 2011-643, p. 1638, §2.)
(a) To be eligible for a grant, residential property owners applying for a grant must have an insurable property that has been granted a homestead exemption and must be able to meet the eligibility requirements as set forth by the department for each grant type.
(b) Grants to residential property owners must be used to retrofit an insurable property as defined in Section 27-31D-3, to resist loss due to hurricane, tornado, or other catastrophic windstorm events as prescribed in subsection (b) of Section 27-31D-2.
(c) Documents, materials, and other information submitted to the department by property owners or insurance companies in support of a grant application shall be subject to the confidentiality provisions of subsection (g) of Section 27-2-24, provided that the amount of any grant awarded and the name of the recipient of the grant awarded shall be available for public disclosure.
(Act 2011-643, p. 1638, §3; Act 2019-242, §1.)
(a) Notwithstanding Section 27-2-39, the Commissioner of Insurance shall transfer from the Insurance Department Fund to the Strengthen Alabama Homes Fund any amount remaining in the Insurance Department Fund on September 30, 2022, which exceeds 25 percent of the amount appropriated for the Insurance Department Fund for the fiscal year ending September 30, 2022.
(b) The Commissioner of Insurance may transfer to the Strengthen Alabama Homes Fund from the Insurance Department Fund up to 50 percent of the amount appropriated to the Insurance Department Fund each fiscal year.
(Act 2022-147, §§1, 2.)
(a) To perform retrofitting work on insurable property under the program, a residential property owner may hire any licensed contractor who is capable of performing work that satisfies the standards prescribed by this chapter and rules adopted by the department in conformity with this chapter.
(b) The department may not endorse or otherwise provide preferential treatment to any contractor.
(c) A residential property owner is responsible for any amount owed to a contractor that exceeds awarded grant monies.
(Act 2022-147, §3.)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) IMPAIRMENT or INSOLVENCY. The capital of a stock insurer, the net assets of a Lloyd’s plan 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 Lloyd’s plan, 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. Any person, firm, corporation, association, or aggregation of persons doing an insurance business and subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization, or conservation by, the commissioner, or the equivalent insurance supervisory official of another state.
(3) DELINQUENCY PROCEEDING. Any proceeding commenced against any insurer pursuant to this chapter for the purpose of liquidating, rehabilitating, reorganizing, or conserving such insurer.
(4) STATE. Any state of the United States and also the District of Columbia and Puerto Rico.
(5) FOREIGN COUNTRY. Such term means territory not in any state.
(6) DOMICILIARY STATE. 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 policyholders or policyholders and creditors in the United States, and any such insurer is deemed to be domiciled in such state.
(7) ANCILLARY STATE. Any state other than a domiciliary state.
(8) RECIPROCAL STATE. Any state other than this state in which in substance and effect the provisions of the Uniform Insurers Liquidation Act, as defined in Section 27-32-22, 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. 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 persons, 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. 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. 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. Any claim secured by mortgage, trust deed, pledge, deposit as security, escrow, or otherwise, but not including a 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. Such term means receiver, liquidator, rehabilitator, or conservator as the context may require.
(Acts 1971, No. 407, p. 707, §621.)
The purpose of this chapter is to promote effectiveness, economy, and uniformity in the rehabilitation, reorganization, conservation, and liquidation of insurers doing business in this state. It is intended that this chapter shall be liberally construed to the end so far as possible that the assets of such insurers shall be effectively conserved and that, in the case of insurers transacting business in more than one state, claimants against the insurer shall receive equal and uniform treatment irrespective of residence or the place of the acts or contracts upon which their claims are based.
(Acts 1971, No. 407, p. 707, §620.)
(a) The circuit court shall have original jurisdiction of delinquency proceedings under this chapter, and any court with jurisdiction is authorized to make all necessary and 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 the Circuit Court of Montgomery County.
(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 proceedings to Montgomery County or 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. No person other than the commissioner and the Attorney General representing him shall appear in the courts of this state requesting the appointment of a receiver or otherwise commence such delinquency proceedings to take over, liquidate, rehabilitate, reorganize, or conserve 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 of Alabama from an order granting or refusing rehabilitation, liquidation, or conservation and from every order in delinquency proceedings having the character of a final order or judgment as to the particular portion of the proceedings embraced therein.
(Acts 1971, No. 407, p. 707, §622.)
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 requested. On the hearing of such order to show cause, the court 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.
(Acts 1971, No. 407, p. 707, §623.)
(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.
(Acts 1971, No. 407, p. 707, §624.)
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;
(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 or otherwise violated Section 27-27-29;
(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 articles 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 under this section;
(9) Has consented to such an order through a majority of its directors, stockholders, members, or subscribers; or
(10) Has failed to pay a final judgment entered 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.
(Acts 1971, No. 407, p. 707, §625.)
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 27-32-6, 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.
(Acts 1971, No. 407, p. 707, §626.)
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 27-32-6 or 27-32-7; or
(2) Upon the ground that its property has been sequestrated in its domiciliary sovereignty or in any other sovereignty.
(Acts 1971, No. 407, p. 707, §627.)
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 27-32-6 or 27-32-7;
(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 sovereignty or elsewhere.
(Acts 1971, No. 407, p. 707, §628.)
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.
(Acts 1971, No. 407, p. 707, §629.)
(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.
(Acts 1971, No. 407, p. 707, §630.)
(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 Commissioner of Insurance 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.
(Acts 1971, No. 407, p. 707, §631.)
An order to liquidate the business of a United States branch of an alien insurer having trusteed assets in this state shall be in the same terms as those prescribed for domestic insurers, save and except only that the assets of the business of such United States branch shall be the only assets included therein.
(Acts 1971, No. 407, p. 707, §632.)
(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 due regard to the rights and powers of the domiciliary receiver as provided in this chapter.
(Acts 1971, No. 407, p. 707, §633.)
(a) Whenever under this chapter a receiver is to be appointed in delinquency proceedings for a domestic or alien 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 orders 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 prescribed in this section for ancillary receivers appointed in this state as to assets located in this state.
(c) The recording of a certified copy of the order directing possession to be taken, or a certified copy thereof, in the office of the judge of probate of the county where the proceedings are pending 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.
(Acts 1971, No. 407, p. 707, §634.)
(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 27-32-10:
(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 state may maintain an action in this state to recover any assets of such insurer to which he may be entitled under the laws of this state.
(Acts 1971, No. 407, p. 707, §635.)
(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 27-32-18 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.
(Acts 1971, No. 407, p. 707, §636.)
(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.
(Acts 1971, No. 407, p. 707, §637.)
(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, for good cause shown, fix, 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 receiver, as the court shall specify, shall give such notice as 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.
(Acts 1971, No. 407, p. 707, §638.)
(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 owing 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 proceeding 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 creditors 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.
(Acts 1971, No. 407, p. 707, §639.)
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.
(Acts 1971, No. 407, p. 707, §640.)
(a) Subdivisions (2) through (13) of Section 27-32-1, together with Sections 27-32-4, 27-32-5, and 27-32-15 through 27-32-22 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.
(Acts 1971, No. 407, p. 707, §641.)
The moneys 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 moneys, or any part thereof, in a national bank or trust company as a trust fund.
(Acts 1971, No. 407, p. 707, §642.)
The commissioner shall not be required to pay any fee to any public officer in this state for filing, recording, or issuing a transcript or certificate, or 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.
(Acts 1971, No. 407, p. 707, §643.)
For the purpose of facilitating the rehabilitation, liquidation, 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.
(Acts 1971, No. 407, p. 707, §644.)
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.
(Acts 1971, No. 407, p. 707, §645.)
(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.
(c) 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 specified in this section.
(Acts 1971, No. 407, p. 707, §646.)
(a) For purposes of this chapter, the following terms shall have the following meanings:
(1) FEDERAL HOME LOAN BANK or FHLB. A federal home loan bank established pursuant to the Federal Home Loan Bank Act, 12 U.S.C. Section 1421, et seq.
(2) INSURER MEMBER. An insurer who is a member of a federal home loan bank.
(b) Notwithstanding any other provision of this chapter, the receiver for an insurer member may not void any transfer of, or any obligation to transfer, money or any other property arising under or in connection with any federal home loan bank security agreement, or any pledge, security, collateral, or guarantee agreement, or any other similar arrangement or credit enhancement relating to a federal home loan bank security agreement made in the ordinary course of business and in compliance with the applicable federal home loan bank agreement. The receiver also may not void a redemption or repurchase of any stock or equity securities made by the federal home loan bank within four months of the commencement of the delinquency proceedings or which received prior approval of the receiver. However, a transfer is voidable if the transfer is made with the actual intent to hinder, delay, or defraud the insurer member, the receiver for the insurer member, existing creditors, or future creditors.
(c) If a federal home loan bank exercises its rights regarding collateral pledged by an insurer member who is subject to a delinquency proceeding, the federal home loan bank shall repurchase any outstanding capital stock that is in excess of the amount of federal home loan bank stock that the insurer member is required to hold as a minimum investment, to the extent the federal home loan bank in good faith determines the repurchase to be permissible under applicable laws, regulations, regulatory obligations, and the federal home loan bank’s capital plan, and consistent with the federal home loan bank’s current capital stock practices applicable to its entire membership.
(d) Following the appointment of a receiver for an insurer member, the federal home loan bank, within 10 business days after a request from the receiver is made, shall provide a process and establish timelines for the:
(1) Release of collateral that exceeds the lendable collateral value, as determined pursuant to the advance agreement with the federal home loan bank, required to support secured obligations remaining after any repayment of advances.
(2) Release of any of the insurer member’s collateral remaining in the federal home loan bank’s possession following full repayment of all outstanding secured obligations of the insurer member in full.
(3) Payment of fees owed by the insurer member and the operation of deposits and other accounts of the insurer member with the federal home loan bank.
(4) Possible redemption or repurchase of federal home loan bank stock or excess stock of any class that an insurer member is required to own.
(e) Upon request from the receiver for an insurer member, the federal home loan bank shall provide any available options that an insurer member may exercise to renew or restructure an advance to defer associated prepayment fees, subject to all of the following:
(1) Market conditions.
(2) The terms of the advances outstanding to the insurer member.
(3) The applicable policies of the federal home loan bank.
(4) The compliance of the Federal Home Loan Bank with the Federal Home Loan Bank Act, 12 U.S.C. Section 1421, et seq., and corresponding regulations.
(f) Nothing in this section affects the rights of a receiver regarding advances to an insurer member in delinquency proceedings pursuant to 12 C.F.R. Section 1266.4.
(g) After the fourteenth day following the commencement of a delinquency proceeding involving an insurer member domiciled in this state, the insurer member’s FHLB may not be stayed or prohibited from exercising its rights regarding collateral pledged by that insurer member.
(h) The provisions of this section apply notwithstanding another provision of this chapter.
(Act 2016-367, §1.)
(a) Compensation actually owing to employees other than officers of an insurer, for services rendered within three months prior to the commencement of a proceeding against the insurer under this chapter, but not exceeding $500.00 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.
(Acts 1971, No. 407, p. 707, §647.)
(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) of this section.
(b) 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 27-32-26, entitle him to share as a claimant in the assets of the insurer;
(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.
(Acts 1971, No. 407, p. 707, §648.)
(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 or such other date set by the court for determining rights and liabilities as provided in Section 27-32-26 unless the claimant shall surrender his security to the commissioner, in which event the claim shall be allowed in the full amount for which it is valued.
(Acts 1971, No. 407, p. 707, §649.)
(a) If, upon the granting of an order of liquidation under this chapter or at any time thereafter during the liquidation proceedings, the insurer shall not be clearly solvent, the court shall, after such notice and hearing as it deems proper, make an order declaring the insurer to be insolvent. Thereupon, regardless of any prior notice which may have been given to creditors, the commissioner shall notify all persons who may have claims against the insurer and who have not filed proper proofs thereof to present the same to him at a place specified in such notice, within four months from the date of entry of such order or, if the commissioner certifies that it is necessary, within such longer time as the court shall prescribe. The last day for filing of proofs of claims shall be specified in the notice, and notice shall be given in a manner to be determined by the court.
(b) Proofs of claim may be filed subsequent to the date specified if filed during pendency of the proceedings, but no such claim shall share in the distribution of the assets until all allowed claims, proofs of which have been filed before said date, have been paid in full with interest.
(Acts 1971, No. 407, p. 707, §650.)
Within three years from the date an order of rehabilitation or liquidation of a domestic mutual insurer or a domestic reciprocal insurer was filed in the office of the clerk of the court by which such order was made, the commissioner may make his report to the court setting forth:
(1) The reasonable value of the assets of the insurer;
(2) The insurer’s probable liabilities; and
(3) The probable necessary assessment, if any, to pay all claims and expenses in full, including expenses of administration.
(Acts 1971, No. 407, p. 707, §651.)
(a) Upon the basis of the report provided for in Section 27-32-32, including any amendments thereto, the court may, of its own motion, order the commissioner to levy one or more assessments against all members of such insurer who, as shown by the records of the insurer, were members, if a mutual insurer, or subscribers, if a reciprocal insurer, at any time within one year prior to the date of issuance of the order to show cause under Section 27-32-4.
(b) Such assessment or assessments shall cover the excess of the probable liabilities over the reasonable value of the assets, together with the estimated cost of collection and percentage of uncollectability thereof. 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 law, shall be for no greater amount than that specified in the policy or policies of the member or subscriber; except, that if the court finds that the policy was issued at a rate or premium below the minimum rate lawfully permitted for the risk insured, the court may determine the upper limit of such assessment upon the basis of such minimum rate.
(c) No assessment shall be levied against any member or subscriber with respect to any nonassessable policy issued in accordance with Sections 27-27-34 or 27-31-25.
(Acts 1971, No. 407, p. 707, §652.)
After levy of assessment as provided in Section 27-32-33, upon the filing of a further detailed report by the commissioner, the court shall issue an order directing each member, if a mutual insurer, or each subscriber, if a reciprocal insurer, if he shall not pay the amount assessed against him to the commissioner on, or before, a day to be specified in the order, to show cause why he should not be held liable to pay such assessment, together with costs, as provided in Section 27-32-36, and to show cause why the commissioner should not have judgment therefor.
(Acts 1971, No. 407, p. 707, §653.)
The commissioner shall cause a notice of such assessment order, setting forth a brief summary of the contents of such order to be:
(1) Published in such manner as shall be directed by the court; and
(2) Enclosed in a sealed envelope, addressed and mailed postage prepaid to each member or subscriber liable thereunder at his last known address as it appears on the records of the insurer, at least 20 days before the return of the order, to show cause provided for in Section 27-32-34.
(Acts 1971, No. 407, p. 707, §654.)
(a) Upon the return day of the order to show cause provided for in Section 27-32-34, if the member or subscriber does not appear and serve duly verified objections upon the commissioner, the court shall make an order adjudging that such member or subscriber is liable for the amount of the assessment against him, together with costs, and that the commissioner may have judgment against the member or subscriber therefor.
(b) If, on such return date, the member or subscriber appears and serves duly verified objections upon the commissioner, there shall be a full hearing before the court, which, after such hearing, shall make such order as the facts shall warrant.
(c) Any such order shall have the same force and effect, shall be entered and docketed and may be appealed from as if it were a judgment in an original action brought in the court in which the proceeding is pending.
(Acts 1971, No. 407, p. 707, §655.)
Upon the issuance of a proper court order placing a domestic insurer in receivership or placing a foreign insurer in ancillary receivership for rehabilitation or liquidation, pursuant to this chapter or other insurance laws of Alabama, all beneficiaries of and all persons holding or owning a contract of insurance with such insurer shall be a preferred creditor of said insurer to the extent of the equity, cash value, or other benefit then accrued, arising under the terms of such contract. With the exception of costs of administration of said receiverships, recorded tax liens and judgments obtained prior to initiation of delinquency proceedings, and secured creditors’ claims, no claim of a creditor shall be preferred over that of a policyholder of the insurer in receivership. Policyholders are hereby removed from the class of general creditors and all laws and court decisions in conflict herewith shall have no further application. This section and Sections 27-32-38 through 27-32-41 shall apply to all policyholders of insurers in receivership on October 10, 1975, and to all future receiverships.
(Acts 1975, No. 1040, p. 2085, §1.)
Upon proper filing of claims pursuant to this title and upon order of the appropriate circuit court having jurisdiction of such cause after hearing, the duly appointed receiver shall make payment of claims upon liquidation of the insurer giving preference to policyholder claims as set out in Section 27-32-37 in strict conformity to said court order.
(Acts 1975, No. 1040, p. 2085, §2.)
(a) When, upon hearing, the circuit court having jurisdiction of a receivership shall determine it to be in the best interest of the policyholders and the public, the court may order and direct the receiver to reinsure the policies of the insurer with a solvent insurer to the extent of the assets available in the receivership. The circuit court is hereby empowered to place a lien or moratorium against policy benefits and values as necessary to reinsure all policyholders as fully as possible to the extent of assets available and to order the receiver to transfer such assets as determined adequate, necessary, or available to reinsure policies of the insolvent insurer with a solvent insurer, to the exclusion of general creditors should no assets remain thereafter.
(b) Except as provided in subsection (c), reinsurance shall be payable under a contract reinsured by the assuming insurer on the basis of reported claims allowed by the liquidation court, without diminution because of the insolvency of the ceding insurer. The payments shall be made directly to the ceding insurer or to its domiciliary liquidator, except in either of the following cases:
(1) Where the contract or other written agreement specifically provides another payee of the reinsurance in the event of the insolvency of the ceding insurer.
(2) Where the assuming insurer, with the consent of the direct insured, has assumed the policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under the policies and in substitution for the obligations of the ceding insurer to the payees.
(c) Notwithstanding subsection (b), in the event that a life and health insurance guaranty association has made the election to succeed to the rights and obligations of the insolvent insurer under the contract of reinsurance, the reinsurer’s liability to pay covered reinsured claims shall continue under the contract of reinsurance subject to the payment to the reinsurer of the reinsurance premiums for the coverage. Payment for the reinsured claims shall only be made by the reinsurer pursuant to the direction of the guaranty association or its designated successor. Any payment made at the direction of the guaranty association or its designated successor by the reinsurer shall discharge the reinsurer of all further liability to any other party for the claim payment.
(Acts 1975, No. 1040, p. 2085, §3; Act 2003-346, p. 879, §1.)
The circuit court having jurisdiction over a receivership for liquidation or rehabilitation pursuant to the insurance laws of this state may distinguish between classes of policyholders or beneficiaries and establish priorities for each such class for payment of claims, sharing in the assets remaining or for reinsurance purposes. In establishing priorities among classes of policyholders and beneficiaries, death claims payable on life insurance contracts, cash surrenders payable, annuity holders, paid up policies, single premium policies, and other such classifications may be used by the court in establishing priorities for payment of claims or for reinsurance of policies.
(Acts 1975, No. 1040, p. 2085, §4.)
A receiver of an insolvent insurer in liquidation or rehabilitation acting upon order of a circuit court having jurisdiction over said receivership shall not be liable to civil suit for obeying or carrying out the terms of such court order or in giving a preference to policyholders. Any such civil actions filed against a receiver shall be dismissed and barred upon a showing that the receiver was acting pursuant to court order or in conformity with Sections 27-32-37 through 27-32-40.
(Acts 1975, No. 1040, p. 2085, §5.)
This chapter applies to all alien insurers using Alabama as a state of entry to transact insurance in the United States.
(Acts 1971, No. 407, p. 707, §656.)
(a) An alien insurer may use Alabama as a state of entry to transact insurance in the United States by making and maintaining in this state a deposit of assets in trust with a solvent bank or trust company approved by the commissioner.
(b) The deposit, together with other trust deposits of the insurer held in the United States for the same purpose, shall be in amount not less than the deposits required of an alien insurer under Section 27-3-14 and shall consist of cash and/or securities eligible for the investment of the funds of like domestic insurers.
(c) Such a deposit may be referred to as “trusteed assets.”
(Acts 1971, No. 407, p. 707, §657.)
All trusts of trusteed assets heretofore created and now existing shall be continued under the instruments creating them, unless inconsistent with the provisions of this chapter.
(Acts 1971, No. 407, p. 707, §658.)
The deposit required by Section 27-33-2 shall be for the benefit, security, and protection of the policyholders or policyholders and creditors of the insurer in the United States. It shall be maintained as long as there is outstanding any liability of the insurer arising out of its insurance transactions in the United States.
(Acts 1971, No. 407, p. 707, §659.)
(a) The deposit referred to in Section 27-33-2 shall be made under a written trust agreement between the insurer and the trustee, consistent with the provisions of this chapter, and shall be authenticated in such form and manner as the commissioner may designate or approve.
(b) The agreement shall not be effective until filed with and approved in writing by the commissioner. The commissioner shall not approve any trust agreement found by him not to be in compliance with the law or the terms of which do not in fact provide reasonably adequate protection for the insurer’s policyholders or policyholders and creditors in the United States.
(Acts 1971, No. 407, p. 707, §660.)
An alien insurer proposing to use Alabama as a state of entry to transact insurance in the United States, whether or not it is then authorized to transact insurance in this state, is authorized to make and execute any trust agreement required by this chapter.
(Acts 1971, No. 407, p. 707, §661.)
A trust agreement may be amended, but the amendment shall not be effective until filed with and approved in writing by the commissioner as being in compliance with this chapter.
(Acts 1971, No. 407, p. 707, §662.)
The commissioner’s approval of any trust agreement, or of any amendment thereof, may be withdrawn by the commissioner if he finds upon hearing, after notice thereof to the insurer and the trustee or trustees, that the requisites for such approval, as provided in this chapter, no longer exist.
(Acts 1971, No. 407, p. 707, §663.)
Title to the trusteed assets is vested in the trustee or trustees and their successors for the purposes of the trust deposit, and the trust agreement shall so provide.
(Acts 1971, No. 407, p. 707, §664.)
The trustee shall keep the trusteed assets separate from other assets and shall maintain a record thereof sufficient to identify trusteed assets at all times.
(Acts 1971, No. 407, p. 707, §665.)
(a) The trustee of trusteed assets shall from time to time file with the commissioner statements, in such form as he may designate and request in writing, certifying the character of such assets and the amounts thereof.
(b) If the trustee fails to file any such statement after request therefor and expiration of a reasonable time thereafter, the commissioner may suspend or revoke the certificate of authority of the insurer.
(Acts 1971, No. 407, p. 707, §666.)
The commissioner may examine trusteed assets of any insurer at any time in accordance with the same conditions and procedures governing the examination of insurers in general under Chapter 2 of this title.
(Acts 1971, No. 407, p. 707, §667.)
(a) The trust agreement shall provide, in substance, that no withdrawals of trusteed assets shall be made by the insurer or permitted by the trustee without the written authorization or approval of the commissioner in advance thereof except as follows:
(1) Any or all income, earnings, dividends, or interest accumulations of the trusteed assets may be paid over to the United States manager of the insurer upon request of the insurer or the manager;
(2) For substitution, coincidentally with such withdrawal, of other securities or assets of value at least equal in amount to those being withdrawn, if such substituted securities or assets are likewise such as are eligible for investment of the funds of like domestic insurers and if such withdrawal is requested in writing by the insurer’s United States manager pursuant to general or specific written authority previously given or delegated by the insurer’s board of directors, or other similar governing body, and a copy of such authority has been filed with the trustee;
(3) For the purpose of making deposits required by law in any state in which the insurer is, or thereafter becomes, an authorized insurer for the protection of the insurer’s policyholders or policyholders and creditors in such state or in the United States, if such withdrawal does not reduce the insurer’s deposit in this state to an amount less than the minimum deposit required under subsection (a) of Section 27-3-14. The trustee shall transfer any assets so withdrawn and in the amount so required to be deposited in the other state direct to the depositary required to receive such deposit in such other state, as certified in writing by the public official having supervision of insurance in the other state; and
(4) For the purpose of transferring the trusteed assets to an official liquidator, conservator, or rehabilitator pursuant to the order of a court of competent jurisdiction.
(b) The commissioner shall so authorize or approve withdrawal of only such assets as are in excess of the amount of assets required to be so held in trust under Section 27-33-2, or as may otherwise be consistent with the provisions of this chapter.
(c) If at any time the insurer becomes insolvent or if its assets held in the United States are less in amount than as required under subsection (a) of Section 27-3-14, upon determination thereof, the commissioner shall in writing order the trustee to suspend the right of the insurer or any other person to withdraw assets as authorized under subdivisions (a) (1), (a) (2), and (a) (3) of this section, and the trustee shall comply with such order until the further order of the commissioner.
(Acts 1971, No. 407, p. 707, §668.)
(a) A new trustee, or new trustees, may be substituted for the original trustee, or trustees, of trusteed assets in the event of a vacancy or for other proper cause. Any such substitution shall be subject to the commissioner’s approval.
(b) If the trustees of any trusteed assets heretofore created are individuals, and if the number of such trustees is reduced to less than three by death, resignation, or otherwise, the commissioner shall require that there be substituted for such trustees a bank or trust company in this state approved by him.
(Acts 1971, No. 407, p. 707, §669.)
The compensation and expenses of any trustee, or trustees, of assets of an alien insurer under this chapter shall be borne by the insurer in such amount, or on such basis, as may be agreed upon by the insurer and the trustees and as set forth in the trust agreement.
(Acts 1971, No. 407, p. 707, §671.)
The provisions of this chapter applicable to a United States manager shall, in the case of insurers domiciled in Canada, be deemed to refer to the president, vice-president, secretary, or treasurer of such a Canadian insurer.
(Acts 1971, No. 407, p. 707, §670.)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) FRATERNAL BENEFIT SOCIETY. Any incorporated society, order, or supreme lodge without capital stock, including one exempted under the provisions of subdivision (a) (3) of Section 27-34-5, 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.
(2) SOCIETY. Such term, unless otherwise indicated, means a fraternal benefit society.
(3) PREMIUMS. Premiums, rates, or other required contributions by whatever name known.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §§672, 703.)
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 are 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.
(Acts 1911, No. 476, p. 700; Acts 1931, No. 55, p. 71; Acts 1971, No. 407, p. 707, §673.)
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 two thirds 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 four calendar years;
(4) Each insured member shall be eligible for election to act or serve as a delegate to such meeting;
(5) 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;
(6) 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;
(7) The officers are elected either by the supreme legislative or governing body or by the board of directors; and
(8) The members, officers, representatives, or delegates shall not vote by proxy.
(Acts 1911, No. 476, p. 700; Acts 1931, No. 55, p. 71; Acts 1971, No. 407, p. 707, §674.)
Except as provided in this chapter, 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 are expressly designated therein.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §675.)
(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) Grand or subordinate lodges of societies, orders, or associations now doing business in this state which provide for a death benefit of not more than one thousand dollars ($1,000) to any one person, provided that no commission or other direct compensation is paid with respect to the sale of such death benefit contracts;
(3) 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, and the ladies’ societies or ladies’ auxiliaries to such orders, societies, or associations;
(4) 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 $400.00 or disability benefits of not more than $350.00 to any person in any one year, or both; or
(5) Domestic societies or associations of a purely religious, charitable, or benevolent description which provide for a death benefit of not more than $400.00 or for disability benefits of not more than $350.00 to any one person in any one year, or both.
(b) Any such society or association described in subdivision (a)(4) or (a)(5) of this section which provides for death or disability benefits for which benefit certificates are issued and any such society or association included in subdivision (a)(5) of this section which has more than 1,000 members shall not be exempted from the provisions of this chapter, but shall comply with all requirements thereof.
(c) No society which, by the provisions of this section, is exempt from the requirements of this chapter, except any society described in subdivision (a)(3) of this section, shall give or allow, or promise to give or allow, to any person any compensation for procuring new members.
(d) 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.
(e) 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.
(Acts 1911, No. 476, p. 700; Acts 1931, No. 55, p. 71; Acts 1971, No. 407, p. 707, §676; Act 2000-692, p. 1409, §1.)
(a) No fraternal benefit society shall transact business in this state unless authorized therefor under a subsisting license issued to the society by the commissioner.
(b) Societies authorized to transact business in this state as of immediately prior to January 1, 1972, may continue such business until the April 1 next succeeding January 1, 1972. The authority of such societies, and of all societies hereafter licensed, may thereafter be renewed annually, but in all cases to terminate on the succeeding April 1; however, a license so issued shall continue in full force and effect until the new license is issued or specifically refused.
(c) For each such license or renewal, the society shall pay the commissioner $50.00.
(d) A duly certified copy or duplicate of the license shall be prima facie evidence that the licensee is a fraternal benefit society within the meaning of this chapter.
(e) Any person who in this state solicits membership for, or in any manner assists in procuring membership in, any fraternal benefit society not currently licensed to do business in this state shall be guilty of a misdemeanor and, upon conviction thereof, shall be subject to the penalties prescribed by Section 27-1-12.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §677.)
(a) 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 27-34-47;
(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;
(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.
(b) Any foreign or alien society desiring admission to this state shall have the qualifications required of domestic societies organized under this chapter.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §678.)
(a) When the commissioner upon investigation finds that a foreign or alien society transacting or applying to transact business in this state:
he shall notify the society of his findings, state in writing the reasons for his dissatisfaction 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 show good and sufficient cause 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §679.)
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:
(1) 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;
(2) 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, however, that any lawful, social, intellectual, educational, charitable, benevolent, moral, fraternal, or religious advantages may be set forth among the purposes of the society; and
(3) 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 one year from the date of the issuance of the permanent certificate.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §680.)
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 one 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 $5,000.00 nor more than $25,000.00, 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 provided in this chapter.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §681.)
No preliminary certificate granted under the provisions of this section shall be valid after one year from its date or after such further period, not exceeding one year, as may be authorized by the commissioner upon cause shown, unless the 500 applicants required in this chapter have been secured and the organization has been completed as provided in this chapter. The articles of incorporation and all other proceedings thereunder shall become null and void in one 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 provided in this chapter.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §682.)
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 one 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:
(1) Actual bona fide applications for death benefits have been secured aggregating at least $500,000.00 on not less than 500 lives;
(2) All such applicants for death benefits shall have furnished evidence of insurability satisfactory to the society;
(3) Certificates of examinations or acceptable declarations of insurability have been duly filed and approved by the chief medical examiner of the society;
(4) Ten subordinate lodges or branches have been established into which the 500 applicants have been admitted;
(5) 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 number of the subordinate branch of which each applicant is a member, amount of benefits to be granted and premiums therefor; and
(6) 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 one regular monthly premium as provided in this chapter, which premiums in the aggregate shall amount to at least $2,500.00, 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. Such 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 one year, as provided in this chapter, the premiums shall be returned to the applicants.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §683.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §684.)
(a) 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.
(b) A society shall have such other powers as are necessary and incidental to carrying into effect the objects and purposes of the society.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §685.)
Any incorporated society authorized to transact business in this state on January 1, 1973, 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §686.)
(a) After January 1, 1973, no unincorporated or voluntary association shall be permitted to transact business in this state as a fraternal benefit society.
(b) Any domestic voluntary association now authorized to transact business in this state may incorporate and shall receive from the commissioner a permanent certificate of incorporation as a fraternal benefit society when:
(1) It has completed its conversion to an incorporated society not later than January 1, 1974;
(2) It has filed its articles of incorporation and has satisfied the other requirements described in Sections 27-34-9 through 27-34-13; and
(3) The commissioner has made such examination and procured whatever additional information he deems advisable.
(c) Every voluntary association so incorporated shall incur the obligations and enjoy the benefits thereof the same as though originally incorporated, and such corporation shall be deemed a continuation of the original voluntary association. The officers thereof shall serve through their respective terms as provided in its original articles of association, but their successors shall be elected and serve as provided in its articles of incorporation. Incorporation of a voluntary association shall not affect existing actions, claims, or contracts.
(Acts 1971, No. 407, p. 707, §687.)
(a) 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 six months from the date of submission thereof, a majority of all of the voting members of the society shall have signified their consent to such amendment by one of the methods specified in this subsection.
(b) 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 disapproves 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 the amendment, the reasons therefor shall be stated in the written notice.
(c) Within 90 days from the approval thereof by the commissioner, all such amendments, or a synopsis thereof, shall be furnished by the society to all members 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.
(d) 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.
(e) 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §688.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §689.)
(a) 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 five 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.
(b) The minutes of the proceedings of the supreme or governing body and of the board of directors, or corresponding body of a society, shall be in the English language.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §690.)
(a) 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.
(b) 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.
(c) No society shall own or operate funeral homes or undertaking establishments.
(Acts 1971, No. 407, p. 707, §691.)
(a) 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 six months after becoming a benefit member shall furnish additional evidence of insurability acceptable to the society.
(b) Any person admitted prior to attaining the full age of 19 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.
(Acts 1911, No. 476, p. 700; Acts 1931, No. 55, p. 71; Acts 1971, No. 407, p. 707, §692.)
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 of the society the amount of the member’s equitable proportion of such deficiency as ascertained by its board and that, if the payment is not made, it shall stand as an indebtedness against the member’s certificate and draw interest not to exceed five percent per annum, compounded annually.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §693.)
(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) Hospital, medical, or nursing benefits due 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 $300.00.
(b) Such benefits may be provided on the lives of members or, upon application of a member, on the lives of a member’s family, including the member, the member’s spouse, and minor children, in the same or separate certificates.
(Acts 1911, No. 476, p. 700; Acts 1931, No. 55, p. 71; Acts 1949, No. 680, p. 1050, §1; Acts 1971, No. 407, p. 707, §694.)
(a) A society may provide for benefits on the lives of children under the minimum age for adult membership but not greater than 19 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 27-34-23. 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 voice in the management of the society.
(b) 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 and all rights, obligations, and liabilities incident thereto and connected therewith.
(Acts 1919, No. 10, p. 19; Acts 1949, No. 680, p. 1050, §2; Acts 1971, No. 407, p. 707, §695.)
(a) 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 January 1, 1972, 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.
(b) In the case of certificates other than those for which reserves are computed on the commissioners 1958 Standard Ordinary Mortality Table or the 1961 Standard Industrial 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 subdivision (1) over subdivision (2) of this subsection, as follows:
(1) The reserve under the certificate determined on the basis specified in the certificate; and
(2) The sum of any indebtedness to the society on the certificate, including interest due and accrued, and a surrender charge equal to two and one-half percent 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.
(c) 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 percent of those shown by the mortality table specified in the certificate for the computation of the reserve.
(d) In the case of certificates for which reserves are computed on the commissioners 1958 Standard Ordinary Mortality Table or the 1961 Standard Industrial 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §696.)
(a) 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.
(b) 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, but the portion so paid shall not exceed the sum of $500.00.
(c) If, at the death of any member, there is no lawful beneficiary to whom the insurance benefits are payable, the amount of such benefits, except to the extent that funeral benefits may be paid as provided in this chapter, shall be payable to the personal representative of the deceased member.
(Acts 1911, No. 476, p. 700; Acts 1931, No. 55, p. 71; Acts 1971, No. 407, p. 707, §697.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §698.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §699.)
(a) 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.
(b) All statements purporting to be made by the member shall be representations and not warranties. Any waiver of this subsection shall be void.
(c) 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.
(d) 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §700.)
(a) After January 1, 1973, no life benefit certificate shall be delivered, or issued for delivery, in this state unless a copy of the form has been filed with the commissioner.
(b) The certificate shall contain in substance the following standard provisions or, in lieu thereof, provisions which are more favorable to the member:
(1) Title on the face and filing page of the certificate clearly and correctly describing its form;
(2) 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;
(3) 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;
(4) A provision that the member shall be entitled to have the certificate reinstated at any time within three years from the due date of the premium in default, unless the certificate has been completely terminated through the application of a nonforfeiture 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 six percent per annum, compounded annually;
(5) 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 three full years’ premiums have been paid or after premiums for a lesser period have been paid if the contract so provided, 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;
(6) 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;
(7) 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;
(8) 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;
(9) A provision that the certificate shall be incontestable after it has been in force during the lifetime of the member for a period of two 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 two 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 two years from the date of reinstatement with the same exceptions as provided in this subdivision;
(10) A provision that in case the age 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 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; but if the correct age was not an insurable age 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 according to the society’s promulgated rates and any extension thereof based on actuarial principles;
(11) 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
(12) 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.
(c) Any of the provisions, or portions thereof, prescribed in subsection (b) of this section 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.
(Acts 1971, No. 407, p. 707, §701.)
After January 1, 1973, no life benefit certificate shall be delivered or issued for delivery in this state containing, in substance, any of the following provisions:
(1) Any provision limiting the time with which any action may be commenced to less than two years after the cause of action accrues;
(2) Any provision by which the certificate purports to be issued or to take effect more than six 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
(3) Any provision for forfeiture of the certificate for failure to repay any loan thereon or to pay interest on such loan which the total indebtedness, including interest, is less than the loan value of the certificate.
(Acts 1971, No. 407, p. 707, §702.)
(a) No domestic, foreign, or alien society authorized to do business in this state shall issue or deliver in this state any certificate or other evidence of any contract of 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.
(b) 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 19 of this title. Where the commissioner deems inapplicable, either in part or in their entirety, the provisions of Chapter 19 of this title, he may prescribe the portions, or summary thereof, of the contract to be printed on the certificate issued to the member.
(c) Any filing made under this section shall be deemed approved unless disapproved within 60 days from the date of such filing.
(Acts 1971, No. 407, p. 707, §704.)
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 January 1, 1972, 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.
(Acts 1923, No. 596, p. 785; Acts 1971, No. 407, p. 707, §705.)
(a) 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.
(b) 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.
(c) 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 January 1, 1973, 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §706.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §707.)
(a) Report shall be filed and synopses of annual statements shall be published in accordance with the provisions of this section.
(b) Every society transacting business in this state shall annually, on or before March 1, 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 $10.00 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.
(c) 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §708.)
(a) As a part of the annual statement required under Section 27-34-36, each society shall, on or before March 1, file with the commissioner a valuation of its certificates in force on December 31 last preceding; provided, however, that the commissioner may, in his discretion for cause shown, extend the time for filing such valuation for not more than two 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 one year after January 1, 1972, shall be determined in accordance with the provisions of law applicable prior to January 1, 1972, and, as to certificates issued on or after January 1, 1973, shall not be less than the reserves determined according to the commissioners’ reserve valuation method as defined in this section. 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.
(b) Reserves, according to the commissioners’ 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 subdivision (1) over subdivision (2) of this subsection, as follows:
(1) 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 one year higher than the age at issue of such certificate; and
(2) A net one-year term premium for such benefits provided for in the first certificate year.
(c) Reserves according to the commissioners’ reserve valuation method for:
(1) Life insurance benefits for varying amounts of benefits or requiring the payment of varying premiums;
(2) Annuity and pure endowment benefits;
(3) Disability and accidental death benefits in all certificates and contracts; and
(4) All other benefits, except life insurance and endowment benefits, shall be calculated by a method consistent with the principles of subsection (b) of this section.
(d) 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 subsections (e) and (f) of this section.
(e) 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.
(f) The minimum standards of valuation for certificates issued prior to one year from January 1, 1972, shall be those provided by the law applicable immediately prior to January 1, 1972, but not lower than the standards used in the calculating of rates for such certificates.
(g) The minimum standard of valuation for certificates issued after January 1, 1973, shall be three and one-half percent interest and the following tables:
(1) 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 commissioner’s 1958 Standard Ordinary Mortality Table, the commissioner’s 1941 Standard Industrial Table of Mortality or the commissioner’s 1961 Standard Industrial Table of Mortality;
(2) FOR ANNUITY CERTIFICATES, INCLUDING LIFE ANNUITIES PROVIDED OR AVAILABLE UNDER OPTIONAL MODES OF SETTLEMENT IN SUCH CERTIFICATES. The 1937 Standard Annuity Table;
(3) FOR DISABILITY BENEFITS ISSUED IN CONNECTION WITH LIFE BENEFIT CERTIFICATES. Hunter’s Disability Table, which, for active lives, shall be combined with a mortality table permitted for calculating the reserves on life insurance certificates, except that the table known as Class 3 Disability Table (1926) modified to conform to the contractual waiting period, shall be used in computing reserves for disability benefits under a contract which presumes that total disability shall be considered to be permanent after a specified period;
(4) FOR ACCIDENTAL DEATH BENEFITS ISSUED IN CONNECTION WITH LIFE BENEFIT CERTIFICATES. The Intercompany Double Indemnity Mortality Table combined with a mortality table permitted for calculating the reserves for life insurance certificates; and
(5) FOR NONCANCELLABLE ACCIDENT AND HEALTH BENEFITS. The Class 3 Disability Table (1926) with conference modifications or, with the consent of the commissioner, tables based upon the society’s own experience.
(h) The commissioner may, in his discretion, accept other standards for valuation 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 prescribed in this section. 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 three consecutive years, the commissioner may require additional reserves when deemed necessary in his judgment on account of such certificates.
(i) Any society, with the consent of the insurance supervisory official 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 under this section, but the contractual rights of any insured member shall not be affected thereby.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §709.)
A society neglecting to file the annual statement in the form and within the time provided by this chapter shall forfeit $100.00 for each day 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.
(Acts 1971, No. 407, p. 707, §710.)
(a) 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 three 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.
(b) 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.
(c) 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.
(d) 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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §711.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §712.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §713.)
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.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §714.)
Persons representing a fraternal benefit society in the solicitation of applications for insurance or annuities and the fraternal benefit society with respect thereto shall be subject to the provisions of Chapters 7 and 8A of this title.
(Acts 1971, No. 407, p. 707, §715; Act 2001-702, p. 1509, §15.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1971, No. 407, p. 707, §716.)
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:
a. If it does not compare in detail:
The gross rates and the gross rates less any dividend or other reduction allowed at the date of the comparison; and
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
b. If it omits from consideration:
Any benefit or value provided in the contract;
Any differences as to amount or period of rates; or
Any differences 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.
(4) 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 $100.00 nor more than $1,000.00 or by imprisonment in the county jail not less than 30 days nor more than 90 days, or by both fine and imprisonment, and shall, in addition, be liable for a civil penalty in the amount of three times the sum received by such violator as compensation or commission, which penalty an action may be maintained 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.
(Acts 1971, No. 407, p. 707, §717.)
(a) 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.
(b) 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 of 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.
(Acts 1971, No. 407, p. 707, §718.)
(a) 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.
(b) 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 or certified 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 provided in this section. 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 $2.00.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §719.)
(a) 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 the contract;
(3) A certificate of such officers, duly verified by their respective oaths, that the consolidation or merger has been approved by a two-thirds 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.
(b) 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.
(c) If the commission 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. 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 and a certificate of such approval filed with the commissioner or, if the laws of such state contain no such provision, then the consolidation or merger shall not become effective unless, and until, it has been approved by the insurance supervisory official of such state and a certificate of such approval filed with the commissioner.
(Acts 1923, No. 596, p. 785; Acts 1971, No. 407, p. 707, §720.)
Upon the consolidation or merger effective as provided in Section 27-34-48, 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 merged 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.
(Acts 1971, No. 407, p. 707, §721.)
(a) When the commissioner upon investigation finds that a domestic society:
(1) Has exceeded its powers; or
(2) Has failed to comply with any provision of this chapter; or
(3) Is not fulfilling its contracts in good faith; or
(4) Has a membership of less than 400 after an existence of one 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 his findings, state in writing the reasons for his dissatisfaction 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.
(b) 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.
(c) 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 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 society’s license.
(d) 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.
(e) 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.
(f) 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 voluntarily determines to discontinue business.
(Acts 1911, No. 476, p. 700; Acts 1939, No. 525, p. 816; Acts 1939, No. 579, p. 936; Acts 1971, No. 407, p. 707, §722.)
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.
(Acts 1971, No. 407, p. 707, §723.)
All decisions and findings of the commissioner made under the provisions of this chapter shall be subject to review by the court in accordance with the provisions of Section 27-2-32.
(Acts 1971, No. 407, p. 707, §724.)
Any person who willfully makes a false statement of any material fact or thing in a sworn statement as to the death or disability of a certificate holder in any fraternal benefit society, for the purpose of procuring payment of a benefit named in the certificate of such holder, and any person who willfully makes any false statement in any verified report or declaration under oath required or authorized by law as to fraternal benefit societies shall be guilty of perjury and shall be proceeded against and punished as provided by the statutes of this state in relation to the crime of perjury.
(Acts 1911, No. 476, p. 700; Acts 1971, No. 407, p. 707, §725.)
In addition to the provisions heretofore contained or referred to in this chapter, other chapters and provisions of this title shall apply to fraternal benefit societies, to the extent applicable and not in conflict with the express provisions of this chapter, and the reasonable implications thereof, as follows:
(1) Chapter 1.
(2) Chapter 2.
(3) The following sections of Chapter 3:
a. Section 27-3-4.
b. Section 27-3-5.
(4) The following sections of Chapter 10:
a. Section 27-10-1.
b. Section 27-10-2.
c. Section 27-10-3.
(5) Chapter 12.
(6) Section 27-15-29.
(7) The following sections of Chapter 27:
a. Section 27-27-26.
b. Section 27-27-27.
c. Section 27-27-29.
d. Section 27-27-50.
(8) Chapter 32.
(9) Chapter 29.
(Acts 1971, No. 407, p. 707, §726; Act 2014-324, p. 1151, §1.)
Any fraternal benefit society organized under the laws of this state may convert itself into a stock life insurance company or a mutual life insurance company, which may be a continuation of such society under an amended charter, if such society is then incorporated, or a new corporation formed for such purpose if such society is then unincorporated. In either event, the conversion of such society into a stock life insurance company or a mutual life insurance company shall be effected as provided in this chapter.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §727.)
(a) The proposed plan for the conversion of the society into a stock or mutual life insurer shall be prepared in writing, setting forth in full the terms and conditions thereof. After approval of the plan by the society’s board of directors, the society shall file the plan of conversion with the commissioner.
(b) If, upon examination thereof, the commissioner is of the opinion that the plan is complete, is in compliance with the law, is fair and equitable to the certificate holders and interests of the society and that no reasonable objection thereto exists, he shall approve the plan; if he finds otherwise, the commissioner shall disapprove the plan. If not disapproved and written notice thereof given the society within 30 days after the date of filing with the commissioner, the plan shall be deemed to have been approved as of the expiration of such 30 days’ period. In any such notice of disapproval, the commissioner shall state the reasons for disapproval.
(c) No society shall effectuate any plan of conversion which has been disapproved by the commissioner.
(Acts 1971, No. 407, p. 707, §728.)
After the plan of conversion has been approved by the commissioner, the society shall mail notice by registered or certified mail to all of its subordinate lodges or branches, by whatever name called, stating that a proposal will be made at a meeting of the supreme governing or legislative body of the society, to be held at least 90 days after the mailing of the notice, to convert the society into a stock or mutual life insurer and enclosing a copy of the proposed plan of conversion.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §729.)
Pursuant to the notice provided for in Section 27-35-3, the supreme governing or legislative body shall adopt a resolution authorizing the conversion of the society into a stock or mutual insurer, as the case may be, and shall ratify articles of incorporation, if the society is then unincorporated, or amend the society’s articles of incorporation if it is then incorporated, to comply with the requirements of this title.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §730.)
(a) The articles of incorporation so adopted or as so amended, as the case may be, shall be filed with the probate judge as required of domestic insurers under this title; except, that no bond or solicitation permit shall be required.
(b) At the time of filing of articles of incorporation or amended articles of incorporation with the commissioner, the society shall likewise file a report of the meeting of its supreme governing or legislative body referred to in Sections 27-35-3 and 27-35-4, certified by the presiding officer thereof under the corporate seal, if the society has a corporate seal.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §731.)
The society shall have corporate existence as a domestic stock or mutual life insurer upon issuance of the certificate of incorporation by the commissioner or approval of the amended articles of incorporation, as the case may be; but it shall not transact business as an insurer until all its authorized capital stock, if a stock insurer, has been subscribed and paid in full and it has otherwise qualified for, and received from the commissioner, a certificate of authority as provided in this title for legal reserve insurers.
(Acts 1971, No. 407, p. 707, §732.)
If the fraternal benefit society is to be converted into a stock life insurer, the plan of conversion shall make reasonable provisions under which each adult certificate holder of the society shall have the preemptive right to subscribe to and purchase that proportion of the total authorized capital which the amount of his insurance bears to the society’s total insurance in force at a date to be specified in such plan; except, that if more than 75 percent of the society’s adult certificate holders are residents of this state, such preemptive right may, in the commissioner’s discretion, under the plan be limited to such residents.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §733.)
(a) When a fraternal benefit society has complied with the provisions of this chapter and with the laws of this state relating to domestic stock life insurers or domestic mutual life insurers, as the case may be, and has received from the commissioner a certificate of authority to transact business in this state, its reorganization and conversion into such stock insurer or mutual insurer shall be complete.
(b) The reorganized and converted corporation shall be deemed in law to be a continuation of the fraternal benefit society, whether the reorganization and conversion shall have been accomplished by the formation of a new corporation or by the amendment of the certificate of incorporation of the former society; and such reorganized and converted corporation shall succeed to, and become invested with, all and singular, the rights, privileges, franchises, and all property, real, personal, or mixed, and all debts due on any account and all other things in action theretofore belonging to such fraternal benefit society; and all property, rights, privileges, franchises, and all and every other interest shall thereafter be as effectually the property of such reorganized and converted corporation as they were of the former fraternal benefit society; and the title to any real estate, by deed or otherwise vested in such former fraternal benefit society, shall vest in such reorganized and converted corporation and shall not in any way be impaired by reason of the conversion.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §734.)
Rights of creditors and all liens upon the property of the former fraternal benefit society shall be preserved unimpaired after the society’s conversion, and the former fraternal benefit society shall be deemed to continue in existence in order to preserve the same; and all debts, liabilities, and duties of the former fraternal benefit society shall thenceforth attach to the reorganized and converted corporation and may be enforced against it to the same extent as if said debts, duties, and liabilities had been incurred or contracted by it.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §735.)
(a) The reorganized and converted corporation shall be obligated to carry out and perform all of the obligations of every kind and character owing by the former fraternal benefit society to the holders of its policies or beneficial certificates, and the same may be enforced against it to the same extent as if the policies and beneficial certificates had been issued by it after such conversion.
(b) Any pending actions wherein the former fraternal benefit society was a party shall be unaffected by the conversion thereof and shall be prosecuted by or against such reorganized and converted corporation the same as if the conversion had not taken place.
(Acts 1927, No. 537, p. 624; Acts 1971, No. 407, p. 707, §736.)
The insurer, after conversion from a fraternal benefit society, shall maintain separate records of premiums received by it on account of policies and certificates originally issued while a fraternal benefit society and continuing in force without material change as to form or basis of premium. All such premiums shall be exempt from premium taxes to the same extent, if any, as to which exempted if currently received by a domestic fraternal benefit society.
(Acts 1971, No. 407, p. 707, §737.)
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 and disability insurance and annuity contracts:
a. The amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest, and methods adopted pursuant to this title which are applicable thereto;
b. Reserves for disability benefits, for both active and disabled lives;
c. Reserves for accidental death benefits; and
d. Any additional reserves which may be required by the commissioner consistent with practice as last formulated or approved by the National Association of Insurance Commissioners, or its successor organization, on account of such insurance;
(4) With reference to insurance other than specified in subdivision (3) of this section, and other than title insurance, the amount of reserves equal to the unearned portions of the gross premiums charged on policies in force, computed in accordance with this chapter;
(5) Taxes, expenses and other obligations due or accrued at the date of the statement; and
(6) In the case of life insurers, a securities valuation reserve calculated in accordance with the rules of the commissioner, which rules shall not be inconsistent with the rules and regulations promulgated by the National Association of Insurance Commissioners or its successor organization.
(Acts 1971, No. 407, p. 707, §738.)
(a) In addition to an adequate reserve as to outstanding losses as required under Section 27-36-1, a title insurer shall maintain an unearned premium reserve of not less than an amount computed as follows:
(1) Ten percent of the total amount of the risk premiums written in the calendar year for title insurance contracts shall be assigned originally to the reserve; and
(2) During each of the 20 years next following the year in which the title insurance contract was issued, the reserve applicable to the contract shall be reduced by five percent of the original amount of such reserve.
(b) The insurer may credit upon the reserve provided for by this section the amount of its deposit made under Section 27-3-13.
(c) Title insurance risk premium shall not include charges for abstracting, record searching, certificates as to the record title, escrow and closing services, and other related services which may be offered or furnished, or the costs and expenses of examination of titles.
(Acts 1971, No. 407, p. 707, §743.)
(a) As to insurance against loss or damage to property, except as provided in Section 27-36-4, and as to all general casualty insurance and surety insurance, every insurer shall maintain an unearned premium reserve on all policies in force.
(b) The commissioner may require that such reserves shall be equal to the unearned portions of the gross premiums in force after deducting applicable reinsurance in solvent insurers as computed on each respective risk from the policy’s date of issue. If the commissioner does not so require, the portions of the gross premium in force, less applicable reinsurance in solvent insurers, to be held as an unearned premium reserve, shall be computed according to the following table:
Term for Which Policy Was Written Reserved for Unearned Premium1 year or less 1/22 years 1st year3/4 2nd year1/43 years 1st year5/6 2nd year1/2 3rd year1/64 years 1st year7/8 2nd year5/8 3rd year3/8 4th year1/85 years 1st year9/10 2nd year7/10 3rd year1/2 4th year3/10 5th year1/10Over 5 years pro rata
(c) In lieu of computation according to the table in subsection (b) of this section, the insurer, at its option, may compute all of such reserves on a monthly or more frequent pro rata basis.
(d) After adopting a method for computing such reserve, an insurer shall not change methods without approval of the insurance supervisory official of its state of domicile.
(e) This section does not apply to title insurance.
(Acts 1971, No. 407, p. 707, §739.)
In lieu of the unearned premium reserve required in Section 27-36-3, the Commissioner of Insurance may require any surety insurer or limited insurer to set up and maintain a reserve on all bail bonds or other single-premium bonds without a definite expiration date, furnished in judicial proceedings, equal to the lesser of 35 percent of the bail premiums in force or seven dollars ($7) per one thousand dollars ($1,000) of bail liability. This reserve shall be reported as a liability in financial statements required to be filed with the commissioner. Each insurer shall file a supplementary schedule showing bail premiums in force and bail liability and the associated special reserve for bail and judicial bonds with financial statements required by Section 27-3-26. Bail premiums in force do not include amounts retained by licensed bail bond agents or licensed managing general agents, but may not be less than 6.5 percent of the total consideration received for all bail bonds in force.
(Act 2015-407, §1.)
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 percent of premiums on trip risks written during the month ended as of the date of statement.
(Acts 1971, No. 407, p. 707, §740.)
For all disability 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.
(Acts 1971, No. 407, p. 707, §741.)
If loss experience shows that an insurer’s loss reserves, however computed or estimated, are inadequate, the commissioner shall require the insurer to maintain loss reserves in such increased amount as is needed to make them adequate.
(Acts 1971, No. 407, p. 707, §742.)
[Repealed]
Repealed by Act 2016-411, §3, effective January 1, 2017.
(Acts 1971, No. 407, p. 707, §744; Acts 1976, No. 370, p. 459, §2; Acts 1979, No. 79-661, p. 1142, §2; Acts 1981, No. 81-783, p. 1347, §2; Acts 1996, No. 96-784, p. 1426, §1.)
This chapter shall be known as the Standard Valuation Law.
(Act 2016-411, §2.)
For purposes of this chapter, the following definitions shall apply on or after the operative date of the valuation manual as defined by Section 27-36A-15:
(1) ACCIDENT AND HEALTH INSURANCE. Contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the valuation manual.
(2) APPOINTED ACTUARY. A qualified actuary who is appointed in accordance with the valuation manual to prepare the actuarial opinion required in subsection (b) of Section 27-36A-4.
(3) COMPANY. An entity, which (i) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and has at least one such policy in force or on claim or (ii) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this state.
(4) DEPOSIT-TYPE CONTRACT. A contract that does not incorporate mortality or morbidity risks and as may be specified in the valuation manual.
(5) LIFE INSURANCE. Contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the valuation manual.
(6) NAIC. The National Association of Insurance Commissioners.
(7) POLICYHOLDER BEHAVIOR. Any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this section including, but not limited to, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.
(8) PRINCIPLE-BASED VALUATION. A reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with Section 27-36A-16 as specified in the valuation manual.
(9) QUALIFIED ACTUARY. An individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements and who meets the requirements specified in the valuation manual.
(10) TAIL RISK. A risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.
(11) VALUATION MANUAL. The manual of valuation instructions adopted by the NAIC as specified in this chapter or as subsequently amended.
(Act 2016-411, §2.)
(a) Policies and contracts issued prior to the operative date of the valuation manual.
(1) 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 insurance company doing business in this state issued on or after January 1, 1972, and prior to the operative date of the valuation manual. In calculating reserves, the commissioner may use group methods and approximate averages for fractions of a year or otherwise. In lieu of the valuation of the reserves 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 valuation complies with the minimum standard provided in this chapter.
(2) The provisions set forth in Sections 27-36A-5, 27-36A-6, 27-36A-7, 27-36A-8, 27-36A-9, 27-36A-10, 27-36A-11, 27-36A-12, 27-36A-13, and 27-36A-14 shall apply to all policies and contracts, as appropriate, subject to this chapter issued on or after January 1, 1972, and prior to the operative date of the valuation manual and the provisions set forth in Sections 27-36A-15 and 27-36A-16 shall not apply to any such policies and contracts.
(3) The minimum standard for the valuation of policies and contracts issued prior to January 1, 1972, shall be that provided by the laws in effect immediately prior to that date.
(b) Policies and contracts issued on or after the operative date of the valuation manual as defined by Section 27-36A-15.
(1) The commissioner shall annually value, or cause to be valued, the reserve liabilities, hereinafter called reserves, for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the valuation manual. In lieu of the valuation of the reserves required of a foreign or alien company, the commissioner may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this chapter.
(2) The provisions set forth in Sections 27-36A-15 and 27-36A-16 shall apply to all policies and contracts issued on or after the operative date of the valuation manual.
(Act 2016-411, §2.)
(a) Actuarial opinion prior to the operative date of the valuation manual as defined by Section 27-36A-15.
(1) GENERAL. Every life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The commissioner, by regulation, shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.
(2) ACTUARIAL ANALYSIS OF RESERVES AND ASSETS SUPPORTING RESERVES.
a. Every life insurance company, except as exempted pursuant to regulation, shall also annually include in the opinion required by subdivision (1) an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by regulation when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company’s obligations under the policies and contracts, including, but not limited to, the benefits under and expenses associated with the policies and contracts.
b. The commissioner may provide by regulation for a transition period for establishing higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this section.
(3) REQUIREMENT FOR OPINION UNDER SUBDIVISION (2). Each opinion required by subdivision (2) shall be governed by the following provisions:
a. A memorandum, in form and substance acceptable to the commissioner as specified by regulation, shall be prepared to support each actuarial opinion.
b. If the company fails to provide a supporting memorandum at the request of the commissioner within a period specified by regulation, or the commissioner determines that the supporting memorandum provided by the company fails to meet the standards prescribed by the regulation or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and the actuary shall prepare the supporting memorandum as is required by the commissioner.
(4) REQUIREMENT FOR ALL OPINIONS SUBJECT TO SUBSECTION (a). Every opinion subject to subsection (a) shall be governed by the following provisions:
a. The opinion shall be submitted with the annual statement reflecting the valuation of the reserve liabilities for each year ending on or after December 31, 1996.
b. The opinion shall apply to all business in force including individual and group health insurance plans. The form and substance shall comply with regulation of the commissioner.
c. The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board and on any additional standards as the commissioner may by regulation prescribe.
d. In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.
e. For the purposes of this section, qualified actuary means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in the regulation.
f. Except in cases of fraud or willful misconduct, the qualified actuary shall not be liable for damages to any person, other than the company and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary’s opinion.
g. Disciplinary action by the commissioner against the company or the qualified actuary shall be defined by regulation of the commissioner.
h. Except as provided in paragraphs l., m., and n., documents, materials, or other information in the possession or control of the Department of Insurance that are a memorandum in support of the opinion, and any other material included by the company to the commissioner in connection with the memorandum, shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine or other public record disclosure laws, and shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private or civil action. However, the commissioner is authorized to use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the commissioner’s official duties.
i. Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to paragraph h.
j. In order to assist in the performance of the commissioner’s duties, the commissioner:
May share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to paragraph h. with other state, federal, and international regulatory agencies, with the NAIC and its affiliates and subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees to maintain the confidentiality and privileged status of the document, material, or other information.
May receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the NAIC and its affiliates and subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
May enter into agreements governing sharing and use of information consistent with this paragraph and paragraphs h. and i.
k. No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in paragraph j.
l. A memorandum in support of the opinion, and any other material provided by the company to the commissioner in connection with the memorandum, may be subject to subpoena for the purpose of defending an action seeking damages from the actuary submitting the memorandum by reason of an action required by this section or by regulations promulgated hereunder.
m. The memorandum or other material may otherwise be released by the commissioner: (i) with the written consent of the company, or (ii) to the American Academy of Actuaries upon request, stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material.
n. Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential.
(b) Actuarial opinion of reserves after the operative date of the valuation manual as defined by Section 27-36A-15.
(1) GENERAL. Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and subject to regulation by the commissioner shall annually submit the opinion of the qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this state. The valuation manual will prescribe the specifics of this opinion including any items deemed to be necessary to its scope.
(2) ACTUARIAL ANALYSIS OF RESERVES AND ASSETS SUPPORTING RESERVES. Every company with outstanding life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this state and subject to regulation by the commissioner, except as exempted in the valuation manual, shall also annually include in the opinion required by subdivision (1) an opinion of the same actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the valuation manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company’s obligations under the policies and contracts, including, but not limited to, the benefits under and expenses associated with the policies and contracts.
(3) REQUIREMENTS FOR OPINIONS SUBJECT TO SUBDIVISION (2). Each opinion required by subdivision (2) shall be governed by the following provisions:
a. A memorandum, in form and substance as specified in the valuation manual, and acceptable to the commissioner, shall be prepared to support each actuarial opinion.
b. If the company fails to provide a supporting memorandum at the request of the commissioner within a period specified in the valuation manual or the commissioner determines that the supporting memorandum provided by the company fails to meet the standards prescribed by the valuation manual or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum required by the commissioner.
(4) REQUIREMENT FOR ALL OPINIONS SUBJECT TO SUBSECTION (b). Every opinion subject to subsection (b) shall be governed by the following provisions:
a. The opinion shall be in form and substance as specified in the valuation manual and acceptable to the commissioner.
b. The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the valuation manual as defined in Section 27-36A-15.
c. The opinion shall apply to all policies and contracts subject to subdivision (2), plus other actuarial liabilities as may be specified in the valuation manual.
d. The opinion shall be based on standards adopted from time to time by the Actuarial Standards Board or its successor, and on such additional standards as may be prescribed in the valuation manual.
e. In the case of an opinion required to be submitted by a foreign or alien company, the commissioner may accept the opinion filed by that company with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.
f. Except in cases of fraud or willful misconduct, the qualified actuary shall not be liable for damages to any person, other than the company and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary’s opinion.
g. Disciplinary action by the commissioner against the company or the qualified actuary shall be defined in regulations by the commissioner.
(Act 2016-411, §2.)
(a) Except as provided in Sections 27-36A-6, 27-36A-7 and 27-36A-14, the minimum standard for the valuation of all the policies and contracts issued prior to May 28, 1996, shall be that provided by the laws in effect immediately prior to May 28, 1996.
(b) Except as otherwise provided in Sections 27-36A-6, 27-36A-7, and 27-36A-14, the minimum standard for the valuation of all policies and contracts issued on or after May 28, 1996, shall be the commissioners reserve valuation method defined in Sections 27-36A-8, 27-36A-9, 27-36A-12, and 27-36A-14, three and one-half percent interest, or, in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after August 23, 1976, four percent interest for the policies issued prior to July 30, 1979, and five and one-half percent interest for single premium life insurance policies and four and one-half percent interest for all other policies issued on or after July 30, 1979, and the following tables:
(1) For ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in the policies: The Commissioners 1958 Standard Ordinary Mortality Table for the policies issued on or after the operative date of Section 27-15-76 and prior to the operative date of Section 27-15-78, provided that for any category of 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 six years younger than the actual age of the insured; and for policies issued on or after the operative date of Section 27-15-78, any of the following:
a. The Commissioners 1980 Standard Ordinary Mortality Table.
b. At the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with 10-year select mortality factors.
c. Any ordinary mortality table, adopted after 1980 by the NAIC, that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the policies.
(2) For industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in the policies: The Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the policies.
(3) For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in the policies: The 1937 Standard Annuity Mortality Table or, at the option of the company, 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 the policies: The Group Annuity Mortality Table For 1951, any modification of the table approved by the commissioner or, at the option of the company, 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, 1972, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit or any tables of disablement rates and termination rates adopted after 1980 by the NAIC that are approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the policies; for policies or contracts issued prior to January 1, 1972, either of the tables or, at the option of the company, the Class (3) Disability Table (1926). Any table shall, for active lives, be combined with a mortality table permitted for calculating the reserve for life insurance policies.
(6) For accidental death benefits in or supplementary to policies issued on or after January 1, 1972: The 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the policies; for policies issued prior to January 1, 1972, 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: The tables as may be approved by the commissioner.
(Act 2016-411, §2.)
(a) Except as provided in Section 27-36A-7, the minimum standard of valuation for individual and group annuity and pure endowment contracts issued on or after May 28, 1996, shall be the commissioners reserve valuation methods defined in Sections 27-36A-8 and 27-36A-9 and the following tables and interest rates:
(1) For individual annuity and pure endowment contracts issued prior to July 30, 1979, excluding any disability and accidental death benefits in the contracts: The 1971 Individual Annuity Mortality Table, or any modification of this table approved by the commissioner, and six percent interest for single premium immediate annuity contracts and four percent interest for all other individual annuity and pure endowment contracts.
(2) For individual single premium immediate annuity contracts issued on or after July 30, 1979, excluding any disability and accidental death benefits in the contracts: The 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the contracts, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.
(3) For individual annuity and pure endowment contracts issued on or after July 30, 1979, other than single premium immediate annuity contracts, excluding any disability and accidental death benefits in the contracts: The 1971 Individual Annuity Mortality Table or any individual annuity mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for the contracts, or any modification of these tables approved by the commissioner, and five and one-half percent interest for single premium deferred annuity and pure endowment contracts and four and one-half percent interest for all other individual annuity and pure endowment contracts.
(4) For annuities and pure endowments purchased prior to July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts: The 1971 Group Annuity Mortality Table or any modification of this table approved by the commissioner, and six percent interest.
(5) For annuities and pure endowments purchased on or after July 30, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under the contracts: The 1971 Group Annuity Mortality Table or any group annuity mortality table adopted after 1980 by the NAIC that is approved by regulation promulgated by the commissioner for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of these tables approved by the commissioner, and seven and one-half percent interest.
(b) After August 23, 1976, any company may file with the commissioner a written notice of its election to comply with this section after a specified date but before January 1, 1980, which shall be the operative date of this section for that company. If a company makes no election, the operative date of this section for that company shall be January 1, 1980.
(Act 2016-411, §2.)
(a) The interest rates used in determining the minimum standard for the valuation of the following shall be the calendar year statutory valuation interest rates as defined in this section:
(1) Life insurance policies issued in a particular calendar year, on or after the operative date of Section 27-15-78.
(2) Individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982.
(3) Annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts.
(4) The net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts.
(b) Calendar year statutory valuation interest rates.
(1) The calendar year statutory valuation interest rates, I, shall be determined as follows and the results rounded to the nearest one-quarter of one percent (1/4 of 1%):
a. For life insurance:
I = .03 + W (R1 – .03) + W/2 (R2 – .09)
b. For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:
I = .03 + W (R – .03)
where R1 is the lesser of R and .09, R2 is the greater of R and .09, R is the reference interest rate defined in this section, and W is the weighting factor defined in this section.
c. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in paragraph b., the formula for life insurance stated in paragraph a. shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years and the formula for single premium immediate annuities stated in paragraph b. shall apply to annuities and guaranteed interest contracts with guarantee duration of 10 years or less.
d. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in paragraph b. shall apply.
e. For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in paragraph b. shall apply.
(2) However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than one-half of one percent, the calendar year statutory valuation interest rate for the life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, using the reference interest rate defined for 1979, and shall be determined for each subsequent calendar year regardless of when Section 27-15-78 becomes operative.
(c) Weighting factors.
(1) The weighting factors referred to in the formulas stated in subsection (b) are given in the following tables:
a.1. Weighting Factors for Life Insurance:
Guarantee DurationWeighting(Years)Factors 10 or less:.50More than 10, but not more than 20:.45More than 20:.35
b. Weighting factor for single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: .80
c. Weighting factors for other annuities and for guaranteed interest contracts, except as stated in paragraph b., shall be as specified in subparagraphs 1., 2., and 3., according to the rules and definitions in subparagraphs 4., 5., and 6.:
GuaranteeWeighting Factor Durationfor Plan Type(Years)ABC5 or less:.80.60.50More than 5, but not more than 10:.75 .60.50More than 10, but not more than 20:.65 .50.45More than 20:.45 .35.35
Plan TypeABC.15.25.05
Plan TypeABC.05.05.05
For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.
Plan type as used in the above tables is defined as follows:
Plan Type A: At any time policyholder may withdraw funds only (i) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the company, or (ii) without the adjustment but in installments over five years or more, or (iii) as an immediate life annuity, or (iv) no withdrawal permitted.
Plan Type B: Before expiration of the interest rate guarantee, policyholder may withdraw funds only (i) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the company, or (ii) without the adjustment but in installments over five years or more or (iii) no withdrawal permitted. At the end of interest rate guarantee, funds may be withdrawn without the adjustment in a single sum or installments over less than five years.
Plan Type C: Policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than five years either (i) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the company or (ii) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
(d) Reference interest rate. The reference interest rate referred to in subsection (b) shall be defined as follows:
(1) For life insurance, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year next preceding the year of issue, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc.
(2) For single premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or year of purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc.
(3) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision (2), with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc.
(4) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except as stated in subdivision (2), with guarantee duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc.
(5) For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc.
(6) For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except as stated in subdivision (2), the average over a period of 12 months, ending on June 30 of the calendar year of the change in fund, of the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc.
(e) Alternative method for determining reference interest rates. In the event that the monthly average of the composite yield on seasoned corporate bonds is no longer published by Moody’s Investors Service, Inc., or in the event that the NAIC determines that the monthly average of the composite yield on seasoned corporate bonds, as published by Moody’s Investors Service, Inc., is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, adopted by the NAIC and approved by regulation promulgated by the commissioner, may be substituted.
(Act 2016-411, §2.)
(a) Except as otherwise provided in Sections 27-36A-9, 27-36A-12, and 27-36A-14, 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 the future guaranteed benefits provided for by the policies over the then present value of any future modified net premiums therefor. The modified net premiums for a policy shall be the uniform percentage of the respective contract premiums for the benefits, excluding extra premiums on a substandard policy, that the present value, at the date of issue of the policy, of all modified net premiums shall be equal to the sum of the then present value of the benefits provided for by the policy and the excess of subdivision (1) over subdivision (2) as follows:
(1) A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one percent per annum payable on the first and each subsequent anniversary of the policy on which a premium falls due; however, the 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 one year higher than the age at issue of the policy.
(2) A net one-year term premium for the benefits provided for in the first policy year.
(b) For a life insurance policy issued on or after January 1, 1985, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than the excess premium, the reserve according to the commissioner’s reserve valuation method on the policy anniversary occurring on or before the assumed ending date defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than the excess premium shall, except as otherwise provided in Section 27-36A-12, be the greater of the reserve as of the policy anniversary calculated as described in subsection (a) and the reserve as of the policy anniversary calculated as described in subsection (a), but with (i) the value defined in subdivision (1) of subsection (a) being reduced by 15 percent of the amount of excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on the date as an endowment, and (iv) the cash surrender value provided on the date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in Sections 27-36A-5 and 27-36A-7 shall be used.
(c) Reserves according to the commissioners reserve valuation method shall be calculated by a method consistent with the principles of subsections (a) and (b) for all of the following:
(1) Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums.
(2) Group annuity and pure endowment contracts purchased under a retirement plan or a plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended.
(3) Disability and accidental death benefits in all policies and contracts.
(4) All other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts.
(Act 2016-411, §2.)
(a) This section shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended.
(b) Reserves according to the commissioner’s annuity reserves method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in the contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by the contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of the contract, that become payable prior to the end of the respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate, or rates, specified in the contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of the contracts to determine nonforfeiture values.
(Act 2016-411, §2.)
(a) In no event shall a company’s aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after January 1, 1972, be less than the aggregate reserves calculated in accordance with the methods set forth in Sections 27-36A-8, 27-36A-9, 27-36A-12, and 27-36A-13 and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for the policies.
(b) In no event shall the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by Section 27-36A-4.
(Act 2016-411, §2.)
(a) Reserves for policies and contracts issued prior to January 1, 1972, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all policies and contracts than the minimum reserves required by the laws in effect immediately prior to that date.
(b) Reserves for any category of policies, contracts, or benefits issued on or after January 1, 1972, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for the category than those calculated according to the minimum standard provided in this chapter, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein.
(c) A company which at any time shall have adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this chapter, with the approval of the commissioner, may adopt any lower standard of valuation, but not lower than the minimum provided in this chapter; provided that, for the purposes of this section, the holding of additional reserves previously determined by the qualified actuary to be necessary to render the opinion required by Section 27-36A-4 shall not be deemed to be the adoption of a higher standard of valuation.
(Act 2016-411, §2.)
(a) If in any contract year the gross premium charged by a company on a policy or contract issued on or after January 1, 1972, is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon, but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for the policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for the policy or contract, or the reserve calculated by the method actually used for the policy or contract but using the minimum valuation standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this section are those standards stated in Sections 27-36A-5 and 27-36A-7.
(b) For a life insurance policy issued on or after January 1, 1985, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for the excess, and which provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than excess premium, the provisions of subsection (a) shall be applied as if the method actually used in calculating the reserve for the policy were the method described in Section 27-36A-8, but ignoring subsection (b) of Section 27-36A-8. The minimum reserve at each policy anniversary of the policy shall be the greater of the minimum reserve calculated in accordance with Section 27-36A-8, including subsection (b) of Section 27-36A-8, and the minimum reserve calculated in accordance with this section.
(Act 2016-411, §2.)
In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of a nature that the minimum reserves cannot be determined by the methods described in Sections 27-36A-8, 27-36A-9, and 27-36A-12, the reserves which are held under any plan shall comply with both of the following:
(1) Be appropriate in relation to the benefits and the pattern of premiums for that plan.
(2) Be computed by a method which is consistent with the principles of this standard valuation law, as determined by regulations promulgated by the commissioner.
(Act 2016-411, §2.)
(a) For accident and health insurance contracts issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection (b) of Section 27-36A-3.
(b) For disability, accident and sickness, and accident and health insurance contracts issued on or after January 1, 1972, and prior to the operative date of the valuation manual, the minimum standard of valuation is the standard adopted by the commissioner by regulation.
(Act 2016-411, §2.)
(a) For policies issued on or after the operative date of the valuation manual, the standard prescribed in the valuation manual is the minimum standard of valuation required under subsection (b) of Section 27-36A-3, except as provided under subsection (e) or (g) of this section, Section 27-36A-19, or Section 27-36A-20.
(b) The operative date of the valuation manual is January 1 of the first calendar year following the first July 1 as of which all of the following have occurred:
(1) The valuation manual has been adopted by the NAIC by an affirmative vote of at least 42 members, or three-fourths of the members voting, whichever is greater.
(2) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than 75 percent of the direct premiums written as reported in the following annual statements submitted for 2008: Life, accident and health annual statements; health annual statements; or fraternal annual statements.
(3) The Standard Valuation Law, as amended by the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions: The 50 states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam, and Puerto Rico.
(c) Unless a change in the valuation manual specifies a later effective date, changes to the valuation manual shall be effective on January 1 following the date when both of the following have occurred:
(1) The change to the valuation manual has been adopted by the NAIC by an affirmative vote representing both of the following:
a. At least three-fourths of the members of the NAIC voting, but not less than a majority of the total membership.
b. Members of the NAIC representing jurisdictions totaling greater than 75 percent of the direct premiums written as reported in the following annual statements most recently available prior to the vote in paragraph a.: Life, accident, and health annual statements; health annual statements; or fraternal annual statements.
(2) The change to the valuation manual becomes effective pursuant to a regulation adopted by the commissioner.
(d) The valuation manual must specify all of the following:
(1) Minimum valuation standards for and definitions of the policies or contracts subject to subsection (b) of Section 27-36A-3. The minimum valuation standards shall be:
a. The commissioners reserve valuation method for life insurance contracts, other than annuity contracts, subject to subsection (b) of Section 27-36A-3.
b. The commissioners annuity reserve valuation method for annuity contracts subject to subsection (b) of Section 27-36A-3.
c. Minimum reserves for all other policies or contracts subject to subsection (b) of Section 27-36A-3.
(2) Which policies or contracts or types of policies or contracts that are subject to the requirements of a principle-based valuation in subsection (a) of Section 27-36A-16 and the minimum valuation standards consistent with those requirements.
(3) For policies and contracts subject to a principle-based valuation under Section 27-36A-16:
a. Requirements for the format of reports to the commissioner under subdivision (3) of subsection (b) of Section 27-36A-16 and which shall include information necessary to determine if the valuation is appropriate and in compliance with this chapter.
b. Assumptions shall be prescribed for risks over which the company does not have significant control or influence.
c. Procedures for corporate governance and oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures.
(4) For policies not subject to a principle-based valuation under Section 27-36A-16 the minimum valuation standard shall either:
a. Be consistent with the minimum standard of valuation prior to the operative date of the valuation manual.
b. Develop reserves that quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring.
(5) Other requirements, including, but not limited to, those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls.
(6) The data and form of the data required under Section 27-36A-17, with whom the data must be submitted, and may specify other requirements including data analyses and reporting of analyses.
(e) In the absence of a specific valuation requirement or if a specific valuation requirement in the valuation manual is not, in the opinion of the commissioner, in compliance with this section, then the company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the commissioner by regulation.
(f) The commissioner may engage a qualified actuary, at the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company’s compliance with any requirement set forth in this chapter. The commissioner may rely upon the opinion, regarding provisions contained within this chapter, of a qualified actuary engaged by the commissioner of another state, district, or territory of the United States. As used in this subsection, the term “engage” includes employment and contracting.
(g) The commissioner may require a company to change any assumption or method that in the opinion of the commissioner is necessary in order to comply with the requirements of the valuation manual or this chapter; and the company shall adjust the reserves as required by the commissioner. The commissioner may take other disciplinary action as permitted pursuant to this title.
(Act 2016-411, §2.)
(a) A company must establish reserves using a principle-based valuation that meets the following conditions for policies or contracts as specified in the valuation manual:
(1) Quantify the benefits and guarantees, and the funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For polices or contracts with significant tail risk, reflects conditions appropriately adverse to quantify the tail risk.
(2) Incorporate assumptions, risk analysis methods and financial models, and management techniques that are consistent with, but not necessarily identical to, those utilized within the company’s overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.
(3) Incorporate assumptions that are derived in one of the following manners:
a. The assumption is prescribed in the valuation manual.
b. For assumptions that are not prescribed, the assumptions shall either:
Be established utilizing the company’s available experience, to the extent it is relevant and statistically credible.
To the extent that company data is not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience.
(4) Provide margins for uncertainty including adverse deviation and estimation error, such that the greater the uncertainty the larger the margin and resulting reserve.
(b) A company using a principle-based valuation for one or more policies or contracts subject to this section as specified in the valuation manual shall:
(1) Establish procedures for corporate governance and oversight of the actuarial valuation function consistent with those described in the valuation manual.
(2) Provide to the commissioner and the board of directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. The controls shall be designed to assure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the valuation manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.
(3) Develop, and file with the commissioner upon request, a principle-based valuation report that complies with standards prescribed in the valuation manual.
(c) A principle-based valuation may include a prescribed formulaic reserve component.
(Act 2016-411, §2.)
A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the valuation manual.
(Act 2016-411, §2.)
(a) For purposes of this section, “confidential information” shall mean all of the following:
(1) A memorandum in support of an opinion submitted under Section 27-36A-4 and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such memorandum.
(2) All documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in the course of an examination made under subsection (f) of Section 27-36A-15; provided, however, that if an examination report or other material prepared in connection with an examination made under Chapter 2 is not held as private and confidential information under Section 27-2-24, an examination report or other material prepared in connection with an examination made under subsection (f) of Section 27-36A-15 shall not be “confidential information” to the same extent as if such examination report or other material had been prepared under Chapter 2.
(3) Any reports, documents, materials, and other information developed by a company in support of, or in connection with, an annual certification by the company under subdivision (2) of subsection (b) of Section 27-36A-16 evaluating the effectiveness of the company’s internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such reports, documents, materials, and other information.
(4) Any principle-based valuation report developed under subdivision (3) of subsection (b) of Section 27-36A-16 and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such report.
(5) Any documents, materials, data, and other information submitted by a company under Section 27-36A-17, collectively “experience data,” and any other documents, materials, data, and other information, including, but not limited to, all working papers, and copies thereof, created or produced in connection with such experience data, in each case that includes any potentially company-identifying or personally identifiable information, that is provided to or obtained by the commissioner, together with any “experience data,” the “experience materials,” and any other documents, materials, data, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the commissioner or any other person in connection with such experience materials.
(b) Privilege for, and confidentiality of, confidential information.
(1) Except as provided in this section, a company’s confidential information is confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine or other public record disclosure laws, and shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. However, the commissioner is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the commissioner’s official duties.
(2) Neither the commissioner nor any person who received confidential information while acting under the authority of the commissioner shall be permitted or required to testify in any private civil action concerning any confidential information.
(3) In order to assist in the performance of the commissioner’s duties, the commissioner may share confidential information (i) with other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries and (ii) in the case of confidential information specified in subdivisions (1) and (4) of subsection (a) of Section 27-36A-18 only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials; in the case of (i) and (ii), provided that the recipient agrees, and has the legal authority to agree, to maintain the confidentiality and privileged status of the documents, materials, data, and other information in the same manner and to the same extent as required for the commissioner.
(4) The commissioner may receive documents, materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential and privileged any document, material, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information.
(5) The commissioner may enter into agreements governing sharing and use of information consistent with this subsection.
(6) No waiver of any applicable privilege or claim of confidentiality in the confidential information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subdivision (3).
(7) A privilege established under the law of any state or jurisdiction that is substantially similar to the privilege established under this subsection shall be available and enforced in any proceeding in, and in any court of, this state.
(8) In this section, the terms “regulatory agency,” “law enforcement agency,” and the “NAIC” include, but are not limited to, their employees, agents, consultants, and contractors.
(c) Notwithstanding subsection (b), any confidential information specified in subdivisions (1) and (4) of subsection (a):
(1) May be subject to subpoena for the purpose of defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under Section 27-36A-4 or principle-based valuation report developed under subdivision (3) of subsection (b) of Section 27-36A-16 by reason of an action required by this chapter or by regulations promulgated hereunder.
(2) May otherwise be released by the commissioner with the written consent of the company.
(3) Once any portion of a memorandum in support of an opinion submitted under Section 27-36A-4 or a principle-based valuation report developed under subdivision (3) of subsection (b) of Section 27-36A-16 is expressly cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.
(Act 2016-411, §2.)
(a) The commissioner may exempt specific product forms or product lines of a domestic company that is licensed and doing business only in the State of Alabama from the requirements of Section 27-36A-15 provided:
(1) The commissioner has issued an exemption in writing to the company and has not subsequently revoked the exemption in writing.
(2) The company computes reserves using assumptions and methods used prior to the operative date of the valuation manual in addition to any requirements established by the commissioner and promulgated by regulation.
(b) For any company granted an exemption under this section, Sections 27-36A-4(a), 27-36A-5, 27-36A-6, 27-36A-7, 27-36A-8, 27-36A-9, 27-36A-10, 27-36A-11, 27-36A-12, 27-36A-13, and 27-36A-14 shall be applicable. With respect to any company applying this exemption, any reference to Section 27-36A-15 found in Sections 27-36A-4(b), 27-36A-5, 27-36A-6, 27-36A-7, 27-36A-8, 27-36A-9, 27-36A-10, 27-36A-11, 27-36A-12, 27-36A-13, and 27-36A-14 shall not be applicable.
(Act 2016-411, §2.)
(a) A company calculating reserves under this section shall calculate reserves for life insurance, accident and health insurance contracts, credit life contracts, group life contracts, annuities, or deposit-type contracts in this state as if the policies were issued before the operative date of the Valuation Manual. For policies issued on or after the operative date of the Valuation Manual, applicable actuarial assumptions defined by the Valuation Manual for reserves shall be used. A company calculating reserves under this section shall comply with Section 27-36A-4(b) and, if it meets at least one of the conditions set forth in subdivisions (1) or (2), may file a statement of exemption for individual life insurance policies and certificates, except those policies identified in subsection (c) issued directly or assumed during the current calendar year which would otherwise be subject to Chapter 20 of the Valuation Manual, do not require a statement of exemption.
(1) The company has less than three hundred million dollars ($300,000,000) of exemption premium and, if the company is a member of a group that includes other life insurance companies, the group has combined exemption premium of less than six hundred million dollars ($600,000,000).
(2) The only new policies that would otherwise be subject to Chapter 20 of the Valuation Manual being issued or assumed by the company are due to election of policy benefits or features from existing policies valued under Appendix A and Appendix C of the Valuation Manual and the company was exempted from, or otherwise not subject to, the requirements of Chapter 20 of the Valuation Manual in the policy year.
(b) The exemption premium is determined under the Valuation Manual as follows:
(1) The amount reported in the prior calendar year life/health annual statement, Exhibit 1, Part 1, Column 3 (Ordinary Life Insurance), line 20.1; plus
(2) The portion of the amount in the prior calendar year life/health annual statement, Exhibit 1, Part 1, Column 3 (Ordinary Life Insurance), line 20.2 assumed from unaffiliated companies; minus
(3) The amount included in either subdivision (1) or (2) that is associated with guaranteed issue insurance policies and/or preneed life insurance policies; minus
(4) The amount included in either subdivision (1) or (2) that represents transfers of reserves in force as of the effective date of a reinsurance assumed transaction; plus
(5) The amount of premium for individual life certificates issued under a group life certificate which meets the conditions defined in Chapter 20 of the Valuation Manual and that are not included in either subdivision (1) or (2).
(c) The following policies are excluded from the Life Principal Based Reserving (PBR) Exemption:
(1) Universal Life with Secondary Guarantee (ULSG) policies.
(2) Policies other than ULSG policies that contain a rider with a secondary guarantee, in which the secondary guarantee does not meet the Valuation Manual definition of a nonmaterial secondary guarantee.
(d) Each exemption or lack of exemption pursuant to this section applies to policies issued or assumed in the current year and to all future valuation dates for those policies.
(e) An Alabama-domiciled company intending to calculate reserves as described in this section must file a statement with the commissioner prior to July 1 of each year certifying that at least one of the conditions of subdivisions (a)(1) or (a)(2) is met. The commissioner may reject the statement prior to September 1 if the commissioner specifically identifies risk in the affected policies that requires a principle-based valuation and require the company to comply with the Valuation Manual requirements.
(f) If a filed statement of exemption is not rejected by the commissioner, the filing of subsequent statements of exemption is not required if the company continues to qualify for the exemption. Ongoing statements of exemption for each new calendar year shall not be deemed to be rejected, unless both of the following apply:
(1) The company does not meet at least one condition in subdivisions (a)(1) or (a)(2).
(2) The commissioner notifies the company prior to September 1 that the statement of exemption is rejected.
(g) If an ongoing statement of exemption is rejected, the statement of exemption for the current calendar year is deemed rejected and a new statement of exemption must be filed and not rejected in order for the company to exempt additional policies.
(h) The minimum reserve requirements for life insurance, accident and health insurance contracts, credit life contracts, group life contracts, annuities, or deposit-type contracts issued on or after the operative date of the Valuation Manual for a company calculating reserves under this section are those pursuant to applicable requirements in Appendix A and Appendix C of the Valuation Manual using the mortality as defined in Section 3.C.1 of Chapter 20 and Appendix M of the Valuation Manual.
(i) A company that reports reserves using the alternative valuation shall also be exempt from the principle-based reserves corporate governance requirements, certification of effectiveness of principle-based reserves internal controls, and a principle-based reserves valuation report.
(Act 2016-411, p. 1108, §2; Act 2021-397, §1; Act 2022-151, §3.)
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:
a. 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;
b. Declared and unpaid dividends on stock and shares, unless such amount has otherwise been allowed as an asset;
c. Interest due or accrued upon a collateral loan in an amount not to exceed one year’s interest thereon;
d. 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;
e. 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;
f. Rent due or accrued on real property if such rent is not in arrears for more than three months and rent more than three months in arrears if the payment of such rent is adequately secured by property held in the name of the tenant and conveyed to the insurer as collateral; and
g. 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 three 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 27-5-12;
(9) Amounts receivable by an assuming insurer representing funds withheld by a solvent ceding insurer under a reinsurance treaty;
(10) 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;
(11) Electronic and mechanical machines constituting a data processing and accounting system if the cost of such system is at least $10,000.00, which costs shall be amortized in full over a period not to exceed 10 calendar years;
(12) 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; and
(13) 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.
(Acts 1965, No. 572, p. 1056; Acts 1971, No. 407, p. 707, §745.)
In addition to assets impliedly excluded by the provisions of Section 27-37-1, the following expressly shall not be allowed as assets in any determination of the financial condition of an insurer:
(1) Good will, trade names, and other like intangible assets;
(2) Advances to officers, directors, and controlling stockholders, other than policy loans, unless the same are secured by collateral satisfactory to the commissioner, 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 material 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, except:
a. Such personal property as is required through foreclosure of chattel mortgages under loans insured or guaranteed under provisions of the National Housing Act or any act of Congress relating to veterans benefits;
b. Such as is reasonably necessary for the maintenance and operation of real estate held by it other than real estate for home office, branch office, and similar purposes; and
c. In the case of title insurers, abstract plant and equipment not to exceed 50 percent of the paid-in capital stock of such title insurer; and
(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.
(Acts 1971, No. 407, p. 707, §747.)
Assets may be allowed as deductions from corresponding liabilities, and liabilities may be charged as deductions from assets and deductions from assets may be charged as liabilities in accordance with the form of an annual statement applicable to the insurer as prescribed by the commissioner or otherwise in his discretion.
(Acts 1971, No. 407, p. 707, §746.)
(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 on a temporary basis 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. Reinsurance of any substantial part of the insurer’s outstanding risks contracted for in fact within 90 days prior to the date of any such financial statement and cancelled in fact within 90 days after the date of such statement shall prima facie be deemed to have been arranged for the purpose of deception within the intent of this section.
(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;
(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) No such disallowance of assets or credits shall be valid unless made by the commissioner after a hearing of which notice was given the insurer within six months after the date the financial statement of the insurer as to which such deception is claimed was filed with the commissioner.
(d) 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.
(Acts 1971, No. 407, p. 707, §748.)
(a) All bonds or other evidences of debt having a fixed term and rate of interest held by an insurer shall, if amply secured and not in default as to principal or interest, be valued 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; and
(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, but no such method or valuation shall be inconsistent with any applicable valuation or method currently accepted and in use among insurers in general.
(Acts 1971, No. 407, p. 707, §749.)
(a) Securities, other than those referred to in Section 27-37-5, 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 valuation as he may approve.
(c) No valuation under this section shall be inconsistent with any applicable valuation or method currently accepted and in use among insurers in general.
(Acts 1971, No. 407, p. 707, §750.)
(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 valued at an amount greater than the unpaid principal of the defaulted loan or contract 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 three years old, the commissioner may at his discretion call for and require a new appraisal in order to determine fair value.
(c) Personal property acquired pursuant to chattel mortgages shall not be valued at an amount greater than the unpaid balance of principal on the defaulted loan at the date of acquisition, together with taxes and expenses incurred in connection with such acquisition or the fair value of such property, whichever amount is the lesser.
(Acts 1971, No. 407, p. 707, §751.)
Funeral supply inventories owned by the insurer shall be valued at an amount not exceeding cost to the insurer or market value, whichever is lower. Funeral equipment owned by the insurer shall be valued at an amount not in excess of cost to the insurer reduced by depreciation at the rate of not less than 18 percent per annum from date of acquisition of such equipment.
(Acts 1971, No. 407, p. 707, §752.)
Purchase money mortgages on real property shall be valued in an amount not exceeding the acquisition cost of the real property covered thereby or the unpaid balance of the debt secured by such mortgage, whichever is less.
(Acts 1971, No. 407, p. 707, §753.)
A life insurer organized under the laws of this state may, by or pursuant to a resolution of its board of directors, establish one or more separate accounts and may allocate thereto amounts, including without limitation proceeds applied under optional modes of settlement or under dividend options, to provide for life insurance or annuities, and benefits incidental thereto, payable in fixed or variable amounts or both, subject to the following:
(1) The income, gains, and losses, realized or unrealized, from assets allocated to a separate account shall be credited to, or charged against, the account, without regard to other income, gains, or losses of the insurer;
(2) Except as provided in this section, amounts allocated to any separate account, and accumulations thereon, may be invested and reinvested without regard to any requirements or limitations prescribed by the laws of this state governing the investments of life insurers; provided, however, that to the extent that the insurer’s reserve liability with regard to:
The investments in such separate account or accounts shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the insurer;
(3) With respect to 75 percent of the market value of the total assets in a separate account, no insurer shall purchase or otherwise acquire the securities of any issuer, other than securities issued or guaranteed as to principal or interest by the United States, if immediately after such purchase or acquisition the market value of such investment, together with prior investments of such separate account in such security taken at market, would exceed 10 percent of the market value of the assets of said separate account; provided, however, that the commissioner may waive such limitation if, in his opinion, such waiver will not render the operation of such separate account hazardous to the public or the policyholders in this state;
(4) Unless otherwise approved by the commissioner, no insurer shall purchase or otherwise acquire for its separate accounts:
a. Any securities of any subsidiary of the insurer; or
b. More than 10 percent of the total issued and outstanding voting securities of any other single issuer; provided, however, that the foregoing shall not apply with respect to securities held in separate accounts, the voting rights in which are exercisable only in accordance with instructions from persons having interests in such accounts;
(5) The limitations provided in subdivisions (3) and (4) of this section shall not apply to the investment with respect to a separate account in the securities of an investment company registered under the Investment Company Act of 1940, provided that the investments of such investment company comply in substance with subdivisions (3) and (4) of this section.
(6) Unless otherwise approved by the commissioner, 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 as provided under the terms of the contract, or the rules or other written agreement applicable to such separate account; provided, however, that, unless otherwise approved by the commissioner, the portion of the assets of such separate account equal to the insurer’s reserve liability with regard to the guaranteed benefits and funds referred to in paragraphs (2)a. and (2)b. of this section, if any, shall be valued in accordance with the rules otherwise applicable to the insurer’s assets;
(7) Amounts allocated to a separate account in the exercise of the power granted by this section shall be owned by the insurer, and the insurer shall not be, nor hold itself out to be, a trustee with respect to such amounts. That portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the insurer may conduct;
(8) To the extent such insurer deems it necessary to comply with any applicable federal or state laws, such insurer, with respect to any separate account, including, without limitation, any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest therein appropriate voting and other rights and special procedures for the conduct of the business of such account, including, without limitation, special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such insurer, to manage the business of such account; and
(9) No sale, exchange, or other transfer of assets may be made by an insurer between any of its separate accounts or between any other investment account and one or more of its separate accounts unless, in case of a transfer into a separate account, such transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made and unless such transfer, whether into or from a separate account, is made:
The commissioner may approve other transfers among such accounts if, in his opinion, such transfers would not be inequitable.
(Acts 1969, No. 565, p. 1045, §1; Acts 1971, No. 407, p. 707, §754; Acts 1985, 2nd Ex. Sess., No. 85-993, p. 357, §1.)
(a) Any variable contract providing benefits payable in variable amounts delivered, or issued for delivery, in this state shall contain a statement of the essential features of the procedures to be followed by the insurer in determining the dollar amount of such variable benefits. Any such contract, including a group contract, and any certificate in evidence of variable benefits issued thereunder shall state that such dollar amount will vary to reflect investment experience and shall contain on its first page a statement to the effect that the benefits thereunder are on a variable basis.
(b) Variable annuity contracts delivered, or issued for delivery, in this state may include as an incidental benefit provision for payment on death during the deferred period of an amount not in excess of the greater of the sum of the premiums or stipulated payments paid under the contract or the value of the contract at time of death. Any such provision shall not be deemed to be life insurance and therefore shall not be subject to the provisions of this title governing life insurance contracts. A provision for any other benefit on death during the deferred period shall be subject to this title.
(Acts 1969, No. 565, p. 1045, §1; Acts 1971, No. 407, p. 707, §755.)
(a) No insurer shall deliver, or issue for delivery, within this state variable contracts unless it is licensed to do a life insurance or annuity business in this state and the commissioner is satisfied that its condition or method of operation in connection with the issuance of such contracts will not render its operation hazardous to the public or its policyholders in this state. In this connection, the commissioner shall consider among other things:
(1) The history and financial condition of the insurer;
(2) The character, responsibility, and fitness of the officers and directors of the insurer; and
(3) The law and regulation under which the insurer is authorized in the state of domicile to issue variable contracts.
(b) If the company is a subsidiary of an admitted life insurer or affiliated with such insurer through common management or ownership, it may be deemed to have met the provisions of the section if either it or the parent or affiliated company meets the requirements of this section.
(Acts 1971, No. 407, p. 707, §756.)
Notwithstanding any other provision of law, the commissioner shall have sole authority to regulate the issuance and sale of variable contracts and the licensing of persons selling such contracts and to issue reasonable rules and regulations as may be appropriate to carry out the purposes and provisions of this chapter.
(Acts 1969, No. 565, p. 1045, §1; Acts 1971, No. 407, p. 707, §757.)
The reserve liability for variable contracts shall be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided and any mortality guarantees.
(Acts 1971, No. 407, p. 707, §758; Acts 1985, 2nd Ex. Sess., No. 85-993, p. 357, §2.)
Except for Sections 27-15-16, 27-15-17, 27-15-22, 27-15-23, and 27-15-28.1 of this title, in the case of a variable annuity contract, and Sections 27-15-2, 27-15-3, 27-15-8.1, 27-15-9, 27-15-10, 27-15-11, and 27-15-28 of this title, in the case of a variable life insurance policy, and except as otherwise provided in this chapter, all pertinent provisions of this title shall apply to separate accounts and contracts relating thereto. Any individual variable life insurance contract, delivered or issued for delivery in this state shall contain grace, reinstatement and nonforfeiture provisions appropriate to such a contract.
(Acts 1969, No. 565, p. 1045, §2; Acts 1971, No. 407, p. 707, §759; Acts 1985, 2nd Ex. Sess., No. 85-993, p. 357, §3.)
For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:
(1) AUTOMOBILE CLUB OR ASSOCIATION. A legal entity which, in consideration of dues, assessments, or periodic payments of money, promises its members or subscribers to assist them in matters relating to the ownership, operation, use, or maintenance of a motor vehicle; provided, however, that the definition of automobile clubs shall not include persons or associations or corporations which are organized and operated solely for the purpose of conducting, sponsoring, or sanctioning motor vehicle races, exhibitions, or contests upon race tracks or upon race courses established and marked as such for the duration of such particular event.
(2) COMMISSIONER. The Commissioner of Insurance of the State of Alabama.
(Acts 1971, No. 407, p. 707, §798.)
This chapter shall be deemed and held exclusive authority for the organization and operation of automobile clubs and associations within this state, and such clubs and associations shall not be subject to any other laws respecting insurance companies of any class, kind, or character except as to the conduct of hearings by the commissioner and appeals therefrom; provided, however, that this chapter shall not affect the validity of any membership certificate of any automobile club or association issued and outstanding prior to January 1, 1972. Notwithstanding the aforementioned, nothing in this chapter shall be construed as authority for a licensed automobile club or association to provide or furnish insurance coverage unless such clubs shall have complied with all the laws and regulations required of insurance companies authorized to do business in this state.
(Acts 1971, No. 407, p. 707, §805.)
No automobile club or association shall do, or offer to do, business in the state unless the same shall be organized as a domestic or foreign corporation and shall be licensed by the commissioner.
(Acts 1971, No. 407, p. 707, §799.)
All automobile clubs and associations now organized and/or operating in the State of Alabama and all automobile clubs and associations hereafter organized and/or operating in the State of Alabama shall be under the authority, supervision, and control of the commissioner.
(Acts 1971, No. 407, p. 707, §801.)
(a) The commissioner shall have full and complete authority to grant certificates of authorization to automobile clubs and associations, to revoke such certificates, and to prescribe such rules and regulations as are reasonably necessary for the conduct of the business of such clubs and associations within the state and for carrying out the objects and purposes of this chapter. In determining if a certificate of authorization shall be issued, the commissioner shall take into consideration, along with all other factors, the name of the automobile club or association; and, if such name, emblem, or trademark is distinctive and not likely to mislead the public as to the nature or identity of the corporation using it or interfere with the transactions of any other automobile club already doing business in the state, it shall be entitled to be approved.
(b) The commissioner shall also have the authority to conduct hearings as provided under this title.
(Acts 1971, No. 407, p. 707, §800.)
(a) Within 30 days after January 1, 1972, every automobile club or association organized and/or operating in the State of Alabama shall file with the commissioner an application for a certificate of authority to continue said operations within the state, and every automobile club or association desiring to commence operations within the state shall, prior to the commencement of said operation, file application with and receive a certificate of authority from the commissioner. No certificate of authority shall be issued until the automobile club or association has paid to the commissioner $250.00 as an annual license fee, which fee shall not be returnable. Licenses shall be issued for the period beginning January 1 of each year and shall expire on the following December 31. The commissioner shall deposit all fees collected in the State Treasury to the credit of the General Fund.
(b) The following documents and information shall be filed with the application of all such clubs and associations:
(1) The sum of $25,000.00 in cash or securities, as approved by the commissioner and deposited in trust with the State Treasurer or, in lieu thereof, a surety bond payable to the commissioner in the amount of $25,000.00 of a surety company authorized to do business in this state, conditioned upon the full compliance with this chapter and the faithful performance of the obligations of such club or association to its members. The bonds shall be approved by the commissioner and shall not be cancelled without 30 days’ notice to the commissioner. If such bond is filed, any person defrauded or injured by any wrongful act, misrepresentation, or failure on the part of a motor club with respect to selling or rendering of any service may maintain an action on such bond in his own name. Upon receipt of notice of the intended dissolution of such automobile club or association and upon receipt of notice of evidence satisfactory to the commissioner that all obligations of the club or association to its members and creditors have been satisfied, the State Treasurer, upon written authorization from the commissioner, shall refund said money or securities and the obligations of said bond shall terminate;
(2) Appointment of an agent for service of process who shall be a resident of the State of Alabama or, in lieu thereof, the commissioner; and
(3) A copy of the proposed form of membership application, membership certificate, bylaws, contracts for service, and any other material, including advertising matter, requested by the commissioner.
(c) If the commissioner shall be satisfied that the applicant is competent and trustworthy and possesses the professional ability to perform the services and that he meets all the requirements of this chapter, he shall issue to the applicant a certificate of authority to conduct the business of such automobile club or association within this state.
(Acts 1971, No. 407, p. 707, §802; Acts 1988, 1st Ex. Sess., No. 88-875, p. 410, §1.)
Persons representing any automobile club or association in soliciting automobile club or association memberships and the automobile club or association with respect thereto shall be subject to the provisions of Chapters 7 and 8A of this title, except that automobile club or association producers shall be exempt from the 40-hour prelicensing course and written examination requirements of Chapter 7 and the continuing education requirements of Chapter 8A of this title.
(Acts 1971, No. 407, p. 707, § 803; Act 2001-702, p. 1509, § 15.)
It shall be unlawful for any person, firm, association, copartnership, corporation, company, or other organization to organize, operate, or in any way solicit members for an automobile club or association or to offer any of the motor club services as defined in Section 27-39-1 except in the manner provided in this chapter and under the rules and regulations promulgated by the commissioner. Any person, firm, association, copartnership, corporation, company, or other organization violating the provisions of this chapter shall be guilty of a misdemeanor and, upon conviction, shall be punished by a fine not exceeding $500.00, or be imprisoned not exceeding six months or punished by both fine and imprisonment, in the discretion of the court.
(Acts 1971, No. 407, p. 707, §804.)
For the purposes of this chapter, the following words and phrases shall have the following meanings:
(1) INSURANCE PREMIUM FINANCE COMPANY. A person engaged in the business of entering into premium finance agreements.
(2) PREMIUM FINANCE AGREEMENT. An agreement by which an insured or prospective insured promises to pay to a premium finance company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or broker in payment of premiums on an insurance contract together with a service charge, as authorized and limited by this chapter, and charges for wind mitigation construction financing, as approved by the commissioner.
(3) LICENSEE. A premium finance company holding a license issued under this chapter.
(4) PERSON. An individual, partnership, association, business corporation, nonprofit corporation, common law trust, joint-stock company, or any other group of individuals however organized.
(5) INSURANCE CONTRACT. The policy or contract of insurance which is the subject of premium financing under this chapter.
(6) WIND MITIGATION CONSTRUCTION FINANCING. A construction loan agreement between the homeowner/policyholder under the policy or contract of homeowner insurance that is the subject of premium financing under this chapter, and an authorized lender for the purpose of wind mitigation upgrades to the insured home.
(Acts 1975, No. 1042, p. 2088, §2; Acts 1986, No. 86-400, p. 586, §1; Acts 1995, No. 95-309, p. 567, §1; Act 2016-396, §1.)
The provisions of this chapter shall not apply with respect to any of the following:
(1) Any insurance company licensed to do business in this state.
(2) Any banking or other financial institution regulated by the state, or savings and loan association, or credit union authorized to do business in this state, or any national banking institution or federal savings and loan association incorporated under the laws of the United States and located within this state.
(3) A charge for insurance in connection with an installment sale of a motor vehicle or boat or mobile home.
(4) The financing of insurance premiums in this state in accordance with the provisions of this title relating to rates of insurance.
(5) Any insurance agent or agency licensed in Alabama that charges a collection fee on unpaid balances for insurance premiums under Section 27-12-17 or under the Alabama Consumer Credit Act.
(Acts 1975, No. 1042, p. 2088, §1; Acts 1994, No. 94-118, p. 146, §1.)
(a) No person shall engage in the business of financing insurance premiums in this state without first having obtained a license as a premium finance company from the commissioner. Any person who shall engage in the business of financing insurance premiums in this state without first having obtained a license as provided herein shall be guilty of a misdemeanor and upon conviction shall be punished by a fine of not more than $1,000.00 or by imprisonment for not more than one year, or both.
(b) The annual license fee shall be $200.00; provided, that an insurance agency which finances its own business of less than $150,000.00 in premiums annually shall pay a fee of $50.00. The fee for said license shall be paid into the Insurance Department Examination Revolving Fund and the same is hereby appropriated for that use.
(c) The person to whom the license or the renewal thereof may be issued shall file sworn answers subject to the penalties of perjury to such interrogatories as the commissioner may require. The commissioner shall have authority at any time to require the applicant fully to disclose the identity of all stockholders, partners, officers, and employees and he may in his discretion refuse to issue or renew a license in the name of any firm, partnership, or corporation if he is not satisfied that any officer, employee, stockholder, or partner thereof who may materially influence the applicant’s conduct meets the standards of this section.
(Acts 1975, No. 1042, p. 2088, §3.)
(a) Upon the filing of an application and the payment of the license fee the commissioner shall make an investigation of each applicant and shall issue a license if the applicant is qualified in accordance with this section. If the commissioner does not so find, he shall, within 30 days after he has received such application, at the request of the applicant, give the applicant a full hearing.
(b) The commissioner shall issue or renew a license as may be applied for when he is satisfied that the person to be licensed:
(1) Is competent and trustworthy and intends to act in good faith in the capacity involved by the license applied for;
(2) Has a good business reputation and has had experience, training, or education, so as to be qualified in the business for which the license is applied for; and
(3) If a corporation, is a corporation incorporated under the laws of this state or a foreign corporation authorized to transact business in this state.
(Acts 1975, No. 1042, p. 2088, §4.)
(a) The commissioner may revoke or suspend the license of any premium finance company when, and if, after complaint and investigation, it appears to the commissioner that:
(1) Any license issued to such company was obtained by fraud;
(2) There were any misrepresentations in the application for the license;
(3) The holder of such license has otherwise shown himself untrustworthy or incompetent to act as a premium finance company;
(4) Such company has violated any of the provisions of this chapter; or
(5) No license shall issue or remain in force if any principal of the licensee has been convicted of a crime involving moral turpitude.
(b) Before the commissioner shall revoke, suspend, or refuse to renew the license of any premium finance company, the aggrieved person shall be entitled to a hearing in accord with administrative procedures in effect in this state or if no such administrative procedures are set out, then in the same manner as provided in Section 27-2-28 et seq. In lieu of revoking or suspending the license for any of the causes enumerated in this section, after hearing as herein provided, the commissioner may subject such company to a penalty of not more than $200.00 for each offense but not more than a maximum of $5,000.00 in the event multiple violations occurred, when in his judgment he finds that the public interest would not be harmed by the continued operation of such company. The amount of any such penalty shall be paid by such company to the commissioner.
(c) If the commissioner refuses to issue to any person a license as a premium finance company, or he revokes, suspends, or refuses to renew the license of any premium finance company or he imposes a penalty on such company, after a hearing as provided under subsection (b), the applicant or licensee may appeal from such refusal to issue a license or from such adjudication in accordance with Section 27-2-32 et seq.
(Acts 1975, No. 1042, p. 2088, §5.)
(a) Every licensee shall maintain records of its premium finance transactions and the said records shall be open to examination and investigation by the commissioner. The commissioner may at any time require any licensee to bring such records as he may direct to the commissioner’s office for examination.
(b) Every licensee shall preserve its records of such premium finance transactions including cards used in a card system, if any, for at least three years after making the final entry in respect to any premium finance agreement. The preservation of records in photographic form shall constitute compliance with this requirement.
(Acts 1975, No. 1042, p. 2088, §6.)
The commissioner shall have authority to make and enforce such reasonable rules and regulations as may be necessary in making effective the provisions of this chapter, but such rules and regulations shall not be contrary to nor inconsistent with the provisions of this chapter.
(Acts 1975, No. 1042, p. 2088, §7.)
(a) The contents and style of the premium finance agreement shall be as follows:
(1) It shall be dated, signed by the insured or an authorized representative and the printed portion thereof shall be in at least eight-point type.
(2) It shall contain the name and place of business of the insurance agent negotiating the related insurance contract, the name and residence, or place of business, of the insured as specified by the insured, the name and place of business of the premium finance company to which payments are to be made, a description of the insurance contracts or wind mitigation construction financing involved, and the amount of the premium or other charges therefor.
(3) It shall set forth the following items where applicable:
a. The total amount of the premiums and other approved charges.
b. The amount of the down payment.
c. The principal balance, that being the difference between items a. and b.
d. The amount of the service charge.
e. The balance payable by the insured, that being the sum of items c. and d.
f. The number of installments required, the amount of each installment expressed in dollars, and the due date or period thereof.
g. The annual percentage rate (APR) charged.
(b) The items set out need not be stated in the sequence or order in which they appear, and additional items may be included to explain the computations made in determining the amount to be paid by the insured.
(Acts 1975, No. 1042, p. 2088, §8; Acts 1986, No. 86-400, p. 586, §1; Acts 1995, No. 95-309, p. 567, §1; Act 2016-396, §1.)
(a) For the purpose of this section, “consumer insurance premium finance agreement” means an insurance premium finance agreement as defined in Section 27-40-1 wherein the insurance contracts which are the subject of the premium finance agreement are for personal, family, or household purposes or where the premiums for those agreements are two thousand dollars ($2,000) or less. For the purpose of this section, “commercial premium finance agreement” means any insurance premium finance agreement other than a consumer premium finance agreement.
(b) A premium finance company shall not charge, contract for, receive, or collect a service charge other than in accordance with the following provisions:
(1) The service charge is to be computed on the balance of the premium due, after subtracting the down payment made by the insured in accordance with the premium finance agreement, from the effective date of the insurance for which the premiums are being advanced, to and including the date when the final installment of the premium finance agreement is payable.
(2) The service charge per consumer insurance premium finance agreement shall be a maximum of nine dollars ($9) per one hundred dollars ($100) per annum plus an additional charge, which shall not exceed $15.00 per premium finance agreement, which additional charge need not be refunded.
(3) The service charge for a commercial insurance premium finance agreement shall be as agreed to by the parties to the agreement.
(c) Notwithstanding the provisions of any premium finance agreement, any insured may prepay the obligation in full at any time. In such event he shall receive a credit or refund under the rule of 78ths or the sum of the digits principle as follows: The amount of the refund or credit shall be as great a proportion of the finance charge originally contracted for as the sum of the periodic time balances of the debt scheduled to follow the date of prepayment bears to the sum of all the periodic time balances of the debt, both sums to be determined according to the scheduled payment originally contracted for. No refund of less than $1.00 need be made. If such prepayment is made by the debtor other than on a scheduled payment date, the nearest scheduled payment date shall be used in such computation. If, in addition to the service charge, an additional charge was imposed, such additional charge need not be refunded, nor taken into consideration in computing the credit refund.
(Acts 1975, No. 1042, p. 2088, §9; Acts 1986, No. 86-400, p. 586, §1; Acts 1995, No. 95-309, p. 567, §1.)
A premium finance agreement may provide for the payment by the insured of the delinquency charge of $1.50 to a maximum of five percent of the delinquent installment which is in default for a period of five days or more. If the default results in the cancellation of any insurance contract listed in the agreement, the agreement may provide for the payment by the insured of a cancellation charge of $5.00 in the case of a consumer insurance premium finance agreement and $15.00 in the case of a commercial insurance premium finance agreement.
(Acts 1975, No. 1042, p. 2088, §10; Acts 1986, No. 86-400, p. 586, §1.)
(a) When a premium finance agreement contains a power of attorney enabling the premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled by the premium finance company unless such cancellation is effectuated in accordance with this section.
(b) Not less than 10-day written notice shall be mailed to the insured, at his last known address as shown on the records of the premium finance company, of the intent of the premium finance company to cancel the insurance contract unless the default is cured within such 10-day period.
(c) After the notice in subsection (b) of this section has expired, the premium service company may thereafter request, in the name of the insured, cancellation of such insurance contract by mailing to the insurer a notice of cancellation, and the insurance contract shall be cancelled as if such notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract. The premium service company shall also mail a notice of cancellation to the insured at his last address as set forth in its records, and such mailing shall constitute sufficient proof of delivery.
(d) All statutory, regulatory, and contractual restrictions providing that the insurance contract may not be cancelled unless notice is given to a governmental agency, mortgagee, or other third party shall apply where cancellation is effected under the provisions of this section. The insurer shall give the prescribed notice in behalf of itself or the insured to any governmental agency, mortgagee, or other third party on or before the second business day after the day it receives the notice of cancellation from the premium finance company and shall determine the effective date of cancellation taking into consideration the number of days’ notice to complete the cancellation.
(Acts 1975, No. 1042, p. 2088, §11.)
(a) Whenever a financed insurance contract is cancelled, the insurer shall return whatever gross unearned premiums are due under the insurance contract to the premium finance company, either directly or via the agent or surplus lines broker placing the insurance, for the account of the insured or insureds as soon as reasonably possible, but in any event no later than 30 days after the effective date of cancellation.
(b) In the event that the crediting of return premiums to the account of the insured results in a surplus over the amount due from the insured, the premium finance company shall refund the excess to the insured or the agent or surplus lines broker, within 30 days after receipt by the premium finance company with the check or draft made payable to the agent or surplus lines broker and to the insured, provided that no refund shall be required if it amounts to less than one dollar ($1).
(Acts 1975, No. 1042, p. 2088, §12; Acts 1986, No. 86-400, p. 586, §1; Acts 1995, No. 95-309, p. 567, §1.)
No filing of the premium finance agreement shall be necessary to perfect the validity of such agreement as a secured transaction as against creditors, subsequent purchasers, pledges, encumbrances, successors, or assigns.
(Acts 1975, No. 1042, p. 2088, §13.)
When a premium finance company has complied with the licensing provisions of this chapter, it shall not be subject to any other licensing or regulatory agency of the State of Alabama other than the Department of Insurance.
(Acts 1975, No. 1042, p. 2088, §14.)
(a) The amount of premium financed, more specifically referred to as “the principal balance” in paragraph c. of subdivision (3) of subsection (a) of Section 27-40-8, shall be sent to the insurance company or companies, or the agent or surplus lines broker.
(b) All drafts, checks, or other orders of payment issued for premiums financed shall be issued by or on behalf of the premium finance company and shall be mailed, delivered, or otherwise transmitted directly to the insurance company or its agent, or surplus lines broker. Any check, draft, or other order or form of payment to any insurance agent, insurance broker, managing general agent, or other person, when issued shall be presumed to have been issued by the duly authorized agent of the premium finance company which provided the checks or drafts to the person issuing the same for the purpose of issuance of such instrument.
(c) Notwithstanding anything to the contrary in this section, the insurance company shall not be relieved of any of its duties or responsibilities with respect to the cancellation of any insurance contract which is subject to the premium finance agreement.
(Acts 1986, No. 86-400, p. 586, §2; Acts 1995, No. 95-309, p. 567, §1.)
No premium finance company and no employee of such a company shall pay, allow, or offer to pay or allow in any manner whatsoever to the insurance agent, insurance broker, or managing general agent, or any employee of any of the aforesaid, or to any other person, either as an inducement to the financing of any insurance contract with the premium finance company, or, after any such contract has been financed, any rebate whatsoever, either from the service charge for financing specified in the premium finance agreement or otherwise, or shall give or offer to give any valuable consideration or inducement of any kind directly, but a premium finance company may purchase or otherwise acquire a premium finance agreement, provided that it conforms to the provisions of this chapter, in all respects, from another premium finance company on such terms and conditions as may be mutually agreed upon.
(Acts 1986, No. 86-400, p. 586, §3.)
Any premium finance company which enters into a premium finance agreement under this chapter shall notify the insurer whose premiums are being financed of the existence of the agreement within a reasonable period of time, not to exceed 30 days after the date the agreement is accepted by the premium finance company.
(Acts 1986, No. 86-400, p. 586, §4; Acts 1995, No. 95-309, p. 567, §1.)
Prior to the due date of the first installment payable under a premium finance agreement, the premium finance company holding the agreement shall deliver to the insured, or mail to him or her at his or her address as shown in the agreement, a copy thereof.
(Acts 1986, No. 86-400, p. 586, §5.)
Except as provided in Section 27-41-39, this chapter shall apply to all domestic insurers and health maintenance organizations.
(Acts 1977, No. 408, p. 530, §1; Acts 1993, No. 93-675, p. 1240, §13.)
As used in this chapter, the following terms shall have the respective meanings herein set forth, unless the context shall otherwise require:
(1) ALABAMA INSURANCE CODE. Title 27 of this code.
(2) INSURER. The term shall have the meaning ascribed in Section 27-1-2 and shall include health maintenance organizations.
(3) PERSON. The term shall have the meaning ascribed in Section 27-1-2.
(4) COMMISSIONER and DEPARTMENT. The terms, respectively, shall have the meanings ascribed in Section 27-1-2.
(5) INVESTMENT. Any asset owned by an insurer.
(6) ELIGIBLE INVESTMENT. Any investment permitted by Sections 27-41-7 to 27-41-35, inclusive, provided the investment meets all the other requirements of this chapter.
(7) DOMESTIC INSURER, FOREIGN INSURER, and ALIEN INSURER. The terms shall have the meanings ascribed in Section 27-1-2 and shall include health maintenance organizations.
(8) ADMITTED ASSET. Any asset of an insurer permitted by the Commissioner of Insurance to be taken into account in any determination of the financial condition of the insurer.
(Acts 1977, No. 408, p. 530, §2; Acts 1993, No. 93-675, p. 1240, §13.)
(a) Only eligible investments may be counted as admitted assets.
(b) Every investment lawfully held by a life, disability, or burial insurer on January 1, 1978, and every investment which the life, disability, or burial insurer became obligated to make prior to January 1, 1978, which was a lawful investment for the insurer at the time made or at the time the insurer became obligated to make it shall be an eligible investment. Any particular investment held by an insurer on May 17, 1993, or any amendment thereto, which was a legal investment at the time it was made, and which the insurer was legally entitled to possess immediately prior to the effective date, shall be deemed to be an eligible investment; however, any investment made after May 17, 1993, shall be in compliance with the limitations and qualifications of this section.
(c) All life, disability, or burial insurers shall within 90 days after January 1, 1978, file with the commissioner a written statement certified by its treasurer or chief investment officer, listing in the manner as to readily identify the same, all the investments or obligations for investments not otherwise eligible under this chapter, identifying each nonconforming investment and stating the terms and conditions of acquisition or proposed acquisition thereof.
(d) All insurers, other than life, disability, or burial insurers, shall within 90 days after May 17, 1993, file with the commissioner a written statement certified by its treasurer or chief investment officer, listing in the manner as to readily identify the same, all the investments or obligations for investments not otherwise eligible under this chapter, identifying each nonconforming investment and stating the terms and conditions of acquisition or proposed acquisition thereof.
(e) Eligibility of an investment shall be determined as of the date of its making or acquisition, except as stated in subsection (b) of this section.
(f) Any investment limitation based upon the amount of the insurer’s assets or particular funds shall relate to the value of the assets or funds as shown by the insurer’s annual statement as of December 31 next preceding the date of the investment by the insurer or as shown by a current financial statement filed with and accepted as to content in writing by the commissioner.
(Acts 1977, No. 408, p. 530, §3; Acts 1993, No. 93-675, p. 1240, §13.)
No investment (other than in common stocks allowed under Section 27-41-17, in insurance stocks allowed under Section 27-41-18, in loans or investments allowed under Section 27-41-35, in real property allowed under Section 27-41-34, or in funeral supply inventories and equipment allowed under Section 27-41-38) shall be an eligible investment unless it is interest-bearing or interest-accruing or dividend or income-paying, is not then in default, and the insurer is entitled to receive for its account and benefit the interest or income accruing thereon.
An investment may be eligible notwithstanding that part of the interest or income accruing thereon is paid by the insurer to a third party in consideration of services rendered by the third party with respect to the investment or that part of the interest or income accruing thereon is shared by the insurer with one or more joint venturers or others participating in the same investment.
Any investment authorized may be deposited in a clearing corporation as defined in Section 7-8-102(3) or in a federal reserve bank under book-entry system. When such securities are so deposited, certificates representing securities of the same class of the same issuer may be merged and held in bulk in the name of the nominee of such clearing corporation with any other securities deposited in such clearing corporation by any person, regardless of the ownership of such securities, and securities of small denominations may be merged into one or more certificates of larger denominations. Title to such securities may be transferred by bookkeeping entry on the books of such clearing corporation or federal reserve bank without physical delivery or certificates representing such securities.
(Acts 1977, No. 408, p. 530, §4; Acts 1981, No. 81-541, p. 904, §4.)
An insurer shall not make any investment or loan exceeding 10 percent of the admitted assets of the insurer, other than loans on policies or annuity contracts, unless authorized, approved, or ratified by the board of directors of the insurer or by the committee or person as the board of directors shall expressly authorize. The action of the board of directors, the committee, or other persons so authorized shall be recorded and regular reports thereof shall be submitted to the board of directors. This requisite shall not apply to funeral supplies authorized for mutual aid associations under Section 27-41-38 which are purchased in the regular course of business under the general supervision of the association’s board of directors.
(Acts 1977, No. 408, p. 530, §5; Act 2012-370, p. 921, §1.)
(a) An insurer shall not have at any one time any single investment or combination of investments in or loans upon the security of the obligations, property, or securities of any one person aggregating in cost to the insurer in excess of the greater of 10 percent of such insurer’s assets or the total of its capital and surplus, as shown in the latest annual report of the insurer filed pursuant to subsection (a) of Section 27-3-26 of the Alabama Insurance Code, less the minimum capital and surplus required of said insurer for authority to transact insurance by Sections 27-3-7 and 27-3-8 of the Alabama Insurance Code.
The restriction of this subsection shall not apply to evidences of indebtedness issued, assumed, or guaranteed by the United States of America or any department, agency, or instrumentality thereof or by any state of the United States.
(b) An insurer shall at all times invest and maintain invested funds in cash and assets allowed in the following sections of this chapter in an amount not less than the capital required of it to transact insurance by Section 27-3-7 of the Alabama Insurance Code:
(1) Section 27-41-7 (United States government obligations).
(2) Section 27-41-9 (state, county, municipal, and school obligations).
(3) Section 27-41-29 (mortgage loans).
(c) An insurer shall at all times invest and maintain invested funds in cash and the investments prescribed in this chapter in an amount not less than the amount of the reserves under its policies and annuity contracts in force.
(d) Limits as to investments shall apply as stated in specific sections relating to particular kinds of investments.
(Acts 1977, No. 408, p. 530, §6.)
An insurer may invest in bonds, notes, warrants, debentures, and other evidences of indebtedness which are direct obligations of the United States of America for which the full faith and credit of the United States of America is pledged for the payment of principal and interest.
(Acts 1977, No. 408, p. 530, §7.)
An insurer may invest in loans guaranteed as to principal and interest by the United States of America or by any agency or instrumentality of the United States of America to the extent of such guaranty.
(Acts 1977, No. 408, p. 530, §8.)
An insurer may invest in bonds or other evidences of indebtedness which are general obligations of or are adequately secured as to both principal and interest by irrevocable pledge of specific revenues by this state or any other state of the United States or any county, incorporated city or town, or duly organized school district or other civil division, governmental unit, or public instrumentality of any such state. Obligations payable solely out of special assessments on properties benefited by local improvements shall not be eligible under this section.
(Acts 1977, No. 408, p. 530, §9.)
An insurer may invest in bonds and other evidences of indebtedness which are obligations of any state, county, city, town, village, municipality, district, or other political subdivision of any state or of any instrumentality or board thereof or of the United States of America issued to provide funds for public projects, or for refunding of bonds issued for such purposes, which are revenue producing and self-supporting if such obligations are secured by a lien on such revenues to pay principal and interest and the issuing body is required to charge adequate rates for the services so provided to pay all charges against the project, including principal and interest on all indebtedness outstanding against the project.
(Acts 1977, No. 408, p. 530, §10.)
An insurer may invest in bonds, debentures, or other evidences of indebtedness of local public housing authorities existing under the laws of the United States or of any state if such obligations are:
(1) Secured by a pledge of annual contributions unconditionally payable under the annual contributions contract between the Department of Housing and Urban Development and the local agencies issuing the bonds;
(2) Unconditionally guaranteed by the state, municipality, or political subdivision creating the authority, if the tax supported obligations of such state, municipality, or political subdivision so guaranteeing would be eligible for investment under this chapter; or
(3) Secured by payments to be made sufficient to pay principal and interest on the bonds under an “assistance contract” between the local authority and the state, municipality, or other political subdivision creating the authority; provided, the tax supported obligations of the assisting state, municipality, or political subdivision would be eligible for investment under this chapter.
(Acts 1977, No. 408, p. 530, §11.)
An insurer may invest in obligations issued or guaranteed by the following agencies of the United States of America:
(1) Commodity Credit Corporation;
(2) Federal intermediate credit banks;
(3) Federal land banks;
(4) Central bank for cooperatives;
(5) Federal home loan banks;
(6) Federal National Mortgage Association;
(7) Federal Home Loan Mortgage Corporation;
(8) Tennessee Valley Authority; and
(9) Any other similar agency of the government of the United States of America having similar financial quality.
(Acts 1977, No. 408, p. 530, §12.)
An insurer may invest in bonds or other evidences of indebtedness issued, assumed, or guaranteed by Canada or any province thereof or issued by any municipality in Canada having a population of 25,000 or more.
(Acts 1977, No. 408, p. 530, §13.)
(a) An insurer may invest in obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development.
(b) An insurer may invest in the obligations of the Federal National Mortgage Association.
(c) An insurer may invest in obligations issued, assumed, or guaranteed by the African Development Bank.
(Acts 1977, No. 408, p. 530, §14; Acts 1987, No. 87-594, p. 1033, §1.)
An insurer may invest in secured and unsecured obligations bearing interest at a fixed rate, with mandatory principal and interest being due at specified times, of any solvent institution engaged in any lawful business and existing under the laws of the United States or any state of the United States or Canada or any province thereof if the issuing institution has not defaulted in the payment of principal and interest on any of its fixed interest obligations during the five years preceding the date of investment; provided, that the obligations of an institution which has not been in existence for a period of five years shall be deemed eligible for investment under this section if the institution has not defaulted in the payment of principal and interest on any of its fixed obligations during the period of its existence and if such institution meets the other requisites of this chapter.
(Acts 1977, No. 408, p. 530, §15.)
An insurer may invest in the preferred or guaranteed stocks or shares of any solvent corporation engaged in any lawful business and existing under the laws of the United States or any state thereof if the prior obligations of the issuing company or the guarantor, if any, would be eligible for investment under the provisions of Section 27-41-15 and if the company has continuously paid the dividends provided for by outstanding preferred stock, if any, during the five years preceding the acquisition of the investment.
(Acts 1977, No. 408, p. 530, §16.)
(a) An insurer may invest in common stocks or shares of any solvent corporation engaged in any lawful business and existing under the laws of the United States or any state thereof or of Canada or any province thereof if the prior obligations of such corporation, if any, would be eligible for investment under the provisions of Section 27-41-15.
(b) An insurer may invest in and own all or a controlling part of the capital stock of any corporation organized under the laws of the United States or any state thereof if the stock of such corporation is eligible for investment under subsection (a) of this section.
(c) The total amount of the insurer’s investments under this section shall not at any time exceed the greater of 10 percent of assets of the insurer or the amount of the insurer’s capital and surplus less the minimum capital and surplus required of said insurer to transact insurance by Sections 27-3-7 and 27-3-8 of the Alabama Insurance Code. The limitations contained in this section shall not prevent an insurer from making eligible investments in common stock in excess of said limitations pursuant to the provisions of Section 27-41-35.
(Acts 1977, No. 408, p. 530, §17.)
An insurer may invest in the stocks of other solvent insurers formed under the laws of the United States or any state thereof, provided that the total amount of the insurer’s investments in excess of the net asset value of the stock acquired shall not at any time exceed the greater of 10 percent of assets of the insurer or the insurer’s capital and surplus less the minimum capital and surplus required of said insurer to transact insurance by Sections 27-3-7 and 27-3-8 of the Alabama Insurance Code.
(Acts 1977, No. 408, p. 530, §18.)
(a) An insurer may invest in equipment trust obligations or certificates which are adequately secured evidencing an interest in transportation equipment wholly or in part within the United States and a right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use or purchase of such transportation equipment.
(b) An insurer may invest in notes, bonds, debentures, or other evidences of indebtedness secured by an interest in manufacturing, mining, or generating machinery and equipment located wholly within the United States evidencing a right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use or purchase of such machinery and equipment.
(c) An insurer may invest in notes, bonds, debentures, or evidences of indebtedness secured by a lease of manufacturing, mining, computer equipment, or generating machinery and equipment or a lease of other tangible personal property or by a contract or by an agreement requiring aggregate payments sufficient to pay all fixed charges, including maintenance, upkeep and repair, insurance charges and taxes, and to pay the installments of principal and interest and any other payments required by the instrument evidencing the indebtedness.
(d) The lessee or party contracting or agreeing to make such payments under subsections (a), (b), or (c) of this section must be the United States or an agency thereof, a state of the United States, or a civil division or governmental unit thereof or a solvent institution whose fixed interest obligations, if any, would be eligible investments under Section 27-41-15.
(Acts 1977, No. 408, p. 530, §19.)
An insurer may invest in:
(1) Leased line obligations of railroads where all of the fixed interest-bearing obligations of the lessee meet the standards prescribed in Section 27-41-15.
(2) Terminal obligations of railroads and other common carriers where all of the fixed interest-bearing obligations of the obligor meet the standards prescribed in Section 27-41-15.
(Acts 1977, No. 408, p. 530, §20.)
An insurer may invest in secured and unsecured obligations of religious institutions or societies located within the United States if the institution or society has not defaulted in payment of principal or interest on any of its obligations during the five years preceding the investment.
(Acts 1977, No. 408, p. 530, §21.)
An insurer may invest in adequately secured loans secured by first liens on interests in oil, gas, or condensate properties or leaseholds in the United States and Canada on which there are fully completed commercially producing wells.
(Acts 1977, No. 408, p. 530, §22.)
An insurer may invest in certificates, notes, or other obligations issued by trustees or receivers of any institution created or existing under the laws of the United States or of any state thereof which, or the assets of which, are being administered under the direction of any court having jurisdiction if any such obligation is adequately secured as to principal and interest.
(Acts 1977, No. 408, p. 530, §23.)
An insurer may invest in loans with a maturity not in excess of five years from the date thereof which are secured by pledge of securities eligible for investment under this chapter or by the pledge or assignment of life insurance policies issued by insurers authorized to transact insurance in this state. On the date made, no such loan shall exceed in amount 75 percent of the market value of the collateral pledged; except, that loans upon the pledge of United States government bonds and loans upon the pledge or assignment of life insurance policies shall not exceed 95 percent of the market value of the bonds or the cash surrender value of the policies pledged. The amount so loaned shall be included in the maximum amount of funds permitted under this chapter to be invested in a single person.
(Acts 1977, No. 408, p. 530, §24.)
A life insurer may lend to its policyholder upon the security of the policy 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 policy contracts.
(Acts 1977, No. 408, p. 530, §25.)
An insurer may invest in shares or savings accounts of savings and loan associations insured by the Federal Savings and Loan Insurance Corporation.
(Acts 1977, No. 408, p. 530, §26.)
(a) An insurer may invest in securities or other investments (1) issued in, (2) located in, (3) denominated in the currency of, (4) whose ultimate payment amounts of principal or interest are subject to fluctuations in the currency of, or (5) whose obligors are domiciled in countries other than the United States or Canada, which are substantially of the same kinds and classes as those authorized for investment under this chapter.
(b) Subject to the limitations in subsection (c):
(1) An investment of an insurer authorized under subsection (a) in any one foreign jurisdiction whose sovereign debt has a 1 designation from the Securities Valuation Office shall not exceed 10 percent of the admitted assets of the insurer.
(2) An investment of an insurer authorized under subsection (a) in any one foreign jurisdiction whose sovereign debt has a 2 or 3 designation from the Securities Valuation Office may not exceed five percent of the admitted assets of the insurer.
(3) An investment of an insurer authorized under subsection (a) in any one foreign jurisdiction whose sovereign debt has a 4, 5, or 6 designation from the Securities Valuation Office may not exceed three percent of the admitted assets of the insurer.
(4) An investment of an insurer authorized under subsection (a) denominated in any one foreign currency may not exceed two percent of the admitted assets of the insurer.
(5) An investment of an insurer authorized under subsection (a) denominated in foreign currencies may not exceed, in the aggregate, five percent of the admitted assets of the insurer.
(6) An investment of an insurer authorized under subsection (a) may not be considered denominated in a foreign currency if the acquiring insurer enters into one or more contracts in permitted transactions to exchange all payments made on the foreign currency denominated investment for United States currency at a rate which effectively insulates the investment cash flow against future changes in currency exchange rates during the period the contract or contracts are in effect.
(7) The Securities Valuation Office (SVO) or its successor or interest means the National Association of Insurance Commissioners office that is responsible for the day-to-day credit quality assessment and valuation of securities owned by state regulated insurance companies.
(c) An investment of an insurer authorized under subsection (a) may not exceed, in the aggregate, 20 percent of its admitted assets.
(d) An insurer which is authorized to do business in a foreign country or which has outstanding insurance, annuity, or reinsurance contracts on lives or risks resident in or located in a foreign country may, in addition to the investments authorized by subsection (a), invest securities and investments (1) issued in, (2) located in, (3) denominated in the currency of, (4) whose ultimate payment amounts of principal and interest are subject to fluctuations in the currency of, or (5) whose obligors are domiciled in the foreign countries which are substantially of the same kinds and classes as those authorized for investment under this chapter.
(e) An investment of an insurer authorized under subsection (d) and cash in the currency of the country which is at any time held by the insurer, may not exceed, in the aggregate, the greater of (1) one and one-half times the amount of its reserves and other obligations under the contracts or (2) the amount which the insurer is required by law to invest in the country.
(Acts 1977, No. 408, p. 530, §27; Act 2012-370, p. 921, §1.)
An insurer may invest in bonds, debentures, notes, or other evidences of indebtedness which are:
(1) Guaranteed by the United States of America, represented by the Secretary of Commerce acting pursuant to Title 11 of the Merchant Marine Act, 1936, as amended, and the Federal Ship Financing Act of 1972;
(2) Insured by the United States of America, represented by the Secretary of Commerce acting pursuant to Title 11 of the Merchant Marine Act, 1936, as amended, and the Federal Ship Mortgage Insurance Act, as amended; provided, that such indebtedness is secured by mortgages on ships, barges, tugboats, or other shipping vessels; or
(3) Secured by mortgages on ships, barges, tugboats, or other shipping vessels which are under lease or charter to the United States government or an agency or department of the United States government or to a solvent institution whose fixed interest obligations, if any, would be eligible investments under Section 27-41-15, if such lease or charter is assigned as additional security for such bonds, debentures, notes, or other evidences of indebtedness and requires aggregate payments sufficient to pay all fixed charges, including maintenance, upkeep and repair, insurance charges and taxes, and to pay the installments of principal and interest and any other payments required by the instrument evidencing the indebtedness.
(Acts 1977, No. 408, p. 530, §28.)
An insurer may invest in:
(1) Bonds, notes, or other evidences of indebtedness which are secured by a first mortgage lien or deed of trust upon unencumbered improved real property located in the United States or Canada, including leasehold estates in such real estate having an unexpired term (inclusive of the term or terms which may be provided by options of renewal) of not less than 10 years beyond the final maturity of the loan. Unless guaranteed or insured by the Administrator of Veterans Affairs, the Secretary of Housing and Urban Development, or by a mortgage guaranty insurance policy issued by an insurance company licensed and authorized to do business by and in the State of Alabama, no such mortgage loan or loans when made shall exceed 75 percent of the fair value of the real estate or leasehold, except that loans made on single family dwellings shall not exceed 80 percent of the fair value of the property. “Fair value” shall be determined by a competent appraiser or appraisers. For the purposes of this section and Section 27-41-30, real estate shall not be deemed to be encumbered by reason of the existence of taxes or assessments that are not delinquent, instruments creating or reserving mineral, oil, or timber rights, rights-of-way, joint driveways, sewer rights, public utility easements, rights in walls, nor by reason of building restrictions or other restrictive covenants, nor when such real estate is subject to lease in whole or in part whereby rents or profits are reserved to the owner; provided, that the security created by the mortgage or trust deed on the real estate is a first lien upon such real estate and that there is no condition or right of re-entry or forfeiture under which such lien can be cut off, subordinated, or otherwise disturbed.
(2) Bonds, notes, or other evidences of indebtedness which are secured by mortgage or deed of trust on real estate or an interest in real estate in the United States, if payment of such indebtedness or part thereof is guaranteed or insured by the Administrator of Veterans Affairs in accordance with the Servicemen’s Readjustment Act of 1944, as amended. Any portion of a mortgage loan referred to in this subdivision which is not guaranteed as herein provided must not exceed 75 percent of the fair value of the property as defined in subdivision (1) above.
(3) Bonds, notes, or other evidences of indebtedness which are secured by mortgage or deed of trust insured by the Secretary of Housing and Urban Development under the terms of the National Housing Act, as amended.
(4) Purchase money mortgages shall be valued as provided in Section 27-37-9.
(5) Bonds, notes, or other evidences of indebtedness which are secured by a first mortgage lien or deed of trust upon unencumbered improved or income-bearing real property located in the United States or Canada, including leasehold estates in such real estate having an unexpired term of not less than 10 years beyond the final maturity of the loan where the borrower is a solvent corporation engaged in any lawful business and existing under the laws of the United States or any real estate of the United States or Canada, or any province thereof, if such corporation has not defaulted in the payment of principal and interest on any of its fixed interest obligations during five years preceding the date of investment and the amount of indebtedness does not exceed 100 percent of the value of the property.
(Acts 1977, No. 408, p. 530, §29; Acts 1979, No. 79-687, p. 1216, §1.)
An insurer may invest in loans, notes, bonds, or other evidences of indebtedness of any person up to the fair value of real property securing said indebtedness, upon compliance with the following conditions and provisions:
(1) The indebtedness must be secured by a first mortgage lien on real property having a fair value of not less than the principal amount of the loan, except as provided in subdivision (8) of this section;
(2) The indebtedness must be additionally secured by a lease on said real property, which lease must be assigned and transferred by the lessor to the lender or to a trustee of the lender under a trust instrument;
(3) The lease so assigned as additional security must be noncancellable and may be terminated only upon such conditions as are generally provided in commercial leases, such as, for example, destruction by fire, tornado, or similar hazard or condemnation or taking by power of eminent domain;
(4) Rental payments under such lease must be payable monthly, quarterly, or semi-annually and the aggregate rental payments required to be paid during the initial term of any such lease must be sufficient to pay the fixed charges against the leased property, including expenses of maintenance, upkeep and repair, insurance charges and taxes, and to pay the installments of principal and interest and any other payments required by the instrument evidencing the indebtedness;
(5) The lease additionally securing such indebtedness shall be a so-called “net lease,” except as otherwise provided in subdivision (8) of this section. “Net lease” shall mean a lease under the terms of which the lessee is required to pay, in addition to the rental payments, all other charges for the maintenance, upkeep, and repair of the leased property and all taxes, insurance, and other charges provided under the terms of the lease;
(6) The indebtedness must be payable in full, both as to principal and interest, during the initial term of the lease assigned or transferred as additional security. The required payments of principal and interest on such indebtedness must be made in substantially equal periodic installments in an aggregate amount sufficient to retire or pay the loan in full upon or prior to the expiration of the initial term of such lease; except, that if the substantially equal periodic installments are at a rate sufficient to retire or pay the loan in full as amortized over the initial term of the lease, balloon payments may be permitted to pay the remaining balance due on the indebtedness if, by the terms of the instruments evidencing the same, the entire indebtedness matures prior to the expiration of the initial term of the lease. In addition to the required payments of principal and interest, the evidences of indebtedness may also provide for payment of additional moneys to the holder thereof based upon excess rentals, volume of sales, or other events or factors which the parties may agree upon;
(7) The lessee, or any obligor under any such lease, must be a person, corporation, or other legal entity or government agency, unit, or subdivision whose obligations, at the time the lender commits in writing to make a loan, are or would be an eligible investment under this chapter and are or would be amortizable under the rules and regulations promulgated by the commissioner (ordinarily the same as promulgated by the National Association of Insurance Commissioners); and
(8) If the lease additionally securing such indebtedness is not a “net lease,” then, and in such event, the indebtedness shall not exceed 90 percent of the fair value of the real property mortgaged to secure the payment of such indebtedness.
Where the words “lease,” “lessor,” or “lessee” appear in this section, the singular shall include the plural.
(Acts 1977, No. 408, p. 530, §30.)
An insurer may invest in electronic and mechanical machines constituting a data processing and accounting system if the cost of such system is not less than $10,000.00 and cost for such machines is amortized in full over a period not to exceed 10 calendar years.
(Acts 1977, No. 408, p. 530, §32.)
(a) If real property securing any evidence of indebtedness held by an insurer is used for agricultural purposes and a proceeding to foreclose the mortgage or an insolvency proceeding relating to the mortgagor has been commenced or if the mortgagor has made an assignment for the benefit of creditors, the insurer may, for the purpose of preserving or enhancing the earnings of such property:
(1) Purchase agricultural livestock or equipment and utilize the same or cause the same to be utilized in the operation of the property by the mortgagor or by a receiver or trustee or by the insurer; or
(2) Lend up to the value of any agricultural equipment or livestock which may be utilized in the operation of the property on the security of such equipment and livestock as a first lien.
(b) Nothing in this section shall be deemed to limit any right which the insurer may otherwise have under or with respect to any such loan, mortgage, or investment.
(Acts 1977, No. 408, p. 530, §33.)
In connection with mortgage loans made under subdivisions (2) and (3) of Section 27-41-29, an insurer may loan on the value of personal property items listed in the Department of Housing and Urban Development Commitment for Insurance or the Veterans Administration Certificates of Reasonable Value. Nothing in this section shall be deemed to prevent an insurer from taking liens on personal property items as additional security for any investment eligible for investment under this chapter.
Domestic life insurance companies are authorized to invest, within the limitations set forth in this section, in chattel mortgages resulting from the financing of tangible personal property, which mortgages must constitute valid first liens on the chattels mortgaged. The maximum amount of such mortgages to be admitted as assets shall not exceed one half of the amount of surplus remaining after deducting from capital and surplus an amount equal to the statutory minimum capital and surplus required of a newly organized life insurance company. In addition, an adequate reserve for losses, based on past and prospective experience of the company, shall be maintained at all times.
(Acts 1977, No. 408, p. 530, §34.)
(a)(1) An insurer may acquire, invest in, own, maintain, alter, furnish, and improve the following real estate:
a. Land and buildings used for home office and branch office purposes, together with such other real estate as is required for the convenient transaction of its business; and
b. Funeral home buildings used in the servicing of burial insurance policies.
(2) An insurer may lease to others part of the real property otherwise occupied by it for home office and other purposes under paragraphs a. and b. of subdivision (1) of this subsection, except that the value of the parts so leased must be included in subdivision (2) of subsection (b) of this section.
(3) Except as provided in subsection (e) of this section, an insurer may not carry, as an admitted asset, real estate acquired under this subsection following 10 years from the date when such real estate ceases to be necessary for the convenient accommodation of the insurer in the transaction of its business.
(4) The cost of the aggregate amount of real estate owned under this subsection, less encumbrances and less depreciation where applicable, shall not exceed five percent of the insurer’s admitted assets.
(b)(1) An insurer may acquire, invest in, own, maintain, alter, furnish, and improve the following real estate:
a. Real estate acquired as payment or part payment in the sale of other real estate owned by the insurer;
b. Real estate acquired by a gift or devise;
c. Real estate necessary for the protection or enhancement of the value of other real estate owned by the insurer;
d. Real estate acquired through a lawful merger or consolidation with another insurance company and not required for its accommodation as provided in subsection (a) of this section; and
e. Real estate under lease or being constructed under a definite agreement providing for lease to a solvent person for industrial or commercial purposes. The fixed interest obligations, if any, of any such lessee under this paragraph must be eligible for investment under Section 27-41-15.
(2) The cost of the aggregate amount of real estate owned under this subsection, less depreciation, where applicable, shall not exceed 10 percent of the insurer’s admitted assets.
(c) An insurer may acquire, own, maintain, alter, furnish, and improve real estate acquired in satisfaction of loans, mortgages, liens, or other evidences of indebtedness previously owing to the insurer in the regular course of its business. Except as stated in subsection (e) of this section, an insurer may not carry as an admitted asset real estate acquired under this subsection following 10 years from the date of acquisition.
(d) An insurer may acquire, invest in, own, maintain, alter, furnish, and improve real estate acquired to be improved or developed as an investment for the production of income. The cost of the aggregate amount of real estate owned under this subsection, including the cost of improvement and development, less depreciation, where applicable, shall not exceed 10 percent of the insurer’s admitted assets.
(e) Upon evidence satisfactory to him that the interest of an insurer will suffer materially if it is not permitted to carry a particular parcel of real estate as an admitted asset after expiration of the period set out in subsections (a) and (c) of this section, the commissioner may, by order in writing, grant a reasonable extension of the period, as specified in said order, during which time the insurer may continue to carry such real estate as an admitted asset.
(f) Real estate permitted to be carried as an admitted asset of the insurer under this section shall be so carried at an amount equal to its cost at the time of acquisition together with the actual cost of improvements made thereon, less encumbrances and less depreciation where applicable.
(g) The limitations provided in this section with respect to real estate investments under this section shall not apply where the total amount invested by an insurer in such investments does not exceed the total capital and surplus of such insurer, less the minimum capital and surplus required to be maintained by such insurer under the provisions of Sections 27-3-7 and 27-3-8 of the Alabama Insurance Code.
(Acts 1977, No. 408, p. 530, §35.)
(a) An insurer may invest in properties and facilities, and any interest and rights in such properties and facilities, for the development and production of fossil or synthetic fuel or other minerals, whether or not the extraction would deplete the surface of such properties, including, but not limited to, investments relating to:
(1) The exploration for and development and production of such fuel and minerals, and
(2) Ownership and control of such property, facilities, interest, and rights.
(b) An insurer shall not have at any one time any single investment or combination of investments permitted under subsection (a) of this section aggregating in cost to the insurer in excess of five percent of the amount by which the admitted assets of such insurer exceed $50,000,000.00 (excluding in the computation of assets investments permitted under subsection (a) above).
(Acts 1983, No. 83-522, p. 810, §1; Acts 1983, No. 83-669, p. 1034, §1.)
(a) An insurer may make investments not otherwise expressly permitted by this chapter which may be counted as admitted assets, except as expressly prohibited under Section 27-41-36, provided that:
(1) The aggregate of all such investments shall not exceed 10 percent of the insurer’s admitted assets;
(2) The insurer’s capital and surplus shall not be less than twice the total capital and surplus required of the insurer to transact insurance under Sections 27-3-7 and 27-3-8 of the Alabama Insurance Code; and
(3) Such investments are sound investments.
(b) No investment shall be an eligible investment under this section if the investment is in an asset not allowed under the provisions of Section 27-37-2 of the Alabama Insurance Code or is otherwise expressly prohibited or is eligible under any other provision of this chapter; except, that an insurer may invest in common stocks up to the limits imposed by this section in excess of the limits imposed by Section 27-41-17.
(c) The insurer shall keep a separate record of all investments made under this section.
(d) If an investment made under this section subsequently qualifies as an eligible investment under any other provision of this chapter, the investment shall thereafter not be eligible under this section.
(Acts 1977, No. 408, p. 530, §31.)
(a) After January 1, 1978, an insurer shall not invest in nor lend its funds upon the security of any note or other evidence of indebtedness of any director, officer, or controlling stockholder of the insurer, except as to policy loans authorized under Section 27-41-25 and except as provided in Sections 27-1-2, 27-27-26, and 27-37-2 of the Alabama Insurance Code.
(b) No insurer shall underwrite or participate in the underwriting of an offering of securities or property by any other person; provided, that nothing in this subsection shall prevent an insurer from purchasing securities or property directly from any person so long as the purchase is made for investment purposes and not for the purpose of resale through public distribution.
(Acts 1977, No. 408, p. 530, §39.)
(a) The funds of a mutual aid association shall be in cash or shall be invested as provided in Sections 27-41-3 through 27-41-36 and Section 27-41-38 as applicable to life insurers, except that:
(1) Funds of the association to the extent of its reserve liabilities resulting from valuation of its contracts providing for benefits, aid, or services payable or to be rendered other than in cash may, at the option of the association, be invested in securities or assets eligible for investment of the funds of life insurers in general, but with category limits as follows in lieu of limits otherwise applicable thereto under Sections 27-41-3 through 27-41-36:
a. Not to exceed 25 percent of the reserves of the association in the aggregate may be invested in preferred and guaranteed stocks authorized in Section 27-41-16 and common stocks authorized under Section 27-41-17;
b. Not to exceed 10 percent of such reserves may be invested in insurance stock authorized under Section 27-41-18; and
c. Not to exceed 40 percent of such reserves may be invested in real estate for production of income authorized under Section 27-41-34.
(2) In addition to the investment of particular reserves in designated categories of investments as provided in subdivision (1) of this subsection, the association may invest additional funds in the same categories, but within the percentage limitations otherwise applicable under Sections 27-41-3 through 27-41-36 as computed upon all of the assets of the association after deduction of the reserves mentioned in subdivision (1) of this subsection.
(b) This section shall not apply to mutual aid corporations that received a certificate of authority prior to July 31, 1967. The moneys derived by such corporations from the payment of subscriptions to its capital stock, and the payment of sales of stock (contributed surplus for mutual) may be invested in bonds of the United States or of this state or of the cities or counties of this state, estimated at their market value, or in notes or mortgages secured by real estate collateral worth twice the amount of said mortgages or notes.
(c) Mutual aid corporations, both stock and mutual, organized prior to July 31, 1967, shall be solvent so long as their assets exceed their liabilities.
(Acts 1977, No. 408, p. 530, §41.)
In addition to other investments permitted under this chapter, mutual aid associations may invest in funeral supply inventories, consisting of caskets, suits, robes, dresses, and embalming supplies, and funeral equipment, consisting of automobiles, hearses, ambulances, funeral cars, and other motor vehicle equipment, to the extent reasonably necessary to the full performance by the association of its outstanding contracts and policies. Such funeral supply inventories shall not exceed 25 percent of the association’s assets.
(Acts 1977, No. 408, p. 530, §38.)
(a) The investments of a foreign or alien insurer shall be as permitted by the laws of its domicile, but shall be of a quality and diversity substantially equivalent to that required of like domestic insurers under this chapter.
(b)(1) Cash equivalents are exempt from the limitations of this section.
(2) Cash equivalents means investments with a maturity of 90 days or less which are highly rated by a nationally recognized statistical rating organization recognized by the Commissioner of Insurance and which are highly liquid, readily convertible to known amounts of cash without penalty, and so near maturity that they present insignificant risk of change in value.
(Acts 1977, No. 408, p. 530, §40; Act 2013-197, p. 386, §1.)
Any real estate, personal property, securities, or other investment lawfully acquired and held by an insurer shall not be allowed as an admitted asset of the insurer after expiration of the period for disposal thereof or any extension of such period granted by the commissioner pursuant to the provisions of Section 27-41-34.
(Acts 1977, No. 408, p. 530, §36.)
Except as expressly prohibited in Section 27-41-36, an insurer may make any investment without limit as to kind, time, or amount, but only eligible investments shall be included or counted as admitted assets of the insurer in the determination of its financial condition.
If part of an investment qualifies as an eligible investment under any provision of this act and part does not, then only the part of the investment so qualifying shall be counted as an admitted asset.
(Acts 1977, No. 408, p. 530, §37.)
This chapter shall be known and may be cited as the “Alabama Insurance Guaranty Association Act.”
(Acts 1980, No. 80-806, p. 1639, §1.)
The purpose of this chapter is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payments and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer, to assist in the detection and prevention of insurer insolvencies and to provide an association to assess the cost of such protection among insurers.
(Acts 1980, No. 80-806, p. 1639, §2.)
This chapter shall apply to all kinds of direct insurance, excluding all of the following:
(1) Life, annuity, health, or disability insurance.
(2) Mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks.
(3) Fidelity or surety bonds, or any other bonding obligations.
(4) Credit insurance, vendors’ single interest insurance, or collateral protection insurance or any similar insurance protecting the interests of a creditor arising out of a creditor-debtor transaction.
(5) Insurance of warranties or service contracts, including insurance that provides for the repair, replacement, or service of goods or property, or indemnification for repair, replacement, or service, for the operational or structural failure of the goods or property due to a defect in materials, workmanship, or normal wear and tear, or provides reimbursement for the liability incurred by the issuer of agreements or service contracts that provide such benefits.
(6) Title insurance.
(7) Ocean marine insurance.
(8) Any insurance provided by or guaranteed by the government.
(Acts 1980, No. 80-806, p. 1639, §3; Act 2018-526, §1.)
This chapter shall be liberally construed to effect the purpose under Section 27-42-2 which will constitute an aid and guide to interpretation.
(Acts 1980, No. 80-806, p. 1639, §4.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) ACCOUNT. Any one of the three accounts created by Section 27-42-6.
(2) AFFILIATE. A person who directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person on December 31 of the year immediately preceding the date the insurer becomes an insolvent insurer.
(3) ASSOCIATION. The Alabama Insurance Guaranty Association created under Section 27-42-6.
(4) CLAIMANT. Any insured making a first party claim or any person instituting a liability claim. The term does not include a person who is an affiliate of an insolvent insurer.
(5) COMMISSIONER. The Commissioner of Insurance of the State of Alabama.
(6) CONTROL. The possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, 10 percent or more of the voting securities of any other person. This presumption may be rebutted by a showing that control does not exist in fact.
(7) COVERED CLAIM. An unpaid claim, including one of unearned premiums, which arises out of, and is within the coverage and not in excess of, the applicable limits of an insurance policy to which this chapter applies, issued by an insurer, if such insurer becomes an insolvent insurer after January 1, 1981, and (i) the claimant or insured is a resident of this state at the time of the insured event; or (ii) the property from which the claim arises is permanently located in this state. The term does not include any of the following:
a. Any amount due any reinsurer, insurer, insurance pool, self-insurer, or underwriting association, as subrogation recoveries or otherwise.
b. Any first party claims by a high net worth insured.
c. Any amount awarded as punitive or exemplary damages, except for punitive damages awarded under the Alabama Wrongful Death Act.
d. Any amount sought as a return of premium under any retrospective rating plan.
(8) HIGH NET WORTH INSURED. Any insured whose net worth exceeds twenty-five million dollars ($25,000,000) on December 31 of the year prior to the year in which the insurer becomes an insolvent insurer; provided that an insured’s net worth on that date shall be deemed to include the aggregate net worth of the insured and all of its subsidiaries and affiliates as calculated on a consolidated basis.
(9) INSOLVENT INSURER. An insurer licensed to transact insurance in this state, either at the time the policy was issued or when the insured event occurred, and against whom an order of liquidation with a finding of insolvency has been entered after January 1, 1981, by a court of competent jurisdiction in the insurer’s state of domicile or of this state under the provisions of Chapter 32 of this title, which order of liquidation has not been stayed or been the subject of a writ of supersedeas bonds or other comparable order.
(10) INSURED. Any named insured, additional insured, vendor, lessor, or other party identified as an insured under a policy.
(11) MEMBER INSURER. Any person who (i) writes any kind of insurance to which this chapter applies under Section 27-42-3, including the exchange of reciprocal or interinsurance contracts, and (ii) is licensed to transact insurance in this state.
(12) NET DIRECT WRITTEN PREMIUMS. Direct gross premiums written in this state on insurance policies to which this chapter applies, less return premiums thereon and dividends paid or credited to, policyholders on such direct business. “Net direct written premiums” do not include premiums on contracts between insurers or reinsurers.
(13) NET WORTH. The total assets of a person, less the total liabilities against those assets as determined in accordance with generally accepted accounting principles. A person’s net worth shall be deemed to include the aggregate net worth of the person and all of its subsidiaries and affiliates as calculated on a consolidated basis.
(14) PERSON. Any individual or legal entity, including governmental entities.
(15) RESIDENCY. For purposes of determining residency in this chapter, the residency of a claimant or insured that is a corporation, partnership, association, or voluntary organization is the state in which the claimant’s or insured’s principal place of business is located.
(16) SELF-INSURER. A person that covers its liability through a qualified individual or group self-insurance program or any other formal program created for the specific purpose of covering liabilities typically covered by insurance.
(Acts 1980, No. 80-806, p. 1639, §5; Act 2000-743, p. 1650, §1; Act 2009-716, p. 2108, §1; Act 2018-526, §1.)
There is created a nonprofit unincorporated legal entity to be known as the Alabama Insurance Guaranty Association. All insurers defined as member insurers in subdivision (6) of Section 27-42-5 shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under a plan of operation established and approved under Section 27-42-9 and shall exercise its powers through a board of directors established under Section 27-42-7. For purposes of administration and assessment, the association shall be divided into three separate accounts: (a) the workmen’s compensation insurance account; (b) the automobile insurance account; and (c) the account for all other insurance to which this chapter applies.
(Acts 1980, No. 80-806, p. 1639, §6.)
(a) The board of directors of the association shall consist of not less than five nor more than nine persons serving terms as established in the plan of operation. The members of the board shall be selected by member insurers subject to the approval of the commissioner. Vacancies on the board shall be filled for the remaining period of the term by a majority vote of the remaining board members subject to the approval of the commissioner. If no members are selected within 60 days after January 1, 1981, the commissioner may appoint the initial members of the board of directors.
(b) In approving the selections to the board, the commissioner shall consider among other things whether all member insurers are fairly represented.
(c) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors.
(Acts 1980, No. 80-806, p. 1639, §7.)
(a) The association shall:
(1)a. Be obligated to pay covered claims existing prior to the order of liquidation arising within 30 days after the order of liquidation, or before the policy expiration date if less than 30 days after the order of liquidation, or before the insured replaces the policy or causes its cancellation, if he or she does so within 30 days of the order of liquidation. The obligation shall be satisfied by paying to the claimant an amount as follows:
The full amount of a covered claim for benefits under workers’ compensation insurance coverage.
An amount not exceeding ten thousand dollars ($10,000) per policy for a covered claim for the return of unearned premium.
An amount not exceeding three hundred thousand dollars ($300,000) or the policy limits, whichever is less, per claim for all covered claims. For purposes of this limitation, all claims of any kind whatsoever arising out of, or related to, bodily injury or death to any one person shall constitute a single claim, regardless of the number of claims made or the number of claimants.
b. In no event shall the association be obligated to pay a claimant an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises.
c. Notwithstanding any other provisions of this chapter, a covered claim shall not include any claim filed with the association after the earlier of:
Twenty-five months after the date of the order of liquidation.
The final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer.
d. Any obligation of the association to defend an insured on a covered claim shall cease upon the association’s payment, by settlement releasing the insured or on a judgment, of an amount equal to the lesser of the association’s covered claim obligation limit or the applicable policy limit or tender of such amount.
e. If the association determines that there may be more than one claimant having a covered claim or allowed claim against the association or any associations similar to the association in other states, under the policy or policies of any one insolvent insurer, the association may establish a plan to allocate amounts payable by the association in such manner as the association deems equitable.
(2) Be deemed the insurer only to the extent of its obligation on the covered claims and to such extent, subject to the limitations provided in this chapter, shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent including, but not limited to, the right to pursue subrogation recoveries and retain salvage and subrogation recoveries on paid covered claims. The association shall not be deemed the insolvent insurer for any purpose relating to the issue of whether the association is amenable to the personal jurisdiction of the courts of any jurisdiction.
(3) Allocate claims paid and expenses incurred among the three accounts separately, and assess member insurers separately for each account amounts necessary to pay the obligations of the association under subdivision (1) of this subsection subsequent to an insolvency, the expenses of handling covered claims subsequent to an insolvency, the cost of examinations under Section 27-42-13, and other expenses authorized by this chapter. The assessments of each member insurer shall be in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the assessment on the kinds of insurance in the account bears to the net direct written premiums of all member insurers for the calendar year preceding the assessment on the kinds of insurance in the account. Each member insurer shall be notified of the assessment not later than 30 days before it is due. No member insurer may be assessed in any one year on any account an amount greater than one percent of that member insurer’s net direct written premiums for the calendar year preceding the assessment on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the association in any account, does not provide in any one year in any account an amount sufficient to make all necessary payments from that account, the funds available shall be prorated and the unpaid portion shall be paid as soon thereafter as funds become available. The association shall pay claims in any order which it may deem reasonable, including the payment of claims as they are received from the claimants or in groups or categories of claims. The association may exempt or defer, in whole or in part, the assessment of any member insurer, if the assessment would cause the member insurer’s financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by any jurisdiction in which the member insurer is authorized to transact insurance; provided, however, that during the period of deferment, no dividends shall be paid to shareholders or policyholders. Deferred assessments shall be paid when payment will not reduce capital or surplus below required minimums. Payments shall be refunded to those companies receiving larger assessments by virtue of a deferment or, at the election of any company, credited against future assessments. Each member insurer may set off against any assessment, authorized payments made on covered claims and expenses incurred in the payment of claims by the member insurer if they are chargeable to the account for which the assessment is made.
(4) Investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association’s obligation and deny all other claims and may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which the settlements, releases, and judgments may be properly contested.
(5) Notify such persons as the commissioner directs under subdivision (1) of subsection (b) of Section 27-42-10.
(6) Handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the commissioner, but such designation may be declined by a member insurer.
(7) Reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and shall pay the other expenses of the association authorized by this chapter.
(b) The association may:
(1) Employ or retain those persons as are necessary to handle claims and perform other duties of the association.
(2) Borrow funds necessary to effect the purposes of this chapter in accord with the plan of operation.
(3) Sue or be sued, and the power to sue includes the power and right to intervene as a party before any court in this state that has jurisdiction over an insolvent insurer as defined by this chapter.
(4) Negotiate and become a party to any contracts as are necessary to carry out the purpose of this chapter.
(5) Perform other acts as are necessary or proper to effectuate the purpose of this chapter.
(6) Refund to the member insurers, in proportion to the contribution of each member insurer to that account, that amount by which the assets of the account exceed the liabilities if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year.
(7) Bring an action against any third party administrator, agent, attorney, or other representative of the insolvent insurer to obtain custody and control of all claims information including, but not limited to, files, records, and electronic data related to an insolvent company that are appropriate or necessary for the association, or a similar association in other states, to carry out its duties under this chapter. In such a suit, the association shall have the absolute right through emergency equitable relief to obtain custody and control of all claims information in the custody or control of the third party administrator, agent, attorney, or other representative of the insolvent insurer, regardless of where the claims information may be physically located. In bringing such an action, the association shall not be subject to any defense, lien, possessory or otherwise, or other legal or equitable ground whatsoever for refusal to surrender claims information that might be asserted against the liquidator of the insolvent insurers. To the extent that litigation is required for the association to obtain custody of the claims information requested and litigation results in the relinquishment of claims information to the association after refusal to provide the same in response to a written demand, the court shall award the association its costs, expenses, and reasonable attorneys’ fees incurred in bringing the action. This section shall have no effect on the rights and remedies that the custodian of such claims information may have against the insolvent insurers, so long as such rights and remedies do not conflict with the rights of the association to custody and control of the claims information under this chapter.
(c) Suit against the association:
Except for actions by member insurers aggrieved by final actions or decisions of the association pursuant to subdivision (7) of subsection (c) of Section 27-42-9, all actions against the association relating to or arising out of Act 2009-716 shall be brought in the Alabama state courts. Such courts shall have exclusive jurisdiction over all actions relating to or arising out of Act 2009-716 against the association.
(Acts 1980, No. 80-806, p. 1639, §8; Act 2000-743, p. 1650, §1; Act 2009-716, p. 2108, §1; Act 2018-526, §1.)
(a) Notwithstanding the one percent maximum assessment set forth in subdivision (3) of subsection (a) of Section 27-42-8, no member insurer may be assessed in any one year for the workers’ compensation account an amount greater than two percent of that member insurer’s net direct written premiums for workers’ compensation insurance for the calendar year preceding the assessment.
(b) The provisions of this section shall apply to the Alabama Insurance Guaranty Association’s obligations under policies of insolvent insurers as they exist on and after May 19, 2008.
(Act 2008-460, p. 894, §1.)
(a) The association shall submit to the commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the commissioner.
If the association fails to submit a suitable plan of operation within 90 days following January 1, 1981, or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this chapter. Such rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
(b) All member insurers shall comply with the plan of operation.
(c) The plan of operation shall:
(1) Establish procedures whereby all the powers and duties of the association under Section 27-42-8 will be performed.
(2) Establish procedures for handling assets of the association.
(3) Establish the amount and method of reimbursing members of the board of directors under Section 27-42-7.
(4) Establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer shall be deemed notice to the association or its agent and a list of such claims shall be periodically submitted to the association or similar organization in another state by the receiver or liquidator.
(5) Establish regular places and times for meetings of the board of directors.
(6) Establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors.
(7) Provide that any member insurer aggrieved by any final action or decision of the association may appeal to the commissioner within 30 days after the action or decision.
(8) Establish the procedures whereby selections for the board of directors will be submitted to the commissioner.
(9) Contain additional provisions necessary or proper for the execution of the powers and duties of the association.
(d) The plan of operation may provide that any or all powers and the duties of the association, except those under subdivision (3) of subsection (a) and subdivision (2) of subsection (b) of Section 27-42-8 are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent in two or more states. Such a corporation, association, or organization shall be reimbursed as a servicing facility would be reimbursed and shall be paid for its performance of any other functions of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.
(Acts 1980, No. 80-806, p. 1639, §9.)
(a) The commissioner shall:
(1) Notify the association of the existence of an insolvent insurer not later than three days after he receives notice of determination of the insolvency. The association shall be entitled to a copy of any complaint seeking an order of liquidation with a finding of insolvency against a member company at the time that such complaint is filed with a court of competent jurisdiction.
(2) Upon request of the board of directors, provide the association with a statement of the net direct written premiums of each member insurer.
(b) The commissioner may:
(1) Require that the association notify the insureds of the insolvent insurer and any other interested parties of the determination of insolvency and of their rights under this chapter. Such notification shall be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation shall be sufficient.
(2) Suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the commissioner may levy a fine on any member insurer which fails to pay an assessment when due. Such fine shall not exceed five percent of the unpaid assessment per month, except that no fine shall be less than $100.00 per month.
(3) Revoke the designation of any servicing facility if he finds claims are being handled unsatisfactorily.
(c) Any final action or order of the commissioner under this chapter shall be subject to judicial review in a court of competent jurisdiction.
(Acts 1980, No. 80-806, p. 1639, §10.)
(a) Any person recovering under this chapter shall be deemed to have assigned his or her rights under the policy to the association to the extent of his or her recovery from the association. Every insured or claimant seeking the protection of this chapter shall cooperate with the association to the same extent as such person would have been required to cooperate with the insolvent insurer. The association shall have no cause of action against the insured of the insolvent insurer for any sums it has paid out except for those causes of action the insolvent insurer would have had if such sums had been paid by the insolvent insurer and except as provided in subsections (d), (e), (f), (g), and (h) below. In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the association may not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments.
(b) The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by settlements of covered claims by the association or a similar organization in another state. The court having jurisdiction shall grant these claims priority equal to that which the claimant would have been entitled in the absence of this chapter against the assets of the insolvent insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the liquidator’s expenses.
(c) The association shall periodically file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer.
(d) The association shall not be obligated to pay any first party claims by a high net worth insured.
(e) The association shall have the right to recover from a high net worth insured all amounts paid by the association to or on behalf of such insured, whether for indemnity, defense, or otherwise.
(f) The association shall have the right to recover from any person who is an affiliate of the insolvent insurer all amounts paid by the association to or on behalf of such person, whether for indemnity, defense, or otherwise.
(g) The association shall establish procedures for requesting financial information from insureds and claimants on a confidential basis for purposes of applying sections concerning the net worth of insureds or first party and third party claimants, subject to such information being shared with any other association similar to the association and the liquidator for the insolvent insurer on the same confidential basis. If the insured or claimant refuses to provide the requested financial information, the association may deem the net worth of the insured or claimant to be in excess of twenty-five million dollars ($25,000,000) at the relevant time.
(h) In any lawsuit contesting the applicability of this section or the exclusion from covered claims of claims by high net worth insureds embodied in subdivisions (6) and (7) of Section 27-42-5, where the insured has refused to provide financial information under the procedure established pursuant to subsection (g), there shall be a rebuttable presumption that the insured’s net worth exceeded twenty-five million dollars ($25,000,000) at the relevant time. If the court finds that the insured’s net worth exceeded twenty-five million dollars ($25,000,000) at the relevant time the court may award to the association attorney’s fees and costs.
(i) The association and any association similar to the association in another state shall be recognized as claimants in the liquidation of an insolvent insurer for any amounts paid by them on covered claims obligations as determined under this chapter, or similar laws in other states, and shall receive dividends and any other distributions at the priority set forth for policyholder claims in the liquidation proceeding. The receiver, liquidator, or statutory successor of an insolvent insurer shall be bound by determinations of covered claim eligibility under this chapter and by settlements of claims made by the association or a similar organization in another state. The court having jurisdiction shall grant the claims priority equal to that which the claimant would have been entitled in the absence of this chapter against the assets of the insolvent insurer. The expenses of the association or similar organization in handling claims shall be accorded the same priority as the liquidator’s expenses.
(Acts 1980, No. 80-806, p. 1639, §11; Act 2000-743, p. 1650, §1; Act 2009-716, p. 2108, §1; Act 2018-526, §1.)
(a) Any person having a claim under an insurance policy, whether or not it is a policy issued by a member insurer, where the claim under the other policy arises from the same facts, injury, or loss that gave rise to the covered claim against the association, shall be required first to exhaust all coverage provided by any such policy. Any amount payable on a covered claim under this chapter shall be reduced by the full applicable limits stated in the other insurance policy and the association shall receive a full credit for the stated limits, or, where there are no applicable stated limits, the claim shall be reduced by the total recovery. Notwithstanding the foregoing, no person shall be required to exhaust any right under the policy of an insolvent insurer.
(1) A claim under a policy providing liability coverage to a person who may be jointly and severally liable with, or a joint tortfeasor with, the person covered under the policy of the insolvent insurer that gives rise to the covered claim, shall be considered to be a claim arising from the same facts, injury, or loss that gave rise to the covered claim against the association.
(2) For purposes of this section, a claim under an insurance policy shall also include:
a. A claim against a health maintenance organization, a hospital plan corporation, or a professional health service corporation.
b. Any amount payable by or on behalf of a self-insurer.
(3) To the extent that the association’s obligation is reduced by the application of this section, the liability of the person insured by the insolvent insurer’s policy for the claim shall be reduced in the same amount.
(b) Any person having a claim which may be recovered under more than one insurance guaranty association or its equivalent shall seek recovery first from the association of the place of residence of the insured except that if it is a first party claim for damage to property with a permanent location, he or she shall seek recovery first from the association of the location of the property and, if it is a workers’ compensation claim, he or she shall seek recovery first from the association of the residence of the claimant at the time of the accident giving rise to the claim. Any recovery under this chapter shall be reduced by the amount of recovery from any other insurance guaranty association or its equivalent.
(Acts 1980, No. 80-806, p. 1639, §12; Act 2018-526, §1.)
(a) To aid in the detection and prevention of insurer insolvencies, it shall be the duty of the board of directors, upon majority vote, to notify the commissioner of any information indicating any member insurer may be insolvent or in a financial condition hazardous to the policyholders or the public.
(b) The board of directors may, upon majority vote, request that the commissioner order an examination of any member insurer which the board in good faith believes may be in a financial condition hazardous to the policyholders or the public. Within 30 days of the receipt of such request, the commissioner shall begin such examination. The examination may be conducted as a National Association of Insurance Commissioners’ examination or may be conducted by such persons as the commissioner designates. The cost of such examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event, shall such examination report be released to the board of directors prior to its release to the public, but this shall not preclude the commissioner from complying with subsection (c) of this section. The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner, but it shall not be open to public inspection prior to the release of the examination report to the public.
(c) It shall be the duty of the commissioner to report to the board of directors when he has reasonable cause to believe that any member insurer examined or being examined at the request of the board of directors may be insolvent or in a financial condition hazardous to the policyholders or the public.
(d) The board of directors may, upon majority vote, make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer. Such reports and recommendations shall not be considered public documents.
(e) The board of directors may, upon majority vote, make recommendations to the commissioner for the detection and prevention of insurer insolvencies.
(f) The board of directors shall, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, prepare a report on the history and causes of such insolvency, based on the information available to the association and submit such report to the commissioner.
(Acts 1980, No. 80-806, p. 1639, §13.)
The association shall be subject to examination and regulation by the commissioner. The board of directors shall submit, not later than March 30 of each year, a financial report for the preceding calendar year in a form approved by the commissioner.
(Acts 1980, No. 80-806, p. 1639, §14.)
The association shall be exempt from payment of all fees and all taxes levied by this state or any of its subdivisions except taxes levied on real or personal property.
(Acts 1980, No. 80-806, p. 1639, §15.)
(a) A member insurer may offset against its premium tax liability to this state an assessment described in subdivision (3) of subsection (a) of Section 27-42-8 to the extent of 20 percent of the amount of such assessment for each of the five calendar years following the year in which such assessment was paid. In the event a member insurer should cease doing business, all uncredited assessments may be credited against its premium tax liability for the year it ceases doing business.
(b) Any sums acquired by refund, pursuant to subdivision (7) of subsection (a) of Section 27-42-8, from the association which have theretofore been written off by contributing insurers and offset against premium taxes as provided in subsection (a) of this section, and are not then needed for purposes of this chapter, shall be paid by the association to the commissioner and by him deposited with the State Treasurer for credit to the General Fund of this state.
(Acts 1980, No. 80-806, p. 1639, §16.)
There shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer, the association or its agents or employees, the board of directors or the commissioner or his representatives for any action taken by them in the performance of their powers and duties under this chapter.
(Acts 1980, No. 80-806, p. 1639, §17.)
All proceedings in which the insolvent insurer is a party or is obligated to defend a party in any court in this state shall be stayed for up to six months and such additional time thereafter as may be determined by the court from the date the insolvency is determined or an ancillary proceeding is instituted in the state, whichever is later, to permit proper defense by the association of all pending causes of action as to any covered claims arising from a judgment under any decision, verdict, or finding based on the default of the insolvent insurer or its failure to defend an insured, the association either on its own behalf or on behalf of such insured may apply to have such judgment, order, or administrator that made such judgment, order, decision, verdict, or finding and shall be permitted to defend such claim on the merits.
The liquidator, receiver, or statutory successor of an insolvent insurer covered by this chapter shall permit access by the board or its authorized representative to such of the insolvent insurer’s records which are necessary for the board in carrying out its functions under this chapter with regard to covered claims. In addition, the liquidator, receiver, or statutory successor shall provide the board or its representative with copies of such records upon the request by the board and at the expense of the board.
(Acts 1980, No. 80-806, p. 1639, §18.)
Upon the issuance of a proper court order placing a domestic insurer in receivership or placing a foreign insurer in ancillary receivership for rehabilitation or liquidation, all policyholders, beneficiaries, and insureds of such insolvent insurer, with respect to claims arising from and within the coverages of and not in excess of the applicable limits of insurance policies and contracts issued by the insolvent insurer, and liability claims against insureds which claims are within the coverage of and not in excess of the applicable limits of insurance policies and insurance contracts issued by the insolvent insurer, and the Alabama Insurance Guaranty Association and any similar organization in another state shall be preferred creditors of said insolvent insurer.
(Acts 1980, No. 80-806, p. 1639, §19.)
(a) Within 120 days of a final determination of insolvency of an insurance company by a court of competent jurisdiction the receiver shall make application to the said court for approval of a proposal to disburse assets out of such company’s marshalled assets, from time to time as such assets become available, to the Alabama Insurance Guaranty Association and to any entity or person performing a similar function in another state. (The Alabama Insurance Guaranty Association and any entity or person performing a similar function in other states shall hereinafter be referred to collectively as the associations.)
(b) Such proposal shall at least include provisions for:
(1) Reserving amounts for the payment of expenses of administration and claims falling within the priorities established in the Alabama Uniform Insurers Liquidation Act but only with respect to such priorities higher than that of the associations;
(2) Disbursement of the assets marshalled to date and subsequent disbursement of assets as they become available;
(3) Equitable allocation of disbursements to each of the associations entitled thereto;
(4) The securing by the receiver from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the receiver such assets previously disbursed as may be required to pay claims of secured creditors and claims with a higher priority than those of the associations. No bond shall be required of any such association.
(c) The receiver’s proposal shall provide for disbursements to the associations in amounts at least equal to the payments made or to be made thereby for which such associations could assert claims against the receiver, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such payments made or to be made by the associations then disbursements shall be in the amount of available assets.
(d) Notice of such application shall be given to the associations in and to the commissioners of insurance of each of the states. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first-class postage prepaid, at least 30 days prior to submission of such application to the said court. Action on the application may be taken by the said court provided the above required notice has been given and provided further that the receiver’s proposal complies with subdivisions (1) and (4) of subsection (b) of this section.
(Acts 1980, No. 80-806, p. 1639, §20.)
This chapter shall be known and may be cited as the “Legal Expense Insurance Act.”
(Acts 1981, No. 81-719, p. 1214, §1.)
The purpose of this chapter is to authorize state certification and regulation of organizations which provide programs for the payment of the costs of legal services.
(Acts 1981, No. 81-719, p. 1214, §1.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context requires otherwise:
(1) DEPARTMENT. The Department of Insurance;
(2) COMMISSIONER. The Commissioner of Insurance of this state;
(3) INSURER. Any person authorized to do a casualty insurance business or life, accident and sickness insurance business as an insurer in this state and organizations authorized to transact legal expense insurance under Section 27-43-8;
(4) LEGAL EXPENSE INSURANCE. Such term means, irrespective of the definition of insurance in other chapters under this title, the assumption of a contractual obligation to pay for specific legal services or to reimburse for specific legal expenses, in consideration of a specified payment in advance for an interval of time, regardless of whether the payment is made by the beneficiaries individually or by a third person for them, but does not include the provision of or reimbursement for legal services incidental to other insurance coverages.
(Acts 1981, No. 81-719, p. 1214, §1; Acts 1984, No. 84-243, p. 374, §1.)
The insurance laws of this state, including this chapter, do not apply to:
(1) Retainer contracts made by attorneys-at-law with individual clients with fees based on estimates of the nature and amount of services to be provided to the specific client and similar contracts made with a group of clients involved in the same or closely related legal matters;
(2) Any lawyer referral services authorized by the State Bar of Alabama;
(3) The furnishing of legal assistance by labor unions and other employee organizations to their members in matters relating to employment or occupations;
(4) The furnishing of legal assistance to members and/or dependents by churches, cooperatives, educational institutions, credit unions, labor unions, or other organizations of employees, where such organizations contract with and pay directly a lawyer or law firm(s) for the provision of legal services, where the assistance is provided as an incident to membership and not on the basis of an optional fee or charge and the administration of such program of legal assistance is wholly conducted by the organization; and
(5) Employee welfare benefit plans to the extent that state laws are superseded by Section 514 of the Employee Retirement Income Security Act of 1974, provided evidence of exemption from state laws is shown to the department.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) No person or organization may do a prepaid legal expense insurance business in this state unless authorized to do so by the commissioner.
(b) This section does not apply to organizations exempt pursuant to Section 27-43-4.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) Any domestic, foreign, or alien insurer authorized to transact casualty insurance or life, accident and sickness insurance in this state may transact legal expense insurance in this state.
(b) Legal service insurance corporations possessing a valid certificate of authority may transact legal expense insurance in this state.
(Acts 1981, No. 81-719, p. 1214, §1; Acts 1984, No. 84-243, p. 374, §1.)
(a) Any number of corporate or adult natural persons may organize a legal service insurance corporation under this section.
(b) The articles of incorporation shall conform to the requirements applicable to corporations, except that:
(1) The name of the corporation shall indicate that payment for legal services or indemnity for legal expenses is to be provided; and
(2) The purposes of the corporation shall be limited to payment for legal services or indemnity for legal expenses and business expenses reasonably related thereto.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) The incorporators shall file with the commissioner an application for a certificate of authority to do business upon a form to be furnished by the department, which shall include or have attached the following:
(1) The names and, for the preceding 10 years, all addresses and all occupations of all incorporators and proposed directors and officers;
(2) A certified copy of the corporate articles and bylaws and a list of the names, addresses, and occupations of all directors and principal officers and, if previously incorporated, for the three most recent years, the corporation annual statements and reports;
(3) All agreements relating to the corporation to which any incorporator or proposed director or officer is a party;
(4) A statement of the amount and sources of the funds available for organization expenses and the proposed arrangements for reimbursement and compensation of incorporators or other persons;
(5) A statement of compensation of directors and officers;
(6) The forms to be used for any proposed contracts between the corporation and providers of legal services and any corporations which perform administrative, marketing, or management services, concerning the provision of services to insureds;
(7) The plan for conducting the insurance business, including all of the following:
a. The geographical area in which business is intended to be done in the first five years;
b. The types of insurance intended to be written in the first five years, including specification whether and to what extent indemnity rather than service benefits are to be provided;
c. The proposed marketing methods;
d. Actuarial data or other similar statistical data, documented and verified in such manner as the department may reasonably require, affirmatively demonstrating the anticipated income and expenses in the first five years, including, without limitation, the projected expenditure for legal services and projected source of funds to make up any anticipated deficits.
(8) A current statement of the assets and liabilities of the applicant;
(9) Forms of all prepaid legal service contracts the applicant proposes to offer showing the rates to be charged for each form of contract; and
(10) Such other documents or information as the department may reasonably require;
(b) Copies of the documents filed pursuant to subdivisions (6) and (9) of subsection (a) of this section shall be filed with the State Bar of Alabama within five days of filing with the commissioner;
(c) The commissioner shall issue a certificate of authority if he is satisfied that:
(1) All requirements of law have been met;
(2) All natural persons who are incorporators, the directors and principal officers of corporate incorporators and the proposed directors and officers of the corporation being formed are trustworthy and competent and collectively have the competence and experience to engage in the particular insurance business proposed; and
(3) The business plan is consistent with the interests of the corporation’s potential insureds and of the public.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) To assure the faithful performance of its obligations in the event of insolvency, each corporation authorized under Section 27-43-8 shall, through the commissioner, deposit and maintain with the Treasurer of the State securities of the type eligible for deposit by insurers under Section 27-6-3, which securities shall have at all times a market value as follows:
(1) An insurer which has transacted no legal expense insurance in this state prior to January 1, 1982, shall, prior to the issuance of its certificate of authority and before receiving any premiums, place in trust with the Treasurer of the State, through the commissioner an initial amount of $50,000.00;
(2) An insurer transacting a legal expense insurance business in this state prior to January 1, 1982, and having in force in this state less than $300,000.00 of gross written premiums, membership fees, or similar charges shall place in trust with the Treasurer of the State, through the commissioner, a sum equal to 50 percent of the gross premiums in force or $50,000.00, whichever is less;
(3) An insurer transacting a legal expense insurance business in this state prior to January 1, 1982, and having in force in this state more than $300,000.00 but less than $750,000.00 of gross written premiums, membership fees, or similar charges in this state shall place in trust with the Treasurer of the State, through the commissioner, an amount not less than $75,000.00; and
(4) An insurer transacting a legal expense insurance business in this state prior to January 1, 1982, and having in force in this state $750,000.00 or more of gross written premiums, membership fees, or similar charges in this state shall place in trust with the Treasurer of the State, through the commissioner, an amount equal to $100,000.00.
(b) In lieu of any deposit of securities required under subsection (a) of this section and subject to the commissioner’s approval, a legal service insurance corporation may file with the Treasurer of the State a surety bond issued by a surety insurer authorized to serve as surety under the provisions of Chapter 24 of this title. The bond shall be for the same purpose as the deposit in lieu of which it is filed. The department shall not approve any bond under the terms of which the protection afforded against insolvency is not equivalent to the protection afforded by those securities provided for in subsection (a) of this section.
(c) Securities or bonds posted pursuant to this section shall be for the benefit of and subject to action thereon in the event of insolvency or impairment of any legal service insurance corporation by any person or persons sustaining an actionable injury due to the failure of the corporation to faithfully perform its obligations to its insureds.
(d) The state shall be responsible for the safekeeping of all securities deposited with the Treasurer of the State under this chapter. Such securities shall not, on account of being in this state, be subject to taxation, but shall be held exclusively and solely to guarantee the legal service insurance corporation’s performance of its obligations to its insureds.
(e) Such deposit or bond shall be maintained unimpaired as long as the legal service insurance corporation continues in business in this state. Whenever the corporation ceases to do business in this state and furnishes the commissioner proof satisfactory to the commissioner that it has discharged or otherwise adequately provided for all its obligations to its insureds in this state, the Treasurer of the State shall release the deposited securities to the parties entitled thereto, on presentation of the Treasurer’s receipts for such securities, or shall release any bond filed with it in lieu of such deposit.
(f) The commissioner may at any time enter an order increasing the amount of the deposit or bond specified under subsections (a) and (b) of this section if he finds that there has been a substantial change in the facts, including an increase in the amounts of premiums, membership fees, or similar charges in force in this state on which the original determination was based. The commissioner shall hold a hearing within 30 days after receiving a request from the corporation submitted within 30 days after being notified of the modification order. Failure to meet the new requirements within 30 days after final decision or after the expiration of the 30-day period for submitting the hearing request constitutes a ground for rehabilitation.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) Legal expense insurance may be written as individual, group, blanket, or franchise insurance. Each contractual obligation for legal expense insurance must be evidenced by a policy. Each person insured under a group policy must be issued a certificate of coverage.
(b) No policy or certificate of legal expense insurance may be issued in this state unless a copy of the form has been filed and approved by the commissioner.
(c) The commissioner may not approve any form that does not meet the following requirements:
(1) Policies must contain a list and description of the legal service payments promised or the legal matters for which expenses are to be reimbursed and any limits on the amounts to be paid or reimbursed;
(2) Policies and certificates must indicate the name of the insurer and the full address of its principal place of business;
(3) Certificates issued under group policies must contain a full statement of the benefits provided and exceptions thereto, but may summarize the other terms of the master policy;
(4) Policies promising payment for legal services to be provided by a limited number of attorneys who have concluded provider contracts with the insurer, whether the attorney in an individual case is to be selected by the insured or by the insurer, must provide for alternative benefits in the case where the insured is unable to find a participating attorney willing to perform the promised services or the attorney selected by the insurer is disqualified or otherwise unable to perform the promised services. The alternative benefit may consist of furnishing the services of an attorney selected and paid by the insurer or paying the fee of an attorney selected by the insured. The policy must also provide a procedure that includes impartial review for settling disagreements about the grounds for demanding an alternative benefit;
(5) No policy except one issued by a mutual or reciprocal insurance company may provide for assessments on policyholders or for reduction of benefits for the purpose of maintaining the insurer’s solvency;
(6) Policies must contain a statement that the subscriber has a right to complain to the State Bar of Alabama about attorney conduct pursuant to the plan; and
(7) Policies must contain a statement that the individual beneficiary has the right to retain, at his own expense, except where the policy provides otherwise, any attorney authorized to practice law in the state;
(d) The department may disapprove a policy or certificate form if it finds that it:
(1) Is unfair, unfairly discriminatory, misleading, ambiguous, or encourages misrepresentation or misunderstanding of the contract;
(2) Provides coverage or benefits or contains other provisions that would endanger the solvency of the insurer; or
(3) Is contrary to law.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) No policy of legal expense insurance may be issued in this state unless the premium rates for the insurance have been filed with and approved by the commissioner.
(b) Premium rates must be established and justified in accordance with generally accepted insurance principles, including, but not limited to, the experience or judgment of the insurer making the rate filing or actuarial computations.
(c) The commissioner may disapprove rates that are excessive, inadequate, or unfairly discriminatory. Rates are not unfairly discriminatory because they are averaged broadly among persons insured under group, blanket, or franchise policies.
(d) The commissioner may require the submission of whatever relevant information is deemed necessary in determining whether to approve or disapprove a filing made under this section or Section 27-43-10.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) Contracts made between the insurer and participating attorneys, management contracts and contracts with other providers of services by the legal expense insurance policy must be filed with and approved by the commissioner.
(b) Insurers must annually report to the commissioner, in such detail as is reasonably required, the number and geographical distribution of attorneys and other providers of services covered by the legal expense insurance policy with whom it maintains contractual relations and the nature of the relations. For individual insurers or groups of insurers, the commissioner may require more frequent reports.
(Acts 1981, No. 81-719, p. 1214, §1.)
(a) A legal service insurance corporation will pay the prescribed fees and taxes required of a domestic casualty insurer.
(b) The following provisions of the insurance laws of this state apply to legal service insurance corporations authorized under Section 27-43-8, to the extent that they are not inconsistent with the provisions of this chapter:
(1) Chapters 27-1 and 27-2 - Administration and General Provisions;
(2) Chapter 27-4 - Fees and Taxes;
(3) Chapter 27-6 - Administration of Deposits;
(4) Chapter 27-11 [27-12] - Unfair Trade Practices; and
(5) Chapter 27-32 - Insurer Insolvency; Rehabilitation and Liquidation.
(c) The commissioner may by rule modify or waive any requirements referred to in subsection (b) of this section for legal service insurers if it is necessary to avoid unreasonable hardship, expense, or inconvenience and if the interests of policyholders continue to be adequately protected.
(Acts 1981, No. 81-719, p. 1214, §1.)
Persons representing or aiding a legal service insurance corporation in the solicitation of legal expense insurance contracts in this state and the legal service insurance corporation with respect thereto shall be subject to Chapters 7 and 8A of this title, except that legal service insurance corporation producers shall be exempt from the 40-hour prelicensing course and written examination requirements of Chapter 7 of this title and the continuing education requirements of Chapter 8A of this title.
(Acts 1981, No. 81-719, p. 1214, §1; Act 2001-702, p. 1509, §15.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1981, No. 81-719, p. 1214, §1; Acts 1984, No. 84-243, p. 374, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1981, No. 81-719, p. 1214, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1981, No. 81-719, p. 1214, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1981, No. 81-719, p. 1214, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1981, No. 81-719, p. 1214, §1.)
[Repealed]
Repealed by Act 2001-702, p. 1509, § 16, effective January 1, 2002.
(Acts 1981, No. 81-719, p. 1214, §1.)
All moneys received from licenses and fees shall be deposited to the credit of the Examiners’ Revolving Fund of the Department of Insurance.
(Acts 1981, No. 81-719, p. 1214, §1.)
The commissioner shall devise and promulgate rules and regulations, not inconsistent with the provisions of this chapter, as he deems advisable for effectuating its orderly administration.
(Acts 1981, No. 81-719, p. 1214, §1.)
Nothing contained in this chapter shall be construed to regulate the practice of law or limit the powers or authority of the Supreme Court of Alabama or State Bar of Alabama in the regulation of the conduct of attorneys.
(Acts 1981, No. 81-719, p. 1214, §1.)
This chapter shall be known and may be cited as the “Alabama Life and Disability Insurance Guaranty Association Act.”
(Acts 1982, No. 82-561, p. 922, §1.)
(a) The purpose of this chapter is to protect, subject to certain limitations, the persons specified in Section 27-44-3(a) against failure in the performance of contractual obligations, under life and disability insurance policies and annuity contracts specified in Section 27-44-3(b), because of the impairment or insolvency of the member insurer that issued the policies or contracts.
(b) To provide this protection, an association of insurers is created to pay benefits and to continue coverages as limited by this chapter, and members of the association are subject to assessment to provide funds to carry out the purpose of this chapter.
(Acts 1982, No. 82-561, p. 922, §2; Act 2012-319, p. 724, §1.)
(a) This chapter shall provide coverage for the policies and contracts specified in subsection (b) as follows:
(1) To persons who, regardless of where they reside (except for non-resident certificate holders under group policies or contracts), are the beneficiaries, assignees, or payees of the persons covered under subdivision (2).
(2) To persons who are owners of or certificate holders under the policies or contracts, other than structured settlement annuities, and in each case who are either of the following:
a. Residents
b. Not residents, but only under all of the following conditions:
The insurer that issued the policies or contracts is domiciled in this state.
The states in which the persons reside have associations similar to the association created by this chapter.
The persons are not eligible for coverage by an association in any other state due to the fact the insurer was not licensed in the state at the time specified in the state’s guaranty association law.
(3) For structured settlement annuities specified in subsection (b), subdivision (1) and (2) of this subsection shall not apply, and this chapter, except as provided in subdivisions (4) and (5) of this subsection, shall provide coverage to a person who is a payee under a structured settlement annuity (or beneficiary of a payee if the payee is deceased), if the payee is either of the following:
a. A resident, regardless of where the contract owner resides.
b. Not a resident, but only under both of the following conditions:
(i) A resident.
(ii) Not a resident, but only under both of the following conditions:
(I) The insurer that issued the structured settlement annuity is domiciled in this state.
(II) The state in which the contract owner resides has an association similar to the association created by this chapter.
(4) The chapter shall not provide coverage to a person who is a payee (or beneficiary) of a contract owner resident of this state, if the payee (or beneficiary) is afforded any coverage by the association of another state.
(5) This chapter is intended to provide coverage to a person who is a resident of this state and, in special circumstances, to a nonresident. In order to avoid duplicate coverage, if a person who would otherwise receive coverage under this chapter is provided coverage under the laws of any other state, the person shall not be provided coverage under this chapter. In determining the application of the provisions of this subdivision in situations where a person could be covered by the association of more than one state, whether as an owner, payee, beneficiary, or assignee, this chapter shall be construed in conjunction with other state laws to result in coverage by only one association.
(b)(1) This chapter shall provide coverage to the persons specified in subsection (a) for direct, non-group life, disability, or annuity policies or contracts, and for certificates under direct group policies and contracts, and for supplemental contracts to any of these, in each case issued by member insurers, except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.
(2) This chapter shall not provide coverage for any of the following:
a. A portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract owner.
b. A policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract.
c. A portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting two percentage points from Moody’s Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier.
On and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available.
d. A portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, disability, or annuity benefits to its employees, members, or others, to the extent that the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or other person under any of the following:
A multiple employer welfare arrangement as defined in Section 3(40) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1002(40)).
A minimum premium group insurance plan.
A stop-loss group insurance plan.
An administrative services only contract.
e. A portion of a policy or contract to the extent that it provides for any of the following:
Dividends or experience rating credits.
Voting rights.
Payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract.
f. A policy or contract issued in this state by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue the policy or contract in this state.
g. A portion of a policy or contract to the extent that the assessments required by Section 27-44-9 with respect to the policy or contract are preempted by federal or state law.
h. An obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including without limitation:
Claims based on marketing materials.
Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements.
Misrepresentations of or regarding policy benefits.
Extra-contractual claims, including, without limitation, claims relating to bad faith in the payment of claims, punitive or exemplary damages, or attorneys’ fees and costs.
A claim for penalties or consequential or incidental damages.
i. A contractual agreement that establishes the member insurer’s obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer.
j. An unallocated annuity contract.
k. A portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which have not been credited to the policy or contract, or as to which the policy or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier. If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subsection, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture.
l. A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code (commonly known as Medicare Part C and D) or any regulations issued pursuant thereto.
(c) The benefits that the association may become obligated to cover shall in no event exceed the lesser of:
(1) The contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer.
(2)a. With respect to one life, regardless of the number of policies or contracts:
Three hundred thousand dollars ($300,000) in life insurance death benefits, but not more than one hundred thousand dollars ($100,000) in net cash surrender and net cash withdrawal values for life insurance.
In disability insurance benefits:
(i) One hundred thousand dollars ($100,000) for coverages not defined as disability income insurance or basic hospital, medical, and surgical insurance or major medical insurance or long-term care insurance including any net cash surrender and net cash withdrawal values.
(ii) Three hundred thousand dollars ($300,000) for disability income insurance and three hundred thousand dollars ($300,000) for long-term care insurance.
(iii) Five hundred thousand dollars ($500,000) for basic hospital, medical, and surgical insurance or major medical insurance.
b. With respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries if the payee is deceased), two hundred fifty thousand dollars ($250,000) in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any.
c. However, in no event shall the association be obligated to cover more than either of the following:
An aggregate of three hundred thousand dollars ($300,000) in benefits with respect to any one life under paragraphs a. and b. except with respect to benefits for basic hospital, medical, and surgical insurance and major medical insurance under paragraph a.2., in which case the aggregate liability of the association shall not exceed five hundred thousand dollars ($500,000) with respect to any one individual.
With respect to one owner of multiple non-group policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, more than five million dollars ($5,000,000) in benefits, regardless of the number of policies and contracts held by the owner.
d. The limitations set forth in this subsection are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the association’s obligations under this chapter may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights.
(d) In performing its obligations to provide coverage under Section 27-44-8, the association shall not be required to guarantee, assume, reinsure, or perform, or cause to be guaranteed, assumed, reinsured, or performed, the contractual obligations of the insolvent or impaired insurer under a covered policy or contract that do not materially affect the economic values or economic benefits of the covered policy or contract.
(Acts 1982, No. 82-561, p. 922, §3; Acts 1993, No. 93-675, p. 1240, §11; Act 2012-319, p. 724, §1.)
This chapter shall be liberally construed to effect the purpose under Section 27-44-2 which shall constitute an aid and guide to interpretation.
(Acts 1982, No. 82-561, p. 922, §4.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
(1) ACCOUNT. Either of the three accounts created under Section 27-44-6.
(2) ASSOCIATION. The Alabama Life and Disability Insurance Guaranty Association created under Section 27-44-6.
(3) AUTHORIZED ASSESSMENT or the term AUTHORIZED when used in the context of assessments. A resolution by the board of directors has been passed whereby an assessment will be called immediately or in the future from member insurers for a specified amount. An assessment is authorized when the resolution is passed.
(4) BENEFIT PLAN. A specific employee, union, or association of natural persons benefit plan.
(5) CALLED ASSESSMENT or the term CALLED when used in the context of assessments. A notice that has been issued by the association to member insurers requiring that an authorized assessment be paid within the time frame set forth within the notice. An authorized assessment becomes a called assessment when notice is mailed by the association to member insurers.
(6) COMMISSIONER. The Commissioner of Insurance of this state.
(7) CONTRACTUAL OBLIGATION. An obligation under a policy or contract, or certificate under a group policy or contract, or portion thereof for which coverage is provided under Section 27-44-3.
(8) COVERED POLICY. A policy or contract or portion of a policy or contract for which coverage is provided under Section 27-44-3.
(9) IMPAIRED INSURER. A member insurer which, after January 1, 2013, is not an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.
(10) INSOLVENT INSURER. A member insurer which, after January 1, 2013, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
(11) MEMBER INSURER. An insurer licensed or that holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under Section 27-44-3, and includes an insurer whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include any of the following:
a. A hospital or medical service organization, whether profit or non-profit.
b. A health care services plan.
c. A cooperative hospital association.
d. A health maintenance organization.
e. A fraternal benefit society.
f. A mandatory state pooling plan.
g. A mutual assessment company or other person that operates on an assessment basis.
h. An insurance exchange.
i. An organization that has a certificate or license limited to the issuance of charitable gift annuities.
j. An entity substantially similar to any of the above.
(12) MOODY’S CORPORATE BOND YIELD AVERAGE. The Monthly Average Corporates as published by Moody’s Investors Service, Inc., or any successor thereto.
(13) OWNER of a policy or contract and POLICY OWNER and CONTRACT OWNER. The person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. For policies or contracts which do not contractually provide for the designation of an owner, the owner shall be deemed to be the person who has the right to exercise the traditional incidents of ownership of a policy or contract. The terms owner, contract owner, and policy owner do not include person with a mere beneficial interest in a policy or contract.
(14) PERSON. An individual, corporation, limited liability company, partnership, association, governmental body or entity, or voluntary organization.
(15) PREMIUMS. Direct gross insurance premiums and annuity considerations received on covered policies or contracts, less returned premiums and considerations thereon and dividends paid or credited to policyholders on such direct business. “Premiums” do not include premiums and considerations on contracts between insurers and reinsurers.
(16) PRINCIPAL PLACE OF BUSINESS. When referring to a person other than a natural person, the single state in which the natural persons who establish policy for the direction, control, and coordination of the operations of the entity as a whole primarily exercise that function, determined by the association in its reasonable judgment by considering the following factors:
a. The state in which the primary executive and administrative headquarters of the entity is located.
b. The state in which the principal office of the chief executive officer of the entity is located.
c. The state in which the board of directors, or similar governing person or persons, of the entity conducts the majority of its meetings.
d. The state in which the executive or management committee of the board of directors, or similar governing person or persons, of the entity conducts the majority of its meetings.
e. The state from which the management of the overall operations of the entity is directed.
f. In the case of a benefit plan sponsored by affiliated companies comprising a consolidated corporation, the state in which the holding company or controlling affiliate has its principal place of business as determined using the above factors.
(17) RECEIVERSHIP COURT. The court in the insolvent or impaired insurer’s state having jurisdiction over the conservation, rehabilitation, or liquidation of the insurer.
(18) RESIDENT. A person who resides in this state on the date of entry of a court order that determines a member insurer to be an impaired or insolvent insurer and to whom a contractual obligation is owed. A person may be a resident of only one state, which in the case of a person other than a natural person shall be its principal place of business. Citizens of the United States that are either (i) residents of foreign countries or (ii) residents of United States possessions, territories, or protectorates that do not have an association similar to the association created by this chapter, shall be deemed residents of the state of domicile of the insurer that issued the policies or contracts.
(19) STATE. A state, the District of Columbia, Puerto Rico, and a United States possession, territory, or protectorate.
(20) STRUCTURED SETTLEMENT ANNUITY. An annuity purchased in order to fund periodic payments for a plaintiff or other claimant in payment for or with respect to personal injury suffered by the plaintiff or other claimant.
(21) SUPPLEMENTAL CONTRACT. A written agreement entered into for the distribution of proceeds under a life, disability, or annuity policy or contract.
(22) UNALLOCATED ANNUITY CONTRACT. An annuity contract or group annuity certificate which is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under the contract or certificate.
(Acts 1982, No. 82-561, p. 922, §5; Act 2012-319, p. 724, §1.)
(a) There is created a nonprofit unincorporated legal entity to be known as the Alabama Life and Disability Insurance Guaranty Association. All member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state. The association shall perform its functions under the plan of operation established and approved under Section 27-44-10 and shall exercise its powers through a board of directors established under Section 27-44-7. For purposes of administration and assessment the association shall maintain three accounts:
(1) The disability insurance account;
(2) The life insurance account; and
(3) The annuity account.
(b) The association shall come under the immediate supervision of the commissioner and shall be subject to the applicable provisions of the insurance laws of this state.
(Acts 1982, No. 82-561, p. 922, §6.)
(a) The board of directors of the association shall consist of not less than five nor more than nine member insurers serving terms as established in the plan of operation. At all times, at least one member of the board shall be a domestic insurer as defined in Section 27-1-2(6). The members of the board shall be selected by member insurers subject to the approval of the commissioner. Vacancies on the board shall be filled for the remaining period of the term by a majority vote of the remaining board members, subject to the approval of the commissioner. To select the initial board of directors, and initially organize the association, the commissioner shall give notice to all member insurers of the time and place of the organizational meeting. In determining voting rights at the organizational meeting, each member insurer shall be entitled to one vote in person or by proxy. If the board of directors is not selected within 60 days after notice of the organizational meeting, the commissioner may appoint the initial members.
(b) In approving selections or in appointing members to the board, the commissioner shall consider, among other things, whether all member insurers are fairly represented.
(c) Members of the board may be reimbursed from the assets of the association for expenses incurred by them as members of the board of directors, but members of the board shall not otherwise be compensated by the association for their services.
(Acts 1982, No. 82-561, p. 922, §7.)
(a) If a member insurer is an impaired insurer, the association may, in its discretion and subject to any conditions imposed by the association that do not impair the contractual obligations of the impaired insurer, and that are approved by the commissioner:
(1) Guarantee or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the covered policies of the impaired insurers.
(2) Provide such moneys, pledges, notes, guarantees, or other means as are proper to effectuate subdivision (1), and assure payment of the contractual obligations of the impaired insurer pending action under subdivision (1).
(b) If a member insurer is an insolvent insurer, the association shall, in its discretion and subject to the approval of the commissioner, do either of the following:
(1)a. Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the covered policies of the insolvent insurer.
b. Assure payment of the contractual obligations of the insolvent insurer.
c. Provide such moneys, pledges, notes, guarantees, or other means as are reasonably necessary to discharge such duties.
(2) Provide benefits and coverages in accordance with the following provisions:
a. With respect to life and disability insurance policies and annuities, assure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability, that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred:
With respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or 45 days, but in no event less than 30 days, after the date on which the association becomes obligated with respect to the policies and contracts.
With respect to non-group policies, contracts, and annuities not later than the earlier of the next renewal date, if any, under the policies or contracts or one year, but in no event less than 30 days, from the date on which the association becomes obligated with respect to the policies or contracts.
b. Make diligent efforts to provide all known insureds or annuitants (for non-group policies and contracts), or group policy owners with respect to group policies and contracts, 30 days’ notice of the termination (pursuant to paragraph a.) of the benefits provided.
c. With respect to non-group life and disability insurance policies and annuities covered by the association, make available to each known insured or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of paragraph d., if the insureds or annuitants had a right under law or the terminated policy or annuity to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or annuity or had a right only to make changes in premium by class.
d.1. In providing the substitute coverage required under paragraph c., the association may offer either to reissue the terminated coverage or to issue an alternative policy.
Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy.
The association may reinsure any alternative or reissued policy.
e.1. Alternative policies adopted by the association shall be subject to the approval of the commissioner. The association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency.
Alternative policies shall contain at least the minimum statutory provisions required in this state and provide benefits that shall not be unreasonable in relation to the premium charged. The association shall set the premium in accordance with a table of rates that it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten.
Any alternative policy issued by the association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the association.
f. If the association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the commissioner.
g. The association’s obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date the coverage or policy is replaced by another similar policy by the policy owner, the insured, or the association.
h. When proceeding under this subdivision (2) with respect to a policy or contract carrying guaranteed minimum interest rates, the association shall assure the payment or crediting of a rate of interest consistent with Section 27-44-3(b)(2)c.
(c) Nonpayment of premiums within 31 days after the date required under the terms of any guaranteed, assumed, alternative, or reissued policy or contract or substitute coverage shall terminate the association’s obligations under the policy or coverage under this chapter with respect to the policy or coverage, except with respect to any claims incurred or any net cash surrender value which may be due in accordance with the provisions of this chapter.
(d) Premiums due for coverage after entry of an order of liquidation of an insolvent insurer shall belong to and be payable at the direction of the association. If the liquidator of an insolvent insurer requests, the association shall provide a report to the liquidator regarding such premium collected by the association. The association shall be liable for unearned premiums due to policy or contract owners arising after the entry of the order.
(e) The protection provided by this chapter shall not apply where any guaranty protection is provided to residents of this state by the laws of the domiciliary state or jurisdiction of the impaired or insolvent insurer other than this state.
(f) In carrying out its duties under subsection (b), the association may, subject to approval by a court in this state:
(1) Impose permanent policy or contract liens in connection with any guarantee, assumption, or reinsurance agreement, if the association finds that the amounts which can be assessed under this chapter are less than the amounts needed to assure full and prompt performance of the association’s duties under this chapter, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of such permanent policy or contract liens, to be in the public interest.
(2) Impose temporary moratoriums or liens on payments of cash values and policy loans, or any other right to withdraw funds held in conjunction with policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan values. In addition, in the event of a temporary moratorium or moratorium charge imposed by the receivership court on payment of cash values or policy loans, or on any other right to withdraw funds held in conjunction with policies or contracts, out of the assets of the impaired or insolvent insurer, the association may defer the payment of cash values, policy loans, or other rights by the association for the period of the moratorium or moratorium charge imposed by the receivership court, except for claims covered by the association to be paid in accordance with a hardship procedure established by the liquidator or rehabilitator and approved by the receivership court.
(g) If the association fails to act within a reasonable period of time as provided in subsection (b), the commissioner shall have the powers and duties of the association under this chapter with respect to the insolvent insurer.
(h) The association may render assistance and advice to the commissioner, upon the commissioner’s request, concerning rehabilitation, payment of claims, continuance of coverage, or the performance of other contractual obligations of an impaired or insolvent insurer.
(i) The association shall have standing to appear or intervene before a court or agency in this state with jurisdiction over an impaired or insolvent insurer concerning which the association is or may become obligated under this chapter. Standing shall extend to all matters germane to the powers and duties of the association, including, but not limited to, proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the impaired or insolvent insurer and the determination of the covered policies or contracts and contractual obligations. The association shall also have the right to appear or intervene before a court or agency in another state with jurisdiction over an impaired or insolvent insurer for which the association is or may become obligated or with jurisdiction over any person or property against whom the association may have rights through subrogation or otherwise.
(j)(1) A person receiving benefits under this chapter shall be deemed to have assigned the rights under, and any causes of action against any person for losses arising under, resulting from or otherwise relating to, the covered policy or contract to the association to the extent of the benefits received because of this chapter, whether the benefits are payments of or on account of contractual obligations, continuation of coverage or provision of substitute or alternative coverage. The association may require an assignment to it of such rights by any payee, policy or contract owner, beneficiary, insured or annuitant as a condition precedent to the receipt of any rights or benefits conferred by this chapter upon such person.
(2) The subrogation rights of the association under this subsection shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this chapter.
(3) In addition to subdivisions (1) and (2), the association shall have all common law rights of subrogation and any other equitable or legal remedy that would have been available to the impaired or insolvent insurer or owner, beneficiary, or payee of a policy or contract with respect to the policy or contract.
(4) If the preceding provisions of this subsection are invalid or ineffective with respect to any person or claim for any reason, the amount payable by the association with respect to the related covered obligations shall be reduced by the amount realized by any other person with respect to the person or claim that is attributable to the policies, or portion thereof, covered by the association.
(5) If the association has provided benefits with respect to a covered obligation and a person recovers amounts as to which the association has rights as described in the preceding subdivisions of this subsection, the person shall pay to the association the portion of the recovery attributable to the policies, or portion thereof, covered by the association.
(k) In addition to the rights and powers elsewhere in this chapter, the association may:
(1) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this chapter.
(2) Sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under Section 27-44-9 and to settle claims or potential claims against it.
(3) Borrow money to effect the purposes of this chapter. Any notes or other evidence of indebtedness of the association not in default shall be legal investments for domestic insurers and may be carried as admitted assets.
(4) Employ or retain such persons as are necessary to handle the financial transactions of the association, and to perform such other functions as become necessary or proper under this chapter.
(5) Take such legal action as may be necessary to avoid payment of improper claims.
(6) Exercise, for the purposes of this chapter and to the extent approved by the commissioner, the powers of a domestic life or health insurer, but in no case may the association issue insurance policies or annuity contracts other than those issued to perform its obligations under this chapter.
(7) Organize itself as a corporation or in other legal forms permitted by the laws of the state.
(8) Request information from a person seeking coverage from the association in order to aid the association in determining its obligations under this chapter with respect to the person, and the person shall promptly comply with the request.
(9) Take other necessary or appropriate action to discharge its duties and obligations under this chapter or to exercise its powers under this chapter.
(l) The association may join an organization of one or more other state associations of similar purposes, to further the purposes and administer the powers and duties of the association.
(m)(1)a. At any time within 180 days of the date of the order of liquidation, the association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the association. Any such assumption shall be effective as of the date of the order of liquidation. The election shall be effected by the association or the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) on its behalf sending written notice, return receipt requested, to the affected reinsurers.
b. To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver and each reinsurer of the ceding member insurer shall make available upon request to the association or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency proceedings (i) copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed, and (ii) notices of any defaults under the reinsurance contracts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.
c. The following paragraphs 1. through 4. shall apply to reinsurance contracts so assumed by the association:
The association shall be responsible for all unpaid premiums due under the reinsurance contracts for periods both before and after the date of the order of liquidation, and shall be responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relate to policies or annuities covered, in whole or in part, by the association. The association may charge policies or annuities covered in part by the association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the association and shall provide notice and an accounting of these charges to the liquidator.
The association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies or annuities covered, in whole or in part, by the association, provided that, upon receipt of any such amounts, the association shall be obliged to pay to the beneficiary under the policy or annuity on account of which the amounts were paid a portion of the amount equal to the lesser of:
(i) The amount received by the association.
(ii) The excess of the amount received by the association over the amount equal to the benefits paid by the association on account of the policy or annuity less the retention of the insurer applicable to the loss or event.
Within 30 days following the association’s election (the “election date”), the association and each reinsurer under contracts assumed by the association shall calculate the net balance due to or from the association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid for periods prior to the date, and the association or reinsurer shall pay any remaining balance due the other, in each case within five days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration clause, as otherwise provided by law. If the receiver has received any amounts due the association pursuant to subparagraph 2., the receiver shall remit the same to the association as promptly as practicable.
If the association or receiver, on the association’s behalf, within 60 days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the reinsurance contracts relate to policies and annuities covered, in whole or in part, by the association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the association, against amounts due the association.
(2) During the period from the date of the order of liquidation until the election date or, if the election date does not occur, until 180 days after the date of the order of liquidation:
a.1. Neither the association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the association has the right to assume under subdivision (1), whether for periods prior to or after the date of the order of liquidation.
b. Provided that once the association has elected to assume a reinsurance contract, the parties’ rights and obligations shall be governed by subdivision (1).
(3) If the association does not elect to assume a reinsurance contract by the election date pursuant to subdivision (1), the association shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.
(4) When policies or annuities, or covered obligations with respect thereto, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the association, in the case of contracts assumed under subdivision (1), subject to all of the following:
a. Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred.
b. The obligations described in subdivision (1) shall no longer apply with respect to matters arising after the effective date of the transfer.
c. Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days prior to the effective date of the transfer.
(5) The provisions of this subsection shall supersede the provisions of any state law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver, shall remain entitled to any amount payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods prior to the date of the order of liquidation, subject to applicable setoff provisions.
(6) Except as otherwise provided in this section, nothing in this subsection shall alter or modify the terms and conditions of any reinsurance contract. Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract. Nothing in this section shall give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the association’s rights as a creditor of the estate against the assets of the estate. Nothing in this section shall apply to reinsurance agreements covering property or casualty risks.
(n) The board of directors of the association shall have discretion and may exercise reasonable business judgment to determine the means by which the association is to provide the benefits of this chapter in an economical and efficient manner.
(o) Where the association has arranged or offered to provide the benefits of this chapter to a covered person under a plan or arrangement that fulfills the association’s obligations under this chapter, the person shall not be entitled to benefits from the association in addition to or other than those provided under the plan or arrangement.
(p) Venue in a suit against the association arising under this chapter shall be in Jefferson County, Alabama. The association shall not be required to give an appeal bond in an appeal that relates to a cause of action arising under this chapter.
(q) In carrying out its duties in connection with guaranteeing, assuming, or reinsuring policies or contracts under subsection (a) or (b), the association may, subject to approval of the receivership court, issue substitute coverage for a policy or contract that provides an interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value by issuing an alternative policy or contract in accordance with all of the following provisions:
(1) In lieu of the index or other external reference provided for in the original policy or contract, the alternative policy or contract provides for (i) a fixed interest rate, (ii) payment of dividends with minimum guarantees, or (iii) a different method for calculating interest or changes in value.
(2) There is no requirement for evidence of insurability, waiting period, or other exclusion that would not have applied under the replaced policy or contract.
(3) The alternative policy or contract is substantially similar to the replaced policy or contract in all other material terms.
(Acts 1982, No. 82-561, p. 922, §8; Act 2012-319, p. 724, §1.)
(a) For the purpose of providing the funds necessary to carry out the powers and duties of the association, the board of directors shall assess the member insurers, separately for each account, at such time and for such amounts as the board finds necessary. Assessments shall be due not less than 30 days after prior written notice to the member insurers and shall accrue interest at six percent per annum on and after the due date.
(b) There shall be two classes of assessments, as follows:
(1) Class A assessments shall be authorized and called for the purpose of meeting administrative and legal costs and other expenses. Class A assessment may be authorized and called whether or not related to a particular impaired or insolvent insurer.
(2) Class B assessments shall be authorized and called to the extent necessary to carry out the powers and duties of the association under Section 27-44-8 with regard to an impaired or insolvent insurer.
(c)(1) The amount of a Class A assessment shall be determined by the board and may be authorized and called on a non-pro rata basis. The total of all Class A assessments shall not exceed three hundred dollars ($300) per member insurer in any one calendar year. The amount of a Class B assessment shall be allocated for assessment purposes among the accounts pursuant to an allocation formula which may be based on the premiums or reserves of the impaired or insolvent insurer or any other standard deemed by the board in its sole discretion as being fair and reasonable under the circumstances.
(2) Class B assessments against member insurers for each account shall be in the proportion that the premiums received on business in this state by each assessed member insurer on policies or contracts covered by each account for the three most recent calendar years for which information is available preceding the year in which the insurer became insolvent or, in the case of an assessment with respect to an impaired insurer, the three most recent calendar years for which information is available preceding the year in which the insurer became impaired, bears to premiums received on business in this state for those calendar years by all assessed member insurers.
(3) Assessments for funds to meet the requirements of the association with respect to an impaired or insolvent insurer shall not be authorized or called until necessary to implement the purposes of this chapter. Classification of assessments under subsection (b) and computation of assessments under this subsection shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible. The association shall notify each member insurer of its anticipated pro rata share of an authorized assessment not yet called within 180 days after the assessment is authorized.
(d) The association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. In the event an assessment against a member insurer is abated, or deferred in whole or in part, the amount by which the assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. Once the conditions that caused a deferral have been removed or rectified, the member insurer shall pay all assessments that were deferred pursuant to a repayment plan approved by the association.
(e)(1)a. Subject to the provisions of paragraph b., the total of all assessments authorized by the association with respect to a member insurer for each account shall not in one calendar year exceed one percent of that member insurer’s average annual premiums received in this state on the policies and contracts covered by the account during the three calendar years preceding the year in which the insurer became an impaired or insolvent insurer.
b. If two or more assessments are authorized in one calendar year with respect to insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation referenced in paragraph a. shall be equal and limited to the higher of the three-year average annual premiums for the applicable account as calculated pursuant to this section.
c. If the maximum assessment, together with the other assets of the association in an account, does not provide in one year in the account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon thereafter as permitted by this chapter.
(2) The board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
(f) The board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each insurer to that account, the amount by which the assets of the account exceed the amount the board finds is necessary to carry out during the coming year the obligations of the association with regard to that account, including assets accruing from assignment, subrogation, net realized gains, and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the association and for future losses or claims.
(g) It shall be proper for any member insurer, in determining its premium rates and policyowner dividends as to any kind of insurance within the scope of this chapter, to consider the amount reasonably necessary to meet its assessment obligations under this chapter.
(h) The association shall issue to each insurer paying an assessment under this chapter, other than a Class A assessment, a certificate of contribution, in a form prescribed by the commissioner, for the amount of the assessment so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. A certificate of contribution may be shown by the insurer in its financial statement as an asset in such form and for such amount, if any, and period of time as the commissioner may approve.
(i)(1) A member insurer that wishes to protest all or part of an assessment shall pay when due the full amount of the assessment as set forth in the notice provided by the association. The payment shall be available to meet association obligations during the pendency of the protest or any subsequent appeal. Payment shall be accompanied by a statement in writing that the payment is made under protest and setting forth a brief statement of the grounds for the protest.
(2) Within 60 days following the payment of an assessment under protest by a member insurer, the association shall notify the member insurer in writing of its determination with respect to the protest unless the association notifies the member insurer that additional time is required to resolve the issues raised by the protest.
(3) Within 30 days after a final decision has been made, the association shall notify the protesting member insurer in writing of that final decision. Within 60 days of receipt of notice of the final decision, the protesting member insurer may appeal that final action to the commissioner.
(4) In the alternative to rendering a final decision with respect to a protest based on a question regarding the assessment base, the association may refer protests to the commissioner for a final decision, with or without a recommendation from the association.
(5) If the protest or appeal on the assessment is upheld, the amount paid in error or excess shall be returned to the member company. Interest on a refund due a protesting member shall be paid at the rate actually earned by the association.
(j) The association may request information of member insurers in order to aid in the exercise of its power under this section and member insurers shall promptly comply with a request.
(Acts 1982, No. 82-561, p. 922, §9; Act 2012-319, p. 724, §1.)
(a)(1) The association shall submit to the commissioner a plan of operation and any amendments thereto necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and any amendments thereto shall become effective upon approval in writing by the commissioner.
(2) If the association fails to submit a suitable plan of operation within 180 days following January 1, 1983, or if at any time thereafter the association fails to submit suitable amendments to the plan, the commissioner shall, after notice and hearing, adopt and promulgate such reasonable rules as are necessary or advisable to effectuate the provisions of this chapter. Such rules shall continue in force until modified by the commissioner or superseded by a plan submitted by the association and approved by the commissioner.
(b) All member insurers shall comply with the plan of operation.
(c) The plan of operation shall, in addition to requirements enumerated elsewhere in this chapter:
(1) Establish procedures for handling the assets of the association.
(2) Establish the amount and method of reimbursing members of the board of directors under Section 27-44-7.
(3) Establish regular places and times for meetings of the board of directors.
(4) Establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors.
(5) Establish the procedures whereby selections for the board of directors will be made and submitted to the commissioner.
(6) Establish any additional procedures for assessments under Section 27-44-9.
(7) Contain additional provisions necessary or proper for the execution of the powers and duties of the association.
(d) The plan of operation may provide that any or all powers and duties of the association, except those under Sections 27-44-8 (10) c and 27-44-9, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this association, or its equivalent, in two or more states. Such a corporation, association, or organization shall be reimbursed for any payments made on behalf of the association and shall be paid for its performance of any functions of the association. A delegation under this subsection shall take effect only with the approval of both the board of directors and the commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.
(Acts 1982, No. 82-561, p. 922, §10.)
In addition to the duties and powers enumerated elsewhere in this chapter:
(1) The commissioner shall:
a. Upon request of the board of directors, provide the association with a statement of the premiums in the appropriate states for each member insurer.
b. When an impairment is declared and the amount of the impairment is determined, serve a demand upon the impaired insurer to make good the impairment within a reasonable time. Notice to the impaired insurer shall constitute notice to its shareholders, if any. The failure of the insurer to promptly comply with such demand shall not excuse the association from the performance of its powers and duties under this chapter.
c. In any liquidation or rehabilitation proceeding involving a domestic insurer, petition the court of competent jurisdiction to have the chief of the receivership division appointed as the liquidator or rehabilitator. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the chief of the receivership division shall be appointed conservator.
(2) The commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this state of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative the commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when due. Such forfeiture shall not exceed five percent of the unpaid assessment per month but no forfeiture shall be less than $100.00 per month.
(3) Any action of the board of directors or the association may be appealed to the commissioner by any member insurer if such appeal is taken within 60 days of the action being appealed. Any final action or order of the commissioner shall be subject to judicial review in a court of competent jurisdiction.
(4) The liquidator, rehabilitator, or conservator of any impaired insurer may notify all interested persons of the effect of this chapter.
(Acts 1982, No. 82-561, p. 922, §11; Act 2012-319, p. 724, §1.)
To aid in the detection and prevention of insurer insolvencies or impairment:
(1) It shall be the duty of the commissioner:
a. To notify the commissioners of those states, territories of the United States and the District of Columbia where such member company is licensed when he takes any of the following actions against a member insurer:
Revocation of license;
Suspension of license;
Makes any formal order that such company restrict its premium writing or obtain additional contributions to capital or surplus.
Such notice shall be mailed to all commissioners within 30 days following the action taken or the date on which such action occurs.
b. To report to the board of directors when he has taken any of the actions set forth in paragraph a. of this subdivision or has received a report from any other commissioner indicating that any such action has been taken in another state. Such report to the board of directors shall contain all significant details of the action taken on the report received from another commissioner.
c. To report to the board of directors when he has reasonable cause to believe from any examination, whether completed or in process, of any member company that such company may be an impaired or insolvent insurer.
d. To furnish to the board of directors upon its request the insurance regulatory information system ratios developed by the National Association of Insurance Commissioners, and the board may use the information contained therein in carrying out its duties and responsibilities under this section. Such report and the information contained therein shall be kept confidential by the board of directors until such time as made public by the commissioner or other lawful authority.
(2) The commissioner may seek the advice and recommendations of the board of directors concerning any matter affecting his duties and responsibilities regarding the financial condition of member companies and companies seeking admission to transact insurance business in this state.
(3) The board of directors may, upon majority vote, make reports and recommendations to the commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer or germane to the solvency of any company seeking to do insurance business in this state. Such reports and recommendations shall not be considered public documents.
(4) It shall be the duty of the board of directors, upon majority vote, to notify the commissioner of any information indicating any member insurer may be an impaired or insolvent insurer.
(5) The board of directors may, upon majority vote, request that the commissioner order an examination of any member insurer which the board in good faith believes may be an impaired or insolvent insurer. Within 30 days of the receipt of such request, the commissioner shall begin such examination. The examination may be conducted as a National Association of Insurance Commissioners’ examination or may be conducted by such persons as the commissioner designates. The cost of such examination shall be paid by the association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the board of directors prior to its release to the public, but this shall not preclude the commissioner from complying with subdivision (1). The commissioner shall notify the board of directors when the examination is completed. The request for an examination shall be kept on file by the commissioner but it shall not be open to public inspection prior to the release of the examination report to the public.
(6) The board of directors may, upon majority vote, make recommendations to the commissioner for the detection and prevention of insurer insolvencies.
(7) The board of directors shall, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, prepare a report to the commissioner containing such information as it may have in its possession bearing on the history and causes of such insolvency. The board shall cooperate with the boards of directors of guaranty associations in other states in preparing a report on the history and causes for insolvency of a particular insurer, and may adopt by reference any report prepared by such other associations.
(Acts 1982, No. 82-561, p. 922, §12.)
(a) A member insurer may offset against its premium tax liability to this state an assessment described in Section 27-44-9(h) to the extent of 20 percent of the amount of such assessment for each of the five calendar years following the year in which such assessment was paid.
(b) Any sums acquired by refund, pursuant to Section 27-44-9(f), from the association which have theretofore been written off by contributing insurers and offset against premium taxes as provided in subsection (a) above, and are not then needed for purposes of this chapter, shall be paid by the association to the commissioner and by him deposited with the State Treasurer for credit to the General Fund of this state.
(Acts 1982, No. 82-561, p. 922, §13; Act 2014-346, p. 1289, §1(b)(6).)
(a) Nothing in this chapter shall be construed to reduce the liability for unpaid assessments of the insureds on an impaired or insolvent insurer operating under a plan with assessment liability.
(b) Records shall be kept of all negotiations and meetings in which the association or its representatives are involved to discuss the activities of the association in carrying out its powers and duties under Section 27-44-8. Records of such negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the association to render a report of its activities under Section 27-44-15.
(c) For the purpose of carrying out its obligations under this chapter, the association shall be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the association is entitled as subrogee pursuant to Section 27-44-8(8). Assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this chapter. Assets attributable to covered policies, as used in this subsection, are that proportion of the assets which the reserves that should have been established for such policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer.
(d)(1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the court may take into consideration the contributions of the respective parties, including the association, the shareholders and policyowners of the insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of such insolvent insurer. In such a determination consideration shall be given to the welfare of the policyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until and unless the total amount of valid claims of the association for funds expended in carrying out its powers and duties under Section 27-44-8 with respect to such insurer have been fully recovered by the association.
(e)(1) If an order for liquidation or rehabilitation of an insurer domiciled in this state has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer, from any affiliate that controlled it, the amount of distributions, other than stock dividends paid by the insurer on its capital stock, made at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of subdivisions (2) to (4) of this subsection.
(2) No such dividend shall be recoverable if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(3) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions he received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared, shall be liable up to the amount of distributions he would have received if they had been paid immediately. If two persons are liable with respect to the same distributions, they shall be jointly and severally liable.
(4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets of the insolvent insurer to pay the contractual obligations of the insolvent insurer.
(5) If any person liable under subdivision (3) of this subsection is insolvent, all its affiliates that controlled it at the time the dividend was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate.
(Acts 1982, No. 82-561, p. 922, §14.)
The association shall be subject to examination and regulation by the commissioner. The board of directors shall submit to the commissioner, not later than May 1 of each year, a financial report for the preceding calendar year in a form approved by the commissioner and a report of its activities during the preceding calendar year.
(Acts 1982, No. 82-561, p. 922, §15.)
The association shall be exempt from payment of all fees and all taxes levied by this state or any of its subdivisions, except taxes levied on real or personal property.
(Acts 1982, No. 82-561, p. 922, §16.)
There shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer or its agents or employees, the association or its agents or employees, members of the board of directors, or the commissioner or his representatives, for any action taken by them in the performance of their powers and duties under this chapter.
(Acts 1982, No. 82-561, p. 922, §17.)
All proceedings in which the insolvent insurer is a party in any court in this state shall be stayed 180 days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the association on any matters germane to its powers or duties. As to judgment under any decision, order, verdict, or finding based on default the association may apply to have such judgment set aside by the same court that made such judgment and shall be permitted to defend against such suit on the merits.
(Acts 1982, No. 82-561, p. 922, §18; Act 2012-319, p. 724, §1.)
Upon the issuance of a proper court order placing a domestic insurer in receivership or placing a foreign insurer in ancillary receivership for rehabilitation or liquidation, all policyholders, beneficiaries, and insureds of such insolvent insurer, with respect to claims arising from and within the coverage of and not in excess of the applicable limits of insurance policies and contracts issued by the insolvent insurer and the Alabama Life and Disability Insurance Guaranty Fund shall be preferred creditors of said insolvent insurer.
(Acts 1982, No. 82-561, p. 922, §20.)
(a) Within 120 days of a final determination of insolvency of an insurance company by a court of competent jurisdiction the receiver shall make application to the said court for approval of a proposal to disburse assets out of such company’s marshalled assets, from time to time as such assets become available, to the Alabama Life and Disability Insurance Guaranty Association and to any entity or person performing a similar function in another state. (The Alabama Life and Disability Insurance Guaranty Association and any entity or person performing a similar function in other states shall hereinafter be referred to collectively as associations.)
(b) Such proposal shall at least include provisions for:
(1) Reserving amounts for the payment of expenses of administration and claims falling within the priorities established in the Alabama Uniform Insurers Liquidation Act (subdivisions (2) through (13) of Section 27-32-1 and Sections 27-32-4, 27-32-5, 27-32-15 through 27-32-22) but only with respect to such priorities higher than that of the associations;
(2) Disbursement of the assets marshalled to date and subsequent disbursements of assets as they become available;
(3) Equitable allocation of disbursements to each of the associations entitled thereto;
(4) The securing by the receiver from each of the associations entitled to disbursements pursuant to this section of an agreement to return to the receiver such assets previously disbursed as may be required to pay claims of secured creditors and claims with a higher priority than those of the associations. No bond shall be required of any such association; and
(c) The receiver’s proposal shall provide for disbursements to the associations in amounts at least equal to the payments made or to be made thereby for which such associations could assert claims against the receiver, and shall further provide that if the assets available for disbursement from time to time do not equal or exceed the amount of such payments made or to be made by the associations then disbursements shall be in the amount of available assets.
(d) Notice of such application shall be given to the associations in and to the commissioners of insurance of each of the states. Any such notice shall be deemed to have been given when deposited in the United States certified mails, first class postage prepaid, at least 30 days prior to submission of such application to the said court. Action on the application may be taken by the said court provided that above required notice has been given and provided further that the receiver’s proposal complies with subdivisions (1) and (4) of subsection (b) hereof.
(Acts 1982, No. 82-561, p. 922, §21.)
This article shall apply to health insurance and employee benefit plans providing for pharmaceutical services, including without limitation, prescription drugs.
(Acts 1988, No. 88-379, p. 565, §1.)
As used in this article, the following terms shall have the respective meanings herein set forth, unless the context shall otherwise require:
(1) ALABAMA INSURANCE CODE. Title 27 of the Code of Alabama 1975.
(2) INSURER. Such term shall have the meaning ascribed in Section 27-1-2.
(3) PERSON. Such term shall have the meaning ascribed in Section 27-1-2.
(4) COMMISSIONER and DEPARTMENT. Such terms, respectively, shall have the meanings ascribed in Section 27-1-2.
(5) CONTRACTUAL OBLIGATION. Any obligation under covered policies or employee benefit plans.
(6) COVERED POLICY OR PLAN. Any policy, employee benefit plan, or contract within the scope of this article.
(7) HEALTH INSURANCE POLICY. Any individual, group, blanket, or franchise insurance policy, insurance agreement, or group hospital service contract providing for pharmaceutical services, including without limitation, prescription drugs, incurred as a result of accident or sickness, or to prevent same.
(8) EMPLOYEE BENEFIT PLAN. Any plan, fund, or program heretofore or hereafter established or maintained by an employer or an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, pharmaceutical services, including without limitation, prescription drugs.
(9) PHARMACIST. Any person licensed by the Alabama State Board of Pharmacy to practice the profession of pharmacy in the State of Alabama and whose license is in good standing.
(10) PHARMACY. A place licensed by the Alabama State Board of Pharmacy in which prescriptions, drugs, medicines, chemicals, and poisons are sold, offered for sale, compounded, or dispensed, and shall include all places whose title may imply the sale, offering for sale, compounding, or dispensing of prescriptions, drugs, medicines, chemicals, or poisons.
(11) PHARMACEUTICAL SERVICES. Services ordinarily and customarily rendered by a pharmacy or pharmacist, including without limitation, the dispensing of prescriptions, drugs, medicines, chemicals, or poisons.
(12) DRUGS. All medical substances, preparations, and devices recognized by the United States Pharmacopoeia and National Formulary, or any revision thereof, and all substances and preparations intended for external and internal use in the cure, diagnosis, mitigation, treatment, or prevention of disease in man or animal and all substances and preparations other than food intended to affect the structure or any function of the body of man or animal.
(13) PRESCRIPTION. Any order for drug or medical supplies, written or signed or transmitted by word of mouth, telephone, telegraph, closed circuit, television, or other means of communication by a legally competent practitioner, licensed by law to prescribe and administer such drugs and medical supplies intended to be filled, compounded, or dispensed by a pharmacist.
(Acts 1988, No. 88-379, p. 565, §2.)
No health insurance policy or employee benefit plan which is delivered, renewed, issued for delivery, or otherwise contracted for in this state shall:
(1) Prevent any person who is a party to or beneficiary of any such health insurance policy or employee benefit plan from selecting the pharmacy or pharmacist of his choice to furnish the pharmaceutical services, including without limitation, prescription drugs, offered by said policy or plan or interfere with said selection provided the pharmacy or pharmacist is licensed to furnish such pharmaceutical services in this state; or
(2) Deny any pharmacy or pharmacist the right to participate as a contracting provider for such policy or plan provided the pharmacist is licensed to furnish pharmaceutical services, including without limitation, prescription drugs offered by said policy or plan.
(Acts 1988, No. 88-379, p. 565, §3.)
Any provision in a health insurance policy or employee benefit plan which is delivered, renewed, issued for delivery, or otherwise contracted for in this state which is contrary to this article shall to the extent of such conflict be void.
(Acts 1988, No. 88-379, p. 565, §4.)
The provisions of this article do not mandate that any type of benefits for pharmaceutical services, including without limitation, prescription drugs, be provided by a health insurance policy or an employee benefit plan.
(Acts 1988, No. 88-379, p. 565, §5.)
It shall be unlawful for any insurer or any person to provide any health insurance policy or employee benefit plan providing for pharmaceutical services, including without limitation, prescription drugs, that does not conform to the provisions of this article.
(Acts 1988, No. 88-379, p. 565, §6.)
The Commissioner of Insurance shall not approve for sale in this state any health insurance policy or employee benefit plan providing for pharmaceutical services, including without limitation, prescription drugs, which does not conform to the provisions of this article or to the provisions of Sections 27-14-8 and 27-14-9.
(Acts 1988, No. 88-379, p. 565, §7.)
It shall be the duty and responsibility of the Commissioner of Insurance to enforce the provisions of this article.
(Acts 1988, No. 88-379, p. 565, §8.)
Each willful violation of the provisions of this article shall be punishable as provided in Section 27-1-12.
(Acts 1988, No. 88-379, p. 565, §9.)
No insurance company, health maintenance organization (HMO), employer or organization offering a pharmaceutical prescription program to their employees or members in Alabama, shall enter into an agreement for services until they have obtained written verification that the provider pharmacies are registered with the Alabama State Board of Pharmacy. Such verification must be filed with the Alabama Department of Insurance within 10 days of initiating such agreement. Said department shall provide a copy of the verification to the Alabama State Board of Pharmacy. Failure to comply with such verification requirement shall result in a fine to the sponsor of such prescription program, of $100.00 per day, from the date that such agreement was signed until such verification requirement is satisfied.
(Acts 1991, No. 91-595, p. 1098, §1.)
This chapter shall be known as and may be cited as the Alabama Pharmacy Benefits Manager Licensure and Regulation Act.
(Act 2019-457, §1.)
(a) This chapter establishes the standards and criteria for the regulation and licensure of pharmacy benefits managers providing claims processing services or other prescription drug or device services for health benefit plans.
(b) The purpose of this chapter is to:
(1) Promote, preserve, and protect the public health, safety, and welfare through effective regulation and licensure of pharmacy benefits managers.
(2) Provide for powers and duties of the commissioner and department.
(3) Prescribe penalties and fines for violations of this chapter.
(Act 2019-457, §2.)
For purposes of this chapter, the following words have the following meanings:
(1) AFFILIATE or PBM AFFILIATE. An entity, including, but not limited to, a pharmacy, health insurer, or group purchasing organization that directly or indirectly, through one or more intermediaries, has one of the following affiliations:
a. Owns, controls, or has an investment interest in a pharmacy benefits manager.
b. Is owned, controlled by, or has an investment interest holder who is a pharmacy benefits manager.
c. Is under common ownership or corporate control with a pharmacy benefits manager.
(2) CLAIMS PROCESSING SERVICES. The administrative services performed in connection with the processing and adjudicating of claims relating to pharmacist services that include any of the following:
a. Receiving payments for pharmacist services.
b. Making payments to pharmacists or pharmacies for pharmacist services.
c. Both paragraphs a. and b.
(3) COVERED INDIVIDUAL. A member, policyholder, subscriber, enrollee, beneficiary, dependent, or other individual participating in a health benefit plan.
(4) HEALTH BENEFIT PLAN. A policy, contract, certificate, or agreement entered into, offered, or issued by a health insurer to provide, deliver, arrange for, pay for, or reimburse any of the costs of physical, mental, or behavioral health care services, including pharmaceutical services.
(5) HEALTH INSURER. An entity subject to the insurance laws of this state and rules of the department, or subject to the jurisdiction of the department, that contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any of the costs of health care services, including, but not limited to, a sickness and accident insurance company, a health maintenance organization operating pursuant to Chapter 21A, a nonprofit hospital or health service corporation, a health care service plan organized pursuant to Article 6, Chapter 20 of Title 10A, or any other entity providing a plan of health insurance, health benefits, or health services, including a nonprofit agricultural organization that provides a plan for health care services to its members.
(6) INDEPENDENT PHARMACY. A pharmacy as defined in Section 34-23-1 located in the state which holds an active permit from the Alabama State Board of Pharmacy and is classified by the Alabama State Board of Pharmacy as a community pharmacy.
(7) IN-NETWORK or NETWORK. A network of pharmacists or pharmacies that are paid for pharmacist services pursuant to an agreement with a health benefit plan or a pharmacy benefits manager.
(8) MEDICAID REIMBURSEMENT RATE. The total payment amount for an outpatient drug dispensed by a pharmacy as set by rule adopted by the Alabama Medicaid Agency which is in effect on April 15, 2025.
(9) OTHER PRESCRIPTION DRUG OR DEVICE SERVICES. Services, other than claims processing services, provided directly or indirectly, whether in connection with or separate from claims processing services, including, but not limited to, any of the following:
a. Negotiating rebates with drug companies.
b. Disbursing or distributing rebates.
c. Managing or participating in incentive programs or arrangements for pharmacist services.
d. Negotiating or entering into contractual arrangements with pharmacists or pharmacies, or both.
e. Developing formularies.
f. Designing prescription benefit programs.
g. Advertising or promoting services.
(10) PHARMACIST. As defined in Section 34-23-1.
(11) PHARMACIST SERVICES. Products, goods, and services, or any combination of products, goods, and services, provided as a part of the practice of pharmacy.
(12) PHARMACY. As defined in Section 34-23-1.
(13) PHARMACY BENEFITS MANAGER. a. A person, including a wholly or partially owned or controlled subsidiary of a pharmacy benefits manager, that provides claims processing services or other prescription drug or device services, or both, to covered individuals who are employed in or are residents of this state, for health benefit plans. The term includes any person that administers a prescription discount program directly for or on behalf of a pharmacy benefits manager or health benefit plan for drugs to covered individuals which are not reimbursed by a pharmacy benefits manager or are not covered by a health benefit plan.
b. Pharmacy benefits manager does not include any of the following:
A health care facility licensed in this state.
A health care professional licensed in this state.
A consultant who only provides advice as to the selection or performance of a pharmacy benefits manager.
(14) PRESCRIPTION DRUGS. Includes, but is not limited to, certain infusion, compounded, and long-term care prescription drugs. The term does not include specialty drugs.
(15) REBATE. Any payments or price concessions that accrue to a pharmacy benefits manager or its health benefit plan client, directly or indirectly, including through its PBM affiliate or its subsidiary, third party, or intermediary, including an off-shore purchasing organization, from a pharmaceutical manufacturer or its affiliate, subsidiary, third party, or intermediary. The term includes, but is not limited to, payments, discounts, administration fees, credits, incentives, or penalties associated, directly or indirectly, in any way with claims administered on behalf of a health benefit plan.
(16) SPECIALTY DRUGS. Prescription medications that require special handling, administration, or monitoring and are used for the treatment of patients with serious health conditions requiring complex therapies, and that are eligible for specialty tier placement by the Centers for Medicare and Medicaid Services pursuant to 42 C.F.R. § 423.560.
(17) SPREAD PRICING. A prescription drug pricing model used by a pharmacy benefits manager in which the pharmacy benefits manager charges a health benefit plan a contracted price for a prescription drug which is higher than the amount the pharmacy benefits manager pays the pharmacy for the prescription drug.
(18) STEERING. The term includes all of the following practices by a pharmacy benefits manager:
a. Directing, ordering, or requiring a covered individual to use a specific pharmacy, including a PBM affiliate pharmacy, for the purpose of filling a prescription or receiving pharmacist services.
b. Inducing a covered individual to use a designated pharmacy, including a PBM affiliate pharmacy, by increasing costs to the health benefit plan or charging the covered individual up to the full cost for a prescription drug if the covered individual fails to use the pharmacy designated by the pharmacy benefits manager.
c. Advertising, marketing, or promoting a pharmacy, including a PBM affiliate pharmacy, over another in-network pharmacy.
d. Engaging in any practice that results in excluding, restricting, or inhibiting an in-network pharmacy from providing prescription drugs to beneficiaries under a health benefit plan, which may involve, but not be limited to, the use of credentialing or accreditation standards, day supply limitations, or delivery method limitations.
e. Engaging in any practice aimed at directly or indirectly influencing a pharmaceutical manufacturer to limit its distribution of a prescription drug to certain pharmacies or to restrict distribution of the drug to non-PBM affiliate pharmacies.
(Act 2019-457, §3; Act 2021-341, §1; Act 2025-136, §2.)
(a) A person may not establish or operate as a pharmacy benefits manager in this state without first obtaining a license from the commissioner.
(b) Effective through December 31, 2021, to initially obtain a license or renew a license, a pharmacy benefits manager shall submit all of the following:
(1) A nonrefundable fee not to exceed five hundred dollars ($500).
(2) A copy of the licensee’s corporate charter, articles of incorporation, or other charter document.
(3) A completed licensure form adopted by the commissioner containing:
a. The name and address of the licensee.
b. The name, address, and official position of an employee who will serve as the primary contact for the Department of Insurance.
c. Any additional contact information deemed appropriate by the commissioner or reasonably necessary to verify the information contained in the application.
(c) Not later than January 1, 2022, the commissioner shall adopt rules for licensure of pharmacy benefits managers to operate in this state. The rules shall establish all of the following:
(1) The licensing procedure and application form.
(2) Requirements for licensure.
(3) Reporting requirements.
(4) A fee schedule for a nonrefundable application fee and a nonrefundable license renewal fee, set to allow the regulation and oversight activities of the department to be self-supporting.
(d) On and after January 1, 2022, a person applying for a pharmacy benefits manager license shall submit an application for licensure in the form and manner prescribed by the commissioner by rule, along with the application fee.
(e) The commissioner may refuse to issue or renew a license if the commissioner determines that the applicant has been found to have violated this chapter or the insurance laws of this state or any other jurisdiction, or has had an insurance or other certificate of authority or license denied or revoked for cause by any jurisdiction.
(f) Unless denied licensure pursuant to subsection (e), a person who meets the requirements of this chapter and rules adopted by the commissioner shall be issued a pharmacy benefits manager license. The license may be in paper or electronic form and shall clearly indicate the expiration date of the license. Licenses are nontransferable. Notwithstanding any provision of law to the contrary, the application and license shall be public records.
(g) The license shall be initially renewed in accordance with a schedule prescribed by the commissioner and shall thereafter be subject to renewal on an annual basis along with the nonrefundable license renewal fee.
(h) A licensee shall inform the commissioner by any means acceptable to the commissioner of any material change in the information required by this section or rules adopted pursuant to this section within 30 days of the change. Failure to timely inform the commissioner of a change shall result in a penalty against the licensee in the amount of fifty dollars ($50).
(i) The commissioner may suspend or revoke a license or may impose civil penalties for a violation of this chapter or the insurance laws of this state or any other jurisdiction, as determined by the commissioner in accordance with rules adopted by the commissioner, provided a pharmacy benefits manager shall have the same rights as insurers to request a hearing in accordance with Sections 27-2-28, et seq. and to appeal as provided in Section 27-2-32.
(j) Unless surrendered, suspended, or revoked by the commissioner, a license issued under this section shall remain valid as long as the pharmacy benefits manager continues to do business in this state and remains in compliance with this chapter and applicable rules, including the payment of an annual license renewal fee as set forth in subsection (g).
(k) All documents, materials, or other information, and copies thereof, in the possession or control of the department that are obtained by or disclosed to the commissioner or any other person in the course of an application, examination, or investigation made pursuant to this chapter shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, and shall not be subject to subpoena or discovery. This subdivision only applies to disclosure of confidential documents by the department and does not create any privilege in favor of any other party.
(l)(1) Fees collected pursuant to this section shall be deposited in the State Treasury to the credit of the Insurance Department Fund.
(2) Civil penalties collected pursuant to this chapter shall be deposited in the State Treasury to the credit of the state General Fund.
(m) Commencing January 1, 2022, a pharmacy benefits manager licensed by the commissioner prior to January 1, 2022, shall submit an application for a new license in accordance with subsection (d). The pharmacy benefits manager’s previous license shall expire on the date the commissioner issues a new license or April 1, 2022, whichever occurs earlier.
(Act 2019-457, §4; Act 2021-341, §§1,4.)
(a) It shall be the responsibility of the commissioner to enforce this chapter and any conduct arising from any action taken by a pharmacy benefits manager or PBM affiliate pursuant to an audit conducted under Article 8, Chapter 23, Title 34, which violates this chapter.
(b) The commissioner shall adopt rules necessary to implement and enforce this chapter, both independently and in conjunction with the conduct of an audit by a pharmacy benefits manager or PBM affiliate under Article 8, Chapter 23, Title 34, to include the authority to set a complaint filing fee of no more than one hundred dollars ($100) to be paid by a pharmacy or pharmacist with any complaint alleging a violation of Article 8, Chapter 23, Title 34, which fee shall be repaid to the complaining pharmacy or pharmacist by the pharmacy benefits manager or PBM affiliate in the event the violation is proven. The commissioner may waive the complaint filing fee at his or her discretion.
(c) The commissioner shall set and impose civil penalties of not less than one thousand dollars ($1,000) per violation for violations of this chapter, including conduct arising from an action taken by a pharmacy benefits manager or PBM affiliate pursuant to Article 8, Chapter 23, Title 34, which violates this chapter.
(d) The powers and duties set forth in this chapter shall be in addition to all other authority of the commissioner.
(e) The commissioner shall enforce compliance with the requirements of this chapter and rules adopted thereunder.
(f)(1) The commissioner may examine or audit, including on an annual basis, any books and records of a pharmacy benefits manager providing claims processing services or other prescription drug or device services for a health benefit plan as may be deemed relevant and necessary by the commissioner to determine compliance with this chapter and Article 8, Chapter 23, Title 34.
(2) Examinations conducted by the commissioner shall be pursuant to the same examination authority of the commissioner relative to insurers as provided in Chapter 2, including, but not limited to, the confidentiality of documents and information submitted as provided in Section 27-2-24; examination expenses shall be processed in accordance with Section 27-2-25; and pharmacy benefits managers shall have the same rights as insurers to request a hearing in accordance with Sections 27-2-28 et seq., and to appeal as provided in Section 27-2-32.
(3) The commissioner may contract the services of a third party to perform an examination or audit under this subsection.
(g) The commissioner’s examination expenses shall be collected from pharmacy benefits managers in the same manner as those collected from insurers.
(Act 2019-457, §5; Act 2021-341, §1; Act 2025-136, §2.)
Nothing in this chapter is intended or shall be construed to do any of the following:
(1) Be in conflict with existing relevant federal law.
(2) Apply to any specialty drug.
(3) Impact the ability of a hospital to mandate its employees’ use of a hospital-owned pharmacy.
(Act 2019-457, §6; Act 2021-341, §1; Act 2025-136, §2.)
Reserved.
(a) A pharmacy benefits manager may not do any of the following:
(1) Require a covered individual, as a condition of payment or reimbursement, to purchase pharmacist services, including, but not limited to, prescription drugs, exclusively through a mail-order pharmacy or pharmacy benefits manager affiliate.
(2) Prohibit or limit any covered individual from selecting an in-network pharmacy or pharmacist of his or her choice who meets and agrees to the terms and conditions, including reimbursements, in the pharmacy benefits manager’s contract.
(3) Impose a monetary advantage or penalty under a health benefit plan that would affect a covered individual’s choice of pharmacy among those pharmacies that have chosen to contract with the pharmacy benefits manager under the same terms and conditions, including reimbursements. For purposes of this subdivision, “monetary advantage or penalty” includes, but is not limited to, a higher copayment, a waiver of a copayment, a reduction in reimbursement services, a requirement or limit on the number of days of a drug supply for which reimbursement will be allowed, or a promotion of one participating pharmacy over another by these methods.
(4)a. Use a covered individual’s pharmacy services data collected pursuant to the provision of claims processing services for the purpose of soliciting, marketing, or referring the covered individual to a mail-order pharmacy or PBM affiliate.
b. This subdivision shall not limit a health benefit plan’s use of pharmacy services data for the purpose of administering the health benefit plan.
c. This subdivision shall not prohibit a pharmacy benefits manager from notifying a covered individual that a less costly option for a specific prescription drug is available through a mail-order pharmacy or PBM affiliate, provided the notification shall state that switching to the less costly option is not mandatory. The commissioner, by rule, may determine the language of the notification authorized under this paragraph made by a pharmacy benefits manager to a covered individual.
(5) Require a covered individual to make a payment for a prescription drug at the point of sale in an amount that exceeds the lessor of the following:
a. The contracted cost share amount.
b. An amount an individual would pay for a prescription if that individual were paying without insurance.
(6) Otherwise seek to limit, control, or influence the utilization of a pharmacy or pharmacist services by a covered individual through any of the practices of steering.
(b) If any of the practices prohibited under subsection (a), including activities that qualify as other prescription drug or device services, are required of a pharmacy benefits manager pursuant to its contractual duties under a health benefits plan, the pharmacy benefits manager shall not be subject to this section.
(Act 2021-341, §2; Act 2025-136, §2.)
(a) For purposes of this section, client means a health insurer, payor, or health benefit plan.
(b) If requested by a client under subsection (d), a pharmacy benefits manager shall prepare an annual report by June 1 which discloses all of the following with respect to that client:
(1) The aggregate amount of all rebates that the pharmacy benefits manager received from pharmaceutical manufacturers on behalf of the client.
(2) The aggregate amount of the rebates the pharmacy benefits manager received from pharmaceutical manufacturers that did not pass through to the client.
(3) If a pharmacy benefits manager or any consultant providing pharmacy benefits management services engages in spread pricing, the aggregated amount of the difference between the amount paid by the client for prescription drugs and the actual amount paid to the pharmacy or pharmacist for pharmacist services. For purposes of this subdivision, “spread pricing” means the model of prescription drug reimbursement in which a pharmacy benefits manager charges a client a contracted price for prescription drugs, and the contract price for the prescription drugs differs from the amount the pharmacy benefits manager, directly or indirectly, pays the pharmacy or pharmacist for pharmacist services.
(c) Confidentiality of a report submitted under this section shall be governed by contract between the pharmacy benefits manager and the client.
(d) A pharmacy benefits manager shall annually notify all its clients in a timely manner that a report described in subsection (b) will be made available to the client by the pharmacy benefits manager if requested by the client.
(Act 2021-341, §2.)
With respect to a pharmacist or pharmacy, a pharmacy benefits manager, directly or through an affiliate or a contracted third party, may not do any of the following:
(1) Reimburse an in-network pharmacy or pharmacist in the state an amount less than the amount that the pharmacy benefits manager reimburses a similarly situated PBM affiliate for providing the same pharmacist services to covered individuals in the same health benefit plan.
(2) Practice spread pricing in this state unless required under the health benefit plan. If spread pricing is practiced pursuant to the health benefit plan, the pharmacy benefits manager shall submit an annual report to the commissioner which discloses the differences between the amount the health benefit plan is charged and the amount network pharmacies are reimbursed.
(3) Deny a pharmacy or pharmacist the right to participate as a network provider if the pharmacy or pharmacist meets and agrees to the terms and conditions, including reimbursements, in the pharmacy benefits manager’s contract, including an independent pharmacy that qualifies for reimbursement at the minimum rate established in Section 27-45A-13(a)(1), notwithstanding any term to the contrary in the pharmacy benefits manager’s contract.
(4) Impose credentialing standards on a pharmacist or pharmacy beyond or more onerous than the licensing standards set by the Alabama State Board of Pharmacy or charge a pharmacy or pharmacist any fee in regard to, without limitation, network enrollment, network participation, credentialing or recredentialing, change of ownership, submission of claims, transmission of claims, adjudication of claims, claims processed through discount card programs, or otherwise, if not in conjunction with an audit conducted pursuant to Article 8, Chapter 23, Title 34; provided, however, this subdivision shall not prohibit a pharmacy benefits manager from setting minimum requirements for participating in a pharmacy network.
(5) Prohibit a pharmacist or pharmacy from providing a covered individual with any relevant information about a prescription drug, including the following:
a. The cost and reimbursement amount of the drug.
b. An alternative drug.
c. Any other information considered to be necessary in the professional judgment of the pharmacist.
(6) Prohibit a pharmacist or pharmacy from offering and providing delivery services to a covered individual as an ancillary service of the pharmacy, provided all of the following requirements are met:
a. The pharmacist or pharmacy can demonstrate quality, stability, and safety standards during delivery.
b. The pharmacist or pharmacy does not charge any delivery or service fee to a pharmacy benefits manager or health insurer.
c. The pharmacist or pharmacy alerts the covered individual that he or she will be responsible for any delivery service fee associated with the delivery service, and that the pharmacy benefits manager or health insurer will not reimburse the delivery service fee.
(7) Charge or hold a pharmacist or pharmacy responsible for a fee or penalty relating to an audit conducted pursuant to Article 8, Chapter 23, Title 34, provided this prohibition does not restrict recoupments made in accordance with the Pharmacy Audit Integrity Act.
(8) Charge a pharmacist or pharmacy a point-of-sale or retroactive fee or otherwise recoup funds from a pharmacy in connection with claims for which the pharmacy has already been paid, unless the recoupment is made pursuant to an audit conducted in accordance with Article 8, Chapter 23, Title 34.
(9) Except for a drug reimbursed, directly or indirectly, by the Medicaid program, vary the amount a pharmacy benefits manager reimburses an entity for a drug, including each and every prescription medication that is eligible for specialty tier placement by the Centers for Medicare and Medicaid Services pursuant to 42 C.F.R. § 423.560, regardless of any provision of law to the contrary, on the basis of whether:
a. The drug is subject to an agreement under 42 U.S.C. § 256b; or
b. The entity participates in the program set forth in 42 U.S.C. § 256b.
(10) If an entity participates, directly or indirectly, in the program set forth in 42 U.S.C. § 256b, do any of the following:
a. Assess a fee, charge-back, or other adjustment on the entity.
b. Restrict access to the pharmacy benefits manager’s pharmacy network.
c. Require the entity to enter into a contract with a specific pharmacy to participate in the pharmacy benefits manager’s pharmacy network.
d. Create a restriction or an additional charge on a patient who chooses to receive drugs from the entity.
e. Create any additional requirements or restrictions on the entity.
(11) Require a claim for a drug to include a modifier to indicate that the drug is subject to an agreement under 42 U.S.C. § 256b.
(12) Penalize or retaliate against a pharmacist or pharmacy for exercising rights under this chapter or Article 8, Chapter 23, Title 34. For purposes of this subdivision, the conduct prohibited includes any written or verbal communication that a reasonable individual would construe as a threat of penalty or retaliation received before or in the course of exercising rights under this chapter or Article 8, Chapter 23, Title 34.
(13) Prohibit a pharmacist or pharmacy from declining to dispense a drug to a covered individual, or directing a covered individual to another pharmacy, if the reimbursement amount would be lower than the dispensing cost of the pharmacist or pharmacy.
(14) Take retaliatory action against, or impose any penalty on, a pharmacist or pharmacy who declines to dispense a drug to a covered individual under subdivision (13), including cancellation or nonrenewal of a contract, or suit for breach of contract.
(Act 2021-341, §2; Act 2025-136, §2.)
A pharmacy benefits manager may not knowingly make a material misrepresentation to a covered individual, pharmacist, or pharmacy.
(Act 2021-341, §2.)
A pharmacist or pharmacy that participates in a health benefit plan’s pharmacy network shall process a prescription drug using the pharmacy benefits of the covered individual if failure to do so will result in a higher out-of-pocket cost to the covered individual.
(Act 2021-341, §2.)
(a) Notwithstanding any other provision of this chapter or any form of a contract to the contrary, with respect to an independent pharmacy, a pharmacy benefits manager, directly or through an affiliate or a contracted third party, may not do any of the following:
(1) Reimburse for dispensing a prescription drug in an amount that is less than the Medicaid reimbursement rate.
(2) Impose a fee or otherwise adjust or lower the reimbursement of a drug at the time the claim is adjudicated, or after the claim is adjudicated, that in any way reduces the amount of reimbursement for the drug as regulated pursuant to subdivision (1).
(3) Increase a covered individual’s cost-sharing percentage or ratio at or after the point of sale by raising the deductible, copayment, or coinsurance, or by requiring any other out-of-pocket payment as a means to recoup the dispensing cost portion of the reimbursement required pursuant to subdivision (1).
(4) Reject payment of a claim for a drug that is submitted by an independent pharmacy when the drug is available to a covered individual at a different in-network pharmacy; provided, however, if the drug is dispensed by the different in-network pharmacy, the pharmacy benefits manager shall pay the independent pharmacy a surcharge equal to the reimbursement that would have been paid pursuant to subdivision (1) had the independent pharmacy dispensed the drug.
(b) A health benefit plan that covers individuals who are public employees and that reimburses independent pharmacies for dispensing prescription drugs during its plan year in an aggregate amount that is higher than would otherwise be calculated using the rate set in subdivision (a)(1), upon proof of the same submitted to the commissioner, shall be exempt from this section.
(Act 2025-136, §3.)
A pharmacy benefits manager, either directly or through a PBM affiliate, when performing pharmacy benefits management services or other prescription drug or device services for a health benefit plan client, shall pass on 100 percent of all rebates received, directly or indirectly, from a pharmaceutical manufacturer unless the health benefit plan client directs the pharmacy benefits manager or PBM affiliate to apply the rebates to purchases of prescription drugs by covered individuals at the point of sale or the health benefit plan client directs the pharmacy benefits manager, PBM affiliate, or health insurer to retain a portion of the rebates as an administrative fee.
(Act 2025-136, §4.)
Notwithstanding any other provision of law, when any contract or plan of health insurance, or any plan or agreement for health care services provides for the reimbursement or payment for services which are within the scope of practice of registered nurses who have passed or who are qualified to take the national certification examination for the specialty practice of nurse anesthetist as recognized by the Alabama Board of Nursing, then the insured, or any other person covered by the policy, plan, contract, or certificate shall be entitled to reimbursement or payment for such services performed by the certified registered nurse anesthetist, and said certified registered nurse anesthetist shall be entitled to direct reimbursement by the insurer, unless the certified registered nurse anesthetist is employed by contract with a group practice of anesthesiologist or a hospital, then such services shall be reimbursed through the employer.
(Acts 1989, No. 89-664, p. 1318, §1.)
Nothing in this chapter shall prohibit a licensed hospital from prescribing in its bylaws, policies, rules, or regulations, the qualifications, training, experience, scope of permissible activities, and level or degree of supervision required of any certified registered nurse anesthetist employed by or performing services in such hospital.
(Acts 1989, No. 89-664, p. 1318, §2.)
For the purposes of this chapter, certified registered nurse anesthetist means any licensed registered nurse licensed under Section 34-21-20, who is a graduate of a formal education program accredited by the Council on Accreditation of Nurse Anesthesia Educational Programs or its predecessor and who is currently certified as a registered nurse anesthetist by the National Board of Certification and Recertification for Nurse Anesthetists, or other certifying body approved by the Board of Nursing.
(Acts 1989, No. 89-664, p. 1318, §3; Act 2019-280, §1.)
For purposes of this chapter, “qualified long-term care services” includes care for necessary diagnostic, preventive, therapeutic, and rehabilitative services and maintenance, assisted living, or personal care services which are required by a chronically ill individual in a qualified facility or services which are provided pursuant to a plan of care prescribed by a licensed health care practitioner.
(Acts 1995, No. 95-738, p. 772, §1; Acts 1996, No. 96-796, p. 1501, §1.)
(a) The premiums paid for a long-term care insurance contract are deductible pursuant to Section 40-18-15, if the contract meets the following requirements:
(1) Offers coverage only for qualified long-term care services and benefits incidental to the coverage.
(2) Guaranteed renewal.
(3) No cash surrender value.
(4) All refunds of premiums and all policyholder dividends or similar amounts under the contract are to be applied as a reduction in future premiums or to increase future benefits, except for a refund of premiums on surrender or cancellation of the policy.
(b) For purposes of this chapter, a long-term care insurance contract shall be treated as an accident or health insurance contract. The amount of coverage under the long-term care insurance contract shall be equal to or greater than Medicaid coverage for a period of at least three years.
(c) An insurance contract shall not fail to be treated as a long-term care contract by reason of the payments being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payments relate.
(d) A long-term care insurance contract may cover Medicare reimbursable expenses where Medicare is a secondary payor.
(e) In the case of long-term care insurance coverage provided by a rider on a life insurance contract, this chapter shall apply as if the portion of the contract providing long-term care coverage was a separate contract.
(f) The deduction is available to the person or entity who pays the premiums.
(Acts 1995, No. 95-738, p. 772, §2.)
Any amounts of premium tax for long-term care coverage shall be deposited into the Education Trust Fund.
(Acts 1995, No. 95-738, p. 772, §3.)
As used in this chapter, the following terms shall have the following meanings:
(1) HEALTH BENEFIT PLAN. A health insurance policy that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. For the purpose of this chapter, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of the State of Alabama or who receive health care services in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 4 of Title 10.
(2) MEDICALLY NECESSARY. A medical or surgical service, including inpatient hospital care, is medically necessary when in the opinion of the attending physician or the attending certified nurse midwife practicing in collaboration with an obstetrician-gynecologist, the patient’s health would be adversely affected if the service is withheld or discontinued. Medically necessary postpartum care for a mother and a newly born child shall be consistent with the most recent version of the “Guidelines for Perinatal Care” prepared by the American Academy of Pediatrics and the American College of Obstetricians and Gynecologists.
(Acts 1996, No. 96-578, p. 915, §1.)
(a) Every health benefit plan that provides maternity coverage shall provide coverage for the following:
(1) All medically necessary inpatient care for a mother and her newly born child as determined by the woman’s prenatal care physician, obstetrician-gynecologist, certified nurse midwife, or the child’s attending pediatrician and when consistent with the most recent version of the “Guidelines for Perinatal Care” prepared by the American Academy of Pediatrics and the American College of Obstetricians and Gynecologists, including the administration of medical tests recommended by the American Academy of Pediatrics or the American College of Obstetricians and Gynecologists or both on the admission and discharge of a mother and the newborn child to determine whether additional medical care is needed for the mother or newborn child or both. Included in medically necessary inpatient care is the requirement that all hospitals providing a maternity hospital stay perform a complete blood count with differential, or its equivalent, on the mother upon admission and discharge of the mother from the hospital.
(2) Benefits for any hospital length of stay of not less than 48 hours in connection with childbirth for the mother or newborn child, following a normal vaginal delivery.
(3) Benefits for any hospital length of stay of not less than 96 hours in connection with childbirth for the mother or newborn child, following a cesarean section.
(b) Notwithstanding the provisions of subdivisions (2) and (3) of subsection (a), a mother may be discharged early if she, after being advised by her medical provider in writing of the advantages and disadvantages of early discharge, consents in writing, and the medical provider agrees to the early discharge.
(Acts 1996, No. 96-578, p. 915, §2; Act 99-193, p. 228, §2.)
No health benefit plan subject to the provisions of this chapter shall terminate the services, reduce capitation payment, or otherwise penalize an attending physician, certified nurse midwife, or other health care provider who orders medical care consistent with this chapter. No health benefit plan shall provide, directly or indirectly, any financial incentive or disincentive or grant or deny any special favor or advantage of any kind or nature to any person to encourage or cause early discharge of a hospital patient from postpartum care, excluding capitation or global fee arrangements. Provided nothing contained in this chapter is intended to expand the list or designation of covered providers as specified in any health benefit plan or to modify the scope of practice of a certified nurse midwife as provided by law.
(Acts 1996, No. 96-578, p. 915, §3.)
A license issued by the Department of Insurance to an insurance company or a health maintenance organization shall be subject to suspension, revocation, or imposition or other administrative penalty authorized by law, within the discretion of the Commissioner of Insurance, for any violation of the provisions of this chapter.
(Acts 1996, No. 96-578, p. 915, §4.)
This chapter shall apply to all programs administered by the Alabama Medicaid Agency.
(Acts 1996, No. 96-578, p. 915, §5.)
This chapter shall be known and may be cited as the “Women’s Access to Health Care Act.”
(Acts 1996, No. 96-671, p. 1135, §1.)
The Legislature finds that the specialty of obstetrics and gynecology is devoted to primary and preventive health care of women throughout their lifetime. Significant numbers of women view their obstetrician and gynecologist as their primary or only physician. For many women, an obstetrician or gynecologist is often the only physician they see regularly during their reproductive years. A general medical examination was the second most frequently cited purpose for patient visits to obstetricians and gynecologists in 1989 and 1990. Obstetricians and gynecologists refer their patients less frequently than other primary care physicians, thus avoiding costly and time consuming referrals to specialists. Accordingly, it is the intent of the Legislature that women enrolled or covered by health benefit plans have direct access to the services of a participating obstetrician or a participating gynecologist.
(Acts 1996, No. 96-671, p. 1135, §2.)
As used in this chapter, the following terms shall have the following meanings:
(1) HEALTH BENEFIT PLAN. Any individual or group plan, policy, or contract for health care services issued, delivered, issued for delivery, renewed in this state by a health care insurer, health maintenance organization, accident and sickness insurer, fraternal benefit society, nonprofit hospital service corporation, nonprofit medical service corporation, health care service plan, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 4 of Title 10. For the purposes of this chapter, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama.
(2) OBSTETRICIAN/GYNECOLOGIST. A physician who is board eligible or board certified by the American Board of Obstetricians and Gynecologists.
(3) PARTICIPATING OBSTETRICIAN/PARTICIPATING GYNECOLOGIST. An obstetrician or a gynecologist who is employed by or under contract with a health benefit plan.
(4) PRIMARY CARE PHYSICIAN. A physician who has the responsibility for providing initial and primary care to patients, for maintaining the continuity of patient care, and for initiating referrals for specialist care.
(Acts 1996, No. 96-671, p. 1135, §3.)
(a) Each health benefit plan which is issued, delivered, issued for delivery, or renewed in this state on or after October 1, 1996, shall allow obstetricians and gynecologists as primary care physicians. This subsection shall not be construed to require an individual obstetrician or gynecologist to accept primary care physician status if the obstetrician or gynecologist does not wish to be designated as a primary care physician, nor to interfere with the credentialing and other selection criteria usually applied by a health benefit plan with respect to other physicians within its network.
(b) For women not using an obstetrician or gynecologist as their primary care physician, no health benefit plan which is issued, delivered, issued for delivery, or renewed in this state on or after October 1, 1996, shall require as a condition to the coverage of the services of a participating obstetrician or a participating gynecologist that an enrollee, subscriber, or insured first obtain a referral from another primary care physician, it being the intent of this subsection that a woman shall at all times have direct access to the services of a participating obstetrician or a participating gynecologist, or both, under any health benefit plan; provided, however, that the service covered by this subsection shall be limited to those services defined by the published recommendations of the Accreditation Council For Graduate Medical Education for training as an obstetrician or gynecologist, including, but not limited to, diagnosis, treatment, and referral.
(Acts 1996, No. 96-671, p. 1135, §4.)
Any violation of this chapter shall constitute grounds for suspension or revocation of a license by the Department of Insurance issued to an insurance company or health maintenance organization.
(Acts 1996, No. 96-671, p. 1135, §5.)
This chapter shall be known as “The Breast Cancer Screening Act.”
(Acts 1997, No. 97-414, p. 685, §1.)
It is the intent of the Legislature to assist women with the early detection of breast cancer and thereby prevent the following:
(1) Avoidable early death from breast cancer.
(2) Avoidable suffering and impaired quality of life from late detection of breast cancer.
(3) Avoidable suffering and impaired quality of life for family members of women as a result of late detection of breast cancer.
(Acts 1997, No. 97-414, p. 685, §2.)
As used in this chapter, the term “health benefit plan” has the following meaning: A health insurance policy, including a self-insured health plan, that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. The term does not include accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare-supplement, long-term care, or disability income insurance; coverage issued as a supplement to liability insurance, workers’ compensation or similar insurance; or automobile medical-payment insurance. For the purpose of this chapter, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 4 of Title 10.
(Acts 1997, No. 97-414, p. 685, §3.)
Every health benefit plan which provides coverage for surgical services for a mastectomy shall provide coverage for screening mammography as follows:
(1) For women ages 40 to 49, inclusive, a mammogram at least every two years or more frequently based on the recommendation of a woman’s physician.
(2) For women age 50 or over, a mammogram every year or more frequently based on the recommendation of a woman’s physician.
(Acts 1997, No. 97-414, p. 685, §4.)
(a) No health benefit plan subject to the provisions of this chapter shall terminate the services, reduce capitation payment, or otherwise penalize an attending physician or other health care provider who orders medical care consistent with this chapter.
(b) Nothing in this chapter is intended to expand the list or designation of covered providers as specified in any health benefit plan.
(Acts 1997, No. 97-414, p. 685, §5.)
A license issued by the Department of Insurance to an insurance company or a health maintenance organization shall be subject to suspension, revocation, or imposition or other administrative penalty authorized by law, within the discretion of the Commissioner of Insurance, for any violation of the provisions of this chapter.
(Acts 1997, No. 97-414, p. 685, §6.)
This chapter shall apply to all programs administered by the Alabama Medicaid Agency.
(Acts 1997, No. 97-414, p. 685, §7.)
(a) For purposes of this section, the following terms have the following meanings:
(1) COST-SHARING REQUIREMENT. A deductible, copayment, coinsurance, or similar expense borne by the insured for a covered benefit under a health benefit plan.
(2) DIAGNOSTIC BREAST EXAMINATION. A medically necessary and appropriate examination of the breast that includes, but is not limited to, contrast-enhanced mammography, diagnostic mammography, breast magnetic resonance imaging, breast ultrasound, or molecular breast imaging which is used to:
a. Evaluate an abnormality seen or suspected from a screening examination for breast cancer; or
b. Evaluate an abnormality detected by another means of examination.
(3) HEALTH BENEFIT PLAN. a. Any plan, policy, or contract issued, delivered, or renewed in this state which provides health coverage that includes payment for hospitalization, physician care, treatment, surgery, therapy, drugs, equipment, and any other medical expense, regardless of the following:
Whether the plan, policy, or contract is provided by a health care insurer; health maintenance organization established under Chapter 21A of Title 27; health care services plan established under Chapter 20 of Title 10A; a nonprofit agricultural organization that provides health benefits to its members under Chapter 33 of Title 2; or any other entity that pays for, purchases, or reimburses for health care services.
Whether the plan is for a group or an individual.
b. The term does not include accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare supplement, long-term care, disability income, or other limited benefit health insurance policies, or coverage issued as supplemental to liability insurance, workers’ compensation, or automobile medical payment insurance.
(4) SUPPLEMENTAL BREAST EXAMINATION. A medically necessary and appropriate examination of the breast which includes, but is not limited to, contrast-enhanced mammography, breast magnetic resonance imaging, breast ultrasound, or molecular breast imaging that is used to screen for breast cancer when there is no abnormality seen or suspected, based on personal or family medical history or additional factors that increase the risk of breast cancer, including dense tissue, on the recommendation of a physician.
(b) A health benefit plan that pays for, purchases, or furnishes health care services to individuals who reside in this state, and which provides coverage for a supplemental breast examination or a diagnostic breast examination, may not impose any cost-sharing requirement on an enrollee for a supplemental breast examination or diagnostic breast examination.
(Act 2026-190, §1.)
(a) An insurance policy or contract providing for third-party payment or prepayment of health or medical expenses shall include a provision for the payment to a supervising physician for necessary medical or surgical services that are provided by a licensed physician assistant practicing under the supervision of the physician, and pursuant to the rules, regulations, and parameters for physician assistants, if the policy or contract pays for the same care and treatment provided by a licensed physician or doctor of osteopathy.
(b) An insurance policy or contract subject to this section shall not impose a practice or supervision restriction which is inconsistent with or more restrictive than provided by law.
(c) This section shall apply to services provided under a policy or contract delivered, continued, or renewed in this state on or after August 1, 1997, and to any existing policy or contract, on the policy’s or contract’s anniversary or renewal date, or upon the expiration of the applicable collective bargaining contract, if any, whichever is later.
(d) This section does not apply to policyholders or subscribers eligible for coverage under Title XVIII of the federal Social Security Act or any similar coverage under a state or federal government plan.
(e) For purposes of this section, third-party payment or prepayment includes an individual or group policy or accident or health insurance or individual or group hospital or health care service contract, an individual or group health maintenance organization contract, an organized delivery system contract, a medical service organization created pursuant to Article 6, Chapter 4, Title 10, or a preferred provider organization contract.
(f) This section shall not be interpreted to require an individual or group health maintenance organization, an organized delivery system, a medical service organization created pursuant to Article 6, Chapter 4, Title 10, or a preferred provider organization or arrangement to provide payment or prepayment to a physician for services provided by a physician assistant, unless the supervising physician of the physician assistant has entered into a contract or other agreement to provide services with the individual or group health maintenance organization, the organized delivery system, the medical service organization, or the preferred provider organization or arrangement.
(Acts 1997, No. 97-635, p. 1157, §1.)
(a) There is hereby created the Alabama Health Insurance Plan which shall, as a high risk pool in the State of Alabama, provide health insurance coverage to eligible individuals as an alternative to requiring insurers to offer guaranteed-issue policies, as provided in the Health Insurance Portability and Accountability Act of 1996 (Pub.L. 104-191, also known as HIPAA).
(b) In the event any federal mandate includes market reform provisions which satisfy the guaranteed-issue requirements of HIPAA, the Alabama Health Insurance Plan may cease operations upon giving sufficient time for current participants to transition out of the plan. After operation of the Alabama Health Insurance Plan ceases and all current and future liabilities of the plan have been satisfied, any unspent and unencumbered funds of the plan shall be transferred to the State General Fund.
(c) In the event a federal mandate requires the State of Alabama after April 2, 2014, to offer guaranteed-issue health coverage to eligible individuals, the Alabama Health Insurance Plan shall be reestablished and implemented to satisfy the requirements of the federal mandate.
(Acts 1997, No. 97-713, p. 1476, §1; Act 2014-219, p. 690, §1.)
The plan shall have the general powers and authority granted under the laws of this state to health insurers and in addition thereto, the specific authority to do all of the following:
(1) Enter into contracts as are necessary or proper to carry out the provisions and purposes of this article, including the authority, with the approval of the commissioner, to enter into contracts with similar plans of other states for the joint performance of common administrative functions, or with persons or other organizations for the performance of administrative functions.
(2) Sue or be sued, including taking any legal actions necessary or proper to recover or collect assessments due the plan.
(3) Take legal action as necessary to do any of the following:
a. To avoid the payment of improper claims against the plan or the coverage provided by or through the plan.
b. To recover any amounts erroneously or improperly paid by the plan.
c. To recover any amounts paid by the plan as a result of mistake of fact or law.
d. To recover other amounts due the plan.
(4) Establish, and modify from time to time as appropriate, rates, rate schedules, rate adjustments, expense allowances, claim reserve formulas, and any other actuarial function appropriate to the operation of the plan. Rates and rate schedules may be adjusted for appropriate factors such as age, sex, and geographic variation in claim cost and shall take into consideration appropriate factors in accordance with established actuarial and underwriting practices.
(5) Issue policies of insurance in accordance with the requirements of this article and regulations issued pursuant thereto.
(6) Appoint appropriate legal, actuarial, and other committees as necessary to provide technical assistance in the operation of the plan, policy, and other contract design, and any other function within the authority of the pool.
(7) Borrow money to effect the purposes of the plan. Any notes or other evidence of indebtedness of the plan not in default shall be legal investments for insurers and may be carried as admitted assets.
(8) Establish rules, conditions, and procedures for participating insurers desiring to issue plan coverages in their own name.
(9) Employ and fix the compensation of employees.
(10) Prepare and distribute certificate of eligibility forms and enrollment instruction forms to the general public.
(11) Provide for reinsurance of risks incurred by the plan.
(12) Issue additional types of health insurance policies to provide optional coverages.
(13) Provide for and employ cost containment measures and requirements including, but not limited to, preadmission screening, second surgical opinion, concurrent utilization review, and individual case management for the purpose of making the benefit plan more cost effective.
(14) Design, utilize, contract, or otherwise arrange for the delivery of cost effective health care services, including establishing or contracting with preferred provider organizations, health maintenance organizations, and other limited network provider arrangements.
(15) Adopt bylaws, policies, and procedures as may be necessary or convenient for the implementation of this article and the operation of the plan.
(Acts 1997, No. 97-713, p. 1476, §2.)
(a) The commissioner shall, by regulation, establish additional powers and duties of the plan and may adopt such rules as are necessary and proper to implement this article. For the purpose of this section, the term “insurer” means any entity covered by the Health Insurance Portability Act, including, but not limited to, as the terms are defined in the Health Insurance Portability Act, a health insurance issuer, a health maintenance organization and, notwithstanding Section 10-4-115, any health benefit plan. In the case of a self-funded health benefit plan operating through a third party administrator, the third party administrator shall be the insurer for the purpose of this section. The commissioner may, by regulation, define health insurance premiums consistent with the purpose of this section.
(b) The regulations shall set forth coverage eligibility criteria consistent with the requirements of Health Insurance Portability and Accountability Act of 1996 and any and all federal regulations adopted pursuant thereto, establish the criteria for the evaluation of any plan administrator selected through the competitive bid process to administer the plan, and establish the guidelines for the funding of the plan, including the establishment of premium rate schedules and the authority to assess participating insurers based upon their health insurance premiums written in this state.
(c) Each participating insurer may offset any applicable premium taxes otherwise payable in respect of health insurance premiums paid to them by the amount of any assessments in respect of premiums paid in the same calendar year as the assessment. If the participating insurer is not subject to premium taxes on health insurance premiums it receives, the assessment made under this subsection may be reduced by the premium taxes which would otherwise have been payable had it been so subject.
(Acts 1997, No. 97-713, p. 1476, §3.)
The plan shall offer health care coverage consistent with major medical expense coverage to every eligible person who is not eligible for Medicare. The coverage to be issued by the plan, its schedule of benefits, exclusions, and other limitations shall be established by the plan, which plan benefits shall be inclusive of the provisions of Sections 27-1-10 and 27-19-39, and subject to the approval of the commissioner.
(Acts 1997, No. 97-713, p. 1476, §4.)
Neither the establishment of rates, forms, or procedures nor any other joint or collective action required by this article shall be the basis of any legal action, criminal or civil liability, or penalty against the plan.
(Acts 1997, No. 97-713, p. 1476, §5.)
The plan established pursuant to this article shall be exempt from payment of all fees and all taxes levied by this state or any of its subdivisions. If the Commissioner of Insurance enters into a contract with one or more third parties to provide any or all of the services in the operation of the plan, this exemption shall not extend to said third parties except as to the tax on the premiums collected through the plan and any fees required for the filing of forms, rates, and other reports with the Commissioner of Insurance as may be specifically related to the plan.
(Acts 1997, No. 97-713, p. 1476, §6.)
There is hereby created the Alabama Small Employer Allocation Program which shall promote the availability of health insurance coverage to small employers regardless of their health status or claims experience, to prevent abusive rating practices, to prevent segmentation of the health insurance market based upon health risk, to spread health insurance risk more broadly, to require disclosure of rating practices to purchasers, to establish rules regarding renewability of coverage, to limit use of preexisting conditions exclusions, and to improve the overall fairness and efficiency of the small group health insurance market.
(Acts 1997, No. 97-713, p. 1476, §7.)
(a) The Commissioner of Insurance shall, by regulation, establish the conditions, restrictions, requirements, and plan of operation of the Alabama Small Employer Allocation Program consistent with the requirements of the Health Insurance Portability and Accountability Act of 1996 and any and all federal regulations adopted pursuant thereto, which plan benefits shall be inclusive of the provisions of Sections 27-1-10 and 27-19-39. The program shall be patterned after the Small Employer Health Insurance Availability models developed by the National Association of Insurance Commissioners.
(b) All insurers that offer health benefit plans to small employers in this state on and after August 1, 1997, shall be required to meet the requirements of the program as a condition of authority to transact business in this state.
(c) For the purposes of this article, a “small employer” means any person, firm, corporation, partnership, association, political subdivision, or self-employed individual that is actively engaged in business that, on at least 50 percent of its working days during the preceding calendar quarter, employed no less than two and no more than 50 eligible employees, with a normal work week of 30 or more hours, the majority of whom were employed within this state, and is not formed primarily for purposes of buying health insurance and in which a bona fide employer-employee relationship exists. In determining the number of eligible employees, companies that are affiliated companies, or that are eligible to file a combined tax return for purposes of taxation by this state, shall be considered one employer.
(Acts 1997, No. 97-713, p. 1476, §8.)
The commissioner shall consult with the State Board of Health on all aspects related to the provision of medical services under the Alabama Health Insurance Plan and the Alabama Small Employer Allocation Program established under this chapter. All regulations, bylaws, policies, guidelines, or directives issued by the commissioner applicable to the Alabama Health Insurance Plan and the Alabama Small Employer Allocation Program pertaining to the delivery of medical services, including, but not limited to, those items specified in subdivisions (8), (13), (14), (15) of Section 27-52-2 and Section 27-52-4, shall be promulgated with the concurrence of the State Board of Health.
(Acts 1997, No. 97-713, p. 1476, §9.)
As used in this chapter, the following terms shall have the following meanings:
(1) GENETIC CHARACTERISTICS. A scientifically or medically identifiable gene or chromosome, or alteration thereof, that is known to be a cause of a disease or disorder, or determined to be associated with a statistically increased risk of development of a disease or disorder.
(2) GENETIC TEST. A pre-symptomatic laboratory test which is generally accepted in the scientific and medical communities for the determination of the presence or absence of the genetic characteristics that cause or are associated with risk of a disease or disorder.
(3) HEALTH BENEFIT PLAN. A health insurance policy, including a self-insured health plan, that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. For the purpose of this chapter, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 4 of Title 10.
(Acts 1997, No. 97-721, p. 1492, §1.)
(a) A health benefit plan may not require as a condition of insurability that a person take a genetic test to determine if the person has a predisposition for cancer.
(b) A health benefit plan may not use the results of a genetic test which may show the predisposition of a person for cancer to determine insurability or to otherwise discriminate against the person in rates or benefits based on the genetic test results.
(Acts 1997, No. 97-721, p. 1492, §2.)
A license issued by the Department of Insurance to an insurance company or a health maintenance organization shall be subject to suspension, revocation, or imposition or other administrative penalty authorized by law, within the discretion of the Commissioner of Insurance, for any violation of the provisions of this chapter.
(Acts 1997, No. 97-721, p. 1492, §3.)
This chapter shall apply to all programs administered by the Alabama Medicaid Agency.
(Acts 1997, No. 97-721, p. 1492, §4.)
(a) The Legislature finds the following:
(1) Mental illness affects many citizens of this state each year, resulting in anguish, grief, desperation, fear, isolation, and a sense of hopelessness of significant levels among victims and families.
(2) Consequences of mental illness include the significant expenditures of public operating funds for treatment and losses of millions of dollars by businesses in the state in accidents, absenteeism, nonproductivity, and turnover. Excessive stress and anxiety and other forms of mental illness clearly contribute to general health problems and costs.
(3) Typical health coverage in this state by some insurers provides individuals and affected families of mental illness with nonexistent or limited benefits compared to provisions for other illnesses.
(4) Experience in this state and several other states demonstrates that the risk of mental illness can be insured at reasonable additional cost, provided strict controls on quality and utilization of treatment are applied.
(b) The Legislature declares that the following is the policy of this state:
(1) To promote equitable and nondiscriminatory health coverage benefits for all forms of illness including mental and emotional disorders that are of significant consequence to the health of people of the state and that can be treated in a cost-effective manner.
(2) To ensure that victims of mental and other illnesses have access to and choice of appropriate treatment at the earliest point of illness in the least restrictive settings.
(3) To ensure that costs of treatment of mental illness are supported through an equitable combination of public and private responsibilities.
(Act 2000-386, p. 605, §§1, 2.)
For purposes of this chapter, the following terms have the following meanings:
(1) DAY TREATMENT SERVICES. Includes, but is not limited to: Physiological, psychological, and psychosocial concepts, techniques, and processes necessary to maintain or develop functional skills of clients, provided to individuals and groups for periods of more than two hours but less than 24 hours a day.
(2) HEALTH BENEFIT PLAN. A health care service plan governed by the provisions of Article 6, Chapter 4, Title 10, and a group health insurance policy, including an employee welfare health benefit plan, that covers hospital, medical, or surgical expenses, issued by insurers, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. For the purposes of this chapter, a group health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to the provisions of this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama.
(3) INPATIENT SERVICES. Includes, but is not limited to: A range of physiological, psychological, and other intervention concepts, techniques, and processes used in a community mental health psychiatric inpatient unit, general hospital psychiatric unit or psychiatric hospital licensed by the Department of Health, or in an accredited public hospital to restore psychosocial functioning sufficient to allow maintenance and support of the client in a less restrictive setting.
(4) OUTPATIENT SERVICES. Includes, but is not limited to: Screening, evaluation, consultations, diagnosis, and treatment involving use of physiological, psychological, and psychosocial evaluative and interventive concepts, techniques, and processes provided to individuals and groups.
(5) PROVIDER. An appropriately licensed mental health professional, an accredited public hospital or psychiatric hospital, or a community agency certified as a community mental health center by the Department of Mental Health. All agency or institutional providers named in this subdivision shall ensure that services are supervised by an appropriately licensed mental health professional.
In the case of service benefit plans which provide coverage for mental illness services through a limited network of selected mental health providers, the term “provider” means a person or entity who is duly selected and participating via contract or other arrangement with the insurer or other issuer of benefit coverage under selection criteria, including the designation of types of providers for which coverage is provided as well as credentialing used in the selection of providers, solely determined by such issuer.
(Act 2000-386, p. 605, §3.)
Each group health benefit plan shall offer to provide, at a minimum, the following additional benefits for a person suffering from a mental or nervous condition:
(1) Inpatient services.
(2) Day treatment services.
(3) Outpatient services.
(Act 2000-386, p. 605, §4.)
(a) All group health benefit plans shall offer to provide, at a minimum, additional benefits according to this chapter for a person receiving medical treatment for any of the following mental illnesses diagnosed by an appropriately licensed provider.
(1) Schizophrenia, schizophrenia form disorder, schizo affective disorder.
(2) Bipolar disorder.
(3) Panic disorder.
(4) Obsessive-compulsive disorder.
(5) Major depressive disorder.
(6) Anxiety disorders.
(7) Mood disorders.
(8) Any condition or disorder involving mental illness, excluding alcohol and substance abuse, that falls under any of the diagnostic categories listed in the mental disorders section of the International Classification of Disease, as periodically revised.
(b) All group health benefit plans, policies, contracts, and certificates executed, delivered, issued for delivery, continue, or renewed in this state on or after January 1, 2001, shall offer, at the time of proposal, sale, or renewal of a policy subject to this chapter, to provide additional mental health benefits which meet the requirements of this chapter. For purposes of this subsection, all contracts are deemed renewed no later than the next yearly anniversary of the contract date.
(1) The group health benefit plan shall offer to provide benefits for the treatment and diagnosis of mental illnesses under terms and conditions that are no less extensive than the benefits provided for medical treatment for physical illnesses.
(2) At the request of a reimbursing group health benefit plan, a provider of medical treatment for mental illness shall furnish data substantiating that initial or continued treatment is medically necessary and appropriate. When making the determination of whether treatment is medically necessary and appropriate, the insurer or other issuer of the group health benefit plan shall use the same criteria for medical treatment for mental illness as for medical treatment for physical illness under the contract.
(3) This chapter does not apply to group health benefit plans covering employers with 50 or fewer employees, whether the group policy is issued to the employer, to an association, to a multiple-employer trust, or to another entity.
(4) This chapter does not require and shall not be construed to require coverage and benefits for the treatment of alcoholism and other drug dependencies through the diagnosis of a mental illness listed in subsection (a).
(5) This chapter does not require and shall not be construed to require the coverage of services of providers who are not designated as covered providers, or who are not selected as a participating provider, by a group health benefit plan or issuer having a participating network of service providers. Provided, however, reasonable effort shall be made to include a sufficient number of qualified providers to insure reasonable access to services.
(6) Insurers and other issuers of limited or restricted mental health provider networks shall continue to be able to establish and apply selection criteria and utilization protocols for mental health providers including the designation of types of providers for which coverage is provided as well as credentialing criteria used in the selection of providers.
(7) Provided further, employer sponsors of group health benefit plans are not required to purchase additional coverage for mental health services that are offered pursuant to this chapter.
(Act 2000-386, p. 605, §5.)
(a) A group health benefit plan, policy, or contract that provides coverage for the services to be offered pursuant to this chapter may contain provisions for maximum benefits and coinsurance and limitations, deductibles, exclusions, and utilization review protocols to the extent that these provisions are not inconsistent with the requirements of this chapter.
(b) The issuer of a group health benefit plan, policy, or contract may either disclose the additional premium for such additional mental health benefits to the prospective contract holder and allow the contract holder to elect such additional benefits on an optional basis; or conform its policies, contracts, or certificates issued on and after January 1, 2001, and adjust its premium costs to reflect the additional benefit costs.
(Act 2000-386, p. 605, §6.)
Every issuer of a group health benefit plan subject to this chapter shall provide a cost report for each calendar year to the Commissioner of Insurance no later than April 30th of the following year. The report shall be in a form prescribed by the commissioner and shall include certification of parity in mental health benefits and total annual costs of mental health services relative to total health costs. The commissioner shall compile this data for all health benefit plans in an annual report solely for the purpose of demonstrating the health cost impact of the requirements of this chapter.
(Act 2000-386, p. 605, §7.)
This chapter shall supersede subsection (c), Section 27-1-18, and any other conflicting laws to the extent there is a conflict with this chapter.
(Act 2000-386, p. 605, §8.)
This chapter may be known and cited as the Riley Ward Act.
(Act 2012-298, p. 647, §1.)
(a) As used in this section, the following words have the following meanings:
(1) APPLIED BEHAVIOR ANALYSIS. The design, implementation, and evaluation of environmental modifications, using behavioral stimuli and consequences, to produce socially significant improvement in human behavior, including the use of direct observation, measurement, and functional analysis of the relationship between environment and behavior.
(2) AUTISM SPECTRUM DISORDER. Any of the pervasive developmental disorders or autism spectrum disorders as defined by the most recent edition of the Diagnostic and Statistical Manual of Mental Disorders (DSM) or the edition that was in effect at the time of diagnosis.
(3) BEHAVIORAL HEALTH TREATMENT. Counseling and treatment programs, including applied behavior analysis that are both of the following:
a. Necessary to develop, maintain, or restore, to the maximum extent practicable, the functioning of an individual.
b. Provided or supervised, either in person or by telemedicine, by a Board Certified Behavior Analyst, licensed in the State of Alabama, or a psychologist, licensed in the State of Alabama, so long as the services performed are commensurate with the psychologist’s formal university training and supervised experience.
c. Behavioral health treatment does not include psychological testing, neuropsychology, psychotherapy, intellectual assessment, cognitive therapy, sex therapy, psychoanalysis, hypotherapy, and long-term counseling as treatment modalities.
(4) DIAGNOSIS OF AUTISM SPECTRUM DISORDER. Medically necessary assessment, evaluations, or tests to diagnose whether an individual has an autism spectrum disorder.
(5) HEALTH BENEFIT PLAN. Any group insurance plan, policy, or contract for health care services that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes group health care services to patients, insureds, or beneficiaries in this state. For the purposes of this section, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to this section if the plan, policy, or contract is issued or delivered in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6, Chapter 20, Title 10A. On and after December 31, 2018, the term includes health insurance plans administered or offered by the State Employees Insurance Board and the Public Education Employees Health Insurance Plan. The term does not include the Alabama Health Insurance Plan or the Alabama Small Employer Allocation Program provided in Chapter 52 of this title. The term also includes the terms health insurance policy and health insurance plan. The term does not include non-grandfathered plans in the individual and small group markets that were required to provide essential health benefits under the Patient Protection and Affordable Care Act as of January 1, 2017, or accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare-supplement, long-term care, or disability income insurance, other limited benefit health insurance policies, coverage issued as a supplemental to liability insurance, workers’ compensation or similar insurance, or automobile medical-payment insurance.
(6) PHARMACY CARE. Medications prescribed by a licensed physician and any health related services deemed medically necessary to determine the need or effectiveness of the medications.
(7) PSYCHIATRIC CARE. Direct or consultative services provided by a psychiatrist licensed in the State of Alabama.
(8) PSYCHOLOGICAL CARE. Direct or consultative services provided by a psychologist licensed in the State of Alabama.
(9) THERAPEUTIC CARE. Services provided by licensed and certified speech therapists, occupational therapists, or physical therapists.
(10) TREATMENT FOR AUTISM SPECTRUM DISORDER. Evidence-based care prescribed or ordered for an individual diagnosed with an autism spectrum disorder by a licensed physician or a licensed psychologist who determines the care to be medically necessary, including, but not limited to, all of the following:
a. Behavioral health treatment.
b. Pharmacy care.
c. Psychiatric care.
d. Psychological care.
e. Therapeutic care.
(b)(1) A health benefit plan shall cover the screening, diagnosis, and treatment of Autism Spectrum Disorder for an insured 18 years of age or under in policies and contracts issued or delivered in the State of Alabama to employers with at least 51 employees for at least 50 percent of its working days during the preceding calendar year. Coverage provided under this section is limited to treatment that is prescribed by the insured’s treating licensed physician or licensed psychologist in accordance with a treatment plan.
(2) To the extent that the screening, diagnosis, and treatment of autism spectrum disorder are not already covered by a health insurance policy, a health benefit plan shall include coverage under this section in policies and contracts that are delivered, executed, issued, amended, adjusted, or renewed in the State of Alabama on or after October 1, 2017.
(3) A health benefit plan may not deny or refuse to issue coverage on, refuse to contract with, or refuse to renew or refuse to reissue or otherwise terminate or restrict coverage on an individual solely because the individual is diagnosed with Autism Spectrum Disorder.
(c)(1) Except as provided in subsection (g), the coverage required pursuant to this section shall not be subject to dollar limits, deductibles, or coinsurance provisions that are less favorable to an insured than the dollar limits, deductibles, or coinsurance provisions that apply to substantially all medical and surgical benefits under the health insurance plan.
(2) The coverage required pursuant to subsection (b) may be subject to other general exclusions and limitations of the health benefit plan, including, but not limited to, coordination of benefits, participating provider requirements, restrictions on services provided by family or household members, utilization review of health care services including review of medical necessity, case management, and other managed care provisions.
(d) Coverage under this section shall not be subject to any limits on the number of visits an individual may make for treatment of autism spectrum disorder.
(e) This section may not be construed as limiting benefits that are otherwise available to an individual under a health insurance policy.
(f) Coverage for applied behavior analysis shall include the services of the personnel who work under the supervision of the board certified behavior analyst or the licensed psychologist overseeing the program.
(g)(1) Except as provided in subdivision (2), coverage provided under this section for applied behavior analysis shall be subject to a maximum benefit as follows:
a. Forty thousand dollars ($40,000) per year for an insured individual between zero and nine years of age.
b. Thirty thousand dollars ($30,000) per year for an insured individual between 10 and 13 years of age.
c. Twenty thousand dollars ($20,000) per year for an insured individual between 14 and 18 years of age.
(2) The maximum benefit limit may be exceeded, upon prior approval by the insurer administering a health benefit plan, if the provision of applied behavior analysis services beyond the maximum limit is medically necessary for the insured individual. Payments made by a health benefit plan on behalf of an individual for any care, treatment, intervention, service, or item, the provision of which was for the treatment of a health condition unrelated to the individual’s autism spectrum disorder, shall not be applied toward any maximum benefit established under this subsection. Any coverage required under this section, other than the coverage for applied behavior analysis, shall not be subject to the dollar limitations described in this subsection.
(h) This section may not be construed as affecting any obligation to provide services to an individual under an individualized family service plan, an individualized education program, or an individualized service plan.
(i) The treatment plan required pursuant to subsection (b) shall include all elements necessary for the health insurance plan to appropriately pay claims. These elements include, but are not limited to, a diagnosis, proposed treatment by type, frequency, and duration of treatment, the anticipated outcomes stated as goals, the frequency by which the treatment plan will be updated, and the treating licensed physician’s or licensed psychologist’s signature. The health insurance plan may request an updated treatment plan only once every six months from the treating licensed physician or licensed psychologist to review medical necessity, unless the health insurance plan and the treating licensed physician or licensed psychologist agree that a more frequent review is necessary for a particular patient. Any agreement regarding the right to review a treatment plan more frequently applies only to a particular insured being treated for an autism spectrum disorder and does not apply to all individuals being treated for autism spectrum disorder by a physician or psychologist. The cost of obtaining any review or treatment plan shall be borne by the insurer.
(Act 2012-298, p. 647, §2; Act 2017-337, §1.)
This chapter shall be known as and may be cited as the Domestic Abuse Insurance Protection Act.
(Act 2000-595, p. 1185, §1.)
As used in this chapter, these terms shall have the following meanings:
(1) ABUSE. The occurrence of one or more of the following acts by a family or household member, as defined by subdivision (3) of subsection (b) of Section 15-10-3:
a. Attempting to cause or intentionally, knowingly, or recklessly causing another person, including a minor child, bodily injury, severe emotional injury, or psychological trauma or conduct which constitutes the crime of rape.
b. Intentionally following another person, including a minor child, without proper authority, under circumstances that place the person in reasonable fear of bodily injury or physical harm.
c. Subjecting another person, including a minor child, to false imprisonment or kidnapping.
d. Attempting to cause or intentionally, knowingly, or recklessly causing damage to property to intimidate or attempt to control the behavior of another person, including a minor child.
e. Assault, child abuse, criminal coercion, harassment, kidnapping, reckless endangerment, sexual abuse, stalking, trespass, or unlawful imprisonment as defined by subdivision (1) of subsection (a) of Section 30-5-2.
(2) ABUSE-RELATED CLAIM. A claim under an insurance policy or health benefit plan for a loss which resulted from an act of abuse as defined in this chapter.
(3) ABUSE-RELATED MEDICAL CONDITION. A medical condition sustained by a subject of abuse which arises in whole or in part out of an act or pattern of abuse as defined in this chapter.
(4) ABUSE STATUS. The fact that a person is or has been the subject of abuse and has sustained abuse-related medical conditions or has incurred abuse-related claims.
(5) COMMISSIONER. The Commissioner of the state Department of Insurance.
(6) CONFIDENTIAL ABUSE INFORMATION. Information about the acts of abuse or abuse status of a subject of abuse, the address and telephone number, home and work, of a subject of abuse, or the status of an applicant or insured as a family member, employer, or associate of, or a person in a relationship with a subject of abuse.
(7) EVIDENCE OF ABUSE. A court order, police report, medical report, or report from the Department of Human Resources, or a shelter for domestic violence victims, indicating that the insured is or has been the subject of abuse.
(8) HEALTH BENEFIT PLAN. A policy, contract, certificate, or agreement offered by a health carrier to provide, deliver, arrange, pay for, or reimburse any of the costs of health care services or health care benefit. Without limiting the generality of the foregoing the term health benefit plan includes accident only, credit, health, dental, vision, Medicare supplement, long-term and catastrophic health insurance policies, and employer or union-sponsored employee welfare benefit plans for both, or both. The term health care benefit plan does not, however, include workers’ compensation or similar insurance.
(9) HEALTH CARRIER. A person or entity subject to regulation under this chapter who or which contracts or offers to contract to provide, deliver, arrange for, pay for, or reimburse any costs of health care services including, without limitation, a sickness and accident insurance company, a health maintenance organization, mutual aid associations, a fraternal benefit society, a hospital service corporation, or any other entity providing a plan of health insurance, including entities created pursuant to Article 6 (commencing with Section 10A-20-6.01), Chapter 20, Title 10A.
(10) INSURED. A party named on a policy or health benefit plan as the person with legal rights to the benefits provided by the policy or health benefit plan, except that for life insurance, insured means the person whose life is covered under the policy. For group plans and group insurance, insured includes a covered person.
(11) INSURER. A person or other legal entity engaged in the business of insurance in this state, including agents, brokers, adjusters, and third-party administrators. Insurer includes a health carrier.
(12) POLICY. A contract of insurance, certificate, indemnity, suretyship, or annuity issued, proposed for issuance, or intended for issuance by an insurer, including endorsements or riders to an insurance policy or contract.
(13) SUBJECT OF ABUSE. A person, including a minor child, against whom an act of abuse has been committed a. who has current or prior injuries, illnesses, or disorders that resulted from an act of abuse or b. who seeks, or has sought 1. medical or psychological treatment for abuse, or 2. court-ordered protection or shelter from abuse at a domestic violence center.
(14) OTHER TERMS. Terms not otherwise defined by this chapter shall have the meanings given to them in this title, known as the Alabama Insurance Code.
(Act 2000-595, p. 1185, §2.)
(a) No insurer may:
(1) Deny, refuse to issue, renew, or reissue, cancel, or otherwise terminate, restrict, or exclude coverage on an insurance policy or health benefit plan on the basis of an applicant’s or insured’s abuse status, or on the basis of any association, relationship, or assistance to a subject of abuse.
(2) Exclude or limit coverage for a loss, deny benefits, or deny a claim on the basis of the insured’s abuse status, or on the basis of any association, relationship, or assistance to a subject of abuse, except as otherwise permitted or required by the laws of this state relating to acts of abuse committed by a life insurance beneficiary. Notwithstanding anything to the contrary in this section, a liability insurer may include policy provisions providing that a payment required by this subsection may be denied or, if paid, recovered by the insurer from the insured, if the claim arose out of an act of abuse by the insured.
(3) Add a premium differential to an insurance policy or health benefit plan on the basis of an applicant’s or insured’s abuse status, or on the basis of any association, relationship, or assistance to a subject of abuse.
(4) Terminate health coverage for a subject of abuse, where the subject of abuse does not qualify for coverage under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), because coverage originally was issued in the name of the abuser and the abuser has divorced, separated from, or lost custody of the subject of abuse or the abuser’s coverage has terminated voluntarily or involuntarily. Nothing in this subdivision shall prohibit the insurer from requiring the subject of abuse to pay the full premium for the subject’s coverage or requiring the subject of abuse to reside or work within its service area if the requirements are applied to all insureds of the insurer or health carrier. The insurer may terminate coverage after the continuation coverage required by this subdivision has been in force for 18 months. The continuation coverage required by this subdivision shall be satisfied by a COBRA coverage provided to a subject of abuse and is not intended to be in addition to any coverage provided under COBRA.
(b) When the insurer has information in its possession that indicates that the applicant, insured, or claimant is a subject of abuse, it is a violation of this section for an insurer to disclose confidential abuse information for any purpose or to any person, except:
(1) To a subject of abuse or a person specifically designated in writing by a subject of abuse.
(2) To a health care provider for the direct provision of health care services.
(3) To a licensed physician identified and designated by the subject of abuse.
(4) When ordered by the commissioner or a court of competent jurisdiction or otherwise required by law.
(5) When necessary for a valid business purpose to transfer information that includes confidential abuse information. Confidential abuse information may be disclosed only to the following persons:
a. A reinsurer that seeks to indemnify or indemnifies all or part of a policy covering a subject of abuse and that cannot underwrite or satisfy its obligations under the reinsurance agreement without disclosure.
b. A party to a proposed or consummated sale, transfer, merger, or consolidation of all or part of the business of the insurer.
c. Medical or claims personnel contracting with the insurer, including parent or affiliate companies of the insurer that have service agreements with the insurer, only when necessary to process an application or perform the insurer’s duties under the policy or to protect the safety or privacy of a subject of abuse.
d. With respect to address and telephone number, an entity with whom the insurer transacts business when the business cannot be transacted without the address and telephone number.
(6) To an attorney who needs the information to represent the insurer effectively, if the insurer notifies the attorney of its obligations under this chapter and requests that the attorney exercise due diligence to protect the confidential abuse information consistent with the attorney’s obligation to represent the insurer.
(7) To the policy owner or assignee, in the course of delivery of the policy, if the policy contains information about the abuse status.
(8) To any other entity deemed appropriate by the commissioner.
(c) No insurer may require an applicant to disclose information relating to acts of abuse or an applicant’s abuse status for use or consideration as part of the initial application for coverage in the health or medical underwriting process. However, this section does not prohibit an insurer from asking an applicant or insured about a medical condition or a claim or from using information thereby obtained to underwrite or to evaluate and carry out its rights and duties under the policy, even if the information is related to a medical condition or claim that the insurer knows or has reason to know is abuse-related, to the extent otherwise permitted under this chapter and other applicable law.
(d) This section does not preclude a subject of abuse from obtaining his or her own medical records from an insurer.
(e) A subject of abuse must provide evidence of abuse to an insurer to come within the protection afforded by this chapter or to facilitate treatment of an abuse-related condition, or both, or demonstrate that a condition is abuse related. A person must provide evidence of abuse to an insurer to demonstrate that a property and casualty claim is abuse related. Nothing in this subsection shall be construed to authorize an insurer to disregard that information or the confidentiality of the source of information or evidence.
(f) This section does not prohibit a property or casualty insurer from denying a property claim when the damage or loss is the result of intentional conduct by a named insured who commits an act of abuse, except that the property and casualty insurer shall make payment on such a claim to an innocent co-insured subject of abuse to the extent of the innocent co-insured’s interest in the property and within the limits of coverage when the damage or loss was proximately related to and in furtherance of abuse. To recover for a claim under this subsection, the innocent co-insured is required to do one of the following: (1) File a complaint under the “Protection from Abuse Act,” Section 30-5-1 et seq., against the abuser for the act causing this loss, and not voluntarily dismiss the complaint, or (2) seek a warrant for the abuser’s arrest for the act causing this loss and cooperate in the prosecution of the abuser. A property and casualty insurer paying a claim shall be subrogated to the rights of the innocent co-insured subject of abuse to recover for any damages paid by the insurance.
Nothing in this chapter shall prohibit a property or casualty insurer from nonrenewing coverage for the subject of abuse if, after a claim, the subject of abuse remains married to or continues to reside in the same household with the abuser.
(g) This section does not prohibit a life insurer from declining to issue a life insurance policy if the applicant or prospective owner of the policy is or would be designated as a beneficiary of the policy, and if:
(1) The applicant or prospective owner of the policy lacks an insurable interest in the prospective insured.
(2) The applicant or prospective owner of the policy is known on the basis of medical, police, or court records to have committed an act of abuse against the prospective insured.
(3) The insured or prospective insured is a subject of abuse, and that person, or a person who has assumed the care of that person, if a minor or incapacitated, has objected to the issuance of the policy on the ground that the policy would be issued to or for the direct or indirect benefit of the abuser.
(h) An insurer shall not be held civilly or criminally liable for the death of or injury to an insured resulting from any action taken in a good faith effort to comply with the requirements of this chapter. This subsection does not prevent an action by the commissioner to investigate or enforce a violation of this chapter.
(Act 2000-595, p. 1185, §3.)
An insurer that takes an action which adversely affects a subject of abuse, or a related individual or entity, based on an abuse-related medical condition, abuse-related claim, abuse status, or association or relationship with a subject of abuse, pursuant to an individual or group insurance policy or health benefit plan, shall advise the applicant or the insured of the specific reasons for the action in writing. Reference to general underwriting practices or guidelines shall constitute a specific reason. The specific reason for the actions of the insurer shall be stated in writing. The actions of the health carrier or insurer, and any applicable policy provisions, shall be applied equally to all applicants or insureds with similar medical conditions or similar claim or claims history without regard to whether the condition or the claims are abuse related.
(Act 2000-595, p. 1185, §4.)
This chapter shall not be applied or construed to prohibit or limit the application or scope of coverage, limitations, exclusions, and other terms and provisions of insurance contracts so long as such terms and provisions do not apply solely to persons who are in abuse status.
(Act 2000-595, p. 1185, §5.)
(a) A person claiming to be adversely affected by an act or practice prohibited by this chapter may file a complaint with the commissioner for individual relief seeking remedies and penalties authorized by this chapter.
(b) The commissioner shall conduct a reasonable investigation based on a written and signed complaint received by the commissioner and shall issue a prompt determination as to whether a violation of this chapter has occurred. If the commissioner finds from the investigation that a violation of this chapter has occurred, the commissioner shall promptly begin proceedings to address the violation through means such as imposition of injunctive relief, requiring restitution, and, in cases of repeated violation after previous findings or warnings of violations from the commissioner, suspension or revocation of certificates of authority or licenses. The powers and duties set forth in this chapter shall be in addition to all other authority of the commissioner.
(c) An insurer which is found by the commissioner to have violated this chapter may be ordered by the commissioner to do any of the following:
(1) Pay a civil penalty not to exceed five thousand dollars ($5,000) for each act or violation. Each violation shall be a separate offense.
(2) Provide appropriate specific relief, other than the award of damages, to the complainant which may include temporary, preliminary, or permanent injunctive relief.
(Act 2000-595, p. 1185, §6.)
The commissioner shall enforce this chapter in the manner authorized for the enforcement of this title. In lieu of any other penalty provided in this title, a violation of this chapter shall be punishable as provided by Section 27-55-6.
(Act 2000-595, p. 1185, §7.)
This chapter does not and shall not be construed as creating a private cause of action and does not and shall not require insurers, including any health benefit plan, to extend coverage to any providers or type of providers for which coverage is not specifically provided within the policy or certificate of insurance or health benefit plan, or to add additional providers to existing networks, or to add any health care benefits.
(Act 2000-595, p. 1185, §8.)
Nothing in this chapter shall require an insurer to conduct a comprehensive search of its contract files existing on August 1, 2000, to determine which applicants or insureds are subjects of abuse.
(Act 2000-595, p. 1185, §10.)
This chapter shall be known and may be cited as the “Access to Eye Care Act.”
(Act 2001-477, p. 640, §1.)
As used in this chapter, the following terms shall have the following meanings:
(1) COVERED PERSON. Any individual, family, or family member on whose behalf third-party payment or prepayment of health or medical expenses is provided under an insurance policy, plan, or contract providing for third-party payment or prepayment of health care or medical expenses.
(2) EYE CARE PROVIDER. A licensed optometrist or a licensed ophthalmologist.
(3) INSURANCE POLICY, PLAN, OR CONTRACT PROVIDING FOR THIRD-PARTY PAYMENT OR PREPAYMENT OF HEALTH OR MEDICAL EXPENSES. Includes an individual or group policy for accident or health insurance, an individual or group hospital or health care service contract, an individual or group health maintenance organization contract, an organized delivery system contract, or a preferred provider organization contract, and any other similar policy, plan, or contract. This term shall not include any employee welfare benefit plan, as defined in 29 U.S.C. Section 1002(1), or any plan administered by a third party to the extent it provides services to an employee welfare benefit plan, as defined in 29 U.S.C. Section 1002(1).
(Act 2001-477, p. 640, §2.)
An insurance policy, plan, or contract providing for third-party payment or prepayment of health or medical expenses shall include a provision for the payment to a licensed optometrist for each service which falls within the scope of the optometrist’s license, if the policy, plan, or contract pays for the same service when provided by any other provider for such services.
(Act 2001-477, p. 640, §3.)
An insurance policy, plan, or contract providing for third-party payment or prepayment of health or medical expenses shall not do any of the following:
(1) Impose a practice restriction for optometrists which is inconsistent with or more restrictive than provided by law.
(2) Discriminate between classes of eye care providers with respect to any covered service which falls within the scope of the eye care provider’s license.
(3) Require an eye care provider to hold hospital privileges as a condition of participation in or receiving payment from the policy, plan, or contract.
(4) Impose any restriction not required by law based on the eye care provider’s professional degree.
(5) Discriminate between eye care providers in connection with the amount of reimbursement for the provision of the same services.
(6) Require an eye care provider to purchase or maintain a minimum quantity or minimum dollar amount of a specified brand of ophthalmic materials as a condition of participation in or receiving payments from a policy, plan, or contract.
(Act 2001-477, p. 640, §4; Act 2010-583, p. 1303, §1.)
(a) No insurance policy, plan, or contract providing for third-party payment or prepayment of health or medical expenses that provides coverage for eye care services shall be issued or renewed after August 1, 2001, unless such insurance policy, plan, or contract does the following:
(1) Provides a covered person direct access to any eye care provider participating in, or otherwise eligible to provide services under, the policy, plan, or contract for all eye care services covered under the policy, plan, or contract, without any referral or preapproval requirement, including, but not limited to, the following services, if covered:
a. Medical treatment of glaucoma.
b. Postoperative eye care.
(2) Ensures that any list of medical or health care providers participating in, or otherwise eligible to provide services under, the policy, plan, or contract includes eye care providers to the same extent that such list includes other medical or health care providers to whom a covered person has direct access, without need for referral or preapproval, under the policy, plan, or contract.
(b) An insurance policy, plan, or contract providing for third-party payment or prepayment of health or medical expenses shall not deny or limit reimbursement to any covered person on the ground that the covered person was not referred to the eye care provider by a person acting on behalf of, or under an agreement with, the company, entity, or person providing the insurance policy, plan, or contract.
(Act 2001-477, p. 640, §5.)
This chapter shall apply to services provided under a policy, plan, or contract providing for third-party payment or prepayment of health or medical expenses delivered, continued, or renewed in this state on or after August 1, 2001, and to any such existing policy, plan, or contract, on its anniversary or renewal date, or upon the expiration of the applicable collective bargaining contract, if any, whichever is later.
(Act 2001-477, p. 640, §6.)
(a) This chapter does not require and shall not be construed to require any insurance policy, plan, or contract to provide health care coverage for eye care. The provisions of this chapter are applicable only to those insurance policies, plans, or contracts which provide coverage for eye care.
(b) Insurers or other issuers of any insurance policy, plan, or contract which provides coverage for eye care shall continue to be able to establish and apply selection criteria and utilization protocols for health care providers as well as credentialing criteria used in the selection of providers.
(c) This chapter does not require and shall not be construed to require the coverage of eye care services by providers who are not designated as covered providers, or who are not selected as participating providers, by an insurance policy, plan, or contract, or the issuer thereof having a participating network of service providers. Provided, however, if eye care coverage is provided, reasonable efforts shall be made to include a sufficient number of qualified providers, including optometrists, to insure reasonable access to eye care services.
(Act 2001-477, p. 640, §7.)
(a) Any insurance policy, plan, or contract that provides coverage for eye care services may contain provisions for maximum benefits and coinsurance limitations, deductibles, exclusions, and utilization review protocols to the extent that these provisions are not inconsistent with the requirements of this chapter.
(b) If eye care coverage is provided, the eye care benefits for services provided by optometrists within the scope of their licenses shall be subject to the same annual deductible or coinsurance established for all other eye care providers for which coverage is provided.
(Act 2001-477, p. 640, §8.)
Nothing in this chapter shall be construed to expand the scope of practice for any eye care provider.
(Act 2001-477, p. 640, § 11.)
(a) As used in this section, the following words shall have the following meanings:
(1) CONTRACTUAL DISCOUNT. A percentage reduction from a provider’s usual and customary rate for covered services and materials required under a participating provider agreement.
(2) COVERED MATERIALS. Materials for which reimbursement from the insurer or vision care plan is provided to a vision care provider by an enrollee’s plan contract, or for which a reimbursement would be available but for the application of the enrollee’s contractual limitations of deductibles, copayments, or coinsurance.
(3) COVERED SERVICES. Services for which reimbursement from the insurer or vision care plan is provided to a vision care provider by an enrollee’s plan contract, or for which a reimbursement would be available but for the application of the enrollee’s contractual plan limitations of deductibles, copayments, or coinsurance.
(4) INSURER. A health plan as defined in subdivision (3) of Section 27-56-2. The term shall not include corporations organized pursuant to Article 6 of Chapter 20 of Title 10A, commencing at Section 10A-20-6.01, or to policies, plans, or contracts entered into, issued by, or administered by such corporations.
(5) MATERIALS. Ophthalmic devices, including, but not limited to, lenses, devices containing lenses, artificial intraocular lenses, ophthalmic frames and other lens mounting apparatus, prisms, lens treatments and coatings, contact lenses, and prosthetic devices to correct, relieve, or treat defects or abnormal conditions of the human eye or its adnexa.
(6) SERVICES. The professional work performed by a vision care provider.
(7) VISION CARE PLAN. An entity that creates, promotes, sells, provides, advertises, or administers an integrated or standalone vision benefit plan, or a vision care insurance policy or contract that provides vision benefits to an enrollee pertaining to the provision of covered services or covered materials. The term shall not include corporations organized pursuant to Article 6 of Chapter 20 of Title 10A, commencing at Section 10A-20-6.01, or to policies, plans, or contracts entered into, issued by, or administered by such corporations.
(8) VISION CARE PROVIDER. A licensed optometrist or a licensed ophthalmologist.
(b) A contract between an insurer or a vision care plan and a vision care provider may not:
(1) Require that a vision care provider provide services or materials at a fee limited or set by the insurer or vision care plan, unless the services or materials are reimbursed covered services or reimbursed covered materials under the contract.
(2) Require that a vision care provider participate with or be credentialed by any specific vision care plan as a condition to join an insurer’s provider panel.
(3) Restrict or limit, either directly or indirectly, the vision care provider’s choice of sources and suppliers of services or materials or use of optical labs in his or her practice.
(c) A vision care provider may not charge more to an enrollee of a vision care plan or insurer for services or materials that are not covered services or not covered materials than the vision care provider’s usual and customary rate for those services and materials.
(d) Reimbursements paid by an insurer or vision care plan for covered services and covered materials shall be reasonable and may not provide nominal reimbursement in order to claim that services and materials are covered services and covered materials.
(e) No provision of this section shall prohibit the use of a discount card by an enrollee if:
(1) Enrollment by the vision care provider is completely voluntary and not conditioned upon the vision care provider’s participating in any other discount card with different provider terms and conditions or a different insurance program; and
(2) The discount card program does not make or include any coverage or payment to the vision care provider.
(f) The Commissioner of Insurance may adopt rules pursuant to the Administrative Procedure Act to implement the provisions of this section.
(g) The provisions of this section apply to insurer or vision care plan contracts, addendums, and certificates executed, delivered, issued for delivery, continued or renewed in this state. A vision care plan contract under this section may not be longer than two years from the date that it is executed. Vision care plans are prohibited from making changes to the provider manual without notification to an individual vision care provider.
(Act 2015-481, §1.)
AMENDED BY ACT 2026-130, EFFECTIVE OCTOBER 1, 2026. SEE ACT FOR REVISED LANGUAGE.
As used in this chapter, the following words and terms shall have the following meanings:
(1) COLORECTAL CANCER EXAMINATIONS. Examinations and laboratory tests specified in current American Cancer Society guidelines for colorectal cancer screening of asymptomatic individuals.
(2) HEALTH BENEFIT PLAN. A group health insurance policy that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes health care services to patients, insureds, or beneficiaries in this state. For the purposes of this chapter, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in the State of Alabama or who receive health care services in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6, Chapter 20, Title 10A.
(3) POLICY. Any group health benefit plan, contract, or policy, except a disability income policy, and endorsements thereof, specified disease policy, or hospital indemnity policy.
(Act 2004-502, p. 969, §1.)
(a) All group health benefit plans, policies, contracts, and certificates executed, delivered, issued for delivery, continued, or renewed in this state on or after August 1, 2004, shall offer, at the time of proposal, sale, or renewal of a policy subject to this chapter, to include colorectal cancer examinations within the coverage. Such offer of coverage shall include colorectal cancer examinations for covered persons who are 50 years of age or older, or for covered persons who are less than 50 years of age and at high risk for colorectal cancer according to current American Cancer Society colorectal cancer screening guidelines.
(b) This chapter shall apply to group accident and sickness insurance policies issued by a fraternal benefit society, a nonprofit hospital service corporation, a nonprofit medical service corporation, a group health care plan, a health maintenance organization, or any similar entity.
(Act 2004-502, p. 969, §2.)
(a) Nothing in this chapter shall be construed to prohibit the issuance of policies which provide benefits greater than those required by Section 27-57-2, or more favorable to the insured than those required by Section 27-57-2.
(b) Nothing contained in this chapter shall be deemed to prohibit the payment of different levels of benefits or from having differences in coinsurance percentages applicable to benefit levels for services provided by preferred and nonpreferred providers as otherwise authorized by law relating to preferred provider arrangements.
(Act 2004-502, p. 969, §3.)
AMENDED BY ACT 2026-130, EFFECTIVE OCTOBER 1, 2026. SEE ACT FOR REVISED LANGUAGE.
(a) The coverage offered under Section 27-57-2 shall contain any exclusions, reductions, or other limitations as to coverages, deductibles, or coinsurance provisions which apply to that coverage as may be approved by the Commissioner of Insurance.
(b) The benefits provided in this chapter shall be subject to the same annual deductible or coinsurance established for all other covered benefits within a given policy.
(Act 2004-502, p. 969, §4.)
(a) This chapter does not require and shall not be construed to require the coverage of services of providers who are not designated as covered providers, or who are not selected as a participating provider, by a group health benefit plan or insurer having a participating network of service providers. Nothing in this chapter is intended to expand the list or designation of participating providers as specified in any health benefit plan.
(b) Insurers or other issuers of any health benefit plan covered by this chapter shall continue to be able to establish and apply selection criteria and utilization protocols for health care providers including the designation of types of providers for which coverage is provided as well as credentialing criteria used in the selection of providers.
(c) A group health benefit plan, policy, or contract that provides coverage for the services to be offered pursuant to this chapter may contain provisions for maximum benefits and coinsurance limitations, deductibles, exclusions, and utilization review protocols to the extent that these provisions are not inconsistent with the requirements of this chapter.
(Act 2004-502, p. 969, §5.)
(a) The issuer of a group health benefit plan, policy, or contract may either disclose the additional premium for such additional colorectal examination benefits to the prospective contract holder and allow the contract holder to elect such additional benefits on an optional basis; or conform its policies, contracts, or certificates issued on or after August 1, 2004, and adjust its premium cost to reflect the additional benefit cost.
(b) Employer sponsors of group health benefit plans are not required to purchase the additional benefits for colorectal examinations that are offered pursuant to this chapter.
(Act 2004-502, p. 969, §6.)
As used in this chapter, the following terms shall have the following meanings:
(1) HEALTH BENEFIT PLAN. Any individual or group plan, employee welfare benefit plan, policy, or contract for health care services issued, delivered, issued for delivery, or renewed in this state by a health care insurer, health maintenance organization, accident and sickness insurer, fraternal benefit society, nonprofit hospital service corporation, nonprofit medical service corporation, health care service plan, or any other person, firm, corporation, joint venture, or other similar business entity that pays for insureds or beneficiaries in this state. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 20 of Title 10A. A health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in Alabama. Provided, however, the term shall not include accident-only, specified disease, hospital indemnity, Medicare supplement, long-term care, disability income, or other limited benefit health insurance policies.
(2) SCREENING FOR THE EARLY DETECTION OF PROSTATE CANCER. At a minimum, a prostate-specific antigen blood test and a digital rectal examination.
(Act 2007-389, p. 778, §1.)
On and after October 1, 2007, each health benefit plan shall offer, together with identification of associated costs, policies and contracts including coverage for the annual screening for the early detection of prostate cancer in men over age 40.
(Act 2007-389, p. 778, §2.)
Screening for the early detection of prostate cancer shall be provided by a certified, registered, or licensed health care professional certified with expertise in such screening.
(Act 2007-389, p. 778, §3.)
(a) The benefits provided in this chapter shall be subject to the same annual deductible or coinsurance established for all covered benefits within a given policy. Private third party payors may not reduce or eliminate coverage due to the requirements of this chapter.
(b) A health benefit plan subject to this chapter shall not terminate services, reduce capitation payment, or otherwise penalize an attending physician or health care provider who orders medical care consistent with this chapter.
(c) Nothing in this chapter is intended to expand the list of designations of covered providers as specified in any health benefit plan.
(Act 2007-389, p. 778, §4.)
As used in this chapter, the following terms shall have the following meanings:
(1) HEALTH BENEFIT PLAN. Any individual or group plan, employee welfare benefit plan, policy, or contract for health care services issued, delivered, issued for delivery, or renewed in this state by a health care insurer, health maintenance organization, accident and sickness insurer, fraternal benefit society, nonprofit hospital service corporation, nonprofit medical service corporation, health care service plan, or any other person, firm, corporation, joint venture, or other similar business entity that pays for insureds or beneficiaries in this state. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 20 of Title 10A. A health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to this chapter if it receives, processes, adjudicates, pays, or denies claims for health care services submitted by or on behalf of patients, insureds, or beneficiaries who reside in Alabama. Provided, however, the term shall not include accident-only, specified disease, hospital indemnity, Medicare supplement, long-term care, disability income, or other limited benefit health insurance policies.
(2) CHIROPRACTIC. The same meaning as in Chapter 24 of Title 34.
(Act 2008-502, p. 1106, §1.)
On and after October 1, 2008, each health benefit plan shall offer, together with identification of associated costs, policies, and contracts, coverage for chiropractic.
(Act 2008-502, p. 1106, §2.)
(a) The benefits provided in this chapter shall be subject to the same annual deductible or co-insurance established for all covered benefits within a given policy. Private third party payors may not reduce or eliminate coverage due to the requirements of this chapter.
(b) A health benefit plan subject to this chapter may not terminate services, reduce capitation payment, or otherwise penalize an attending physician or health care provider who orders medical care consistent with this chapter.
(c) Nothing in this chapter is intended to expand the list of designations of covered providers as specified in any health benefit plan.
(Act 2008-502, p. 1106, §3.)
Pursuant to the terms and conditions of this chapter, the State of Alabama seeks to join with other states and establish the Interstate Insurance Product Regulation Compact, and thus become a member of the Interstate Insurance Product Regulation Commission. The Alabama Commissioner of Insurance is hereby designated to serve as the representative of this state to the commission.
(Act 2011-536, p. 928, §1.)
The State of Alabama hereby agrees to the following interstate compact known as the Interstate Insurance Product Regulation Compact:
ARTICLE I. PURPOSES.
The purposes of this compact are, through means of joint and cooperative action among the compacting states:
To promote and protect the interest of consumers of individual and group annuity, life insurance, disability income, and long-term care insurance products;
To develop uniform standards for insurance products covered under the compact;
To establish a central clearinghouse to receive and provide prompt review of insurance products covered under the compact and, in certain cases, advertisements related thereto, submitted by insurers authorized to do business in one or more compacting states;
To give appropriate regulatory approval to those product filings and advertisements satisfying the applicable uniform standard;
To improve coordination of regulatory resources and expertise between state insurance departments regarding the setting of uniform standards and review of insurance products covered under the compact;
To create the Interstate Insurance Product Regulation Commission; and
To perform these and such other related functions as may be consistent with the state regulation of the business of insurance.
ARTICLE II. DEFINITIONS.
For purposes of this compact:
“Advertisement” means any material designed to create public interest in a product, or induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace, or retain a policy, as more specifically defined in the rules and operating procedures of the commission.
“Bylaws” mean those bylaws established by the commission for its governance, or for directing or controlling the actions or conduct of the commission.
“Compacting state” means any state which has enacted this compact legislation and which has not withdrawn pursuant to Section 1 of Article XIV, or been terminated pursuant to Section 2 of Article XIV.
“Commission” means the Interstate Insurance Product Regulation Commission established by this compact.
“Commissioner” means the chief insurance regulatory official of a state including, but not limited to, commissioner, superintendent, director, or administrator.
“Domiciliary state” means the state in which an insurer is incorporated or organized; or, in the case of an alien insurer, its state of entry.
“Insurer” means any entity licensed by a state to issue contracts of insurance for any of the lines of insurance covered by this compact.
“Member” means the person chosen by a compacting state as its representative to the commission, or his or her designee.
“Non-compacting state” means any state which is not at the time a compacting state.
“Operating procedures” mean procedures promulgated by the commission implementing a rule, uniform standard, or a provision of this compact.
“Product” means the form of a policy or contract, including any application, endorsement, or related form which is attached to and made a part of the policy or contract, and any evidence of coverage or certificate, for an individual or group annuity, life insurance, disability income, or long-term care insurance product that an insurer is authorized to issue.
“Rule” means a statement of general or particular applicability and future effect promulgated by the commission, including a uniform standard developed pursuant to Article VII, designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of the commission, which shall have the force and effect of law in the compacting states.
“State” means any state, district, or territory of the United States of America.
“Third party filer” means an entity that submits a product filing to the commission on behalf of an insurer.
“Uniform standard” means a standard adopted by the commission for a product line, pursuant to Article VII, and shall include all of the product requirements in aggregate. Each uniform standard shall be construed, whether express or implied, to prohibit the use of any inconsistent, misleading, or ambiguous provisions in a product and the form of the product made available to the public shall not be unfair, inequitable, or against public policy as determined by the commission.
ARTICLE III. ESTABLISHMENT OF THE COMMISSION AND VENUE.
The compacting states hereby create and establish a joint public entity known as the Interstate Insurance Product Regulation Commission. Pursuant to Article IV, the commission shall have the power to develop uniform standards for product lines, receive and provide prompt review of products filed therewith, and give approval to those product filings satisfying applicable uniform standards. It is not intended for the commission to be the exclusive entity for receipt and review of insurance product filings. Nothing herein shall prohibit any insurer from filing its product in any state wherein the insurer is licensed to conduct the business of insurance, and any such filing shall be subject to the laws of the state where filed.
The commission is a body corporate and politic, and an instrumentality of the compacting states.
The commission is solely responsible for its liabilities except as otherwise specifically provided in this compact.
Venue is proper and judicial proceedings by or against the commission shall be brought solely and exclusively in a court of competent jurisdiction where the principal office of the commission is located.
ARTICLE IV. POWERS OF THE COMMISSION.
The commission shall have all of the following powers:
To promulgate rules, pursuant to Article VII, which shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in this compact.
To exercise its rule making authority and establish reasonable uniform standards for products covered under the compact, and advertisements related thereto, which shall have the force and effect of law and shall be binding in the compacting states, but only for those products filed with the commission. A compacting state shall have the right to opt out of such uniform standard pursuant to Article VII, to the extent and in the manner provided in this compact, and any uniform standard established by the commission for long-term care insurance products may provide the same or greater protections for consumers as, but shall not provide less than, those protections set forth in the National Association of Insurance Commissioners’ Long-Term Care Insurance Model Act and Long-Term Care Insurance Model Regulation, respectively, adopted as of 2001. The commission shall consider whether any subsequent amendments to the NAIC Long-Term Care Insurance Model Act or Long-Term Care Insurance Model Regulation adopted by the NAIC require amending of the uniform standards established by the commission for long-term care insurance products.
To receive and review in an expeditious manner products filed with the commission, and rate filings for disability income and long-term care insurance products, and give approval of those products and rate filings that satisfy the applicable uniform standard, where such approval shall have the force and effect of law and be binding on the compacting states to the extent and in the manner provided in this compact.
To receive and review in an expeditious manner advertisements relating to long-term care insurance products for which uniform standards have been adopted by the commission, and give approval to any advertisement that satisfies the applicable uniform standard. For any product covered under this compact, other than long-term care insurance products, the commission shall have the authority to require an insurer to submit all or any part of its advertisements with respect to that product for review or approval prior to use, if the commission determines that the nature of the product is such that an advertisement of the product could have the capacity or tendency to mislead the public. The actions of the commission as provided in this section shall have the force and effect of law and shall be binding in the compacting states to the extent and in the manner provided in this compact.
To exercise its rule making authority and designate products and advertisements that may be subject to a self-certification process without the need for prior approval by the commission.
To promulgate operating procedures, pursuant to Article VII, which shall be binding in the compacting states to the extent and in the manner provided in this compact.
To bring and prosecute legal proceedings or actions in its name as the commission. The standing of any state insurance department to sue or be sued under applicable law shall not be affected.
To issue subpoenas requiring the attendance and testimony of witnesses and the production of evidence.
To establish and maintain offices.
To purchase and maintain insurance and bonds.
To borrow, accept, or contract for services of personnel including, but not limited to, employees of a compacting state.
To hire employees, professionals, or specialists, and elect or appoint officers, and to fix their compensation, define their duties, give them appropriate authority to carry out the purposes of this compact, and determine their qualifications, and to establish personnel policies and programs of the commission relating to, among other things, conflicts of interest, rates of compensation, and qualifications of personnel.
To accept any and all appropriate donations and grants of money, equipment, supplies, materials, and services and to receive, utilize, and dispose of the same. At all times the commission shall strive to avoid any appearance of impropriety.
To lease, purchase, accept appropriate gifts or donations of, or otherwise to own, hold, improve, or use any property, real, personal, or mixed. At all times the commission shall strive to avoid any appearance of impropriety.
To sell, convey, mortgage, pledge, lease, exchange, abandon, or otherwise dispose of any property, real, personal, or mixed.
To remit filing fees to compacting states as may be set forth in the bylaws, rules, or operating procedures.
To enforce compliance by compacting states with rules, uniform standards, operating procedures, and bylaws.
To provide for dispute resolution among compacting states.
To advise compacting states on issues relating to insurers domiciled or doing business in non-compacting jurisdictions, consistent with the purposes of this compact.
To provide advice and training to those personnel in state insurance departments responsible for product review, and to be a resource for state insurance departments.
To establish a budget and make expenditures.
To borrow money.
To appoint committees, including advisory committees comprising members, state insurance regulators, state legislators or their representatives, insurance industry and consumer representatives, and such other interested persons as may be designated in the bylaws.
To provide and receive information from, and to cooperate with, law enforcement agencies.
To adopt and use a corporate seal.
To perform such other functions as may be necessary or appropriate to achieve the purposes of this compact consistent with the state regulation of the business of insurance.
ARTICLE V. ORGANIZATION OF THE COMMISSION.
a. Each compacting state shall have and be limited to one member. Each member shall be qualified to serve in that capacity pursuant to applicable law of the compacting state. Any member may be removed or suspended from office as provided by the law of the state from which he or she shall be appointed. Any vacancy occurring in the commission shall be filled in accordance with the laws of the compacting state wherein the vacancy exists. Nothing herein shall be construed to affect the manner in which a compacting state determines the election or appointment and qualification of its own commissioner.
b. Each member shall be entitled to one vote and shall have an opportunity to participate in the governance of the commission in accordance with the bylaws. Notwithstanding any provision herein to the contrary, no action of the commission with respect to the promulgation of a uniform standard shall be effective unless two-thirds of the members vote in favor thereof.
c. The commission, by a majority of the members, shall prescribe bylaws to govern its conduct as may be necessary or appropriate to carry out the purposes, and exercise the powers, of the compact including, but not limited to, all of the following:
(i) Establishing the fiscal year of the commission.
(ii) Providing reasonable procedures for appointing and electing members, as well as holding meetings, of the management committee.
(iii) Providing reasonable standards and procedures for the establishment and meetings of other committees, and governing any general or specific delegation of any authority or function of the commission.
(iv) Providing reasonable procedures for calling and conducting meetings of the commission that consist of a majority of commission members, ensuring reasonable advance notice of each such meeting, and providing for the right of citizens to attend each such meeting with enumerated exceptions designed to protect the interest of the public, the privacy of individuals, and proprietary information of insurers, including trade secrets. The commission may meet in camera only after a majority of the entire membership votes to close a meeting en toto or in part. As soon as practicable, the commission shall make public a copy of the vote to close the meeting revealing the vote of each member with no proxy votes allowed and votes taken during such meeting.
(v) Establishing the titles, duties and authority, and reasonable procedures for the election of the officers of the commission.
(vi) Providing reasonable standards and procedures for the establishment of the personnel policies and programs of the commission. Notwithstanding any civil service or other similar laws of any compacting state, the bylaws shall exclusively govern the personnel policies and programs of the commission.
(vii) Promulgating a code of ethics to address permissible and prohibited activities of commission members and employees.
(viii) Providing a mechanism for winding up the operations of the commission and the equitable disposition of any surplus funds that may exist after the termination of the compact after the payment or reserving, or both, of all of its debts and obligations.
d. The commission shall publish its bylaws in a convenient form and file a copy thereof, and a copy of any amendment thereto, with the appropriate agency or officer in each of the compacting states.
a. A management committee comprising no more than 14 members shall be established as follows:
(i) One member from each of the six compacting states with the largest premium volume for individual and group annuities, life, disability income, and long-term care insurance products, determined from the records of the NAIC for the prior year.
(ii) Four members from those compacting states with at least two percent of the market based on the premium volume described above, other than the six compacting states with the largest premium volume, selected on a rotating basis as provided in the bylaws.
(iii) Four members from those compacting states with less than two percent of the market, based on the premium volume described above, with one selected from each of the four zone regions of the NAIC as provided in the bylaws.
b. The management committee shall have such authority and duties as may be set forth in the bylaws including, but not limited to, all of the following:
(i) Managing the affairs of the commission in a manner consistent with the bylaws and purposes of the commission.
(ii) Establishing and overseeing an organizational structure within, and appropriate procedures for, the commission to provide for the creation of uniform standards and other rules, receipt and review of product filings, administrative and technical support functions, review of decisions regarding the disapproval of a product filing, and the review of elections made by a compacting state to opt out of a uniform standard. A uniform standard shall not be submitted to the compacting states for adoption unless approved by two-thirds of the members of the management committee.
(iii) Overseeing the offices of the commission.
(iv) Planning, implementing, and coordinating communications and activities with other state, federal, and local government organizations in order to advance the goals of the commission.
c. The commission shall elect annually officers from the management committee, with each having such authority and duties, as may be specified in the bylaws.
d. The management committee, subject to the approval of the commission, may appoint or retain an executive director for such period, upon such terms and conditions, and for such compensation as the commission may deem appropriate. The executive director shall serve as secretary to the commission, but shall not be a member of the commission. The executive director shall hire and supervise such other staff as may be authorized by the commission.
a. A legislative committee, comprising state legislators or their designees, shall be established to monitor the operations of, and make recommendations to, the commission, including the management committee. The manner of selection and term of any legislative committee member shall be as set forth in the bylaws. Prior to the adoption by the commission of any uniform standard, revision to the bylaws, annual budget, or other significant matter as may be provided in the bylaws, the management committee shall consult with and report to the legislative committee.
b. The commission shall establish two advisory committees, one of which shall comprise consumer representatives independent of the insurance industry, and the other comprising insurance industry representatives.
c. The commission may establish additional advisory committees as its bylaws may provide for the carrying out of its functions.
The commission shall maintain its corporate books and records in accordance with the bylaws.
a. The members, officers, executive director, employees, and representatives of the commission shall be immune from suit and liability, either personally or in their official capacity, for any claim for damage to or loss of property or personal injury or other civil liability caused by or arising out of any actual or alleged act, error, or omission that occurred, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of commission employment, duties, or responsibilities. Nothing in this paragraph shall be construed to protect any such person from suit or liability, or both, for any damage, loss, injury, or liability caused by the intentional or willful and wanton misconduct of that person.
b. The commission shall defend any member, officer, executive director, employee, or representative of the commission in any civil action seeking to impose liability arising out of any actual or alleged act, error, or omission that occurred within the scope of commission employment, duties, or responsibilities, or that the person against whom the claim is made had a reasonable basis for believing occurred within the scope of commission employment, duties, or responsibilities provided that the actual or alleged act, error, or omission did not result from the intentional or willful and wanton misconduct of that person. Nothing herein shall be construed to prohibit that person from retaining his or her own counsel.
c. The commission shall indemnify and hold harmless any member, officer, executive director, employee, or representative of the commission for the amount of any settlement or judgment obtained against that person arising out of any actual or alleged act, error, or omission that occurred within the scope of commission employment, duties, or responsibilities, or that such person had a reasonable basis for believing occurred within the scope of commission employment, duties, or responsibilities, provided, that the actual or alleged act, error, or omission did not result from the intentional or willful and wanton misconduct of that person.
ARTICLE VI. MEETINGS AND ACTS OF THE COMMISSION.
The commission shall meet and take such actions as are consistent with this compact and the bylaws.
Each member of the commission shall have the right and power to cast a vote to which that compacting state is entitled and to participate in the business and affairs of the commission. A member shall vote in person or by such other means as provided in the bylaws. The bylaws may provide for participation by members in meetings by telephone or other means of communication.
The commission shall meet at least once during each calendar year. Additional meetings shall be held as set forth in the bylaws.
ARTICLE VII. RULES AND OPERATING PROCEDURES:
RULE MAKING FUNCTIONS OF THE COMMISSION AND OPTING OUT OF UNIFORM STANDARDS.
Rule making authority. The commission shall promulgate reasonable rules, including uniform standards, and operating procedures in order to effectively and efficiently achieve the purposes of this compact. Notwithstanding the foregoing, in the event the commission exercises its rule making authority in a manner that is beyond the scope of the purposes of this compact, or the powers granted hereunder, then such an action by the commission shall be invalid and have no force and effect.
Rule making procedure. Rules and operating procedures shall be made pursuant to a rule making process that conforms to the Model State Administrative Procedure Act of 1981, as amended, as may be appropriate to the operations of the commission. Before the commission adopts a uniform standard, the commission shall give written notice to the relevant state legislative committee or committees in each compacting state responsible for insurance issues of its intention to adopt the uniform standard. The commission in adopting a uniform standard shall consider fully all submitted materials and issue a concise explanation of its decision.
Effective date and opt out of a uniform standard. A uniform standard shall become effective 90 days after its promulgation by the commission or such later date as the commission may determine. A compacting state may opt out of a uniform standard as provided in this article. The term opt out shall be defined as any action by a compacting state to decline to adopt or participate in a promulgated uniform standard. All other rules and operating procedures, and amendments thereto, shall become effective as of the date specified in each rule, operating procedure, or amendment.
Opt out procedure. A compacting state may opt out of a uniform standard, either by legislation or regulation duly promulgated by the insurance department under the administrative procedure act of the compacting state. If a compacting state elects to opt out of a uniform standard by regulation, it shall give written notice to the commission no later than 10 business days after the uniform standard is promulgated, or at the time the state becomes a compacting state and find that the uniform standard does not provide reasonable protections to the citizens of the state, given the conditions in the state. The commissioner shall make specific findings of fact and conclusions of law, based on a preponderance of the evidence, detailing the conditions in the state which warrant a departure from the uniform standard and determining that the uniform standard would not reasonably protect the citizens of the state. The commissioner shall consider and balance the following factors and find that the conditions in the state and needs of the citizens of the state outweigh: (i) The intent of the legislature to participate in, and the benefits of, an interstate agreement to establish national uniform consumer protections for the products subject to this compact; and (ii) the presumption that a uniform standard adopted by the commission provides reasonable protections to consumers of the relevant product.
Notwithstanding the foregoing, a compacting state, at the time of its enactment of this compact, may prospectively opt out of all uniform standards involving long-term care insurance products by expressly providing for such opt out in the enacted compact, and such an opt out shall not be treated as a material variance in the offer or acceptance of any state to participate in this compact. Such an opt out shall be effective at the time of enactment of this compact by the compacting state and shall apply to all existing uniform standards involving long-term care insurance products and those subsequently promulgated.
Once the opt out of a uniform standard by a compacting state becomes effective as provided under the laws of that state, the uniform standard shall have no further force and effect in that state unless and until the legislation or regulation implementing the opt out is repealed or otherwise becomes ineffective under the laws of the state. If a compacting state opts out of a uniform standard after the uniform standard has been made effective in that state, the opt out shall have the same prospective effect as provided under Article XIV for withdrawals.
Stay of uniform standard. If a compacting state has formally initiated the process of opting out of a uniform standard by regulation, and while the regulatory opt out is pending, the compacting state may petition the commission, at least 15 days before the effective date of the uniform standard, to stay the effectiveness of the uniform standard in that state. The commission may grant a stay if it determines the regulatory opt out is being pursued in a reasonable manner and there is a likelihood of success. If a stay is granted or extended by the commission, the stay or extension thereof may postpone the effective date by up to 90 days, unless affirmatively extended by the commission. A stay may not be permitted to remain in effect for more than one year unless the compacting state can show extraordinary circumstances which warrant a continuance of the stay including, but not limited to, the existence of a legal challenge which prevents the compacting state from opting out. A stay may be terminated by the commission upon notice that the rule making process has been terminated.
Not later than 30 days after a rule or operating procedure is promulgated, any person may file a petition for judicial review of the rule or operating procedure. The filing of such a petition shall not stay or otherwise prevent the rule or operating procedure from becoming effective unless the court finds that the petitioner has a substantial likelihood of success. The court shall give deference to the actions of the commission consistent with applicable law and shall not find the rule or operating procedure to be unlawful if the rule or operating procedure represents a reasonable exercise of the authority of the commission.
ARTICLE VIII. COMMISSION RECORDS AND ENFORCEMENT.
The commission shall promulgate rules establishing conditions and procedures for public inspection and copying of its information and official records, except such information and records involving the privacy of individuals and trade secrets of insurers. The commission may promulgate additional rules under which it may make available to federal and state agencies, including law enforcement agencies, records and information otherwise exempt from disclosure, and may enter into agreements with such agencies to receive or exchange information or records subject to nondisclosure and confidentiality provisions.
Except as to privileged records, data, and information, the laws of any compacting state pertaining to confidentiality or nondisclosure shall not relieve any compacting state commissioner of the duty to disclose any relevant records, data, or information to the commission. Disclosure to the commission shall not be deemed to waive or otherwise affect any confidentiality requirement. Except as otherwise expressly provided in this compact, the commission shall not be subject to the laws of the compacting state pertaining to confidentiality and nondisclosure with respect to records, data, and information in its possession. Confidential information of the commission shall remain confidential after such information is provided to any commissioner.
The commission shall monitor compacting states for compliance with duly adopted bylaws, rules, including uniform standards, and operating procedures. The commission shall notify any noncomplying compacting state in writing of its noncompliance with commission bylaws, rules, or operating procedures. If a noncomplying compacting state fails to remedy its noncompliance within the time specified in the notice of noncompliance, the compacting state shall be deemed to be in default as set forth in Article XIV.
The commissioner of any state in which an insurer is authorized to do business, or is conducting the business of insurance, shall continue to exercise his or her authority to oversee the market regulation of the activities of the insurer in accordance with the law of that state. The enforcement of compliance with the compact by the commissioner is governed by the following provisions:
a. With respect to the commissioner’s market regulation of a product or advertisement that is approved or certified to the commission, the content of the product or advertisement shall not constitute a violation of the provisions, standards, or requirements of the compact except upon a final order of the commission, issued at the request of a commissioner after prior notice to the insurer and an opportunity for hearing before the commission.
b. Before a commissioner may bring an action for violation of any provision, standard, or requirement of the compact relating to the use of an advertisement not approved or certified to the commission, the commission, or an authorized commission officer or employee, shall authorize the action. However, authorization pursuant to this paragraph does not require notice to the insurer, opportunity for hearing, or disclosure of requests for authorization or records of the action of the commission on such requests.
ARTICLE IX. DISPUTE RESOLUTION.
The commission, upon the request of a member, shall attempt to resolve any disputes or other issues that are subject to this compact and which may arise between two or more compacting states, or between compacting states and non-compacting states, and the commission shall promulgate an operating procedure providing for resolution of such disputes.
ARTICLE X. PRODUCT FILING AND APPROVAL.
Insurers and third party filers seeking to have a product approved by the commission shall file the product with, and pay applicable filing fees to, the commission. Nothing in this compact shall be construed to restrict or otherwise prevent an insurer from filing its product with the insurance department in any state wherein the insurer is licensed to conduct the business of insurance, and such filing shall be subject to the laws of the states where filed.
The commission shall establish appropriate filing and review processes and procedures pursuant to commission rules and operating procedures. Notwithstanding any provision herein to the contrary, the commission shall promulgate rules to establish conditions and procedures under which the commission will provide public access to product filing information. In establishing such rules, the commission shall consider the interests of the public in having access to such information, as well as protection of personal medical and financial information and trade secrets, that may be contained in a product filing or supporting information.
Any product approved by the commission may be sold or otherwise issued in those compacting states for which the insurer is legally authorized to do business.
ARTICLE XI. REVIEW OF COMMISSION DECISIONS REGARDING FILINGS.
Not later than 30 days after the commission has given notice of a disapproved product or advertisement filed with the commission, the insurer or third party filer whose filing was disapproved may appeal the determination to a review panel appointed by the commission. The commission shall promulgate rules to establish procedures for appointing such review panels and provide for notice and hearing. An allegation that the commission, in disapproving a product or advertisement filed with the commission, acted arbitrarily, capriciously, or in a manner that is an abuse of discretion or otherwise not in accordance with the law, is subject to judicial review in accordance with Article III.
The commission shall have authority to monitor, review, and reconsider products and advertisements subsequent to their filing or approval upon a finding that the product or advertisement does not meet the relevant uniform standard. Where appropriate, the commission may withdraw or modify its approval after proper notice and hearing, subject to the appeal process in Section 1.
ARTICLE XII. FINANCE.
The commission shall pay or provide for the payment of the reasonable expenses of its establishment and organization. To fund the cost of its initial operations, the commission may accept contributions and other forms of funding from the National Association of Insurance Commissioners, compacting states, and other sources. Contributions and other forms of funding from other sources shall be of such a nature that the independence of the commission concerning the performance of its duties shall not be compromised.
The commission shall collect a filing fee from each insurer and third party filer filing a product with the commission to cover the cost of the operations and activities of the commission and its staff in a total amount sufficient to cover the annual budget of the commission.
The budget of the commission for a fiscal year shall not be approved until it has been subject to notice and comment as set forth in Article VII.
The commission shall be exempt from all taxation in and by the compacting states.
The commission shall not pledge the credit of any compacting state, except by and with the appropriate legal authority of that compacting state.
The commission shall keep complete and accurate accounts of all its internal receipts, including grants and donations, and disbursements of all funds under its control. The internal financial accounts of the commission shall be subject to the accounting procedures established under its bylaws. The financial accounts and reports including the system of internal controls and procedures of the commission shall be audited annually by an independent certified public accountant. Upon the determination of the commission, but no less frequently than every three years, the review of the independent auditor shall include a management and performance audit of the commission. The commission shall make an annual report to the governor and legislature of the compacting states, which shall include a report of the independent audit. The internal accounts of the commission shall not be confidential and such materials may be shared with the commissioner of any compacting state upon request. Any work papers related to any internal or independent audit and any information regarding the privacy of individuals and proprietary information of insurers, including trade secrets, shall remain confidential.
No compacting state shall have any claim to or ownership of any property held by or vested in the commission or to any commission funds held pursuant to this compact.
ARTICLE XIII. COMPACTING STATES, EFFECTIVE DATE, AND AMENDMENT.
Any state is eligible to become a compacting state.
The compact shall become effective and binding upon legislative enactment of the compact into law by two compacting states. The commission shall become effective for purposes of adopting uniform standards for, reviewing, and giving approval or disapproval of, products filed with the commission that satisfy applicable uniform standards only after 26 states are compacting states or, alternatively, by states representing greater than 40 percent of the premium volume for life insurance, annuity, disability income, and long-term care insurance products, based on records of the NAIC for the prior year. Thereafter, it shall become effective and binding as to any other compacting state upon enactment of the compact into law by that state.
Amendments to the compact may be proposed by the commission for enactment by the compacting states. No amendment shall become effective and binding upon the commission and the compacting states unless and until all compacting states enact the amendment into law.
ARTICLE XIV. WITHDRAWAL, DEFAULT, AND TERMINATION.
a. Once effective, the compact shall continue in force and remain binding upon each and every compacting state. A compacting state may withdraw from the compact (“withdrawing state”) by enacting a statute specifically repealing the statute which enacted the compact into law.
b. The effective date of withdrawal is the effective date of the repealing statute. However, the withdrawal shall not apply to any product filings approved or self-certified, or any advertisement of such products, as of the date the repealing statute becomes effective, except by mutual agreement of the commission and the withdrawing state unless the approval is rescinded by the withdrawing state as provided in subsection e.
c. The commissioner of the withdrawing state shall immediately notify the management committee in writing upon the introduction of legislation repealing this compact in the withdrawing state.
d. The commission shall notify the other compacting states of the introduction of such legislation within 10 days after its receipt of notice thereof.
e. The withdrawing state is responsible for all obligations, duties, and liabilities incurred through the effective date of withdrawal, including any obligations, the performance of which extend beyond the effective date of withdrawal, except to the extent those obligations may have been released or relinquished by mutual agreement of the commission and the withdrawing state. The approval of the commission of products and advertisements prior to the effective date of withdrawal shall continue to be effective and be given full force and effect in the withdrawing state, unless formally rescinded by the withdrawing state in the same manner as provided by the laws of the withdrawing state for the prospective disapproval of products or advertisements previously approved under state law.
f. Reinstatement following withdrawal of any compacting state shall occur upon the effective date of the withdrawing state reenacting the compact.
a. If the commission determines that any compacting state has at any time defaulted (“defaulting state”) in the performance of any of its obligations or responsibilities under this compact, the bylaws, or duly promulgated rules or operating procedures, then, after notice and hearing as set forth in the bylaws, all rights, privileges, and benefits conferred by this compact on the defaulting state shall be suspended from the effective date of default as fixed by the commission. The grounds for default include, but are not limited to, failure of a compacting state to perform its obligations or responsibilities, and any other grounds designated in commission rules. The commission shall immediately notify the defaulting state in writing of the suspension of the defaulting state pending a cure of the default. The commission shall stipulate the conditions and the time period within which the defaulting state must cure its default. If the defaulting state fails to cure the default within the time period specified by the commission, the defaulting state shall be terminated from the compact and all rights, privileges, and benefits conferred by this compact shall be terminated from the effective date of termination.
b. Product approvals by the commission or product self-certifications, or any advertisement in connection with such product, that are in force on the effective date of termination shall remain in force in the defaulting state in the same manner as if the defaulting state had withdrawn voluntarily pursuant to Section 1.
c. Reinstatement following termination of any compacting state requires a reenactment of the compact.
a. The compact dissolves effective upon the date of the withdrawal or default of the compacting state which reduces membership in the compact to one compacting state.
b. Upon the dissolution of this compact, the compact becomes null and void and shall be of no further force or effect, and the business and affairs of the commission shall be wound up and any surplus funds shall be distributed in accordance with the bylaws.
ARTICLE XV. SEVERABILITY AND CONSTRUCTION.
The provisions of this compact shall be severable; and if any phrase, clause, sentence, or provision is deemed unenforceable, the remaining provisions of the compact shall be enforceable.
The provisions of this compact shall be liberally construed to effectuate its purposes.
ARTICLE XVI. BINDING EFFECT OF COMPACT AND OTHER LAWS.
a. Nothing herein prevents the enforcement of any other law of a compacting state, except as provided in paragraph b.
b. For any product approved by or certified to the commission, the rules, uniform standards, and any other requirements of the commission shall constitute the exclusive provisions applicable to the content, approval, and certification of such products. For an advertisement that is subject to the authority of the commission, any rule, uniform standard, or other requirement of the commission which governs the content of the advertisement shall constitute the exclusive provision that a commissioner may apply to the content of the advertisement. Notwithstanding the foregoing, no action taken by the commission shall abrogate or restrict any of the following:
(i) The access of any person to state courts.
(ii) Remedies available under state law related to breach of contract, tort, or other laws not specifically directed to the content of the product.
(iii) State law relating to the construction of insurance contract.
(iv) The authority of the attorney general of the state including, but not limited to, maintaining any actions or proceedings, as authorized by law.
c. All insurance products filed with individual states shall be subject to the laws of those states.
a. All lawful actions of the commission, including all rules and operating procedures promulgated by the commission, are binding upon the compacting states.
b. All agreements between the commission and the compacting states are binding in accordance with their terms.
c. Upon the request of a party to a conflict over the meaning or interpretation of commission actions, and upon a majority vote of the compacting states, the commission may issue advisory opinions regarding the meaning or interpretation in dispute.
d. In the event any provision of this compact exceeds the constitutional limits imposed on the legislature of any compacting state, the obligations, duties, powers, or jurisdiction sought to be conferred by that provision upon the commission shall be ineffective as to that compacting state, and those obligations, duties, powers, or jurisdiction shall remain in the compacting state and shall be exercised by the agency thereof to which those obligations, duties, powers, or jurisdiction are delegated by law in effect at the time this compact becomes effective.
(Act 2011-536, p. 928, §2.)
Nothing contained in this compact, nor any decision or action by the Interstate Insurance Product Regulation Commission, shall preempt, alter, or modify any claims or remedies against insurance companies, agents, or other persons or entities regulated under this title that are or may become available under the common law, the Alabama Insurance Code, or other statutes of this state.
(Act 2011-536, p. 928, §3.)
THIS SECTION WAS REPEALED BY ACT 2024-71, EFFECTIVE JUNE 1, 2024.
(Act 2011-537, p. 949, §1.)
THIS SECTION WAS REPEALED BY ACT 2024-71, EFFECTIVE JUNE 1, 2024.
(Act 2011-537, p. 949, §2.)
THIS SECTION WAS REPEALED BY ACT 2024-71, EFFECTIVE JUNE 1, 2024.
(Act 2011-537, p. 949, §3.)
This chapter shall be known and may be cited as the Insurance Data Security Law.
(Act 2019-98, §1.)
(a) Notwithstanding any other provision of law, this chapter establishes the exclusive state standards applicable to licensees for data security, the investigation of a cybersecurity event as defined in Section 27-62-3, and notification to the Commissioner of Insurance of a cybersecurity event as provided by this chapter.
(b) This chapter may not be construed to create or imply a private cause of action for a violation of this chapter nor may it be construed to curtail a private cause of action which would otherwise exist in the absence of this chapter.
(Act 2019-98, §2.)
For purposes of this chapter, the following words have the following meanings:
(1) AUTHORIZED INDIVIDUAL. An individual known to and screened by the licensee and determined to be necessary and appropriate to have access to the nonpublic information held by the licensee and its information systems.
(2) COMMISSIONER. The Commissioner of Insurance.
(3) CONSUMER. An individual, including, but not limited to, an applicant, policyholder, insured, beneficiary, claimant, or certificate holder, who is a resident of this state and whose nonpublic information is in the possession, custody, or control of a licensee.
(4)a. CYBERSECURITY EVENT. An event resulting in unauthorized access to, disruption, or misuse of an information system or nonpublic information stored on an information system.
b. The term cybersecurity event does not include the unauthorized acquisition of encrypted nonpublic information if the encryption, process, or key is not also acquired, released, or used without authorization.
c. Cybersecurity event does not include an event with regard to which the licensee has determined that the nonpublic information accessed by an unauthorized person has not been used or released and has been returned or destroyed.
(5) DEPARTMENT. The Department of Insurance.
(6) ENCRYPTED. The transformation of data into a form which results in a low probability of assigning meaning without the use of a protective process or key.
(7) INFORMATION SECURITY PROGRAM. The administrative, technical, and physical safeguards that a licensee uses to access, collect, distribute, process, protect, store, use, transmit, dispose of, or otherwise handle nonpublic information.
(8) INFORMATION SYSTEM. A discrete set of electronic information resources organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of electronic nonpublic information, as well as any specialized system such as industrial/process controls systems, telephone switching and private branch exchange systems, and environmental control systems.
(9) LICENSEE. Any person licensed, authorized to operate, or registered, or required to be licensed, authorized, or registered pursuant to the insurance laws of this state but shall not include a purchasing group or a risk retention group chartered and licensed in a state other than this state or a licensee that is acting as an assuming insurer that is domiciled in another state or jurisdiction.
(10) MULTI-FACTOR AUTHENTICATION. Authentication through verification of at least two of the following types of authentication factors:
a. Knowledge factors, such as a password.
b. Possession factors, such as a token or text message on a mobile phone.
c. Inherence factors, such as a biometric characteristic.
(11) NONPUBLIC INFORMATION. Electronic information that is not publicly available information and is any of the following:
a. Any information concerning a consumer which because of name, number, personal mark, or other identifier can be used to identify the consumer, in combination with any one or more of the following data elements:
The Social Security number.
The driver’s license number or nondriver identification card number.
Any financial account number or a credit or debit card number.
Any security code, access code, or password that would permit access to a consumer’s financial account.
Biometric records.
b. Any information or data, except age or gender, in any form or medium created by or derived from a health care provider or a consumer, that can be used to identify a particular consumer, and that relates to any of the following:
The past, present, or future physical, mental, or behavioral health or condition of a consumer or a member of the consumer’s family.
The provision of health care to any consumer.
Payment for the provision of health care to any consumer.
(12) PERSON. Any individual or any nongovernmental entity, including, but not limited to, any nongovernmental partnership, corporation, branch, agency, or association.
(13)a. PUBLICLY AVAILABLE INFORMATION. Any information that a licensee has a reasonable basis to believe is lawfully made available to the general public from federal, state, or local government records; widely distributed media; or disclosures to the general public that are required to be made by federal, state, or local law.
b. For the purposes of this definition, a licensee has a reasonable basis to believe that information is lawfully made available to the general public if the licensee has taken steps to determine both of the following:
That the information is of the type that is available to the general public.
Whether a consumer can direct that the information not be made available to the general public and, if so, that the consumer has not done so.
(14) RISK ASSESSMENT. The risk assessment that each licensee is required to conduct under subsection (c) of Section 27-62-4.
(15) STATE. The State of Alabama.
(16) THIRD-PARTY SERVICE PROVIDER. A person, not defined as a licensee, who contracts with a licensee to maintain, process, store, or access nonpublic information through the provision of services to the licensee.
(Act 2019-98, §3.)
(a) Commensurate with the size and complexity of the licensee, the nature and scope of the activities of the licensee, including its use of third-party service providers, and the sensitivity of the nonpublic information used by the licensee or in the possession, custody, or control of the licensee, each licensee shall develop, implement, and maintain a comprehensive written information security program based on the risk assessment of the licensee that contains administrative, technical, and physical safeguards for the protection of nonpublic information and the information system of the licensee.
(b) The information security program of a licensee shall be designed to do all of the following:
(1) Protect the security and confidentiality of nonpublic information and the security of the information system.
(2) Protect against any threats or hazards to the security or integrity of nonpublic information and the information system.
(3) Protect against unauthorized access to or use of nonpublic information and minimize the likelihood of harm to any consumer.
(4) Define and periodically reevaluate a schedule for retention of nonpublic information and a mechanism for its destruction when no longer needed.
(c) The licensee shall do all of the following:
(1) Designate one or more employees, an affiliate, or an outside vendor to act on behalf of the licensee who is responsible for the information security program.
(2) Identify reasonably foreseeable internal or external threats that could result in unauthorized access, transmission, disclosure, misuse, alteration, or destruction of nonpublic information, including threats to the security of information systems and nonpublic information that are accessible to or held by third-party service providers.
(3) Assess the likelihood and potential damage of these threats, taking into consideration the sensitivity of the nonpublic information.
(4) Assess the sufficiency of policies, procedures, information systems, and other safeguards in place to manage these threats, including consideration of threats in each relevant area of the operations of the licensee, including all of the following:
a. Employee training and management.
b. Information systems, including network and software design, as well as information classification, governance, processing, storage, transmission, and disposal.
c. Detecting, preventing, and responding to attacks, intrusions, or other systems failures.
(5) Implement information safeguards to manage the threats identified in its ongoing assessment, and no less than annually, assess the effectiveness of the key controls, systems, and procedures of the safeguards.
(d) Based on its risk assessment, the licensee shall do all of the following:
(1) Design its information security program to mitigate the identified risks commensurate with the size and complexity of the licensee, the nature and scope of the activities of the licensee, including the use by the licensee of third-party service providers, and the sensitivity of the nonpublic information used by the licensee or in the possession, custody, or control of the licensee.
(2) Determine which security measures listed in this subdivision are appropriate and, if appropriate, do the following to implement the security measures:
a. Place access controls on information systems, including controls to authenticate and permit access only to authorized individuals to protect against the unauthorized acquisition of nonpublic information.
b. Identify and manage the data, personnel, devices, systems, and facilities that enable the organization to achieve business purposes in accordance with their relative importance to business objectives and the risk strategy of the licensee.
c. Restrict physical access to nonpublic information to authorized individuals only.
d. Protect by encryption or other appropriate means, all nonpublic information while being transmitted over an external network and all nonpublic information stored on any laptop computer or other portable computing or storage device or media.
e. Adopt secure development practices for in-house developed applications utilized by the licensee.
f. Modify the information system in accordance with the information security program of the licensee.
g. Utilize effective controls, which may include multi-factor authentication procedures for employees accessing nonpublic information.
h. Regularly test and monitor systems and procedures to detect actual and attempted attacks on, or intrusions into, information systems.
i. Include audit trails within the information security program designed to detect and respond to cybersecurity events and designed to reconstruct material financial transactions sufficient to support normal operations and obligations of the licensee.
j. Implement measures to protect against destruction, loss, or damage of nonpublic information due to environmental hazards, such as fire and water damage or other catastrophes or technological failures.
k. Develop, implement, and maintain procedures for the secure disposal of nonpublic information in any format.
(3) Include cybersecurity risks in the enterprise risk management process of the licensee.
(4) Stay informed regarding emerging threats or vulnerabilities and utilize reasonable security measures when sharing information relative to the character of the sharing and the type of information shared.
(5) Provide its personnel with cybersecurity awareness training that is updated as necessary to reflect risks identified by the licensee in the risk assessment.
(e) If the licensee has a board of directors, the board or an appropriate committee of the board, at a minimum, shall do all of the following:
(1) Require the executive management of the licensee or its delegates to develop, implement, and maintain the information security program of the licensee.
(2) Require the executive management of the licensee or its delegates to report in writing at least annually, all of the following:
a. The overall status of the information security program of the licensee and the compliance of the licensee with this chapter.
b. Material matters related to the information security program, addressing issues such as risk assessment, risk management and control decisions, third-party service provider arrangements, results of testing, cybersecurity events or violations and the responses of management thereto, and recommendations for changes in the information security program.
(3) If executive management delegates any of its responsibilities under this section, it shall oversee the development, implementation, and maintenance of the information security program of the licensee prepared by the delegate and shall receive a report from the delegate complying with the requirements of the report to the board of directors.
(f)(1) A licensee shall exercise due diligence in selecting a third-party service provider.
(2) A licensee shall require a third-party service provider to implement appropriate administrative, technical, and physical measures to protect and secure the information systems and nonpublic information that are accessible to, or held by, the third-party service provider.
(g) The licensee shall monitor, evaluate, and adjust, as appropriate, the information security program consistent with any relevant changes in technology, the sensitivity of its nonpublic information, internal or external threats to information, and the changing business arrangements of the licensee, such as mergers and acquisitions, alliances and joint ventures, outsourcing arrangements, and changes to information systems.
(h)(1) As part of its information security program, each licensee shall establish a written incident response plan designed to promptly respond to, and recover from, any cybersecurity event that compromises the confidentiality, integrity, or availability of nonpublic information in its possession, the information systems of the licensee, or the continuing functionality of any aspect of the business or operations of the licensee.
(2) The incident response plan shall address all of the following areas:
a. The internal process for responding to a cybersecurity event.
b. The goals of the incident response plan.
c. The definition of clear roles, responsibilities, and levels of decision-making authority.
d. External and internal communications and information sharing.
e. Identification of requirements for the remediation of any identified weaknesses in information systems and associated controls.
f. Documentation and reporting regarding cybersecurity events and related incident response activities.
g. The evaluation and revision as necessary of the incident response plan following a cybersecurity event.
(i) Each insurer domiciled in this state, annually on or before February 15, shall submit to the commissioner a written statement certifying that the insurer is in compliance with the requirements set forth in this chapter. Each insurer shall maintain for examination by the department all records, schedules, and data supporting this certificate for a period of five years. To the extent an insurer has identified areas, systems, or processes that require material improvement, updating, or redesign, the insurer shall document the identification and the remedial efforts planned and underway to address the areas, systems, or processes. The documentation shall be available for inspection by the commissioner.
(j) Licensees shall have until May 1, 2021, to implement subsection (f) and until May 1, 2020, to implement the remainder of this section.
(Act 2019-98, §§4, 14.)
(a) If the licensee learns that a cybersecurity event has or may have occurred, the licensee, or an outside vendor or service provider designated to act on behalf of the licensee, shall conduct a prompt investigation.
(b) During the investigation, the licensee, or an outside vendor or service provider designated to act on behalf of the licensee, at a minimum, shall determine as much of the following information as possible:
(1) If a cybersecurity event has occurred.
(2) The nature and scope of the cybersecurity event.
(3) Any nonpublic information that may have been involved in the cybersecurity event.
(c) The licensee shall perform or oversee reasonable measures to restore the security of the information systems compromised in the cybersecurity event in order to prevent further unauthorized acquisition, release, or use of nonpublic information in the possession, custody, or control of the licensee.
(d) If the licensee learns that a cybersecurity event has or may have occurred in a system maintained by a third-party service provider, the licensee shall complete the steps listed in subsection (b) or confirm and document that the third-party service provider has completed those steps.
(e) The licensee shall maintain records concerning all cybersecurity events for a period of at least five years from the date of the cybersecurity event and shall produce those records upon demand of the commissioner.
(Act 2019-98, §5.)
(a) Each licensee shall notify the commissioner as promptly as possible, but in no event later than three business days from a determination that a cybersecurity event involving nonpublic information that is in the possession of a licensee has occurred when either of the following criteria has been met:
(1) This state is the state of domicile of the licensee, in the case of an insurer, or this state is the home state of the licensee, in the case of a producer, as those terms are defined in Section 27-7-1, and the cybersecurity event has a reasonable likelihood of materially harming a consumer residing in this state or reasonable likelihood of materially harming any material part of the normal operation of the licensee.
(2) The licensee reasonably believes that the nonpublic information involves 250 or more consumers residing in this state and the cybersecurity event is either of the following:
a. A cybersecurity event impacting the licensee that the licensee is required to notify any government body, self-regulatory agency, or any other supervisory body about pursuant to any state or federal law.
b. A cybersecurity event that has a reasonable likelihood of materially harming either of the following:
Any consumer residing in this state.
Any material part of the normal operation of the licensee.
(b) The licensee shall provide as much of the following information as possible in electronic form as directed by the commissioner:
(1) The date of the cybersecurity event.
(2) A description of how the information was exposed, lost, stolen, or breached, including the specific roles and responsibilities of any third-party service providers.
(3) How the cybersecurity event was discovered.
(4) Whether any lost, stolen, or breached information has been recovered and if so, how this was done.
(5) The identity of the source of the cybersecurity event.
(6) Whether the licensee has filed a police report or has notified any regulatory, government, or law enforcement agencies and, if so, when the notification was provided.
(7) A description of the specific types of information acquired without authorization. Specific types of information means particular data elements including, for example, types of medical information, types of financial information, or types of information allowing identification of the consumer.
(8) The period during which the information system was compromised by the cybersecurity event.
(9) The number of total consumers in this state affected by the cybersecurity event. The licensee shall provide the best estimate in the initial report to the commissioner and update this estimate with each subsequent report to the commissioner pursuant to this section.
(10) The results of any internal review identifying a lapse in either automated controls or internal procedures, or confirming that all automated controls or internal procedures were followed.
(11) A description of efforts being undertaken to remediate the situation which permitted the cybersecurity event to occur.
(12) A copy of the privacy policy of the licensee and a statement outlining the steps the licensee will take to investigate and notify consumers affected by the cybersecurity event.
(13) The name of a contact person who is both familiar with the cybersecurity event and authorized to act for the licensee.
(c) The licensee shall have a continuing obligation to update and supplement initial and subsequent notifications regarding material changes to previously provided information relating to the cybersecurity event.
(d) The licensee shall comply with the Alabama Data Breach Notifications Act of 2018, Chapter 38 of Title 8, as applicable and provide a copy of the notice sent to consumers under the law to the commissioner.
(e)(1) If the licensee becomes aware of a cybersecurity event in a system maintained by a third-party service provider, the licensee shall treat the event in the same manner as provided under subsection (a) unless the third-party service provider provides the notice required under subsection (a) to the commissioner.
(2) The computation of deadlines of a licensee shall begin on the day after the third-party service provider notifies the licensee of the cybersecurity event or the licensee otherwise has actual knowledge of the cybersecurity event, whichever is sooner.
(3) Nothing in this chapter shall prevent or abrogate an agreement between a licensee and another licensee, a third-party service provider, or any other party to fulfill any of the investigation requirements of Section 27-62-5 or the notice requirements of this section.
(f)(1) a. In the case of a cybersecurity event involving nonpublic information that is used by the licensee that is acting as an assuming insurer or in the possession, custody, or control of a licensee that is acting as an assuming insurer and that does not have a direct contractual relationship with the affected consumers, the assuming insurer shall notify its affected ceding insurers and the commissioner of its state of domicile within three business days of making the determination that a cybersecurity event has occurred.
b. The ceding insurers that have a direct contractual relationship with affected consumers shall fulfill the consumer notification requirements under the Alabama Data Breach Notification Act of 2018, Chapter 38 of Title 8, and any other notification requirements relating to a cybersecurity event under this section.
(2)a. In the case of a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a third-party service provider of a licensee that is an assuming insurer, the assuming insurer shall notify its affected ceding insurers and the commissioner of its state of domicile within three business days of receiving notice from its third-party service provider that a cybersecurity event has occurred.
b. The ceding insurers that have a direct contractual relationship with affected consumers shall fulfill the consumer notification requirements under the Alabama Data Breach Notification Act of 2018, Chapter 38 of Title 8, and any other notification requirements relating to a cybersecurity event under this section.
(3) Any licensee acting as an assuming insurer shall have no other notice obligations relating to a cybersecurity event or other data breach under this section or any other law of this state.
(g)(1) In the case of a cybersecurity event involving nonpublic information that is in the possession, custody, or control of a licensee that is an insurer or its third-party service provider for which a consumer accessed the services of the insurer through an independent insurance producer, and for which consumer notice is required by the Alabama Data Breach Notification Act of 2018, Chapter 38 of Title 8, the insurer shall notify the producers of record of all affected consumers of the cybersecurity event no later than the time at which notice is provided to the affected consumers.
(2) The insurer is excused from this obligation for any producers who are not authorized by law or contract to sell, solicit, or negotiate on behalf of the insurer, and in those instances in which the insurer does not have the current producer of record information for an individual consumer.
(Act 2019-98, §6.)
(a) The commissioner may examine and investigate the affairs of any licensee to determine whether the licensee has been or is engaged in any conduct in violation of this chapter. This power is in addition to the powers which the commissioner has under Section 27-2-21. The investigation or examination shall be conducted pursuant to Sections 27-2-22, et seq.
(b) If the commissioner has reason to believe that a licensee has been or is engaged in conduct in this state which violates this chapter, the commissioner may take action that is necessary or appropriate to enforce this chapter.
(Act 2019-98, §7.)
(a)(1) Any documents, materials, or other information in the control or possession of the department that are furnished by a licensee or an employee or agent acting on behalf of a licensee pursuant to subsection (i) of Section 27-62-4; subdivisions (2), (3), (4), (5), (8), (10), and (11) of subsection (b) of Section 27-62-6; or that are obtained by the commissioner in an investigation or examination pursuant to Section 27-62-7 shall be confidential by law and privileged, shall not be subject to any open records, freedom of information, sunshine, or other public record disclosure laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action. The commissioner shall not otherwise make the documents, materials, or other information public without the prior written consent of the licensee.
(2) Notwithstanding subdivision (1), the commissioner may use the documents, materials, or other information in the furtherance of any regulatory or legal action brought as a part of the duties of the commissioner.
(b) Neither the commissioner nor any person who received documents, materials, or other information while acting under the authority of the commissioner or with whom the documents, materials, or other information are shared pursuant to this section shall be permitted or required to testify in any private civil action concerning any confidential documents, materials, or information subject to subsection (a).
(c) In order to assist in the performance of the duties of the commissioner under this chapter, the commissioner may do all of the following:
(1) Share documents, materials, or other information, including the confidential and privileged documents, materials, or information subject to subsection (a), with other state, federal, and international regulatory agencies, with the National Association of Insurance Commissioners, its affiliates or subsidiaries, and with state, federal, and international law enforcement authorities, provided that the recipient agrees in writing to maintain the confidentiality and privileged status of the documents, materials, or other information.
(2) Receive documents, materials, or information, including otherwise confidential and privileged documents, materials, or information, from the National Association of Insurance Commissioners, its affiliates or subsidiaries, and from regulatory and law enforcement officials of other foreign or domestic jurisdictions, and shall maintain as confidential or privileged any document, material, or information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or information.
(3) Share documents, materials, or other information subject to subsection (a) with a third-party consultant or vendor, provided the consultant agrees in writing to maintain the confidentiality and privileged status of the document, material, or other information.
(4) Enter into agreements governing sharing and use of information consistent with this subsection.
(d) No waiver of any applicable privilege or claim of confidentiality in the documents, materials, or information shall occur as a result of disclosure to the commissioner under this section or as a result of sharing as authorized in subsection (c).
(e) Nothing in this chapter shall prohibit the commissioner from releasing final adjudicated actions that are open to public inspection to a database or other clearinghouse service maintained by the National Association of Insurance Commissioners, its affiliates, or subsidiaries.
(f) Documents, materials, or other information in the possession or control of the National Association of Insurance Commissioners or a third-party consultant or vendor pursuant to this chapter shall be confidential by law and privileged, shall not be subject to open records, freedom of information, sunshine, or other public record disclosure laws, shall not be subject to subpoena, and shall not be subject to discovery or admissible in evidence in any private civil action.
(Act 2019-98, §8.)
(a) The following exceptions shall apply to this chapter:
(1) A licensee is exempt from Section 27-62-4 if any of the following criteria apply:
a. The licensee has fewer than 25 employees.
b. The licensee has less than $5 million in gross annual revenue.
c. The license has less than $10 million in year-end total assets.
(2) A licensee subject to Pub.L. 104-191, 110 Stat. 1936, enacted August 21, 1996 (Health Insurance Portability and Accountability Act), that has established and maintains an information security program pursuant to the statutes, rules, regulations, procedures, or guidelines established thereunder, shall be considered to meet the requirements of this chapter, provided that licensee is compliant with and submits a written statement certifying its compliance with Pub. L. 104-191.
(3) An employee, agent, representative, or designee of a licensee who is also a licensee is exempt from this chapter and is not required to develop its own information security program to the extent that the employee, agent, representative, or designee is covered by the information security program of the other licensee.
(4) A licensee affiliated with a depository institution that maintains an Information Security Program in compliance with the Interagency Guidelines Establishing Standards for Safeguarding Customer Information as set forth pursuant to Sections 501 and 505 of the Gramm-Leach-Bliley Act (15 U.S.C. §§6801 and 6805) shall be considered to meet the requirements of Section 27-62-4, provided that the licensee produces, upon request, documentation satisfactory to the commissioner that independently validates the affiliated depository institution’s adoption of an Information Security Program that satisfies the Interagency Guidelines.
(b) In the event a licensee ceases to qualify for an exemption, the licensee shall have 180 days to comply with this chapter.
(Act 2019-98, §9.)
(a) An insurance producer violating this chapter may be penalized in accordance with Section 27-7-19.
(b) Any other licensee violating this chapter may be subject to the suspension or revocation of the license or certificate of authority of the licensee or, in lieu thereof and at the discretion of the commissioner, the licensee may be subject to a fine of up to ten thousand dollars ($10,000) per violation.
(Act 2019-98, §10.)
The commissioner may adopt rules implementing this chapter pursuant to Chapter 2.
(Act 2019-98, §11.)
(a) As used in this section, the following words have the following meanings:
(1) HEALTH BENEFIT PLAN. Any group insurance plan, individual health insurance policy or other policy, or contract for health care services that covers hospital, medical, or surgical expenses, health maintenance organizations, preferred provider organizations, medical service organizations, physician-hospital organizations, or any other person, firm, corporation, joint venture, or other similar business entity that pays for, purchases, or furnishes group health care services to patients, insureds, or beneficiaries in this state. For the purposes of this section, a health benefit plan located or domiciled outside of the State of Alabama is deemed to be subject to this section if the plan, policy, or contract is issued or delivered in the State of Alabama. The term includes, but is not limited to, entities created pursuant to Article 6 of Chapter 20 of Title 10A. The term does not include accident-only, specified disease, individual hospital indemnity, credit, dental-only, Medicare-supplement, long-term care, or disability income insurance, other limited benefit health insurance policies, coverage issued as a supplemental to liability insurance, workers’ compensation or similar insurance, or automobile medical-payment insurance.
(2) PRESCRIPTION INSULIN DRUG. A prescription drug that contains insulin, is used to treat diabetes, and has been prescribed as medically necessary by the treating physician.
(b)(1) A health benefit plan that provides coverage for prescription insulin drugs shall cap the total amount of any cost-sharing or co-pay that an insured or beneficiary is required to pay under the plan for a covered prescription insulin drug at an amount not to exceed one hundred dollars ($100) per 30-day supply of the insulin drug, without regard to the policy deductible, regardless of the amount or type of insulin needed to fill the insured’s or beneficiary’s prescription.
(2) This section does not prevent a health benefit plan from reducing an insured’s or beneficiary’s cost-sharing obligation by an amount greater than the amount specified in subdivision (1).
(3) On January 1 of each year, the limit on the amount that an insured is required to pay for a 30-day supply of a covered prescription insulin drug shall increase by a percentage equal to the percentage change from the preceding year in the prescription drug component of the Consumer Price Index of the Bureau of Labor Statistics of the United States Department of Labor.
(4) This section does not apply to a health benefit plan if the implementation of the cost-sharing or co-pay cap in subdivision (1) would necessitate the health benefit plan’s cost sharing for other services to be increased in order to comply with federally mandated actuarial values for non-grandfathered individual and small group plans.
(5) This section shall apply to contracts entered into after October 1, 2021.
(Act 2021-236, §1.)
This chapter shall be known and may be cited as the Travel Insurance Act.
(Act 2022-152, §1.)
(a) The purpose of this chapter is to promote the public welfare by creating a comprehensive legal framework within which travel insurance may be sold in this state.
(b) The requirements of this chapter shall apply to travel insurance that covers any resident of this state, is sold, solicited, negotiated, or offered in this state, and policies and certificates are delivered or issued for delivery in this state. This chapter does not apply to cancellation fee waivers or travel assistance services, except as expressly provided in this chapter.
(c) All other applicable provisions of state insurance laws shall continue to apply to travel insurance, except that the specific provisions of this chapter shall supersede any general provisions of law that would otherwise be applicable to travel insurance.
(Act 2022-152, §1.)
As used in this chapter, the following terms shall have the following meanings:
(1) AGGREGATOR SITE. A website that provides access to information regarding insurance products from more than one insurer, including product and insurer information, for use in comparison shopping.
(2) BLANKET TRAVEL INSURANCE. A policy of travel insurance issued to any eligible group providing coverage for specific classes of persons defined in the policy with coverage provided to all members of the eligible group without a separate charge to individual members of the eligible group.
(3) CANCELLATION FEE WAIVER. A contractual agreement between a supplier of travel services and its customer to waive some or all of the non-refundable cancellation fee provisions of the supplier’s underlying travel contract with or without regard to the reason for the cancellation or form of reimbursement. A cancellation fee waiver is not insurance.
(4) ELIGIBLE GROUP. Two or more persons who are engaged in a common enterprise, or have an economic, educational, or social affinity or relationship, including, but not limited to, any of the following:
a. Any entity engaged in the business of providing travel or travel services, including, but not limited to, tour operators, lodging providers, vacation property owners, hotels and resorts, travel clubs, travel agencies, property managers, cultural exchange programs, and common carriers or the operator, owner, or lessor of a means of transportation of passengers, including, but not limited to, airlines, cruise lines, railroads, steamship companies, and public bus carriers, wherein with regard to any particular travel or type of travel or travelers, all members or customers of the group must have a common exposure to risk attendant to such travel.
b. Any college, school, or other institution of learning, covering students, teachers, employees, or volunteers.
c. Any employer covering any group of employees, volunteers, contractors, boards of directors, dependents, or guests.
d. Any sports team, camp, or sponsor thereof, covering participants, members, campers, employees, officials, supervisors, or volunteers.
e. Any religious, charitable, recreational, educational, or civic organization, or branch thereof, covering any group of members, participants, or volunteers.
f. Any financial institution or financial institution vendor, or parent holding company, trustee, or agent of or designated by one or more financial institutions or financial institution vendors, including account holders, credit card holders, debtors, guarantors, or purchasers.
g. Any incorporated or unincorporated association, including labor unions, having a common interest, constitution, and bylaws, and organized and maintained in good faith for purposes other than obtaining insurance for members or participants of the association covering its members.
h. Any trust or the trustees of a fund established, created, or maintained for the benefit of and covering members, employees, or customers, subject to the commissioner permitting the use of a trust and the state’s premium tax provisions in Section 27-64-5 of one or more associations meeting the requirements of paragraph g.
i. Any entertainment production company covering any group of participants, volunteers, audience members, contestants, or workers.
j. Any volunteer fire department, ambulance, rescue, police, court, or any first aid, civil defense, or other such volunteer group.
k. Any preschool, day care institution for children or adults, or senior citizens club.
l. Any automobile or truck rental or leasing company covering a group of individuals who may become renters, lessees, or passengers defined by their travel status on the rented or leased vehicles. The common carrier, the operator, owner or lessor of a means of transportation, or the automobile or truck rental or leasing company, is the policyholder under a policy to which this provision applies.
m. Any other group where the commissioner has determined that the members are engaged in a common enterprise, or have an economic, educational, or social affinity or relationship, and that issuance of the policy would not be contrary to the public interest.
(5) FULFILLMENT MATERIALS. Documentation sent to the purchaser of a travel protection plan confirming the purchase and providing the travel protection plan’s coverage and assistance details.
(6) GROUP TRAVEL INSURANCE. Travel insurance issued to any eligible group.
(7) LIMITED LINES TRAVEL INSURANCE PRODUCER. Any of the following:
a. A licensed managing general agent or third party administrator.
b. A licensed insurance producer, including a limited lines producer.
c. A travel administrator.
(8) OFFER AND DISSEMINATE. To provide general information, including a description of the coverage and price, as well as processing the application, collecting premiums, and performing other non-licensable activities permitted by the state.
(9) PRIMARY CERTIFICATE HOLDER. A person who elects and purchases travel insurance under a group policy.
(10) PRIMARY POLICYHOLDER. A person who elects and purchases individual travel insurance.
(11) TRAVEL ADMINISTRATOR. A person who directly or indirectly underwrites for, collects charges, collateral, or premiums from, or adjusts or settles claims on, residents of this state in connection with travel insurance, except that a person shall not be considered a travel administrator if that person’s only actions that would otherwise cause it to be considered a travel administrator are among any of the following:
a. An individual working for a travel administrator to the extent that the individual’s activities are subject to the supervision and control of the travel administrator.
b. An insurance producer selling insurance or engaged in administrative and claims-related activities within the scope of the producer’s license.
c. A travel retailer offering and disseminating travel insurance and registered under the license of a limited lines travel insurance producer in accordance with this chapter.
d. An individual adjusting or settling claims in the normal course of that individual’s practice or employment as an attorney-at-law and who does not collect charges or premiums in connection with insurance coverage.
e. A business entity that is affiliated with a licensed insurer while acting as a travel administrator for the direct and assumed insurance business of an affiliated insurer.
(12) TRAVEL ASSISTANCE SERVICES. Non-insurance services for which the customer is not indemnified based on a fortuitous event, and where providing the service does not result in transfer or shifting of risk that would constitute the business of insurance. Travel assistance services include, but are not limited to, security advisories, destination information, vaccination and immunization information services, travel reservation services, entertainment, activity and event planning, translation assistance, emergency messaging, international legal and medical referrals, medical case monitoring, coordination of transportation arrangements, emergency cash transfer assistance, medical prescription replacement assistance, passport and travel document replacement assistance, lost luggage assistance, concierge services, and any other service that is furnished in connection with planned travel. Travel assistance services are not insurance and not related to insurance.
(13)a. TRAVEL INSURANCE. Insurance coverage for personal risks incident to planned travel, including, but not limited to, all of the following:
Interruption or cancellation of trip or event.
Loss of baggage or personal effects.
Damages to accommodations or rental vehicles.
Sickness, accident, disability, or death occurring during travel.
Emergency evacuations.
Repatriation of remains.
Any other contractual obligations to indemnify or pay a specified amount to the traveler upon determinable contingencies relating to travel as approved by the commissioner.
b. The term does not include either of the following:
Major medical plans that provide comprehensive medical protection for travelers with trips lasting six months or longer, including for example, those working overseas as an expatriate or military personnel being deployed.
Any other product that requires a specific insurance producer license.
(14) TRAVEL RETAILER. A business entity that makes, arranges, or offers travel and may offer and disseminate travel insurance as a service to its customers on behalf of and under the direction of a limited lines travel insurance producer.
(Act 2022-152, §1.)
(a) The commissioner may issue a limited lines travel insurance producer license to an individual or business entity that has filed with the commissioner an application for a limited lines travel insurance producer license in a form and manner prescribed by rule by the commissioner. A limited lines travel insurance producer shall be licensed to sell, solicit, or negotiate travel insurance through a licensed insurer.
(b) No person may act as a limited lines travel insurance producer or travel insurance retailer unless properly licensed or registered, respectively.
(c) The criteria for suspension, revocation, and the penalties applicable to resident insurance producers under Section 27-7-19 shall be applicable to limited lines travel insurance producers and travel retailers.
(d) A travel retailer may offer and disseminate travel insurance under a limited lines travel insurance producer business entity license only if the following conditions are met:
(1) The limited lines travel insurance producer or the travel retailer provides to customers of travel insurance all of the following:
a. A description of the material terms or the actual material terms of the insurance coverage.
b. A description of the process for filing a claim.
c. A description of the review or cancellation process for the travel insurance policy.
d. The identity and contact information of the insurer and limited lines travel insurance producer.
(2) At the time of licensure, the limited lines travel insurance producer establishes and thereafter maintains a register, in a form prescribed by rule by the commissioner, of each travel retailer that offers travel insurance on the limited lines travel insurance producer’s behalf. The register shall be maintained and updated annually by the limited lines travel insurance producer and shall include the name, address, contact information, and federal tax identification number of the travel retailer, and the name of an officer or individual who directs or controls the travel retailer’s operations. The limited lines travel insurance producer shall submit the register to the commissioner upon reasonable request. The limited lines travel insurance producer shall also certify that a registered travel retailer complies with 18 U.S.C. § 1033.
(3) The limited lines travel insurance producer shall designate one of its employees who is a licensed individual producer as the designated responsible producer, responsible for the business entity’s compliance with the travel insurance laws and rules of the state applicable to the limited lines travel insurance producer and its registrants.
(4) The designated responsible producer, president, secretary, treasurer, and any other officer or individual who directs or controls the limited lines travel insurance producer’s insurance operations shall comply with the fingerprinting requirements applicable to insurance producers in the resident state of the limited lines travel insurance producer.
(5) The limited lines travel insurance producer has paid all applicable insurance producer licensing fees as set forth in applicable state law.
(6) The limited lines travel insurance producer requires each employee and authorized representative of the travel retailer whose duties include offering and disseminating travel insurance to receive a program of instruction or training, which is subject, at the discretion of the commissioner, to review and approval. The training material, at a minimum, shall contain adequate instructions on the types of insurance offered, ethical sales practices, and required disclosures to prospective purchasers.
(e) Any travel retailer offering or disseminating travel insurance shall make brochures or other written materials available to prospective purchasers that have been approved by the travel insurer. The materials shall include information which at a minimum do all of the following:
(1) Provide the identity and contact information of the insurer and the travel insurance producer.
(2) Explain that the purchase of travel insurance is not required in order to purchase any other product or service from the travel retailer.
(3) Explain that an unlicensed travel retailer is permitted to provide general information about the insurance offered by the travel retailer, including a description of the coverage and price, but is not qualified or authorized to answer technical questions about the terms and conditions of the insurance offered by the travel retailer or to evaluate the adequacy of the customer’s existing insurance coverage.
(f) A travel retailer employee or authorized representative who is not licensed as an insurance producer may not do any of the following:
(1) Evaluate or interpret the technical terms, benefits, and conditions of the offered travel insurance coverage.
(2) Evaluate or provide advice concerning the existing insurance coverage of a prospective purchaser.
(3) Hold himself or herself out as a licensed insurer, licensed producer, or insurance expert.
(g) Notwithstanding any other state law, a travel retailer, whose insurance-related activities and those of its employees and authorized representatives is limited to offering and disseminating travel insurance on behalf of and under the direction of a limited lines travel insurance producer meeting the conditions stated in this section, may offer and disseminate travel insurance, and may receive related compensation, upon registration by the travel insurance producer as described in this section.
(h) As the insurer designee, the limited lines travel insurance producer is responsible for the acts of the travel retailer and shall use reasonable means to ensure compliance by the travel retailer with this section.
(i) Any person licensed in a major line of authority as an insurance producer may sell, solicit, or negotiate travel insurance. A property and casualty insurance producer is not required to become appointed by an insurer in order to sell, solicit, or negotiate travel insurance.
(Act 2022-152, §1.)
(a) A travel insurer shall pay premium tax, as provided in Section 27-4A-3, on travel insurance premiums paid by any of the following:
(1) An individual primary policyholder who is a resident of this state.
(2) A primary certificate holder who is a resident of this state who elects coverage under a group travel insurance policy.
(3) A blanket travel insurance policyholder who is a resident of, or has its principal place of business or the principal place of business of an affiliate or subsidiary that has purchased blanket travel insurance in this state for eligible blanket group members, subject to any apportionment rules that apply to the insurer across multiple taxing jurisdictions or that permit the insurer to allocate premiums on an apportioned basis in a reasonable and equitable manner in those jurisdictions.
(b) A travel insurer shall do both of the following:
(1) Document the state of residence or principal place of business of the policyholder or certificate holder, as required in subsection (a).
(2) Report as premium only the amount allocable to travel insurance and not any amounts received for travel assistance services or cancellation fee waivers.
(Act 2022-152, §1.)
Travel protection plans may be offered for one price for the combined features that the travel protection plan offers in this state if all of the following criteria are met:
(1) The travel protection plan clearly discloses to the purchaser, at or prior to the time of purchase, that it includes travel insurance, travel assistance services, and cancellation fee waivers as applicable, and provides information and an opportunity, at or prior to the time of purchase, for the purchaser to obtain additional information regarding the features and pricing of each.
(2) The fulfillment materials do both of the following:
a. Describe and delineate the travel insurance, travel assistance services, and cancellation fee waivers in the travel protection plan.
b. Include the travel insurance disclosures and the contact information for persons providing travel assistance services, and cancellation fee waivers, as applicable.
(Act 2022-152, §1.)
(a) All persons offering travel insurance to residents of this state are subject to the provisions of Chapter 12, except as otherwise provided in this section. In the event of a conflict between this section and other provisions of this title regarding the sale and marketing of travel insurance and travel protection plans, the provisions of this chapter shall control.
(b) Offering or selling a travel insurance policy that could never result in payment of any claims for any insured under the policy is an unfair trade practice under Chapter 12.
(c)(1) All documents provided to customers prior to the purchase of travel insurance, including, but not limited to, sales materials, advertising materials, and marketing materials, shall be consistent with the travel insurance policy itself, including, but not limited to, forms, endorsements, policies, rate filings, and certificates of insurance.
(2) For travel insurance policies or certificates that contain preexisting condition exclusions, information and an opportunity to learn more about the preexisting condition exclusions shall be provided any time prior to the time of purchase, and in the coverage’s fulfillment materials.
(3)a. The fulfillment materials and the information described in paragraphs a. through d. of Section 27-64-4(d)(1) shall be provided to a policyholder or certificate holder as soon as practicable, following the purchase of a travel protection plan. Unless the insured has either started a covered trip or filed a claim under the travel insurance coverage, a policyholder or certificate holder may cancel a policy or certificate for a full refund of the travel protection plan price from the date of purchase of a travel protection plan until at least:
Fifteen days following the date of delivery of the travel protection plan’s fulfillment materials by postal mail; or
Ten days following the date of delivery of the travel protection plan’s fulfillment materials by means other than postal mail.
b. For purposes of this subsection, delivery means handing fulfillment materials to the policyholder or certificate holder or sending fulfillment materials by postal mail or electronic means to the policyholder or certificate holder.
(4) A travel insurer shall disclose in the policy documentation and fulfillment materials whether the travel insurance is primary or secondary to other applicable coverage.
(5) Where travel insurance is marketed directly to a customer through an insurer’s website or by others through an aggregator site, it shall not be an unfair trade practice or other violation of law where an accurate summary or short description of coverage is provided on the website, so long as the customer has access to the full provisions of the policy through electronic means.
(d) No person offering, soliciting, or negotiating travel insurance or travel protection plans on an individual or group basis may do so by using negative option or opt out, which would require a customer to take an affirmative action to deselect coverage, such as unchecking a box on an electronic form, when the customer purchases a trip.
(e) It shall be an unfair trade practice to market blanket travel insurance coverage as free.
(f) Where a customer’s destination jurisdiction requires insurance coverage, it shall not be an unfair trade practice to require that a customer choose between the following options as a condition of purchasing a trip or travel package:
(1) Purchasing the coverage required by the destination jurisdiction through the travel retailer or limited lines travel insurance producer supplying the trip or travel package.
(2) Agreeing to obtain and provide proof of coverage that meets the destination jurisdiction’s requirements prior to departure.
(Act 2022-152, §1.)
(a) Notwithstanding any other provision of this title, no person shall act or represent itself as a travel administrator for travel insurance in this state unless the person meets one of the following requirements:
(1) Is a licensed property and casualty insurance producer in this state for activities permitted under that producer license.
(2) Holds a valid managing general agent license in this state.
(3) Holds a valid third-party administrator license in this state.
(b) A travel administrator and its employees are exempt from the licensing requirements of Chapter 9A for travel insurance the travel administrator administers.
(c) An insurer is responsible for the acts of a travel administrator administering travel insurance underwritten by the insurer, and is responsible for ensuring that the travel administrator maintains all books and records relevant to the insurer, to be made available by the travel administrator to the commissioner upon request.
(Act 2022-152, §1.)
(a) Notwithstanding any other provision of this title, travel insurance shall be classified and filed for purposes of rates and forms under an inland marine line of insurance; provided, however, that travel insurance that provides coverage for sickness, accident, disability, or death occurring during travel, either exclusively or in conjunction with related coverages of emergency evacuation or repatriation of remains, or incidental limited property and casualty benefits such as baggage or trip cancellation, may be filed under either an accident and health line of insurance or an inland marine line of insurance.
(b) Travel insurance may be in the form of an individual, group, or blanket policy.
(c) Eligibility and underwriting standards for travel insurance may be developed and provided based on travel protection plans designed for individual or identified marketing or distribution channels, provided those standards also meet the state’s underwriting standards for inland marine.
(Act 2022-152, §1.)
The commissioner may adopt rules to implement this chapter.
(Act 2022-152, §1.)
For the purposes of this chapter, the following words have the following meanings:
(1) CLEAN CLAIM. A clean electronic claim or a clean written claim.
(2) CLEAN ELECTRONIC CLAIM. As defined in Section 27-1-17.
(3) CLEAN WRITTEN CLAIM. As defined in Section 27-1-17.
(4) COLLECTION. Any written or oral communication made to an enrollee for the purpose of obtaining payment for the services rendered by an emergency medical service provider, including invoicing and legal debt collection efforts.
(5) COST-SHARING AMOUNT. The enrollee’s deductible, coinsurance, copayment, or other amount due under a health care benefit plan for covered services.
(6) COVERED SERVICES or COVERED SERVICE. Transport or medical services provided by the ground ambulance of an emergency medical service provider which are covered by an enrollee’s health care benefit plan, which may include emergency ground transport and treat in place.
(7) EMERGENCY GROUND TRANSPORT. a. When an enrollee is transported by an emergency medical service provider to a hospital or definitive care facility as defined in Section 22-18-1, and which may include basic life support or advanced life support, in response to a medical condition described in paragraph b.
b. An event as defined by the Centers for Medicare and Medicaid Services (CMS) which manifests itself by acute symptoms of sufficient severity, including severe pain, such that a prudent layperson who possesses an average knowledge of health and medicine could reasonably expect the absence of immediate medical attention to result in:
Placing the patient’s health in serious jeopardy;
Serious impairment to bodily functions; or
Serious dysfunction of any bodily organ or part.
(8) EMERGENCY MEDICAL SERVICE PROVIDER or PROVIDER. Any public or private organization that is licensed to provide emergency medical services as defined in Section 22-18-1.
(9) ENROLLEE. An individual who is covered by a health care benefit plan.
(10) HEALTH CARE BENEFIT PLAN. The term includes any individual or group plan, policy, or contract issued, delivered, or renewed in this state by a health care insurer to provide, deliver, arrange for, pay for, or reimburse health care services, including those provided by an emergency medical service provider, except for payments for health care made under an automobile or homeowners’ insurance plan, accident-only plan, specified disease plan, long-term care plan, supplemental hospital or fixed indemnity plan, dental or vision plan, or Medicaid.
(11) HEALTH CARE INSURER. Any entity that issues or administers a health care benefit plan, including a health care insurer, a health care services plan incorporated under Chapter 20 of Title 10A, a health maintenance organization established under Chapter 21A of Title 27, or a nonprofit agricultural organization that offers health benefits to its membership pursuant to Chapter 33 of Title 2.
(12) IN-NETWORK. When an emergency medical service provider is in a contract with a health care insurer to provide covered services in the health care insurer’s provider network.
(13) OUT-OF-NETWORK. When an emergency medical service provider does not have a contract with a health care insurer to provide covered services in the health care insurer’s provider network.
(14) TREAT IN PLACE. An emergency response event in which an emergency medical service provider that would otherwise provide the emergency ground transport assesses an enrollee and renders basic life support at his or her location without emergency ground transport.
(Act 2026-349, §1.)
(a)(1) A health care insurer shall contract with any willing emergency medical service provider to provide covered services in the health care insurer’s provider network under terms extended to comparable providers that are in-network.
(2) An in-network provider shall meet licensing requirements provided by law.
(b)(1) Beginning October 1, 2026, the minimum reimbursement from a health insurer to an emergency medical service provider that is in-network for emergency ground transport shall be 200 percent of the Medicare Ambulance Fee Schedule rate as published by the Centers for Medicare & Medicaid Services (CMS).
(2)a. Beginning January 1, 2027, the minimum reimbursement from a health insurer to an emergency medical service provider that is in-network for treat in place shall be 200 percent of the Medicare Ambulance Fee Schedule rate for basic life support as published by CMS which is in effect on January 1, 2027.
b. Submission of a claim for reimbursement for treat in place is prohibited if the emergency medical service provider has submitted a claim for emergency ground transport for the same event or occurrence.
(c)(1) Beginning January 1, 2027, the minimum reimbursement amount from a health care insurer to an emergency medical service provider that is out-of-network for covered services shall be 180 percent of the Medicare Ambulance Fee Schedule rate as published by CMS.
(2) The minimum reimbursement rate for treat in place provided in paragraph (b)(2)a. shall not apply to an out-of-network emergency medical service provider.
(d)(1) For purposes of this section, the Medicare Ambulance Fee Schedule rate shall be the rate applicable to zip code 35462, including the applicable Medicare base rate and mileage components.
(2) The reimbursement rate established under this section shall be applied uniformly on a statewide basis, without regard to the geographic locality, population density, or zip code in which the ground ambulance service is provided.
(Act 2026-349, §2.)
(a)(1) Payment in accordance with Section 27-65-2 shall be payment in full for covered services.
(2) An emergency medical service provider, whether in-network or out-of-network, including the provider’s agent, contractor, or assignee, may not bill or seek collection of any amount from an enrollee except for the enrollee’s in-network cost-sharing amount.
(3) The health care insurer shall certify an enrollee’s in-network cost-sharing amount to an out-of-network provider upon request.
(b)(1) Not later than 30 days after receipt of a clean electronic claim, or not later than 45 days after receipt of a clean written claim, a health care insurer shall remit payment to an out-of-network emergency medical service provider and shall not send payment to an enrollee.
(2) If a claim for reimbursement submitted by an emergency medical service provider to a health care insurer is not a clean claim, not later than 30 days after receiving the claim, the health care insurer shall send the provider a written receipt acknowledging the claim, accompanied with one of the following applicable statements:
a. The insurer is declining to pay all or a part of the claim, with the specific reason for the denial.
b. Additional information is necessary to determine if the claim is payable, with the specific additional information that is required.
(3) In no event shall a health care insurer require the provider to submit either of the following as a condition to the acceptance and processing of an initial claim as a clean claim:
a. Data elements in excess of those required on the standard electronic health insurance claim format designated by Section 27-1-16.
b. Information or data elements in excess of those required on the standard health insurance claim form designated by Section 27-1-16.
(4) Any dispute between a health care insurer and an emergency medical service provider over the amount to be paid, or over full or partial denial of a claim, may be settled by:
a. Affording the provider access to the insurer’s internal forum for resolving provider disputes concerning coverage and reimbursement amounts; and
b. If the dispute is not resolved in the insurer’s internal forum, submission of the dispute to an independent dispute resolution contractor selected by mutual agreement of the insurer and the provider.
(Act 2026-349, §3.)
(a) Beginning in the year 2027, and in each year thereafter, an emergency medical service provider shall submit to the Alabama Department of Public Health a report that includes, but is not limited to, the following information for the preceding calendar year:
(1) The number and type of emergency medical service vehicles that are in service.
(2) The number of employees, both full-time and part-time, classified by position or emergency medical service provider license classification.
(3) The total number of ground ambulance transports rendered.
(4) The average response time for collecting and transporting a patient to a definitive care facility.
(5) The gross income received by the emergency medical service provider in the State of Alabama and the net profit.
(6) If the emergency medical service provider distributes ownership shares to the public, the number and amount of dividends issued.
(7) For the calendar year 2027, the amount of receipts collected by the emergency medical service provider which are remitted to a parent entity, both before and after implementation of any change in payment or reimbursement by a health care insurer.
(8) For the calendar year 2027, the amount paid or reimbursed to an emergency medical service provider by health care insurers, presented on a monthly or quarterly basis.
(b)(1) In the year 2027, a health care insurer shall submit to the Alabama Department of Public Health a report on claims for reimbursement submitted by emergency medical service providers which presents, for each of the three calendar years preceding January 1, 2027:
a. The number of denied claims;
b. The aggregate dollar value of denied claims;
c. The percentage of denied claims to approved claims;
d. The applicable out-of-pocket charge under each health care benefit plan issued by the health care insurer on an approved claim for covered services; and
e. The total amount paid on claims for covered services, including in comparison to the total amount paid out on all claims for health care services.
(2) Beginning in the year 2028, and in each year thereafter, a health care insurer shall submit to the Alabama Department of Public Health a report that includes, but may not be limited to, each item of information required under subdivision (1) for the preceding calendar year.
(c) The financial information required for submission under subsections (a) and (b) shall be confidential and may not be made public by the Alabama Department of Public Health or any contractor of the department.
(d) The Alabama Department of Public Health shall adopt rules to implement this section, and may prescribe reporting periods, deadlines, or formatting of information to be reported, and may require an emergency medical service provider or health care insurer to submit operational and financial data or information in addition to the information required under subsections (a) and (b).
(Act 2026-349, §4.)
(a) The Alabama Association of Ambulance Services shall contract with a business school, accredited by the Association to Advance Collegiate Schools of Business, located at a doctoral granting regional institution with research college and university Carnegie classification status, which has expertise in risk management and insurance, to study the impact of this chapter on the provision of emergency medical services.
(b) The consultant shall produce a report on the findings, which shall not exceed fifty thousand dollars ($50,000) in cost, with the cost to be borne by the three largest health care insurers as measured by the number of enrollees in the state, which offer individual health care benefit plans on the Health Insurance Marketplace.
(c) In addition to findings on the impact of this chapter on the provision of emergency medical services, the report shall include, but not be limited to, the following:
(1) Measures taken by other states on the provision of emergency medical services and the effectiveness of those measures.
(2) Recommendations of measures that would balance the goals of ensuring adequate access to emergency medical services with the cost burden of such measures on the state, its employers, and residents.
(d) The report shall be submitted to the President Pro Tempore of the Senate and the Speaker of the House of Representatives no later than December 1, 2028.
(Act 2026-349, §5.)
This chapter repealed on June 1, 2029.
(Act 2026-349, §6.)
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